Public accountability has come to assume special significance today with the increasing involvement of public and non-profit organizations in the delivery of a wide range of goods and services. Important issues of public policy become directly relevant to accountability. When and under what circumstances should organizations be subject to public accountability? How should such organizations be held accountable? Through which mechanisms? Why is it important to develop an accountability relationship? How, and to what extent, can such accountability mechanisms enhance the legitimacy of organizations and the public trust in them? These questions have generated considerable interest among policymakers, academics, and the general public. Indeed, several conceptual and empirical works have been done in relation to these questions from various perspectives. These include stakeholder theory, public policy, economic theory, political philosophy, administrative law, political agency theory, and so on. Each literature provides a specific framework for understanding accountability. The utility of these frameworks is discussed here.

Accountability refers to the responsibility of an organization to provide information on its decision-making actions and to justify that they are being performed rationally, that they are in accordance with laws and rules, and that they are consistent with organizational goals. The meaning is closely linked to the concept of “responsibility.” Organizations are answerable for their decisions and actions to various parties, which include governments, funders, professional bodies, and beneficiaries of the service. This kind of public accountability is the foundation for open democracy, good government, and the prevention of public sector corruption. Good internal communication, for example, is also a critical part of promoting public accountability. Ideas and practices about accountability and how it is fostered have evolved over time, with the result that, today, interest is growing fast in the effectiveness of the range of mechanisms in an age of renewed interest in “regulatory state,” “corporate governance,” and “new public management.” It is argued that this public accountability affects these mechanisms.

Public accountability has been defined as a collection of key principles designed to direct decision-making within organizations by mandating them to serve society’s interests, within the constraints of national laws, and with due concern for a wide variety of stakeholder expectations and values. Equating with principles of good governance, organizational performance, and ethical conduct, accountability can be seen as a concept that requires organizations to be transparent in their operations, mindful of the legislative structures which endow them, to be clear about their contours, to report their performance through a myriad of popular and specialist media. By doing so, accountability should ensure that citizens, their representatives, and interest groups are able to comprehend the organizational environment within which they operate; and according to the standards they do so.

The importance of public accountability systems and structures is evidenced by the litany of examples and case law referring to a lack of public accountability which contributed to the loss of life, limb, property, and reputation. In the absence of proper mechanisms, public organizations may become self-serving, unethical, unfair, unsafe, and unpopular or derided. Indeed, studies have suggested that organizations and their leaders who portray themselves as accountable are more likely to engender trust among their staff, stakeholders, and clients.

The idea of public accountability has been conceptualized differently in different countries; sometimes with unique terms, norms, and procedures being applied to public organizations. While the concept of public accountability may differ between jurisdictions, several cases suggest the existence of certain common elements, both at a generic and at an individual action event level. Such specificity has been helped by a variety of expert definitions that explain that there are a number of ways in which public accountability needs to be understood. No definition, thus far, categorically outlines the term public accountability; on the other hand, it can be said that accountability involves organizational transparency in its operational objectives in accord with social values. In its essence, public accountability can be associated with an aspiration of managers or leaders being transparent about important decisions which take place in the public interest. However, this ideal of openness and transparency can and may be hard to reconcile with the modern principles which govern operational effectiveness and organizational efficiency.

Theoretical Frameworks of Public Accountability

Among several fields of study, public accountability has its roots in a number of theoretical frameworks. Several of these frameworks directly provide insights into public accountability, including Agency Theory and Stakeholder Theory. These frameworks enable us to understand public accountability. Agency Theory is primarily about the principal-agent relationships. Its central concerns are the relationships between principals (owners) and agents (managers) who act on their behalf. It is also concerned with investigating how and to what extent the interests and incentives of principals and agents are aligned, or whether there are conflicts. It details the ways in which agency costs can arise and investigates the various ways in which these can be managed or reduced.

