In a risk averse, blame attributing society, accountability is often seen as a way of shifting responsibility.
But it should be a process that helps businesses manage risks, protect existing value and enable further value-creation.
A company’s board is publicly accountable for its successes and challenges. This means demonstrating responsibility for its decision-making.
But accountability is more than meeting regulatory requirements or explaining how things went wrong, it is about holding others to account and being accountable to others.
Why provide accountability?
Accountability and transparency go hand-in-hand.
While not all decisions can be shared outside the business, the right tone can be established for shareholders and wider stakeholders through the way a company communicates its strategy, risks and results.
They should be able to understand a board’s decision-making process: its responsibility, challenges and how it plans to address them. Informed investors can weigh up the risks and make their own judgements; the ill-informed can only react, or overreact, to events.
Demonstrating accountability – particularly in the annual report – gains stakeholder trust and earns capital; be it investment funds, supplier working capital or the commitment of employees and customers.
But accountability is not always easy to demonstrate. We find consistently in our Corporate Governance Review that while companies are typically good at explaining what they did, they often provide less detail around why they did it.