CENTRAL UNIVERSITY OF SOUTH BIHAR

SCHOOL OF LAW AND GOVERNANCE

Topic: “Corporate accountability and corporate disclosure are important aspects of

corporate transparency: An analysis”

Under the Supervision of:

Prof. Pradip Kumar Das

Submitted by

SHIVAM SAKET

B.A.LL.B. (8th Sem.)

CUSB1513125043

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ACKNOWLEDGEMENT

An enterprise of such a magnitude as this research on “Corporate accountability and

corporate disclosure are important aspects of corporate transparency: An analysis”
could only fructify in such a short span of time due to the coalescing of able guidance and
support of many learned and able persons, whose efforts and cooperation, I as the researcher,
with a sense of gratitude, being duty bound too, acknowledge in no particular order. My
deepest gratitude and thanks to the Hon’ble Prof. Pradip Kumar Das, Asst. Professor, Central
University of South Bihar, an eminent professor and scholar gave enough time and space for
free exchange of ideas and, opinions greatly benefiting me in augmentation and critiquing of
many of the opinions which find their place in this work.

Despite the busy schedule and onerous academic responsibilities, she gave me ample time
whenever he was approached for his invaluable guidance. I am highly indebted to the library
staff to help me find the relevant books and journals, and other officials and office staffs, who
have also extended their help whenever needed. I would like to extend my sincere thanks to
all of my friends for their review and honest remarks. Last, but not the least my eternal
gratitude is due, to my loving Parents whose constant unflinching support, blessings and
encouragement both, temporal and emotional support, to meet any challenge with confidence
including, of this purposive academic exercise.

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RESEARCH TITLE- Corporate accountability and corporate disclosure are important aspects of

corporate transparency: An analysis.

RESEARCH METHODOLOGY

The research is based on corporate accountability and corporate disclosure are important
aspects of corporate transparency. Basically the data which has been collected for the
research purpose is particularly of qualitative nature. It has been collected from various sites,
magazines and newspaper articles. So it was very difficult to use some typical statistical tools
and techniques. So basically the analysis has been done through editing and coding
the information.

RESEARCH QUESTIONS

1. Do you think corporate accountability and corporate disclosure are necessary for
corporate transparency?
2. Is corporate transparency beneficial for every company?

HYPOTHESIS

This project deals with corporate accountability, corporate disclosure and corporate
transparency. Corporate accountability and corporate disclosure are important aspects of
corporate transparency. It is very necessary to disclose their documents to the external world.
And this leads to corporate transparency.

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 CONTENT

SERIAL NUMBER TOPIC PAGE NUMBER

1. Introduction 5-6

2. Corporate Transparency 7-8

3. Corporate Accountability 9-10

4. Corporate Disclosure 11-12

5. Conclusion 13

6. Bibliography 14

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INTRODUCTION
Corporate Personality is the creation of law. Legal personality of corporation is recognized
both in English and Indian law. A corporation is an artificial person enjoying in law capacity
to have rights and duties and holding property. In order to maintain orderly mechanism in
good state every corporation need to have transparency. The management inside corporation
is regulated and governed with the principles of Corporate Accountability and Corporate
Discloser to bring transparency in the Company.
Transparency means disclosure of the relevant information about corporate in timely and
accurate manner is necessary. It helps stakeholder to know their rights and day to day activity
of the corporate.
The term corporate accountability is commonly used instead to refer to more confrontational
or enforceable strategies of influencing corporate behavior. Often, the term corporate
responsibility is used to indicate voluntary approaches, albeit those supported by market
based incentives. Corporate accountability typically implies that corporate behavior is
influenced by pressure exerted by social and governmental actors beyond the company itself.
Such actors can adopt a range of strategies, including but not limited to the mobilization of
legal mechanisms to enforce social standards1.
Corporate disclosure is defined as reporting of qualitative and quantitative information of
financial and non-financial nature regarding the reporting entity to outsiders for the purpose
of their analysis and decision- making. For the purpose of the study corporate disclosure
through published annual reports is examined.
Corporate disclosure is a broad area consisting of mandatory and voluntary disclosures about
a company and its operations. The conceptual framework of corporate disclosure is intended
to be a collection of fundamental concepts on which accounting and reporting standards are
based2.
In this modern world, company is considered as a socio economic entity having financial and
social objectives. The focus of financial reporting is on the commercial and economic
accountability of the companies, but social responsibility disclosures deal with social impacts
of corporate actions. Thus investors should be provided with additional and enhanced
information enabling them to measure the performance of companies in a better way.

