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Corporate Accountability

What exactly is Corporate Accountability?

It refers to the functioning of a firm in areas other than financial, such as social responsibility, sustainability, and corporate governance.

Corporate Accountability

A firm's primary goal should be something other than financial performance, and shareholders are not the only individuals for whom a corporation must be accountable. Employees and members of the community, for example, are among those who demand accountability.

In-depth understanding of Corporate Accountability

Profit is usually what motivates big ?rms. As a result, whether they are leaders, investors, or other stakeholders, firms must answer to their shareholders. Many individuals feel that a corporation's bottom line should not be the main drive. Corporate accountability is a means of holding businesses and their executives accountable for their activities.

Corporate accountability, as previously said, comprises a firm assuming responsibility for all of its acts. This can be for financial success (or failure) and, more crucially, for social responsibility and sustainability. Companies must account for their financial stakeholders and others, such as workers, community members, and the general public.

Corporate accountability advocates make firms accountable for their operations' social and environmental repercussions. It is also critical for ethical investors and shareholders, as this practice comprises making financial decisions based on moral ideals.

Several publicly traded firms publish corporate accountability reports to meet the demands of their shareholders and the broader public. This is in addition to the yearly financial statements that firms must provide by the Securities and Exchange Commission (SEC). Non-government groups create social and environmental norms that public enterprises must follow.


Governments can only control companies if explicit legislation is established. Enacting such legislation has traditionally required a strong public campaign to persuade lawmakers to restrict certain activities.

One of these early attempts was the fight to prohibit tobacco advertising and identify tobacco products as harmful, which resulted in the implementation of the Public Health Cigarette Smoking Act in 1969. This provoked public fury at television and radio commercials drawing in new smokers while ignoring that smoking is deadly, as well as a thorough Office of the Surgeon General study explaining the precise health consequences of smoking.

The following campaigns called for more public health programs, ecologically sound or sustainable corporate practices, and social justice concerns such as employee exploitation, bribery, and corruption. Specific situations occasionally precipitate initiatives, such as recurring attempts to control oil sector practices after well-publicized oil spills. Some non-profit organizations, like Corporate Accountability International and Friends of the Earth, have been charged with lobbying for greater corporate accountability for specific initiatives.

Corporate Accountability Reports

Several corporations now produce yearly corporate accountability reports due to the rising prominence of such initiatives and awareness about ethical or responsible investment. These reports have no common format, and they vary widely per industry. Yet, various groups provide services or rules to track and assess corporations' accountability and policies.

Reports on corporate accountability can boost a company's public image. Components of employee treatment, initiatives to create things or sustainably offer services, corporate culture, internal management, and quantitative estimations of the positive and negative externalities of organizations' business activities are frequently reported.

What are the Issues with Corporate Accountability?

To encourage international investment to support economic progress, the payback for developing countries is minimal. The consequences include tax evasion and avoidance, human rights breaches, land accumulation, and environmental crimes. Locals bear the brunt of the expenditure. For decades, the stakeholder perspective has been the standard method of looking at company relationships with the surrounding society. Stakeholder recognition, on the other hand, could be improved. Well-known major stakeholders are owners, consumers, clients, employees, and suppliers. In recent years, there has been a rising realization that essential stakeholders in corporate accountability include local communities, civil society organizations, and the media.

Companies have considered the general people to have the least say as stakeholders, even though they have suffered the most if we undertake a cost-benefit analysis. Citizens from developing countries are last. Because of their small assets, they are not even included in the consumer bracket. But, they are the most crucial to be taken care of, as they establish the atmosphere in which the organization must develop. Unfortunately, no one recognizes their authority as stakeholders, whether it is the government, a firm, or even themselves. They also, consciously or unknowingly, give corporations the authority to violate their core human rights, such as the right to breathe clean air, clean water, healthy soil, and clean surroundings.

That is not the only issue for the general public who live there, but also for the labourers, who face problems such as lower wages for female workers, child labour, the guarantee of safe working conditions, no pension accrual, and poor working conditions that put them at risk of not surviving until retirement age. We may assess the political prospects for social reporting and create a knowledge of what is required to be an effective form of corporate accountability legislation.

According to critics, corporations will never freely give information that will hold them accountable. If an institution produces social accounts freely, it will likely not enhance accountability.

What is the Importance of Corporate Accountability?

Corporate Accountability

Companies significantly impact people's lives and the environment in which they operate. At times, the impact is positive: job creation, technical improvements, facility expansion, and investment in community services all benefit residents. There are numerous examples of firms abusing lax and ineffective domestic legislation, with terrible effects on individuals and communities. There are few effective mechanisms for monitoring corporate human rights breaches and holding companies accountable at the national and international levels.

Corporate accountability measures a company's ability to pay attention to its stakeholders and ensure they get the most out of its activities. The topic of corporate accountability is essential these days. Companies have grown in power, attaining more authority than a few states in some situations, without contributing to the improvement of the common welfare. The situation described by various authors-the rise of truly global businesses, environmental deterioration, the race to the bottom in labour, environmental, and welfare norms, and the excessive commercialization of cultural and moral values-has prompted a debate about corporate domination.

Corporate responsibility refers to a company's legal obligation to do the right thing. Corporate responsibility ensures that a company's products and actions assist society rather than harm it. This concept tackles the issue of corporations that refuse to act responsibly; it also discusses situations in which organizations and employees are held accountable by the economic system's competitive demands and forced to choose the final result. According to the neoclassical perspective of corporate responsibility, firms are solely answerable to shareholders because they are the firm's legal owners. Instead of encouraging firms to voluntarily account for their activities and effects and improve their social and environmental performance (if it makes commercial sense), the corporate accountability movement thinks firms must be held accountable, which implies enforcement.

Corporate Accountability Vs Corporate Social Responsibility (CSR)

Sometimes the two names are used interchangeably or as synonyms. Yet, corporate accountability and CSR are usually separated in a subtle but significant way.

Both are predicated on the idea that companies have duties other than profiting their shareholders. One example is the responsibility to refrain from harming the environment, persons, or communities, as is the positive commitment to safeguarding society and the environment. One example is protecting the rights of employees and communities impacted by company activities.

Although accountability usually refers to more aggressive or enforced measures for influencing corporate conduct (pressure imposed by social and political actors other than the corporation itself), CSR often refers to voluntary initiatives. This involves using legal measures to set social standards (but is not limited to). As a result, yearly accountability reports are generated as a corporate accountability preventive act.


Rather than encouraging corporations to voluntarily account for their acts and effects to improve their social and environmental practices, the corporate accountability viewpoint believes firms must be held accountable - implying enforcement. As citizens, we must take sustainable development and social and environmental justice seriously. The moment has come to combine the efforts of rigorous governmental rules that would empower people to hold corporations accountable for their social and environmental performance and drive them to properly evaluate their social and environmental performance.

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