Importance Of Corporate Accountability

1152 Words5 Pages
2.2.4 Corporate Accountability (CA) Corporate accountability is also used as a component part of CSR as well as a synonym of CSR. Accountability is one of the processes which a firm adopts to ensure integrity. Accountability is among the fundamental challenges of contemporary organizations in society. A rational firm must align the demands, interests, expectations and values of multitude stakeholders with its core economic activities. Corporate accountability is a fractional part of CSR. A socially responsible firm must be accountable in all aspects. Several researchers have reported in the literature, a growing demand for firms to report their CSR activities. Reporting their CSR activities will prove them as more ethical, transparent,…show more content…
Most of the arguments are in support of the idea of Freeman (1984), and other stakeholder theorists. The summary of the argument is that firms must operate in such a way that would fulfill society’s demands. According to Faris et al (2012), companies engage in CSR programs in order to reduce public criticism and discourage further government involvement into their business territory. This involvement is sometimes considered a defensive approach designed to offset possible government action against those in the business cycle who depleted the environmental resources without caring to offer back part of it to the immediate constituents. Firms must understand that society is a “system” which constitutes corporate entities and other stakeholders as well and of which are…show more content…
The superior dimension of this argument in the literature revolved around the primary motive of forming any business which is „profits making‟. This argument falls within the position of average stockholder theorists, who asserted that the primary purpose of establishing any business is to maximize profits, therefore having firm‟s management engage in any matter other than a profit maximizing goal is amounting to jeopardizing shareholders interest. This is in line with the economic argument of Fiedman (1970) against CSR. According to him, the primary responsibility of business is to make profit for its owners, albeit while complying with the law of land. Friedman further stressed that, the concern of any business is to make profits and to maximize shareholders wealth. This has practically contradicted the fundamental ideas of most contemporary businesses considering how they are increasingly becoming involved in social and environmental issues. Friedman (1970) viewed business as an economic institution and not a social one. Therefore, in as much as business is able to discharge its fundamental functions, manage its affairs efficiently and operate within the law of the land, any social issue should be addressed by government. Thus, firms are only responsible to shareholders when they become involved in social matters otherwise these corporate

More about Importance Of Corporate Accountability

Open Document