1
www.academia.com
2
www.corporateupdates.com

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Voluntary disclosures regarding value added, human resource accounting and social reporting
are very much urged and welcomed in annual reports in this new era of financial reporting.
Transparency means having nothing to hide that allows its process and transactions
observable to outsiders. It also makes necessary disclosure, informs anyone affected about its
decisions Transparency is a critical component of corporate governance because it ensures
that all of entity's actions can be checked at any given time by an outside observer.
Inefficiency and lack of transparency in corporate governance that often lead to scandals and
frauds are major challenges facing the corporate world. These have bumpered the smooth
functioning of companies and stock markets and have negative effect on the long term
investment which is crucial for sustained growth of economy3.

3
www.csr.in

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CORPARATE TRANSPARANCY

Corporate Transparency means having nothing to hide that allows its process and transactions
observable to outsiders. It also makes necessary disclosure, informs anyone affected about its
decisions. Transparency is a critical component of corporate governance because it ensures
that all of entity's actions can be checked at any given time by an outside observer.
Inefficiency and lack of transparency in corporate governance that often lead to scandals and
frauds are major challenges facing the corporate world. These have bumpered the smooth
functioning of companies and stock markets and have negative effect on the long term
investment which is crucial for sustained growth of economy.
Transparency is a critical component of corporate governance because it ensures that all of
entity’s actions can be checked at any given time by an outside observer. This makes its
processes and transactions verifiable, so if a question does come up about a step, the
company can provide a clear answer4.
A principle of good governance is that stakeholders should be informed about the company’s
activities, what it plans to do in the future and any risks involved in its business strategies.
Transparency means openness, a willingness by the company to provide clear information to
shareholders and other stakeholders. For example, transparency refers to the openness and
willingness to disclose financial performance figures which are truthful and accurate.
Disclosure of material matters concerning the organization’s performance and activities
should be timely and accurate to ensure that all investors have access to clear, factual
information which accurately reflects the financial, social and environmental position of the
organization. Organizations’ should clarify and make publicly known the roles and
responsibilities of the board and management to provide shareholders with a level of
accountability.
Transparency ensures that stakeholders can have confidence in the decision-making and
management processes of a company.
Transparency, as currently defined, is letting the truth be available for others to see if they so
choose, or perhaps think to look, or have the time, means and skill to look. This implies a
passive position on the part of the corporation under consideration. In today’s broader public
context, however, transparency is taking on a whole new meaning: active disclosure. The old
transparency (being open and forthright, should anyone happen to ask) has given way to a

4
www.ssrn.com

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new transparency, more active in calling attention to deeds, both intentional and
unintentional. In other words the new concept of transparency includes action or motion,
putting new responsibilities on the corporation5.
Transparency extends to every face of business and can both affect, and be affected by, the
conduct of employees at all levels. For most businesses, success results from the ideas and
actions of employees. A transparent corporation will attract the best and retain the best. An
opaque corporation will continually deal with turnover or a disgruntled workforce.
Transparency has also impact outside the corporation, on customers, suppliers, international
trade, and adherence to government regulations.

5
http://www.indiankanoon.com

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CORPORATE ACCOUNTABILITY

To account is to give a description or depiction of something that happens or happened.

Accountability would therefore be taken to literally mean the process of giving and account
of an event. The board should communicate to the company's shareholders and other
stakeholders at regular intervals a fair balanced and understandable assessment of how the
company is achieving its business purpose and meeting its other responsibilities.
Accountability is defined as the assignment of responsibility to specified persons or groups
within the corporate enterprise for undertaking definite tasks to produce certain results or
outcome and holding such persons or groups responsible for doing the assigned task
properly6.
In contrast, the term corporate accountability is commonly used instead to refer to more
confrontational or enforceable strategies of influencing corporate behavior. Often, the term
corporate responsibility is used to indicate voluntary approaches, albeit those supported by
market based incentives. Corporate accountability typically implies that corporate behavior is
influenced by pressure exerted by social and governmental actors beyond the company itself.
Such actors can adopt a range of strategies, including but not limited to the mobilization of
legal mechanisms to enforce social standards.

INNOVATIONS IN CORPORATE ACCOUNTABILITY

Initiatives seeking to pressure companies to conform to standards of social responsibility
have taken a number of forms. These have included relatively ‘soft’, collaborative approaches
where companies have worked together with NGOs and other social groups to try and
improve the sustainability of their behavior; ‘hard’ approaches involving coercive pressure
from confrontational activist campaigns and/or traditional forms of government regulation;
and mixed strategies in which collaborative approaches have been combined with an
emphasis on greater influence and participation in shaping corporate decision making by
workers and communities affected by corporate behavior. Often these approaches have
interacted in important ways, both in shaping the dynamics of their development over time,
and in exerting influence over the sustainability of business behavior7.
“Hard” corporate accountability agendas thus seek to strengthen legislative and legal
regulatory governance over corporate practices at national, regional and international levels.
6
www.accountability/corporategovernance.com
7
www.corporategovernance.com

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They have two objectives. One is the reformation of state-based regulation in order to better
operate within global systems of production. On the one hand, this entails legally formalizing
non-standard working arrangements-extending the reach of regulation outside the traditional
workplace or factory as well as providing new rights to consumers. On the other hand, it
involves extending regulation outside national jurisdictions.

