Accountability and transparency in new business ventures

As the world becomes increasingly interconnected, stakeholders of business ventures, both internal and external, must also be always-on, and always connected.

Bennis et al., 2008; Tapscott and Ticoll, 2003

This approach ensures that new business ventures should communicate their actions and intentions. Maintaining transparency is important because without it, stakeholders such as investors and suppliers, lose confidence in the organisation’s standards of ethics, social rules, and environmental regulations (Hein, 2002).

An associated but distinct idea of organizational governance is accountability. According to Tripathi (2016), it is the capacity of individuals impacted by a company to hold it responsible for its actions. It is the company’s readiness to behave in an open, just, and equitable manner. According to several researchers (Bovens, 2007; Mabillard and Zumofen, 2016), responsibility includes openness. Research in accountability and transparency has gained traction among scholars albeit in the context of government agencies and social bodies. However, they still fail to feature prominently in the context of business and leadership. Considering the growing number of corporate venture failures in recent years, the relevance of these twin principles and the impact they can have on organisational success must be investigated.

Understanding accountability in the context of a business

Simply put, being accountable means having to justify actions and decisions to some individual or organisation (Mayernik, 2017). As a complex construct, accountability is often difficult to implement and even more challenging to measure. This is because it is construed differently by different individuals (Hall & Ferris, 2011). Moreover, the scope of accountability has expanded to include the consideration of other business stakeholders such as systems, managers, community and oneself (Messner, 2009). Thus, one can surmise that accountability has grown in scope as well as complexity.

Significant literature exists on exploring the importance of related concepts like monitoring of individuals rather than their accountability (McKernan, 2012; Mero et al, 2012), public sector organisations (Gomes et al, 2023; Johnstone et al, 2023) and non-profit organisations (Awuah-Werekoh et al, 2023). However as noted earlier, empirical evidence on the application of accountability in contemporary organisations is dissatisfactory. When such evidence is lacking, organisations grappling with longevity issues do not find theoretical foundations to justify their strategies.

Scope of accountability in new business ventures

Calls for accountability in corporate governance have persisted to this day, particularly in the UK where the Cadbury Report from 1992 emphasized financial responsibility as a crucial component of best practice governance. But, with time accountability has become more and more reinterpreted to consider factors other than only financial interests and limited financial effects. Holding corporate officers accountable for the results of corporate choices is based on the fundamental idea of accountability. This obligation goes beyond making profits; it also has an impact on other stakeholders, including creditors, employees, shareholders, and the general public.

Accountability is also emphasized as being socially, ethically, and environmentally rather than just financially measurable in many studies and policies. The broader perspective has resulted in a heightened examination of business behaviour and elevated standards for openness and moral behaviour. As a result, corporate accountability now encompasses both non-economic and economic effects, highlighting a comprehensive approach to governance that includes corporate accountability to all stakeholders.

Furthermore, according to Pearson & Sutherland ( 2017), the scope of accountability best fits today’s business scenario. They classify accountability into two types :

• Informal: about norms and values; are inculcated within the workplace but not formally. They further include:
  • Accountability to self: the inward accountability developed based on individual values.
  • Leadership accountability: top management creates an ethical and accountable culture in the organisation.
  • Accountability to peers: the horizontal form of accountability which affects peers.
• Formal: processes and procedures that include mechanisms such as formal reporting relationships, performance evaluations, employment contracts, performance monitoring, reward systems (including compensation), disciplinary procedures, supervisory leadership training, personnel manuals, etc. This further includes:
  • Manager accountability: managers as enforcers of systems are accountable for the latter’s performance.
  • Systems accountability: the implementation of control and monitoring systems to ensure the organisation remains competitive.

Importance of accountability in new business ventures

Accountability is necessary where there is no trust (Gray et al., 1997). Trust in this context refers to the reliance on the predictability of the other’s behaviour. It contrasts with the notion of distrust which refers to a belief that the other person will pursue his self-interest. According to (Swift, 2002), in situations where trusted leaders tend to disclose more accurate, relevant and complete information. Therefore, accountability is higher. This indicates a direct and positive relationship between accountability and trust in new businesses. Furthermore, research indicates that accountability fosters improved decision-making and risk-taking, both of which are essential for building trust in cutthroat marketplaces (Rausch and Brauneis, 2014).

