“It is wrong and immoral to seek to escape the consequences of one’s acts.” (Mahatma Gandhi)
“Accountability breeds responsibility.” – Stephen R. Covey
In this chapter you will accomplish the following learning objectives:
- You will understand accountability principles as they relate to responsible management (RM)
- You will understand some behavioural methods towards achieving RM
Five years ago, Richard Thaler and Cass Sunstein published Nudge: Improving Decisions about Health, Wealth and Happiness, a book that asked us to fundamentally change the way we think about how policy is made. Nudge challenged the prevailing approaches to policy-making and governance that were grounded in the appealing idea that human beings are rational decision-makers, cognitively sophisticated enough to process all relevant information and unswayed by emotion. It presented several years’ worth of research to demonstrate that, by contrast, our decision-making is surprisingly malleable and therefore dramatically influenced by context. And if that is the case, Thaler and Sunstein asked, is it not possible to create the context that steers people toward the right choice (or at least the one we believe brings about the greatest common good)?
Given that government budgets are shrinking and public opposition to taxes and bans is growing, nudging offers a good way to accomplish social good without the associated inefficiencies of traditional policy instruments. But while the deluge of recent evidence in favour of nudging has assuaged some of the criticisms, some concerns still make the rounds.
The first of these concerns is that nudging is manipulative: the citizen is being tricked by the technocrat into choosing a certain path. Yet one of the most fundamental goals of human enterprise is to influence and persuade others to follow a path– we are always being nudged. If nudging is manipulative, then so too are many interactions that we routinely accept as fair, from advertising to parenting and teaching, from selling to the cornerstone activity of democracy: asking for a vote.
A second criticism is that we should be using education and not nudging to achieve our policy goals, reflected in the idea that education is empowering, nudging is demeaning. This argument would have merit if the proponents of nudging wanted to convert all policy and welfare interventions into nudges. They do not. Nudging is most effective in initiating actions, such as getting someone to open a bank account or visit a doctor, whereas education is paramount in nurturing activities, like managing a portfolio or leading a healthy lifestyle. The educating versus nudging debate is a false choice. The appropriate question is how to use these two approaches in tandem.
What can be done, then, to spread the word of behavioural insights and embed them more often in our policy choices? One of the key differences between the traditional and the behavioural approaches to economics is the nature of the science. The traditional approach is theoretical: it makes certain assumptions about the decision-makers and proceeds to make specific predictions about their choices. The behavioural approach is empirical. It essentially points to the data as the primary source of insights. It is imperative to build a widely shared, open-source database that measures the outcomes of various behavioural interventions and guides policy-makers on the suitability of nudges.
We now have some experience with nudges in action and its implications. We know, for example, that people are paralyzed when faced with too much information. The behavioural approach leads us to advocate for providing people with relevant and meaningful– but not copious– information, in conjunction with decision-making tools that organize information in meaningful ways. These “choice engines” could take the form of online Web-based tools or mobile smart-phone apps, what Richard Thaler and Will Tucker recently referred to as “smart disclosure.”
Nudge is not a panacea for all the problems that confront us. But it is showing itself to be an effective way to encourage socially beneficial behaviour. Most importantly, by getting our policy leaders to focus on how people actually behave rather than on unproven assumptions of economic rationality, the nudge approach kindles a fresh way of looking at problems, offering hope where we now see only obstacles.
As shown in the example in the section abobe, the principles of nudging as described by Thaler (1) can be used to change individual behaviour – and in the example, with policy-makers, towards ensuring responsible and accountable behaviour. Very specifically, Thaler states that “all nudging should be transparent and never misleading; it should be possible to opt out of the nudge, preferably with as little as one mouse click; there should be a good reason to believe that the behavior being encouraged will improve the welfare of those being nudged” (p. BU6).
