9
CHAPTER II THEORETICAL BACKGROUND AND HYPOTHESIS DEVELOPMENT
2.1 Stakeholder Theory
The survival of the company depends on the support of stakeholders. Social disclosure is considered as part of a dialogue between the company and
stakeholders Gray et al., 1995. The company is not the only entity operates for his own benefit, and to gain support from stakeholders companies must provide
benefits to its stakeholders. Edward Freeman 2001 on his article said that Stakeholders are those groups who have a stake in or claim on the firm. Lawrence
et al., 2005, stakeholders are all the groups affected by, or that can affect, an organization’s decisions, policies, and operations. Stakeholder theory argues that
corporations serve a broader public purpose: to create value for society. Companies should maintain a relationship with its stakeholders to
accommodate the desires and needs of its stakeholders, especially stakeholders who have the power to the availability of resources that used for the operational
activities of the company, such as labor, corporate and product markets over others Chariri and Ghozali, 2007. So, here company does not only have a
responsibility to fulfil the shareholders interest but also have a responsibility to fulfil the stakeholders interest by doing and disclosed CSR in their annual report
to maintain the stability of the company.
2.1 Stakeholder Theo o
ry ry
The s
survival of the co co
mp p
an an
y y
depe p
nd d
s s
on the suppo port
r of stakeholders.
Social d d
i isclosure is
c con
on si
i d
dered a
as part of a
a d d
ia alo
logu gue
e b
between the co
c mpany and
stak akeholders
rs Gr
Gr a
ay et al .,
., 1
1 99
99 5
. The co
mpan y
is is
n n
ot the o o
nl nly
y en en
tity ope e
ra r
tes for his ow
ow n
n be
be n
nefit, t,
a a
nd t
o gain support f
ro m stakeholde
rs c
om ompani
ni es m
mus ust prov
ovide bene
ne fi
fits ts
to i
it s stakehol
de rs
. Edward Freeman 20
01 on h is
s artic
ic le
le s s
aid th h
at a
St Stak
akehol l
d de
rs are those group s
who ha ve
a stake i
n or claim on the fi
firm. La
Lawr wr
ence e
et al., 2
005, st
ak eh
olders are a
ll the gro up
s affected b
y, or that c
a an a
ff ff
e ect, a
an n
organi i
za tion’s decisions, po
li ci
es, and oper
at io
ns .
St akeholder theo
ry y
argues s
tha at
corp por
orat a
io ns serve a broad
ad er
er p
p ublic purpose: to cr
cr ea
ea te
te value for socie
ty y.
Companies should maint t
ai ain
n a
a relationship with its stakeholde e
rs rs t
to ac
acco c
mm mmodate the desires and needs of its stakeholders, especially
y st
st ak
akeh ehol
ol de
de rs
wh who
o have the power er
t to
o th
the avai la
la bi
bili lity
ty o
o f
f resources
th th
at at
use d
d f
for th
e op ope
erat ational
activi i
ti ti
es es
of th th
e e company, such
as a
labor r, corporate and
d pr
pr od
od uct
t ma
markets over others Chariri and Ghozali, 20
007. So, h here company does not only have a
responsibility to fulfil the shareh holders in
t terest but also have a responsibility to
fulfil the stakeholders interest by do doing
g and disclosed CSR in their annual report
to maintain the stability of the company
10
2.2 Corporate Social Responsibility