Stakeholder Theory has some similarities with Agency Theory, in that it is also concerned with relationships; however, it has a much broader perspective than Agency Theory. While Agency Theory is typically applied to intra-organizational relationships, Stakeholder Theory explicitly recognizes that there are many external parties who have a stake in an organization’s activities. These include customers, suppliers, lenders, governments, and local communities, and not just the organization’s shareholders (or members) and employees. Stakeholder Theory revolves around the idea that the firm is not an isolated island, but that it is embedded in economic, social, and political forces, and in a web of social relationships. Building on this, public accountability is seen as a mechanism to enhance the interests of multiple publics or stakeholders which are affected by organizational actions.

Drawing from the overview presented above, one may argue that it ranks as the fundamental overarching paper, inasmuch as it draws upon theoretical frameworks of public accountability and their applications. More generally, one area that these articles devote significant attention to is the effectiveness of accountability mechanisms.

This section discusses Agency Theory and its relevance to public accountability. The concept is equally applicable in the private sector, especially in publicly listed corporations where there is a separation of ownership and control between the principal and the agent. The principal generally lacks the day-to-day capacity to monitor and manage the organization. In order to solve this problem, the principal provides incentives in the form of the shareholders’ residual value and, in some cases, performance-based compensation. The idea is that the agent will act in the best interests of the company in the interests of self-preservation and a long-term career.

Although the principal and agent share a common objective, acting in their best interests, potential problems may arise. These may occur due to potential conflicts between the objectives of the principal and agent, such as executive self-interest, combined with information asymmetry between the principal and agent. Agency problems are prevalent in markets where asset ownership is separated from control. One of the most common problems is the phenomenon of ‘tunneling’, most commonly found in emerging economies, but not exempt from developed economies. The effectiveness of a number of methods can mitigate the potential for agency problems. One of the solutions to the agency problem is for the principal to monitor the behavior of the agent. It shows that the principal still has an effective method of calling the agent to account. It is one of the main reasons why this theory is so closely associated with the concept of accountability.

The basic principles of the theoretical model can be practically applied in the design and governance of public sector organizations. In New Zealand, for example, there are now high levels of disclosure in public sector annual reports. Public sector organizations are also increasingly using the tools of NGOs, such as customer surveys, to open up more information about their activity. Various sorts of accountability, based upon output, process, or outcome indicators, are now a feature of many areas of public management. However, despite the importance and relevance of Agency Theory, it is not without its limitations. In the first instance, it is predicated on a rather narrow view of interests, one where the activities point necessarily towards a singular and complete interest in the welfare of the individual pursuer who bases all consumption and capital allocation decisions on information derived from cost-benefit analysis. It ignores the perfectly legitimate interests of the wider stakeholder group. These are not fellow agents and, interestingly, may be more concerned with the wider distributional and human rights implications of the organization’s activities. That pluralist view is also particularly apt in the place we have argued it needs to be in the context of NGOs.

Integral stakeholder theory, as we have come to know it over time, is an important framework for understanding public accountability. In short, we must consider the interests of people in whose lives or affairs our decisions make a difference and those who make a difference in our operations based on the decisions they make.

According to the theory, corporations reward and respect all stakeholders’ interests, not just the interests of shareholders. It demands the provision of accurate information about the organizations’ performance to all stakeholder groups and mediates their respective claims. Stakeholder theory might be distinguished by its insistence on the interconnectedness of accountability and responsibility and the role of communication and dialogue in acting to facilitate this side condition. Hence, transparent and clear communication with these groups is also considered a part of the foundation for establishing and sustaining a culture of accountability within organizations. For organizations that are serious about embracing public accountability, this understanding plays out and is made visible in their policies regarding the respective stakeholders. For instance, the level of safety and environmental sustainability pursued by an extractive or construction company also becomes a matter of concern given the direct impact or consequences of business operations on host communities.