An important part of responsible management enacted through sustainability and CSR is the concept of accountability. Organizationally or individually, the promise of actions remains a set of intentions until they are implemented and when this is done, stakeholders will want to verify and hold to account the responsible parties. This concept as a way of modifying behaviors supports the governance concepts of firms (2). This accountability mechanism could be used as a way of nudging towards responsible management.
Accountability bears many definitions and interpretations but at its core, accountability is the process where one party holds another party to account by imposing rewards or sanctions as a consequence of a particular conduct (3). Accountability is a mechanism that is discussed in agency theory as a way to control agents who are in themselves trying to maximize their own utility (4).
Accountability can also be viewed as a process or an outcome (5). In either case, there is an expectation that there is an element of control or exercise of power between the stakeholders and the one who is responsible for the accounting; an exchange of information needs to take place in the context of transparency and ideally, stakeholders have the power to punish or sanction the account holder. An example is the discourse and ultimately exercise of power, through electoral changes exercised on the Ontario Liberal government during the implementation and then closing of gas-fired utility plants in Ontario in 2011 (6)(7). There was a flurry of blog postings by readers of the Toronto Sun, the Globe and Mail, and the Toronto Star around this issue with the discourse focused on transparency and accountability – eventually and arguiably leading to the resignation of a sitting provincial premier and extensive discourse about a lack of accountability on this issue from an incoming premier (extensive details can be read from the Standing Committee on Justice Policy (SCJP) report of the Legislative Assembly of Ontario available at https://www.ola.org/en/legislative-business/committees/justice-policy/parliament-41/reports/the-cancellation-relocation-gas-plants-document-retention-issues).
A lack of accountability can result in behavior that favors one party without considering consequences on other individuals. High profile scandals can be easily sourced through an internet search which would lead to reports on the Enron Scandal of 2001, the WorldCom Scandal of 2002, the Freddie Mac Scandal of 2003, the Lehman Brothers Scandal of 2003 and in Canada the SNC-Lavalin affair involving both government and business. Accountability scandals from broader societal issues such as the #Metoo movement (see Figure 1), the #BlackLivesMatter movement, the Missing and Murdered Indigenous Women and Girls movement, and other current issues have stemmed from individuals pursuing personal or financial gains without considering social context and from systemic inequalities perpetuated by individuals or organizations wilfully ignoring or ignorant of societal context. It speaks to the strength of stakeholder activism that these individuals have been held to account or that organizations and institutions are being held to account for their lack of social responsibility.
At the organizational level, accountability problems can result from breaches of codes of conduct and ethics by individuals or groups of individuals (research the Enron scandal mentioned in the previous paragraph for example). Social accountability where societal groups exert a requirement for accounting from perpetrators (3) is visible when societal inequality issues are highlighted as discussed in the previous paragraph. Cases that also impact the environment such as the Deep Water Horizon disaster which created an environmental sustainability problem in the Gulf of Mexico in 2010 (see Figure 2) are also held up as particular examples where society expects the responsible parties to be held to account for perceived negligence.
Accounting for sustainability at a consumer level brings in the discussion of greenwashing. Particularly prevalent in consumer markets, the practice of greenwashing is one where claims for a particular outcome or process usually linked to ecological sustainability are not borne out by actual performance. Greenwashing may be used to gain market share but when organizations promoting greenwashing claims are ‘caught up’ in their false claims, the backlash or accounting for bad practices expected by society can cause financial stresses. For example, consider the backlash from the information in the late 1990’s that Nike factories in Southeast Asia used child labour as opposed to the positive branding that was promoted at that time by Nike; or the more recent MetoWe backlash on its claims of doing social good, signals to stakeholders in particular and to society in general, that the organization in question needs to be punished or account for its misleading claims.