Soft vs. Hard Approach impacts

Softer approaches focused more on processes of collaboration and learning to bring about
change, have certainly made some contributions to influencing corporate behavior in the
direction of greater sustainability. In particular, collaborative initiatives that offer forums for
stakeholder dialogue and participation can enable the strengthening of communication, trust
and shared learning around areas of potentially common interests, and enable NGOs and
affected groups to participate directly in consultative and decision-making processes
associated with new forms of standard setting and enforcement. They can also contribute to
organizational and cultural change within companies, fostered by learning and dialogue. This
can be especially beneficial in relation to complex features of organizational culture such as
discrimination and health and safety regulatory systems, where normative change and
participatory engagement are often important prerequisites for effectiveness.
However, such ‘soft’ approaches to corporate accountability have been widely criticized as
ineffective and unresponsive to the concerns of workers and communities affected by
corporate activity. Because they lack significant means of sanctioning those companies that
fail to engage with such change processes, improvements brought about as a result of such
mechanisms are typically highly uneven across sectors and companies.
At the other end of the spectrum, where governments have implemented strong regulatory
approaches to underpin corporate accountability strategies, in some cases stronger and more
consistent enforcement of CSR norms has been achieved8.

8
www.ssrn.com

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CORPORATE DISCLOSURE

Disclosure is the process through which corporations communicate business and financial
information to their stakeholders. Corporate disclosure is a process through which a corporate
entity communicates to the external world. In common sense, corporate disclosure means
periodical statement of financial activities, accounting for assets and liabilities, calculating
profit and loss, and showing movements of funds.
Corporate disclosure is defined as reporting of qualitative and quantitative information of
financial and non-financial nature regarding the reporting entity to outsiders for the purpose
of their analysis and decision- making. For the purpose of the study corporate disclosure
through published annual reports is examined.
Accounting operates in a socio economic environment as a 'service function'. When there is a
drastic change in the political or economic system of the country, it is bound to change the
objectives of accounting and corporate disclosure. In developing countries, the movement
toward a market oriented economy has necessitated a revision of financial reporting system.
The emergence of joint stock companies together with the divorce of management and
ownership has led to the increasing significance of corporate disclosure9.
The wider recognition of social responsibility of business for the last few decades has
important implications for corporate disclosure practices. This has emphasized the efficient
allocation of society's resources and wealth. The concept of social responsibility has now
become broader and includes employment generation, pollution control, civic amenities etc.
Corporate disclosure aims not only at investors, but also at creditors, employees, regulatory
agencies, and the public at large. As a rule, disclosure performs a facilitating function: it is
designed to facilitate, assist or enable the decision-making of the persons to whom it is
addressed. This applies, in particular, to disclosure directed to persons making decisions
whether to contribute capital, general investors, and existing shareholders, who are the
primary addressees of the disclosure.

9
http://www.wikipedia.org

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Nature of Corporate Disclosure

The origin of contemporary financial accounting and reporting lies in the century and the
development of double entry record keeping by merchants to keep track of their business
activities. The system was designed to provide information about economic resources,
owners investments, and obligations to creditors, as well as to measure the results of business
transactions. Believing that a common measuring unit would greatly facilitate the recording
and communication process, the merchants selected the monetary unit as the most appropriate
choice, because they thought about their investments and the results of their business
operations in terms of cash. The system of measuring economic resources, obligations and
activities in financial terms was the beginning of financial accounting and reporting.
Corporate disclosure practices are constantly evolving and are influenced by changes in the
social, legal and economic environment. It influences capital formation and flow of funds and
perform a vital role in the successful functioning of the economy10.

10
http://www.manupatra.com

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CONCLUSION

Corporate governance practices are playing an important role in the growth of companies. So
this moral practice should have to follow by all organizations for smooth running of business,
for formulate good corporate image, to increase the transparency in corporate affairs and at
the end to protect the interest of its stakeholders.
Transparency means disclosure of the relevant information about corporate in timely and
accurate manner is necessary. It helps stakeholder to know their rights and day to day activity
of the corporate.
Transparency is a critical component of corporate governance because it ensures that all of
entity’s actions can be checked at any given time by an outside observer. This makes its
processes and transactions verifiable, so if a question does come up about a step, the
company can provide a clear answer

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Bibliography:

BOOKS

 “Singh Avtar”, Company Law, Eastern Book Company, 2008

 “Tripathi S. C.”, Modern Company Law, Central Law Publications, 2006

WEBSITES

 http://www.wikipedia.org
 http://www.indiankanoon.com
 http://www.manupatra.com
 http://www.scconline.com
 www.csr.in
 http://www.legalservisesindia.com

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