There are many practical examples of the implementation of this integral or enlightened stakeholder theory, with a very striking one being the setting up of the Department of Corporate Citizenship at the Development Bank of Southern Africa. The only criticism of this approach is that it may prove extremely challenging and, indeed, requires structured and strategic engagement to ensure that a bankruptcy does not occur when an attempt is made to equitably balance these competing interests. Integrated stakeholder theory does not assume that organizations are socially responsible, but recognizes that they need to respond to societal expectations to ensure their long-term sustainability; perhaps not to be accepted as a privilege, but rather as a condition for their operations. Essentially, based on this approach, it would be assumed that those who pursue unsustainable goals are likely to fail in terms of accountability.

Mechanisms for Ensuring Public Accountability

Several mechanisms ensure public accountability within organizations. Transparency and disclosure are seen as the cornerstone of accountability. To foster public accountability, it is said that the relevant information on performance should be disclosed to stakeholders who have a right to access it. Therefore, the flow of information generates trust between the provider and the receiver of the service delivery and reduces the cost of contracting and monitoring. From a public accountability perspective, the availability of adequate information reduces the possibilities of undue discretion. Public accountability emphasizes information disclosure or the reduction of information asymmetry as the basis for informed decision-making. It is against this backdrop that a number of elements of public accountability were identified from an information disclosure perspective.

Several mechanisms ensure the public accountability of organizations. One of these mechanisms is the existence of formal or informal processes that help prevent abuse and wrongful actions within the organization. These include efforts to implement internal controls, the development and maintenance of an adequate accounting system, the development and implementation of a code of conduct, and thorough information control to ensure compliance with procedures. A further mechanism is to convey credibility. Even if organizations try to disclose all relevant information, stakeholders may question the objectivity of the information provided and suspect that it is designed to support the information provider. Consequently, verifying the credibility of the information may become a way of ensuring public accountability.

Lastly, technology plays a major role in facilitating greater accountability through the mechanism of transparency. Transparency results in the capacity of stakeholders to access new sources of information because it is cheaper, as well as changes in the means of control and verification of actions. Availability means for providing information, including information technology, change with technology and have implications on how ideas can be communicated to different stakeholders. These means also facilitate the use of information as a way of bringing errant service providers to better performance. Nonetheless, the introduction of these mechanisms is not without challenges. In the financial accountability domain, for example, the implementation of mechanisms for reform has faced questions and challenges about the feasibility of changes. Similarly, public accountability mechanisms are challenged by powerful resistance from political subunits within an organization as a result of a hostile environment and the overwhelming desire to serve. A lasting and enduring legacy impacts the organization, leaving the subunit with fear about change.

Transparency and Disclosure

Transparency and disclosure are inherently political, as they can be viewed as strategies aimed at affecting the relationship between organizations and members of society. The conduct of transparency involves the disclosure of information regarding an organization’s operations, at a level of detail relevant to the concerns of stakeholders and at a time when that information is still meaningful or can be acted upon. In doing so, organizations build the trust necessary to receive societal license and also to flatten any asymmetry of information that may exist between them.

Disclosure is the most immediate and practical way in which organizations can be called to account in practice. It involves the release, either voluntarily or as dictated by regulation, of a variety of documents including environmental and feasibility reports, minutes of meetings and, more recently, information about an organization’s policies and practices. Projects seeking the input of stakeholders provide another context in which an organization’s information-conveying practices become subject to review. It is on organizations’ disclosure practices that a judgment of accountability tends heavily to rest. In the context of accountability, publicly available future disclosure practices are being signaled as integral to accountability in practice and hence security in the future. Both are linked. Organizations can expect to be held to account for the past if they are able to disclose their preparations today. Mandated transparency in this case is being argued for as a worthy goal in itself. There is the implication that additional good might also come from making organizations do this.

For corporate entities, mandatory transparency, such as that in corporate financial reporting, has long been associated with transparency as such because of the apparent good that accrues in terms of protecting stakeholders’ interests and ensuring a fair advantage for the operation of free markets. While conjoined with disclosure, transparency is not synonymous with it. An increase in the volume of information disclosed, data or reports, will not necessarily fulfill the more value-laden conception of transparency as understood within the social and political context of a deliberative society. This is especially the case where fixes of fragmented reporting, audit and accountability practices are uncoordinated.