In new business endeavours, accountability is essential in building a positive company culture to increase employee enthusiasm. Studies reveal that prioritising accountability increases employee engagement and motivation by fostering a sense of ownership and responsibility (Li, Liu and Yu, 2022). Moreover, transparent accountability frameworks foster team member trust, which is necessary to create a productive workplace. According to Sinha and Shukla, 2013, new business ventures that prioritise accountability have lower employee turnover rates as the employees feel more appreciated and committed to the company’s success.

Accountability reduces the possibility of mismanagement and improves operational effectiveness, making it essential for startups (Ritchie and Richardson, 2000). The chances of financial irregularities are reduced in businesses that have clear accountability frameworks. Moreover, accountability practices also reduce risks by guaranteeing adherence to legal requirements and promoting proactive problem-solving (Efunniyi and Omozele, 2024).

In new business ventures, accountability is crucial because it fosters ownership and responsibility, both of which are necessary for success (Dose and Klimoski, 1995). Accountability cultivates a climate of openness and confidence, empowering team members to assume responsibility for their jobs. Therefore, accountable team members are more likely to make choices that support the objectives of the business and guarantee that activities are carried out efficiently (O’Donoghue and Werff, 2021).

Importance of transparency in new business ventures

Extant literature exists on the notion of transparency, that causes variations in how it is controlled and quantified (Baker, 2008; MacKenzie, 2003). Transparency has also been recognised as an enabler of accountability, thus critically linking it to the element of trust within organisations. Like accountability, transparency has mainly been explored in the context of public sector and nonprofit initiatives. Bergulund (2014), measures transparency as the frequency of full information disclosure. Bernardi and Lacrosse, (2005) determine transparency by the disclosure of the code of ethics on the company website. However, one can safely conclude based on available literature that transparency is the degree to which organizations convey information related to governance and financing to their stakeholders.

Bringing in and keeping investors in new business endeavours depends heavily on transparency. Transparent communication builds trust, and trust is necessary for investor confidence (Yoro, 2024). Because of this trust, investors are more inclined to support the business over the long run and see fewer dangers. Furthermore, investors are more likely to make repeat investments when financial reporting and corporate procedures are transparent since they can make well-informed selections. Studies also indicate that leaders who communicate openly are better positioned to develop enduring bonds with investors, which will increase the project’s overall stability (Salas et al., 2007).

According to research, companies that are transparent with their customers about their policies, beliefs, and decision-making procedures build customer trust (Yang and Battocchio, 2020). Moreover, transparency helps reduce scepticism from customers, particularly when interacting with new companies that have not yet built a reputation. Customers are therefore more likely to build a long-term commitment to the company when they feel informed. Transparency in communication also fosters trust, which is necessary for cooperation and creativity (Nedbala, Auingera and Hochmeiera, 2013). It improves employee engagement because when strategic goals are shared openly, it breaks the need for hierarchy, bringing out more ideas from employees (Dada et al., 2018).

Transparency also reduces the possibility of mismanagement. According to Lee and Cheong (2018), confidence among stakeholders guarantees that decisions are made ethically and cooperatively (Schnackenberg and Tomlinson, 2014). Better accountability, early problem detection, and the promotion of an ethical culture are all made possible by this transparency (Zhong, 2018).

The success of new company endeavours is contingent upon the principles of accountability and transparency. Both act as cornerstones that strengthen decision-making, promote stakeholder trust and improve business culture. Clear responsibilities and an ownership culture are fostered by accountability, both of which are essential for improving performance and lowering the possibility of poor management. Accountability ensures adherence to moral and legal requirements as companies navigate difficult situations, which promotes sustainable growth. Likewise, a transparent culture fosters improved internal communication, which facilitates creativity and teamwork—two qualities that are critical in the fast-paced industry of today. To survive in competitive environments, companies must prioritize accountability and openness as they work to satisfy the changing expectations of stakeholders.

