Page 132 - (DK) The Business Book

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THE INTERESTS OF

THE SHAREHOLDERS

ARE OUR OWN

ACCOUNTABILITY AND GOVERNANCE

IN CONTEXT
Good governance relies on...
FOCUS
Executive control

KEY DATES
1981 Australian-born US
management consultant Peter
Drucker suggests that chief
executives “have not yet faced
up to the fact that they ...proactive, ethical, ...clear, traceable ...alert board
well-informed lines of
represent power—and power members.
directors. responsibility.
has to be accountable.”
1991 The Cadbury Committee
is established in the UK to
investigate scams, failures,
and accountability in corporate
governance. Its influential ccountability is the Following a series of business
report, Financial Aspects of obligation of an individual disasters (from Enron through to
Corporate Governance, is A or organization to accept Lehman Brothers and numerous
published a year later. responsibility (be accountable) banks), corporate governance has
for their actions. In business, become a major issue worldwide.
2002 The US government’s
it is often used to trace chains To achieve effective accountability,
Sarbanes-Oxley Act sets out
of responsibility: staff may be directors need to make sure that
much stricter guidelines to held to account for their actions roles and lines of authority are clear.
govern accounting practices by those above them in the This makes it possible to trace the
and the publication of organization’s hierarchy; or higher cause of a mistake to its source—
previously confidential tiers of management may be held and attribute responsibility to
data (such as operational accountable for those below them. the right person or group. For
business risks). Ultimately, the way the company is governance to work well, board
governed is the responsibility of the members must be well-informed,
directors; their governance should fully independent, and should work
therefore be proactive and ethical. together for the long-term interests