Corporate governance and accountability are intertwined in organizations, with governance being a framework that safeguards stakeholders’ interests, and accountability being the obligation to uphold operations and business activities. They promote fairness, ethical behavior, and transparency, and are crucial for publicly traded companies to secure future funding. The general public also looks at a company’s governance structure as a disciplinary system to correct inappropriate behavior.
Corporate governance and accountability are two business features that are often interrelated in organizations. Corporate governance is a framework of policies or procedures that help safeguard the interest of various stakeholders in the business. Stakeholders include owners, directors, board members, managers, employees and the general public. Accountability is the obligation – perceived or real – that a company must uphold for its operations and business activities in society. These items connect because many companies implement corporate governance that sets goals for remaining accountable to the company’s internal and external stakeholders.
While the corporate governance framework is often unique to individual organizations, it can contain universal principles that are often operating procedures. Corporate governance and accountability provide a focus for business practices that promote fairness, ethical behavior and transparency. The framework generally provides information about how a company interacts with other companies through contractual arrangements, procedures for reconciling conflicts or disagreements between stakeholders, and the development of a system of checks and balances between managers, employees, and business departments.
Responsibility is the responsibility of completing business functions. It’s not enough to simply complete a function as quickly or easily as possible; most organizations require individuals to follow standards and guidelines. Standards and guidelines can come from senior management, government regulators, third-party organizations, or societal norms. Organizations must be accountable to these standards and guidelines, because variations to them can create a distorted view of the company’s true operational or financial health. Individual workers can also intentionally manipulate a company’s information for their own personal gain, damaging the organization’s reputation and goodwill.
Corporate governance and accountability are especially important for publicly traded companies. These organizations rely on their governance structure and past accountability performance to secure future capital funding from investors, investment firms and private investors. These groups can review the corporate governance framework from public reports to see exactly how a company attempts to control its operating environment. These statements can be compared to activities a company engages in to ensure it uses accountability to maintain a strong relationship in the business environment. A disconnect between corporate governance and accountability practices can lead to a company’s unfavorable reputation among investors and the general public.
The general public also looks at a company’s corporate governance structure, as the disciplinary system used by organizations to reprimand owners, directors, managers and employees who fail to account for business operations. The ability to correct inappropriate behavior is often necessary so that companies can remain an ongoing concern and avoid negative business situations due to poor corporate governance and accountability.
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