130130
T H E I N T E R E S T S O F
T H E S H A R E H O L D E R S
A R E O U R O W N
ACCOUNTABILITY AND GOVERNANCE
A
ccountability is the
obligation of an individual
or organization to accept
responsibility (be accountable)
for their actions. In business,
it is often used to trace chains
of responsibility: staff may be
held to account for their actions
by those above them in the
organization’s hierarchy; or higher
tiers of management may be held
accountable for those below them.
Ultimately, the way the company is
governed is the responsibility of the
directors; their governance should
therefore be proactive and ethical.Following a series of business
disasters (from Enron through to
Lehman Brothers and numerous
banks), corporate governance has
become a major issue worldwide.
To achieve effective accountability,
directors need to make sure that
roles and lines of authority are clear.
This makes it possible to trace the
cause of a mistake to its source—
and attribute responsibility to
the right person or group. For
governance to work well, board
members must be well-informed,
fully independent, and should work
together for the long-term interestsGood governance relies on......proactive, ethical,
well-informed
directors....clear, traceable
lines of
responsibility....alert board
members.IN CONTEXT
FOCUS
Executive controlKEY DATES
1981 Australian-born US
management consultant Peter
Drucker suggests that chief
executives “have not yet faced
up to the fact that they
represent power—and power
has to be accountable.”1991 The Cadbury Committee
is established in the UK to
investigate scams, failures,
and accountability in corporate
governance. Its influential
report, Financial Aspects of
Corporate Governance, is
published a year later.2002 The US government’s
Sarbanes-Oxley Act sets out
much stricter guidelines to
govern accounting practices
and the publication of
previously confidential
data (such as operational
business risks).