What Is Accountability?
Accountability is an acceptance of responsibility for honest and ethical conduct towards others.
In the corporate world, a company's accountability extends to its shareholders, employees, and the wider community in which it operates.
In a wider sense, accountability implies a willingness to be judged on performance.
- Accountability is the acceptance of responsibility for one's own actions. It implies a willingness to be transparent, allowing others to observe and evaluate one's performance.
- In the U.S. financial world, accountability includes a requirement that public corporations make accurate financial records available to all stakeholders.
- In recent years, there has been an increased focus on other elements of corporate accountability such as ethical conduct, environmental impact, a commitment to diversity, and fair treatment of employees.
Accountability has become an essential concept in corporate finance.
It is particularly relevant to the accounting practices that a company adopts when it prepares the financial reports that are submitted to shareholders and the government. Without checks, balances, and consequences for wrongdoing, a company cannot retain the confidence of its customers, regulators, or the markets.
However, in recent years corporate accountability has come to encompass the company's activities as they affect the community. A company's environmental impact, its investment decisions, and its treatment of its own employees all have come under public scrutiny.
Some high-profile accounting scandals in the past demonstrated that a public company cannot continue to exist if it loses the trust of the financial markets and regulators.
The erstwhile energy giant Enron collapsed in 2001, taking the venerable accounting firm Arthur Andersen with it after its false accounting methods were exposed. The global financial crisis in 2008–2009 revealed gross financial speculation by some of the nation's biggest banking institutions. The LIBOR scandal revealed currency rate manipulation by several London banks.
But many leaders have called for the creation of a new culture of accountability in finance—one that comes from within.
Each industry has its own standards and rules for accountability that may evolve over time. The rules for social media accountability are being written now.
Types of Accountability
At least three major institutions have a universal impact on citizens: corporate, political, and governmental accountability. Not surprisingly, they overlap each other.
At its most prosaic, accountability is about the numbers. Every public company is required to publish a financial report quarterly and annually detailing its income and expenses.
An auditor reviewing a company's financial statements is responsible for obtaining reasonable assurance that the financial statements are free from any material misstatements caused by error or fraud.
Accountability requires corporate accountants to be careful and knowledgeable, as they can be held legally liable for negligence. An accountant is responsible for the integrity and accuracy of the company's financial statements, even if an error or misstatement was made by others in the organization.
This is why independent outside accountants audit the financial statements. Public companies are required to have an audit committee within the board of directors. Their job is to oversee the audit.
Accountability is results-oriented. HP got top marks for environmental accountability after reducing its greenhouse gas emissions by 44%.
Political accountability in recent years has focused on money. Specifically, it requires transparency about corporate donations to political causes and candidates.
For example, the non-partisan Center for Political Accountability and the Wharton School at the University of Pennsylvania jointly publish an annual index rating the disclosure and oversight policies of major public corporations regarding their donations to political causes and candidates.
These scandals resulted in tougher regulations, and there are armies of regulators and private watchdogs working to make sure that companies report their earnings correctly, that the exchanges execute trades in a timely fashion, and that information provided to investors is timely and accurate.
The Center shines a spotlight on corporate spending to influence politicians. Recently, the Center reported in-depth on a campaign by the pharmaceutical industry to head off a proposal to allow Medicare to negotiate drug prices with vendors. The report named the names of members of Congress who accepted political donations from drugmakers.
The role of corporate cash is only one of the global issues regarding government accountability.
USAID, the federal agency that administers civilian foreign aid, defines measures government accountability by these key factors: a free and fair political justice system; protection of human rights; a vibrant civil society; public confidence in the police and courts, and security sector reform.
The media in the U.S. is uniquely protected by the First Amendment from interference by Congress. This does not mean that it is free from accountability.
The media have long been under the constant scrutiny of a number of watchdogs, internal and external. In the internet era, these have been augmented by independent fact-checking organizations such as FactCheck.org, Snopes, and PolitiFact.
These and other organizations monitor the media for bias and errors and publish their findings for all to see.
Social Media Accountability
What if a publisher had 2.8 billion contributors, and all of them were free to say whatever they wanted?
That's roughly the position that Facebook is in, although it is arguable whether the social media site is or is not a publisher. In fact, denying that it is a publisher may be a good defense strategy for Facebook, which is now under fire for spreading dangerous misinformation and providing a platform for hate speech.
At this writing, some are proposing that Facebook be held accountable for the posts it publishes, or the ways in which it promotes and distributes those posts to its vast membership.
The standards for accountability have still to be written for social media.
Examples of Accountability
Corporate accountability can be hard to quantify but that doesn't stop anyone from trying.
The publication Visual Capitalist ranked the best performing U.S. corporations on environmental, social, and corporate governance issues. The top performer on environmental issues was HP, which has decreased its greenhouse gas emissions by 44% since 2015. General Motors got the highest marks for social responsibility as the only U.S. company with a woman as both CEO and CFO. Qualcomm topped the list in corporate governance due to its introduction of STEM programs for women and minorities.
Here are answers to some commonly asked questions about accountability.
How Is Accountability Defined in the Workplace?
To management coaches, accountability in the workplace goes beyond giving each employee a task to complete in a project. It also means making each individual accountable for the success or failure of their contribution to the overall project.
In other words, it's all about ownership of success—or failure.
What Is the NIMS Management Characteristic of Accountability?
The National Incident Management System (NIMS) was developed by the U.S. Department of Homeland Security as a guide for government, non-profit, and private entities working together in response to a major incident or emergency. Any entity that wishes to receive Federal Preparedness grants is required to adopt the system.
NIMS contains 14 key characteristics that make the system work efficiently in a crisis. One of these is accountability. The system requires emergency responders and managers to be accountable for their own actions at the site of an emergency, and for communicating those actions accurately to others.
What Does the Government Accountability Office Do?
The Government Accountability Office is the audit agency of the U.S. government.
It evaluates the effectiveness of U.S. programs and proposed programs. For example, one of its ongoing reviews examined the effectiveness of $4.8 trillion in federal spending related to the COVID-19 pandemic and made recommendations for changes to prevent misuse of funds, fraud, and errors in relief payments. Interestingly, the agency's own reporting indicates that only 33 of a proposed 209 recommendations for improvement had been "fully adopted" as of the end of October 2021.
What Is Drug Accountability?
Drug accountability is specific to the requirements for the proper conduct of clinical trials in the pharmaceutical industry. The part of a clinical trial termed drug accountability requires the proper storage, handling, dispensing, and documentation of drugs during a trial, ending with the destruction of leftover supplies of the drug.
A component of drug accountability is a daily log recording the use of drugs in a clinical trial. This is required by the U.S. Food and Drug Administration.
What Is the Difference Between Accountability and Responsibility?
A responsibility is an assigned (or self-assigned) task or project. Accountability implies a willingness to be judged on the performance of the project.
Accountability does not exist in a vacuum. It requires transparency and effective communication of results with all parties that may be affected.
The Bottom Line
Accountability can be a management buzzword. Or, it can be a real framework for evaluating the success or failure of an individual or an entity.
The concept of corporate accountability has always meant honest and transparent financial reporting. In recent years that concept has expanded to encompass a corporation's performance and responsiveness to environmental, social, and community issues.