Corporate Accountability Research Paper Starter

Corporate Accountability

(Research Starters)

This article focuses on the different ways an organization can be held responsible for the activities which occur in daily operations. With scandals such as Enron, one would think that corporations would adhere to ethical standards. Recent scandals units, such as internal auditing, have been created and the organization's initiatives with ethics and compliance directly report to the senior management team and the board of directors. Enterprise risk management addresses the risks and opportunities facing an organization by classifying objectives into four categories. Every business realizes that it will need to take some level of risk. Therefore, any approach to risk management should include competitive advantages. There will be a discussion of the role of whistleblowers as well as how regulations such as the False Claims Act, Sarbanes Oxley Act and the Lloyd-La Follette Act have been implemented in order to encourage employees to report acts of misconduct.

Corporate accountability is a high priority in many businesses today due to the scandals that have occurred during the last decade. Ward (n.d.) believes that some of the dysfunctional behavior that has been witnessed can be traced back to two sources:

  • The erroneous belief that a leader, or anyone for that matter, can "predict" and commit to delivering outcomes that he or she has little control over. This pressures leaders to take shortcuts and even "rig the results."
  • Tying salary and bonuses to performance, and using it to motivate performance, when performance is difficult if not impossible to accurately measure and assign cause and effect relationships to. This encourages people to "fudge the results," using whatever mechanisms are at their disposal to protect their personal interests (par. 3).

Board members are requiring senior management teams to provide more operational information. External and internal stakeholders are requiring more information. In order to have an effective accountability system in place, organizations must commit to improving and encouraging the use of communication processes and education programs.

"Changing to the new accountability requires a change in culture. It is possible to change an organizational culture, but it requires champions who have a lot of courage, patience and persistence" (Ward, n.d., p. 2). An example of such champions would be whistleblowers. In addition, corporations must be committed to implementing systems that will act as a check-and-balance to ensure that the operations are being run properly. An attempt at addressing this scenario would be the implementation of an enterprise risk management system.


Given the competitiveness in the world today, many people are tempted to go outside of the rules and regulations of society in order to get ahead. Although many would argue that traits such as honesty and credibility are valued, temptations have lured some to act irresponsibly. Actions such as cheating, stealing, lying and bribing have become common in the workplace. Good moral values and actions are becoming the exception rather than the rule. How can the trend turn? Organizations must put policies in place that will encourage employees to do the right thing and inform the proper authorities when illegal actions and dishonesty take place.

Unfortunately, when employees step forward and alert the organization of wrongdoings, they are labeled whistleblowers and negative labels are applied to them. Instead of being considered heroes for doing the right thing, they tend to be chastised and some never fully recover from the experience. For many of these individuals, there is a lost of trust in fellow employees and the organizations in which they work.

For some, the earth moves when they discover that people in authority routinely lie and that those who work for them routinely cover up. Once one knows this, or rather once one feels this knowledge in one's bones one lives in a new world. Some people remain aliens in the new world forever. Maybe they like it that way. Maybe they don't have a choice (Alford, 2001, p. 52).

This can be a devastating moment for many. Everything that they have believed and trusted is turned upside down. In some cases, these employees may have been friends outside of the workplace with the culprits, which may place an additional burden on the potential whistle blower. It is unfortunate that society has come to a point where individuals with moral values and a sense of right and wrong are treated as outsiders of societal norms. Whistleblowers have been ostracized, reprimanded, forced to transfer, referred to receive psychiatric care, assigned to menial duties, dismissed and blacklisted. There are reports of where they have been unable to seek employment at other companies because there is a fear that the same situation will occur. Organizations respond to whistle blowers with hostility and fear.

Enterprise Risk Management

With scandals such as Enron, one would think that corporations would adhere to ethical standards. Unfortunately, many view companies such as Enron as the "ones that got caught," and changes have not occurred in the operations of some businesses because the issue has not been taken seriously. However, the trend is changing. According to a survey conducted in January, 2007 by the Risk Management Association (RMA), many organizations "are moving toward a fully integrated enterprise risk management approach where a myriad of risk types are measured and many of the processes automated and standardized" (p. 14).

There are many situations that can affect the future of a business. These situations can be positive or negative. Situations with negative impact may be viewed as risks, whereas, situations with a positive impact can be seen as opportunities. The overall objective of most businesses is to minimize risk and seize opportunities. Enterprise risk management addresses the risks and opportunities facing an organization by classifying objectives into four categories:

  • Strategic -- "big picture" goals focused on supporting an organization's mission.
  • Operations --effective and efficient use of the organization's resources.
  • Reporting -- reliability of reporting.
  • Compliance -- compliance with laws and regulations.



Federal Protection

The federal government and some states have passed legislation to protect employees who decide to become whistle blowers. According to Sheeder (2006), the federal False Claims Act provides protection for:

Any employee who is discharged, demoted, suspended, threatened, harassed, or in any other manner discriminated in the terms and conditions of employment by his or her employment because of lawful acts done by the employee on behalf of the employee or others in furtherance of an action under this section (i.e. a whistleblower action) shall be entitled to all relief necessary to make the employee whole (p. 39).

Many courts will provide protection when:

  • An employee becomes a participant in a "protected activity" (i.e. when an employee decides to confront an employer about illegal activities such as fraud).
  • The employer becomes aware of the "protected activity."
  • The employee is penalized as a result of coming forth about the "protected activity" (i.e. termination, harassment).

When it has been determined that an employee is a victim of retaliation, he or she may petition for:

  • Reinstatement with the same seniority that he/she would have had if the adverse action did not occur.
  • Two times back pay.
  • Interest on the back pay.
  • Special damages (i.e. compensation for emotional distress, recovery of litigation costs, and reasonable attorney's fees).
  • Any type of relief that will assist the employee in becoming a whole person again (Sheeder, 2006, p. 39-40).

An employee is entitled to all of the relief listed above as well as any recovery obtained by the government based on the regulations of the False Claims Act. Given the financial penalties for acts of wrongdoing, employers are encouraged to monitor the activities of their organization so that these fines are not imposed.

Company-Drafted Whistleblower Policy

In order to avoid the costly expenses of these types of situations, many organizations are encouraged to draft policies that will assist employees in feeling comfortable about coming forward to advise the senior management team and the outside world of fraudulent behavior occurring in companies today. Tennebaum provided four elements of a good whistleblower policy. The four elements are:

  • A policy that has a clear purpose and a statement of intent to protect whistleblowers to the fullest extent possible. The purpose may include creating an environment where the whistleblower can feel safe.
  • Guidelines that provide a detailed explanation of how the organization will attempt to protect the whistleblower.
  • Procedures on who, when and how to contact the organization in order to report unethical and/or...

(The entire section is 4119 words.)