The issuing of a Final Statement of Intent follows this philosophy, recognizing that there is no one-size-fits-all approach to demonstrating how transparent an organization needs to be and the types and amount of information that need to be disclosed because the discussions that define an organization’s activities, and the stakeholders they affect, need to occur in the light of socio-political realities varying from case to case. This statement focuses on principles through which organizations can sift information and make decisions about what to make visible. The example of voluntary increased transparency fits well with this philosophy. Nonetheless, the stated aim is to mitigate misunderstanding and mistrust between organizations and their stakeholders, on the one hand, and between organizations and the rest of society, on the other. Given that these are political relationships, transparency is essentially a political phenomenon. The business of Public Interest Governing is in working out what kind of political phenomenon that might be, and then how to achieve it in practice.

Internal Controls and Auditing

Internal controls are designed as a set of policies, procedures, and practices that are all set in place to provide planned and systematic protective measures tailored to ensure that organizational behavior is compliant with the requirements of its environment as well as to assist in the process of identifying and mitigating risks associated with the organization’s activity. The payoffs of investing in internal control systems are myriad. A report for the Association of Chartered Accountants pointed out that investigations of fraudulent financial reporting show that weaknesses in internal control were the most frequently cited contributing factor. Furthermore, it is noted that controls can discipline operating managers to behave in a manner that keeps their employer’s future in mind in a field study of practices within the worldwide assurance firm that provided new insights for researchers and practitioners of internal control.

It is also the case that inadequate audit trails can inhibit efforts to trace assets that may have been misappropriated by corrupt officials or employees. Properly functioning internal controls are important. Policies, procedures, and practices are only as good as their implementation. Intelligence collected during an audit does not mean the implementation of policies and guidelines is always adequate. In addition to the design and operational effectiveness of internal controls, the auditing function is an important part of the public accountability standards, whether or not the organization being examined is publicly owned. In a review of thrift-management reports prepared by the Olmstead Conference, it is concluded that controls should be designed so that they are subject to audits, and encapsulates thinking about auditing in the following way: Internal auditing evaluates the adequacy of internal controls and performs monitoring activities. These activities are lawfully mandated by the government so that they would not have traditionally been carried out.

Challenges and Issues in Public Accountability

Public accountability makes a lot of demands on organizations. Some of these arise from the range and often the incommensurability of the expectations held by different stakeholders. Other demands arise from the wide array of mechanisms for accountability and are dramatically increasing as more companies are listing or issuing. Some of the challenges constitute others that conflict with it. Here are four issues that stand out. Although they all lie at the core of public accountability, together they suggest a level of complexity in thinking and action about the theme that may be elusive to many corporate leaders.

Some of the best-known and ‘most admired’ public reports produced by organizations contain data that has been carefully manipulated or omitted in order that certain groups, such as a firm’s managers or owners, do not become “too accountable”. The practices of accountancy are founded on a similar risk-avoidance premise about the imbalance between the necessity of making organizations accountable and the costs of compliance. Actual attacks on the public accountability of organizations come not from ignoramuses; however, they come from informed critics who can only be satisfied by situating the accountability of organizations in the broader context of organizational ethics. The ethical imperatives that persistently invade thinking about accountability include openness, honesty, disclosure, refusal to claim inappropriate privileges, refusal of power expended arbitrarily, commitment to particular forms of transparency and interaction, profession, and expertise. Conflicts of interest within organizations easily generate questions about which stakeholders are privileged in reporting arrangements and which only get whatever is suitable left over.

Publication, rather than censorship, of information does not of itself terminate ethical concern; in some contexts, everything may depend on what is not reported. Naming and blaming ‘the guilty parties’ is the quintessence of accountability but no solution at all unless someone also stands ready to propose radical, viable alternatives. Examples seem to show that the above interests work. They knew they were breaking the rules. What they did not know was what the rules were. Aware of this, it was preferable to show fraudulent behavior momentarily rather than be long-term honest and play their opponents’ game. In this case, the commitment to globalization does not lead us to a greater ethical standard but to greater unethicality. National authorities were involved in legalizing the unacceptable, in changing policies and rules not for the good of their citizens—the reason why the national authorities should exist—but to please the lobby of the multinational companies. If the world functions like the example mentioned above, then everything needs to change—from standards and control to what global responsibility should be. Ethics and social issues receiving further attention show the breadth of the research field about ethical and social issues.