References

• Awuah-Werekoh, K., Yamoah, F. A. and Faizan, R. (2023) ‘Accountability Systems of Non-governmental Organisations (NGOs): Case Study from Ghana’, in Corporate Management Ecosystem in Emerging Economies . Springer.
• Bergulund, T. (2014) ‘Corporate governance and optimal transparency’, in The Oxford handbook of economic and institutional transparency . Oxford: Oxford University Press.
• Bernardi, R. and Lacrosse, T. (2005) ‘Corporate transparency: Code of ethics disclosure’, CPA Journal , 75(4), pp. 34–37.
• Bragin, M. and Shehadeh, K. S. (2023) ‘Democratization of Complex-Problem Solving to Enhance Participation, Transparency, Accountability, and Fairness: An Optimization Perspective’, Optimization Online , June.
• Dada, P. et al. (2018) ‘WORK TRANSPARENCY AND INNOVATION ACCOUNTABILITY IN A SELECTED ORGANIZATION IN NIGERIA’, Academy of Entrepreneurship Journa , 24(4).
• Dose, J. J. and Klimoski, R. J. (1995) ‘Doing the right thing in the workplace: Responsibility in the face of accountability’, Employee Responsibilities and Rights Journal , 8, pp. 35–56.
• Efunniyi, C. P. and Omozele, A. (2024) ‘Strengthening corporate governance and financial compliance: Enhancing accountability and transparency’, Finance & Accounting Research Journal , 6(8).
• Gomes, P., Joaquim Santana and Nunes, C. (2023) ‘Transparency, accountability, and governance: a literature review in the context of public hospitals’, Rev. Adm. Pública , 57(2). doi: https://doi.org/10.1590/0034-761220220238x.
• Gray, R. et al. (1997) ‘Struggling with the praxis of social accounting’, Accounting, Auditing and Accountability Journal , 10(3), pp. 325–364.
• Hall, A. and G., F. (2011) ‘Accountability and extra-role behavior’, Employee Responsibilities and Rights Journal , 23(2), pp. 131–144.
• Johnstone, L., Yates, D. and Nylander, S. (2023) ‘Taking shape within the structural and the personal: sustainability accountability within a Swedish public sector organisation’, Sustainability Accounting, Management and Policy Journal , 14(7).
• Li, Y., Liu, W. and Yu, G. (2022) ‘Dancing in Shackles: The Double-Edged Sword Effect of Felt Accountability on Work Outcomes and Individual Wellbeing’, Frontiers in Psychology , 13.
• Mayernik, M. S. (2017) ‘Open data: Accountability and transparency’, Big Data & Society , 4(2). doi: https://doi.org/10.1177/2053951717718853.
• McKernanJ (2012) ‘Accountability as aporia, testimony, and gift’, Critical Perspectives on Accounting , 23(3), pp. 258–278. doi: 10.1016/j.cpa.2011.12.009.
• Mero, N. P., Guidice, R. M. and Werner, S. (2012) ‘A field study of the antecedents and performance consequences of perceived accountability’, Journal of Management , 40(6).
• Messner, M. (2009) ‘The limits of accountability’, Accounting, Organizations and Society , 34(8).
• Nedbala, D., Auingera, A. and Hochmeiera, A. (2013) ‘Addressing Transparency, Communication and Participation in Enterprise 2.0 Projects’, Procedia Technology , 9, pp. 676–686.
• O’Donoghue, D. and Werff, L. van der (2021) ‘Employee Responsibilities and Rights Journal’, Personnel Review , 51(4).
• Pearson, H. and Sutherland, M. (2017) ‘The complexity of the antecedents influencing accountability in organisations’, European Business Review , 29(4), pp. 419–439.
• Rausch, A. and Brauneis, A. (2014) ‘The effect of accountability on management accountants’ selection of information’, Review of Managerial Science , May.
• Ritchie, J. and Richardson, S. (2000) ‘Smaller business governance: Exploring accountability and enterprise from the margins’, Management Accounting Research , 11(4).
• Salas, E. et al. (2007) ‘Trust in leadership: A multi-level review and integration’, The Leadership Quarterly , 18, pp. 606–632.
• Schnackenberg, A. K. and Tomlinson, E. (2014) ‘Organizational Transparency: A New Perspective on Managing Trust in Organization-Stakeholder Relationships’, Journal of Management , 42(7).
• Sinha, D. and Shukla, S. K. (2013) ‘A STUDY OF EMPLOYEE RETENTION IN THE PHARMACEUTICALS SECTOR IN DEHRADUN CITY’, International Journal of Education and Psychological Research , 2(1), pp. 30–39.
• Swift, T. (2002) ‘Trust, reputation and corporate accountability to stakeholders’, Business Ethics, the Environment & Responsibility , 19(1).
• Yang, J. and Battocchio, A. (2020) ‘Effects of transparent brand communication on perceived brand authenticity and consumer responses’, Journal of Product & Brand Management , 30(8).
• Yoro, M. (2024) ‘Impact of Financial Reporting Transparency on Investor Decision-Making’, American Journal of Accounting , 6(1), pp. 25–36.
• Zhong, R. (2018) ‘Transparency and firm innovation’, Journal of Accounting and Economics , 66(1).