The Main Role Of Corporate Accountability - Essay Example

Accounting for accountability a critical evaluation of social; environmental and ethical expectations Discussing about corporate accountability needs a clear understanding of the social, environmental and ethical expectation of the parties involved in business. According to www.istheory.yorku.co, among the theories that proponents of corporate accountability have put forward is the stakeholder theory. It is emphasized that stakeholders are identified by their interests and all are considered to be intrinsically valuable. As a managerial tool, it recommends attitudes and practices and requires that attention be given to all legitimate stakeholders i.e. government, investors, political groups, suppliers, customers, communities, trade associates and employees. It is noteworthy that; it’s the linkage between these stakeholders that is important. Donaldson and Preston, 1995, (www.istheory.york.co) has expressed it diagrammatically. When corporation take responsibility for decisions that earn them profits in spite of their negative impact on degenerating environment, social and ethical issues their organizations/corporate have to be accountable. Some corporations report voluntarily while others are obliged to thorough policies and regulations; traditionally corporate use the inputs of investors; employees and supplies to convert inputs to salable outputs which customers buy and return to the firm some capital benefits. As evident in www.wikipendia.org, scholars that include Donaldson & Preston (1995), Mitchell, Agle and Wood (1997), Philips (2003) their supportive contributions that corporations should act both morally for operation and management of corporations. It’s on the same note that Friedman (2202) examines the implication of the relation between stakeholders and the organization Institutional theory or adoption theory according to Scott (2004) opines that there is no single or universally agreed definition of an institution. He terms it as social structures that have attained a high degree of resilience, this could by symbolic systems composed of negative elements that together with associated activities and resources provide stability and meaning to social relational systems, routines and artifacts. Studying corporate social responsibility (CSR) is in line with the institutional theory; proponents of this theory argue that business doesn’t operate in isolation from the rest of the society and a stronger link between the two facilitates a better understanding of the market. According to Deecan and Unerman, 2006 in financial accounting theory, they opine that CRS has a myriad benefits. It provides a competitive edge for smaller companies especially in this era when big corporations source supplies. It can also provide good reputation and branding as such firms pursuing more responsible business practices especially pertaining environmentally responsible products. Investment considerations nowadays are based on corporate social responsibility as general policies on accountability and governance are based on CRS guidance and reporting systems. Evident in www.wikipendia.org, scholars that include Donald & Preston (1995), Mitchell and Agle It is how short term decision carefully taken may result into social or environmental outcome information system and global diversity has brought a new dimension on viewing corporations. Legitimacy theory according to www.ecom.uwa.edu.ua, this is one of the fastest growing areas in social and environmental accounting (Campbell, craven et al 2003). Different scholars have varying views on what legitimacy is, however, it is worth noting that industrialization has been the underlying force tying time, country and legitimacy together. Suchman (1995) rightly emphasizes that institutional level legitimacy theory should be followed by an organizational level. When he says “perception or assumption that the actions of an entity are desirable, proper or appropriate within some socially constructed system of norms, values, beliefs and definitions. It is in www.ecom.uwa.edu.au that Sethi mentions about the complexity about legitimization as involving not only the type of corporate activities but also the process of internal decision making, the perception of external environment, and the manipulations of external environment to make it more receptive to corporate activities and the nature of accountability to the social institutions in the system” Conclusion Legitimacy theory provides the theoretical basis for understanding how and why management teams might use externally focused disclosure reports to enhance a company’s reputation and manage risk. The concepts embedded in legitimacy theory may be deemed to provide researchers with an invaluable tool that can be used to explain and comprehend corporate disclosure policies. The field is an exciting and rapidly developing area in financial accounting research related to corporate social and environmental reporting. In some areas of operational activity there is lack of regulation and economic situations. Globalization has led to new paradigms of human rights practices and labour practices, society and product responsibility indicators (www.grobalreporting.org.) Bibliography 1. Blattberg, C. 2004 from Pluralist to Patriotic Politics: Putting Practice First, Oxford and New York: Oxford University Press, ch. 6. ISBN 0-19-829688-6 2. Donaldson, T. & Preston, L. 1995. The Stakeholder Theory of the Corporation: Concepts, Evidence, and Implications. Academy of Management Review, v 20. 3. Freeman, R.E. 1984, Strategic Management: A stakeholder approach. Boston: Pitman. 4. Friedman, A.L. & Miles, S. 2002 Developing Stakeholder Theory. Journal of Management Studies, v 39, n 1, pp 1-21. 5. Mitchell, R.K., Agle, B.R., & Wood, D.J. 1997. Toward a Theory of Stakeholder Identification and Salience: Defining the Principle of Who and What Really Counts. Academy of Management Review, v 22, n 4, pp 853-886. 6. Phillips, R. 2003, "Stakeholder Theory and Organizational Ethics". (San Francisco: Berrett-Koehler Publishers) 7. Daines, H. C. 1929. The changing objectives of accounting. The Accounting Review (June) 8. Ahrens, T. and J. F. Dent. 1998. Accounting and organizations: Realizing the richness of field research. Journal of Management Accounting Research 9. Bacidore, J. M., J. A. Boquist, T. T. Milbourn and A. V. Thakor. 1997. The search for the best financial performance measure. Financial Analysts Journal 10. Borthick, A. F., P. L. Bowen, and M. C. Sullivan. 1998. Controlling JIT II: Making the system monitor itself. Journal of Cost Management 11. BELKAOUI, A. (1988), The New Environment in International Accounting: Issues and Practices. New York: Quorum Books. 12. (Riahi-)Belkaoui, Ahmed. International Accounting and Economic Development: The Interaction of Accounting, Economic, and Social Indicators. Westport, 2002. "Disclosure Adequacy and Country Risk," 13. BEAVER, W.H. (1977), The Nature of Mandated Disclosure. In: Security and Exchange Commission Report of the Advisory Committee on Corporate Disclosure. 14. Bailey D.,Harte G.,Sugden R., Corporate disclosure and the deregulation of international investment, Accounting, Auditing & Accountability Journal, 12 April 2000, MCB University Press. 15. Dye, R.A., Mandatory versus Voluntary Disclosures: The Cases of Financial and Real Externalities," Accounting Review 65, 1990. 16. Esty. D.C. and P.K.Cornelius, eds., the Global Report 2001-2002. 17. LATTA, G.W. & J.R. BELLACE (1983), Making the Corporation Transparent: Prelude to Multinational Bargaining. Columbia Journal of World Business, summer. 18. MUELLER, W.F. (1973), Corporate Secrecy vs. Corporate Disclosure. In: R.NADER & M.J.GREEN. Corporate Power in America, New York. 19. Wilmshurst T.D., Frost G.R., Corporate environmental reporting: A test of legitimacy theory, Accounting, Auditing & Accountability Journal, 7 March 2000, vol. 13 MCB University Press. 20. Szejnwald Brown, Halina; David Angel, and Patrick G.Derr, Effective Environmental Regulation: Learning from Poland's Experience. Westport: Conn. Praeger 2000 21. www.istheory.york.co 22. www.wikipendia.org 23. www.ecom.uwa.edu.ua 24. www.globalreporting.org 25. Deecan C and Unerman J, financial accounting theory, European edition McGraw hill, 2006. Read More