The Morality and Accountability of Corporate Decisions

In our previous discussion we have come across the fact that it is hard to establish the accountability and responsibility of corporate decisions but does this mean that a corporation can take infinite liberties with the flexible law structure and systems ? Is it possible for corporate decisions to be moral with social goals met along with the business ones ? Before we dwell deeper into discussing the aspects of corporate decision making, it would be appropriate to understand the expectations of the communities from the corporate.

Community members want jobs which would give them descent income or wage as well as which challenges ingenuity and creativity, they need goods and services which are of a descent quality and a safe and healthy work environment.

Community members also want their share of interest in the corporation either as an employee, shareholders, suppliers, creditors or just as neighbors. There is a certain level of trust and agreement whether written or otherwise which exists between the corporation and these constituents. These agreements are sometimes between the corporation and its employees, suppliers, creditors and while some other agreements are imposable by the legislature.

The public law provides a platform on which the corporations can decide their transaction with these constituents while also providing them the flexibility to expand and contextualize them as per their needs. The legislature is to ensure that the objectives of the corporation are beneficial for the society as a whole and there is no conflict of interests.

Another significant aspect of this discussion is that both the government and the business have always influenced each other liberally. So a senior corporate chief who makes political contribution with an open heart may have a strong impact on the laws created by the government regarding the competition.

The ideal state for the corporate is the free market where there is minimum interference from the government. But, the recent economic crisis has brought the question of whether to have a free market or not, once again into the foray of discussions. However, the governments have always been rather proactive in making accommodation for the business where the long term societal needs and financial implications are overlooked.

Above all, the biggest factor which influences, directs and redirects the decisions of the corporate is the market itself. With the corporations spreading across the globe, it is difficult to determine their domicile and therefore the need to have a more congruent corporate governance structure arises. It is also important that corporations base their decisions on long term strategic and financial planning rather than engaging in short term profits and gains. The impact of corporate decisions are huge not just on economies but on the lives of the common man as well.

To go by the directions provided by the World Bank for the emerging economies, the three points have been identified:

  • Transparency
  • Independent Oversight
  • Accountability

In order to maintain its legitimacy and credibility the corporate would have to base their decisions keeping the above parameters in consideration. The self regulation by corporate remain a distant possibility in the near future, especially in the wake of the current economic crisis, the role of legislature and government becomes paramount in ensuring that the larger interests are not compromised.


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Corporate Governance