What Is Corporate Accountability?
Corporate accountability refers to the public company’s performance in other areas, like social accountability as well as sustainability as well as corporate management. Corporate accountability believes the idea that the financial results shouldn’t be the only goal for a company in the first place. It also argues the fact that shareholders aren’t the only ones that a business must be accountable. In reality, it encompasses individuals like employees and other members of the community as people who are accountable.
Understanding Corporate Accountability
Businesses are usually motivated by profit. Therefore, they are accountable to shareholders, whether that’s their leaders, investors, or any other parties. However, many believe that the business’s profits aren’t the only driving factor. Businesses, as well as their leaders, must be held accountable for their decisions. This can be done by imposing corporate accountability.
As mentioned previously, corporate accountability is when a company is responsible for all its actions. This could include its financial viability (or the lack of it) and, most importantly when it comes to areas such as social accountability or sustainable development. That means that companies are accountable to not just their financial partners, but as well to other stakeholders like their employees, people in their community, as well as the general public.
Corporate accountability argues that companies are accountable for the consequences of their activities on the world and its environment. It’s also a key idea for shareholders and investors who are concerned about ethical investment. This is a method of choosing investments that are based on ethical standards.
Many publicly traded corporations publish their own corporate accountability statements to meet the demands of their shareholders as well as the general public. It is also a part of the annual financial statements that require the Securities and Exchange Commission (SEC) demands corporations to publish. Private entities, that aren’t associated with a government entity have set standards for environmental and social accountability that they require public corporations to comply with.
There are four general principles of corporate governance that are usually a part of accountability for corporate entities. They are people, purpose as well as process, and performance.
History of Corporate Responsibility
The federal government doesn’t have the authority in regulating corporations except when specific laws are adopted. The enactment of such legislation has historically required an effort by the public to persuade politicians are required to regulate certain procedures.
One of the first efforts included the effort to stop tobacco advertising and to declare tobacco products hazardous, leading to the passing in 1969 of the Public Health Cigarette Smoking Act. The law prompted public outrage against radio and television ads that entice new smokers, without taking into account smoking as harmful, as well as an extensive Office of the Surgeon General report which outlined the particular risks to the health of smoking cigarettes.
The subsequent campaigns advocated for additional public health initiatives, environmentally sustainable or sound business practices, as well as social justice issues, such as corruption, bribery, or corrupt practices. Sometimes, initiatives are initiated by certain events like periodic campaigns to regulate the practices of oil companies following highly publicized oil spills. A number of non-profit organizations like Corporate Accountability International and Friends of the Earth have instructions to push for more corporate accountability in specific campaigns.
Corporate Accountability Reports
The growing popularity of these developments and the increased concern over responsible investing and ethical investment has led to many companies preparing annual corporate accountability reports. There isn’t a standard template for these reports and they differ sector from industry to industry. However, many private companies provide guidelines or services to help companies monitor their accountability and assess their conduct.
Corporate accountability reports can act as excellent publicity for a business. Common reports include sections about the management of employees, the efforts to make products or services in an environmentally sustainable manner, company culture and internal management, as well as quantifiable estimates of the externalities – both positive and negative of the business practices of companies.
Corporate Accountability in contrast to. Corporate Social Responsibility (CSR)
What is the difference between the terms corporate accountability (CAR) as well as CSR or corporate social accountability (CSR)? The two terms can be mistaken for one another or are viewed as identical. But CSR and corporate responsibility CSR are often different from each other in a manner that appears subtle but is significant distinctions.
The two are both based upon the idea that corporations are accountable for more than earning a profit for shareholders. This includes the duty to prevent from harming the environment, individuals, or even communities, and the duty to safeguard the environment and society. For instance, it is important to safeguard the rights of employees and communities that are affected by business activities.
In general, accountability refers to more threatening or enforceable methods of influencing the behavior of corporations (pressure applied by political and social actors that are not part of the company), CSR often indicates the use of voluntary strategies. These actors may employ a variety of strategies. This can include (but isn’t limited to) mobilizing legal mechanisms to enforce social norms. In this way, the measure that prevents corporate accountability is the production of annual reports on accountability.