Legitimating Transnational Standard-Setting: The Case of the International Accounting Standards Board

Abstract

The increasing use of transnational standard-setting bodies to address quality uncertainties and coordination issues across the global economy raises questions about how these bodies establish and maintain their legitimacy and accountability outside the sovereignty of democratic states. Based on a discussion of the legitimacy challenge posed by global governance, we provide an overview of mechanisms by which such bodies can defend their legitimacy claims and examine the actual mechanisms used by the International Accounting Standards Board (IASB). While the IASB staked its initial credibility on technical competence and independence, it has increasingly emphasized due process norms in its claim for support. Our analysis evaluates the IASB due process against the cultural benchmarks established by domestic standard-setters in the USA and UK and against a normative model of procedural legitimacy. These comparisons help us to understand the modifications that were made in the hope of due process adding legitimacy to accounting standard-setting beyond the state. They also reveal the broader political context of competing legitimacy criteria that confronts transnational standard-setters.

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Acknowledgments

This work has been supported by a grant from the Schulich School of Business and The Hague Institute for the Internationalisation of Law (under the “Private Transnational Regulation: Constitutional Foundations and Governance Design” project coordinated by Prof. Fabrizio Cafaggi – European University Institute, Prof. Linda Senden – Tilburg University, and Prof. Colin Scott – University College Dublin). We thank Nikola Ilic for his research assistance on this project, Jon Hooper and Peter Godsall of the UK ASB for assistance in verifying information regarding that body, and the reviewers for their constructive comments.

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Richardson, A.J., Eberlein, B. Legitimating Transnational Standard-Setting: The Case of the International Accounting Standards Board. J Bus Ethics 98, 217–245 (2011). https://doi.org/10.1007/s10551-010-0543-9

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Key words

  • due process
  • accounting standard-setting
  • IASB