Accountability

Accountability is a concept that refers to the state of being liable and answerable to someone for something. Accountability is important in democratic societies because it seeks to redress power differentials and information asymmetry by institutionalizing rights to information. In organizational settings, accountability is important because, according to agency theory, managers cannot be expected (or, rather, trusted) to provide full disclosure of information in all stakeholders’ interests. Without accountability, managers and organizations are assumed to resort to opportunism. This entry covers the types of corporate accountability, the ingredients of accountability, questions of measurement, organizations’ responses to the need for accountability, and the linkages between accountability and corporate reputation.

Types of Accountability

Accountability can be thought of in at least two ways. The ideal form of accountability is when there is a direct relationship between a principal and an agent, where the account giver has a legal duty or mandate to provide an account. What is thought of as soft accountability is when the legal mandate is not present but there is still a legitimate one. This is the case for most organizational-public and -stakeholder relationships.

Ingredients of Accountability

[3] Accountability is about the liability, willingness, and ability to provide, and the expectation and act of providing information, by one party to another where the accountable party explains or justifies his or her actions to the other party, who is legitimately owed the explanation. Accountability contains a number of key components. First, accountability requires the presence of another, an interested party seeking an account. Second, accountability requires that there is a linkage between the accountable party and the object of the account. That is, the accountable party must be linked to what he or she says or does. Third, accountability requires that the object of accountability can be observed, measured, monitored, and evaluated and that its observability, measurement process, and levels all be identifiable and, ideally, agreed on by the interested party and the accountable party. Fourth, there must be some consequence in response to the meeting of or failure to meet the expectations. Fifth, and relatedly, the accountable party must be capable of being fully responsible and accepting full responsibility. For example, midlevel managers may not have a high enough position in the organization to assume full responsibility. Individuals under the age of 18 (or older depending on the matter at hand) may not be fully liable, but instead, their parents will be. Finally, accountability requires an act of account giving, that is, some form of explanation or justification for what the accountable party says or does.

Thus, accountability involves the giving of information, the evaluation of the information, and the evaluation of the way in which the information was received. The information within the account must be reliable, qualitatively satisfying, understandable, and accessible. For example, efforts to demonstrate accountability should be met with interactional justice, which is how people were treated interpersonally during the act of accountability. Two types of interactional justice are interpersonal justice and informational justice. Interpersonal justice involves whether or not people felt that they were treated with dignity or respect. Informational justice concerns perceptions of fairness about the explanations people receive about the decision-making process and outcomes.

Measurement

Research measurement has been one of the primary mechanisms by which organizations and their agents have been held accountable. Organizations rely on research, measurement, and evaluation to observe, improve, build on, and account for their performance. The saying is what gets measured gets done. Measurement is the means by which agencies and consultants who advise companies on their reputation, management, and monitoring account for their activities on behalf of their clients. Internally, measurement is how those in marketing and communication document their contributions to the organization’s bottom line through increased sales or other forms of organizational performance. Such activity enables them to justify their jobs and their departments’ budget sizes. It is one of the primary mechanisms that communication officers need to earn a seat at the management table and participate in high-level policy conversations that have an impact on corporate reputation.

Organizational Responses to Accountability

Organizations have a number of responses to the need for accountability. The most direct and expected response is for organizations to improve their performance on the dimensions that matter to their stakeholders or those to whom they are liable. Organizations also have a number of communicative responses, including advertising and promotion, disclosure through public filings, annual reports and annual conference reports, board meetings, and publicity through media attention. Ironically, although organizations are encouraged to be accountable through communication, simple efforts at accountability are met with resistance if the accounting is too self-promotional or optimistic. As a result, more indirect methods that involve dialogue, stakeholder engagement, and audience participation are often seen more favorably.

The trade press and the news media are important third-party mechanisms for holding organizations accountable because they are able to report on nonvisible and intangible aspects of organizational performance that cannot be observed directly by most audiences. Often, trade press outlets self-censor negative reports about the companies they cover, and the traditional news media only devote a limited amount of attention to organizational news. Sometimes the news media face criticism for not having the financial and business skills necessary for reporting on companies. Social and stakeholder media have created new platforms for holding organizations accountable to varying degrees, enabling organizations to respond to a much wider range of stakeholders and in ways that enable third parties and other secondary audiences to witness organizations accounting to primary audiences. Recent research has shown that there are a number of online platforms and digital, open spaces where organizations can engage their stakeholders, but in large part, most of these spaces remain empty of dialogue. Nevertheless, benchmarking research shows through the multitude of channels available that there are best practices available for each, providing opportunities for organizations to employ models guiding their behavior. There are also examples of corporate actions that are seen to demonstrate a lack of accountability. These include strategic silence and strategic inaction.

There are also a number of reactive strategies that organizations use to demonstrate or signal accountability. Organizations can apply preemptive action by addressing their critics before their critics call them out. They can engage in a number of behaviors that signal rectification, including conducting internal investigations, taking corrective action, engaging in restitution, or corporate repentance. One common example of a corrective action is the dismissal of the CEO or board members following poor financial performance. Organizations are able to obfuscate their accountability efforts by transparency signaling or aligning their disclosures with the reporting requirements of the agencies to which they report.

Not all organizational accountability strategies lead to perceptions of accountability. For example, defensive responses such as denials, excuses, or justifications only fulfill some aspects of accountability (giving an answer). Yet offensive responses of attack, embarrassment, shock, or threats and diversionary responses including concessions, ingratiation, disassociation, and relabeling miss the mark entirely. Other strategies organizations use to avoid accountability include decoupling (breaking the link between talk and behavior) and category straddling. Decoupling allows organizations to derive legitimation benefits from discussion of changes stakeholders make without actually changing anything, while subverting the process of independent verification and authentication.

Unfortunately, knowledge of stakeholder responses to accountability efforts by organizations also has the potential to undermine society. For example, research has shown that companies that fully disclose their bad behavior receive less negative media scrutiny than organizations that deny or do not disclose their bad behavior.

Accountability and Reputation

Corporate reputation was supposed to be a mechanism by which to hold organizations accountable. It has succeeded to varying degrees. The reason is that not all organizations care about their reputations. For example, airport fast-food restaurant stands are often criticized for having unhealthy meal options, expensive prices, and sometimes poor quality. One explanation is the limited number of choices, but another is that the high traffic running through the airport means they are likely to have limited repeat business. Travelers often have to rush to take their flights, with limited opportunity to complain, provide feedback, or seek solutions. Still other organizations avoid (public) accountability by being hidden, secretive, or anonymous.

The news media are supposed to be one mechanism holding organizations accountable to society. Research has shown that increased media attention (regardless of whether it is positive or negative) does lead to improved corporate social performance, such as increased philanthropy. On the other hand, increased media attention has been shown to have limited to no effect on weaknesses in corporate social responsibility. The emergence of online media, such as bloggers, stakeholder and social media, and mobile media, has led to challenges to the traditional watchdog role played by the press and has helped to make up for their lapses.