Corporate Accountability

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Description of Corporate Accountability. Explanation.

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Definition Corporate Accountability. Description.

Corporate Accountability is a broad term that refers 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 countries or regions that the firm operates in.

In fact, one can distinguish three forms of accountability:

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 at all three above levels when thinking about accountability are:

To whom is an organization or individual accountable?
For what is this organization or individual accountable? Purpose of the organization, Shareholder Value Perspective, Stakeholder Value Perspective.
How is the accountability organized? (Mechanisms: by law, public reporting, public pressure, election, Organization Chart and 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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End of description Corporate Accountability. An explanation.