Accounting from a social viewpoint is fraught with ethical and moral dilemmas. From the Canadian perspective, accountability for colonialism and unfair and illegal treatment of indigenous peoples (First Nations, Inuit, and Metis) resulted in the Truth and Reconciliation Commission and a set of recommendations ((8); see Figure 3 – more information can be obtained through https://nctr.ca/about/history-of-the-trc/trc-website/). There are continuing calls for accountability from authorities and judicial bodies for continuing instances of discrimination and wilful neglect in situations such as cases of missing indigenous women; neglect of infrastructure requirements (potable water for example); and a requirement for greater stakeholder involvement in the negotiation of land passages for pipelines and extractive industries. The discussions around acts of inhumanity and abuse at former residential schools continues to require a variety of stakeholders and administrators of these institutions to account for their actions to the people they were meant to serve. Although current Canadian society is viewed as tolerant and accepting of societal multicultural viewpoints, the historical and colonial heritage requires the accounting for past actions. The power to exercise accountability is then wielded through stakeholder activism and subsequent media visibility.
Finally, accountability as a backward looking process can be powerful but it should also be considered as a forward looking mechanism. Organizational and individual behaviour can be modified using ethical and moral aspirational goals such as the United Nations Sustainable Development agenda. Returning to the nudging principles described by Nobel-winning economist Richard Thaler, the UN SDGs can be used as behavioural nudging instruments to encourage responsible management of organizations through processes encompassing all aspects of sustainability and CSR.
It is fitting that when viewing accountability, nudging towards principles in alignment with CSR and sustainability will help minimize the need to force individuals and organizations to account for misbehaviours and instead lead them to report positively on their actions. This will be the topic for the next chapter.
Your key takeaways may be:
- that accountability is not just a responsibility but a need for organizations;
- that accountability continues to be an issue that affects organizations of all types.
If you are interested in reading about accountability processes, read Brandsma & Schillemans (2012):
Brandsma, G. J., & Schillemans, T. (2012). The Accountability Cube: Measuring Accountability. Journal of Public Administration Research and Theory, 23(4), 953–975. https://doi.org/10.1093/jopart/mus034
In the context of sustainability, investors value the information that firms provide to account for their actions as described by Hawn et al. (2018):
Take some time to reflect on how you would answer the following questions:
- At a broad level, what is meant by the term “accountability”
- What is meant by the term “greenwashing”?
- Why would organizations want to engage with greenwashing and what problems might this pose?
- How do aspirational goals such as the UN SDGs seek to promote accountability?
- What is the nudging principle and how does it seek to promote accountability?
References used in the text – you are encouraged to consult these references through your institutional library services or through the internet
(1) Thaler, R.. (2015, November 1). The Power of Nudges, for Good and Bad. The New York Times, BU6.
(2) Burga, R., & Rezania, D. (2015). A Scoping Review of Accountability in Social Entrepreneurship. SAGE Open, 5(4), 1–10. https://doi.org/10.1177/2158244015614606
(3) Roberts, J. (1991). The possibilities of accountability. Accounting, organizations and society, 16(4), 355-368.
(4) Jensen, M. C., & Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. Journal of financial economics, 3(4), 305-360.
(5) Leong, C. (1991). Accountability and project management: a convergence of objectives. International Journal of Project Management, 9(4), 240-249.
(6) SCJP Report. 2015, February. “Standing Committee on Justice Policy: The Cancellation and Relocation of the Gas Plants and Document Retention Issues.” Legislative Assembly of Ontario, 1st Session, 41st Parilament, 64 Elizabeth II. Accessed June 19 2016. http://www.ontla.on.ca/committeeproceedings/committee-reports/files_pdf/PDF%20Report%20EN.pdf
(7) Aung, M., Bahramirad, S., Burga, R., Hayhoe, M.-A., Huang, S., & LeBlanc, J. (2017). Sense-making Accountability: Netnographic Study of an Online Public Perspective. Social and Environmental Accountability Journal, 37(1), 18–32. https://doi.org/10.1080/0969160X.2017.1284601
(8) TRC (2012). Truth and Reconciliation Commission of Canada: Calls to Action. Retrieved from https://nctr.ca/records/reports/#trc-reports