Ethical Dilemmas and Conflicts of Interest

The operationalization of internal and external public accountability rests on the assumption that important decisions in the public sector are made under a cloud of deliberate ignorance, incompetence, or prejudices. Even if these practices are not covert, both management and employees inside organizations often have no consensus about the acceptable ethical boundaries while facing critical decisions. It is essential to understand and address these new dilemmas if the growing importance of public accountability in the public sector is to avoid becoming a means of organizing dysfunctionality for employees and a public relations tool for management. In some cases, ethical dilemmas may appear personal. They may arise whenever a public employee is torn between pursuing public benefits by exposing incompetence or deliberately wrongful interference in policy and being loyal to their employer while avoiding negative publicity. Ethical dilemmas also exist when the organization is confronted with conflicts of interest, whenever its policies show that it is partial to certain services, products, sectors, or employees. In such circumstances, they may be tempted to build in preferences for certain groups of people or concrete stakeholders in ways that may compromise them in promoting the principles of transparency, adequacy, and ethics. These are the very drivers of public accountability. Because specific instances may be difficult to resolve, frameworks in the form of complying with the rule of law, relying on codes of ethics, professional guidelines, and training experiences, and providing safe channels for reporting wrongdoings and abuses play important parts in minimizing their occurrence. The role of organizational charter and organizational culture also emerges. For managers in the public sector, the challenge is not one-off and far removed from events that simply make an interesting read. Lofty statements on ethical accountability for public administrators will remain empty rhetoric, politically correct noise. Supporting an official ethics framework, however, could provide the raw materials through which a government could incrementally construct a public service that the people believe is worthy of their respect, input, and trust in all officials. The failure to articulately attend to any of the above risks further eroding the confidence or appreciation of the public in the public service, which in most countries is at historic lows due in part to reasons such as unaddressed conflicts of interest, bias, and ideological allegiances, as well as historical, economic, political, social, and demographic factors resulting in betrayals, mutual suspicions, jealousy, feelings of unfairness, nitpicking, real and perceived disloyalty, and mutual rejection. Real scenarios underpin these regrets. For instance, in at least two high-profile cases, the global financial crisis and the dominance of insurgent terrorist groups, recruits of large agencies and organizations were seen learning on the job at a time when the government could least afford learning curves. Both the failed production run of a major agency and the early rushed products of personal protective equipment and gloves by a health organization at the time of an outbreak, coupled with prediction errors for communicable diseases with epidemic potential, exposed possible evidence of unacceptable conflicts of interest and incompetence.

In this article, we reflect on the role that the public accountability of organizations plays in promoting economic well-being. Given the expanding role and broad scope of the modern corporation, we argue that adapting to societal expectations of a more accountable firm is necessary in order to ensure legitimacy and support from society. While the concept of public accountability has been revisited and unpacked in prior studies, we show that the empirical exploration and practice of accountability in organizations need more attention.

The paper reviews theoretical and empirical streams of the public accountability concept. We then call for continued study of public accountability to better understand what it means for organizations and individuals. We also call for advancing practice in the space by unpacking how accountability might be advanced in organizations. We also review future research and practice directions in understanding public accountability. We believe that public accountability is a process that needs to be implemented within the organization. We advocate for practice-based research to understand how the public accountability practices of organizations evolve over time and in response to changes in a number of contexts. Research in this area will likely need to adopt an interdisciplinary approach to be meaningful. Given the burgeoning field of public accountability research, we advocate for more focused studies that delve deeply into specific organizational practices and are grounded in reality. Finally, we advocate for more research on the application of technology, particularly data-based technologies, in the advancement of organizations’ public accountability.