Corporate Accountability

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What is Corporate Accountability?

Corporate Accountability is a broad term that refers primarily to the moral or legal obligation for companies of being accountable to the shareholders or stakeholders of the organization or even to society as a whole. Stakeholders may include shareholders, employees, customers, suppliers, the local community, special interest groups and the government of countries or regions that the firm operates in.

In fact, one can distinguish three forms of accountability in the field of companies and organizations:

• (Corporate) Societal Accountability: each organization is seen as accountable for its actions to society in general and to specific groups or organizations within society.

• Organizational Accountability: within each organization, agents, directors and other trustees are seen as accountable for the way they represent the organization. Also, when these agents in turn appoint and control managers, these are also seen as accountable for the way they run the organization.

• Interpersonal Accountability: of one person in the organization to another, depending on informal networks, the Organizational Culture and shared values and beliefs.

Three relevant questions when thinking about accountability are:

• To whom is an organization accountable? Think of shareholders and investors, but also society as a whole, law and regulations (for example annual reporting), consumers, NGOs, mass media, social media, etc.

• For what is this organization or individual accountable? Here it matters a lot what is the view towards the Purpose of the organization, wether it has a Shareholder Value Perspective, or a Stakeholder Value Perspective.

• How is the accountability organized? (Key mechanisms include: law and regulations, public reporting, elections, organization charts and organizational structure, corporate governance, etc).

The concept of accountability is strongly related to other concepts such as Corporate Transparency, Corporate Sustainability, Corporate Responsibility, and Corporate Governance.

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Compare also: Shareholder Value Perspective  |  Stakeholder Value Perspective  |  Safe Harbor Statement  |  Whistle Blower  |  Globalization  |  Stakeholder Mapping  |  Stakeholder Analysis  |  Triple Bottom Line  |  Directors and Officers Liability Insurance

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