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Corporate Accountability

By:   •  July 5, 2012  •  Essay  •  997 Words (4 Pages)  •  889 Views

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Corporate accountability is a broad term that is described in the following way according to 12 Manage -The Executive Fast Track (2011): "The moral or legal obligation for companies of being accountable to the shareholders or the stakeholders of the organization or even society as a whole". The problem with corporate accountability lies in who has the authority to ensure that increasingly large multinational corporations are accountable for their activities, accept responsibility for their actions, and disclose information in a transparent manner. Due to corporations wielding significant economic influence and having operations on a global scale, there has arisen an imbalance between political and economic power, allowing corporations to act outside the best interest of individual nation states, environmental safety and human rights, in the name of profitability.

When considering corporate accountability, two questions arise: "to whom is a corporation accountable to?" and "for what is a corporation accountable for?" In simple terms, the majority of the world's largest corporations are publicly traded, and therefore are legally responsible to their shareholders for the generation of profit above all other interests and concerns (Hinkley 2002). This lends significant insight into the motivation of a corporation. Corporate actions are viewed through the lens of profitability and factors negatively affecting profitability are sought to be minimized or eliminated. Unfortunately this often include serious issues such as environmental safety and human rights. The question then is "to whom and for what should a corporation be accountable for?" Ideally, a corporation should be accountable to the nation and society in which it operates, for any action it commits that has a negative impact on that society as a whole, environmental, economic or ethical. Herein lies the corporate dilemma: accountability affects profitability, therefore it is in the best interest of corporations to be accountable for as little as possible.

Corporations have, over the years, extensively lobbied governments for less stringent regulation, further restricting the ability of governments to control corporations and protect both the environment and human rights. Their motivation is simple: regulations cost money and impact potential profits, such as in the case of the so called "Halliburton Loophole" (The New York Times, 2009) Clearly profit is deemed more important than safe drinking water. Often corporations which are lobbying for such changes are large corporations with powerful lobby groups who can provide governments with very strong positive or negative financial incentives in the form of campaign support, bribes, or the threat of moving operations elsewhere. In difficult economic times, governments often compete for jobs from such corporations, placing the governments in difficult situations. Deregulation tends to shift the burden or consequences of corporate actions away from corporations, further eroding the ability of governments to hold corporations accountable. Additionally, the multinational trades agreements such as NAFTA or the World Trade Organization further weaken democratic control over corporations, giving corporations the opportunity to dispute regulations that affect profitability. A good example of this would be the case of the Ethyl Corporation vs Canada in the case of the de facto banning of the gasoline additive MMT. The intent of the Canadian government was clear (environmental concern), and the NAFTA rules were used by a corporation to override those concerns. Thus a corporation is able to exert a degree of control over a government through NAFTA (Kim, Franco and Kong, 2005).

With corporations limiting the ability of domestic governments to hold them accountable for their actions, how can corporations be held accountable? In recent years, there has been a rise of consumer activism fuelled by citizens and consumers around the world who are alarmed by the power these corporations wield and the inability of their own governments to deal effectively with this issue. If there is one cause


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