Accountability

Accountability can be defined as “being answerable”—that is, being able to give an account. In the corporate environment, it has been closely associated with financial auditing and reporting, as well as accountancy in general. Within the neoclassical conception of the corporation, it is described in terms of duties owed toward its shareholders. Recently, however, corporate social responsibility (CSR), or corporate citizenship (CC) as it is otherwise referred to, movements have led to an increased awareness of the duties associated with the various other relationships in which corporations typically participate. From this perspective, the corporation is compelled to acknowledge its accountability to a wider network of stakeholders.

AccountAbility, the organization responsible for the AA 1000 standard for “social and ethical accounting, auditing, and reporting,” defines accountability as follows: “To account for something is to explain or to justify the acts, omissions, risks, and dependencies for which one is responsible to people with legitimate interest.” From this description, it is clear that the notion of accountability is closely related to the concept of responsibility. It belongs to the area of causal responsibility that assigns blame or punishment, and it should ideally also include credit or reward in recognition of corporate success. The primary focus has, however, been on how corporate blame or punishment is appropriated. It is, therefore, understandable that accountability has become associated with corporate control, that is, the establishment of a meaningful way of accounting for corporations' efforts to protect the interests of their shareholders. The notion of corporate sustainability and the introduction of triple-bottom-line reporting have underscored the fact that corporate success can be conceived in nonfinancial as well as in financial terms. Both CSR and CC argue that corporations should be responsive to all stakeholders and not only to shareholders. Instead of defining accountability primarily from the perspective of the fiduciary duties that managers owe to the owners of the corporation, a proper understanding of accountability must now also reflect the mutual dependence between corporations and their stakeholders. From this perspective, accountability refers to the way in which a corporation is able to account for its economic, social, and environmental activities. Social corporate control not only involves the mechanism by which society could respond to corporate failures but also the way in which relationships between corporations and broad groups of stakeholders are proactively sustained.

It is possible to distinguish between “hard” or “involuntary” accountability and “soft” or “voluntary” accountability. Hard or involuntary accountability refers to the kind of accountability that is imposed as a legal, organizational, or societal requirement. This constitutes a more reactive reading of accountability, which focuses on the way in which corporations and their agents are dealt with when something goes wrong. Soft or voluntary accountability is something that the corporation engages in on its own terms and of its own volition. This represents a more positive, proactive approach to accountability in which the corporation actively manages its reputation by fulfilling its responsibilities toward its various stakeholders. It also addresses the way in which the corporation's various agents account for everyday business decisions and actions. Changes in the contemporary business environment, however, make a clear-cut distinction between voluntary and involuntary accountability problematic. In fact, the increasing complexity of business relationships may require a new understanding of accountability, one that is able to deal with multiple stakeholder constituencies, intangible assets, and complex decision-making processes.

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