Of (Starbucks has not paid The UK corporation tax 2012) - Case Study Example

According to this theory, an organisation is part of the society in which it operates (Benoit, 2000). An organisation, therefore, is supposed to adhere to certain, explicit or implicit, norms and values. The voluntary disclosures therefore are seen as biased because they are influenced by the interaction of the firm and that particular society. This theory, therefore, emphasizes that the vehicle for voluntary disclosure and the information disclosed be analyzed in context of the society in which the organisation operates (Benoit, 1995).

Closely related to the system oriented theories is the legitimacy theory. This theory states that the organisation derives its legitimacy from the society in which it operates. Therefore, the society has a multitude of implicit and explicit expectations on the organisation which the organisation should not forego. A firm can only be seen as legitimate if its status, condition or operations are in sync with the society’s expectations. The society supports legitimate businesses (Islam and Deegan, 2010).

One of the ways to legitimize a business is by making voluntary disclosures for the benefit of the society. . This theory states that when a crisis becomes a threat a reputation-conscious organisation will always respond to save its image, identity or reputation by voluntarily releasing information that directly counters that which is eroding its reputation. This theory proposes a wide variety of measures to be taken including excuses, justification, denial and apologies (Freeman, 1984). The Case Context Starbucks is the second largest restaurant chain globally after McDonalds.

It is valued at $40 billion. The company has many units distributed across the globe and the focus of this literature will be the UK unit. In the year ending September 30th 2012 the company’s UK unit recorded a loss in its operations consequently failing to pay the corporate income tax for the third year in a row (Bergin, 2012). The information was first released by Reuters who asserted that even though the company was recording losses, its management was still declaring it as a viable undertaking with lessons to be emulated by other firms and branches.

This mixed information to investors and the taxman brewed a crisis with the esteemed customers with the British government accusing Starbucks of tax evasion (Neville, 2012). Data In its 14 years of operations in the UK, Starbucks had never recorded a profit; this is despite making sales of over $4.8 billion (3 billion UK pounds). According to Her Majesty Revenue and Customs authority, Starbucks had failed to declare any profits during its entire period in operation in the UK managing to pay only 8.

6 million UK pounds in 14 years. McDonalds, its main rival, managed to pay as corporate income tax of 80 million UK pounds from its 3.6 billion worth of sales in the UK market and the third largest