Corporate Accountability

Corporate accountability is a foundation of corporate social responsibility. Corporate social responsibilities, at the most general level, include economic duties, legal and regulatory compliance, responsiveness to ethical norms, and discretionary social welfare contributions. In addition, one of the most basic of all corporate social responsibilities is corporate accountability. It is defined as the continuous, systematic, and public communication of information and reasons designed to justify an organization's decisions, actions, and outputs to various stakeholders. According to this definition, corporate accountability is primarily a form of ethical communication directed toward those parties who are affected by corporate activities and effects.

Corporate accountability represents a corporation's social responsibility to explain its actions (past, present, and future) in an accessible, reasonable, and meaningful way to the society in which it operates. In a democratic society dependent on informed political discourse and deliberations, corporate accountability is a necessary foundation for the system of free enterprise. The appropriate level of corporate accountability underpins the legitimacy of corporate autonomy and decision making in a system of democratic capitalism. In such a system, business enterprises enjoy a high degree of economic freedom of choice and are expected to engage in activities that promote the interests of the business. This economic freedom, however, is contingent on the existence of strong accountability mechanisms.

There are various traditional institutional mechanisms, both external and internal to the corporation, designed to enhance and strengthen accountability to stakeholders. These well-known mechanisms include the annual report to shareholders, corporate governance, government regulations, corporate codes and credos, and various forms of corporate communications.