Preventing corporate collapse through accountability

The Indian company Satyam Computer Services balance sheet manipulation which has now been revealed to have taken place over several years and the collapse of select financial institutions in Sri Lanka are not uncommon incidents in the world of business. They are just two incidents which are very close to home.

The common factors in these instances is the lack of management accountability by these companies due to poor corporate governance, resulting in creating severe impact on stakeholders, including customers, employees, investors and lenders. In this context, the launch of the Corporate Accountability Rating scheme in LMD’s January 2009 issue could not have been more timely.

According to STING Consultants which designed and launched this initiative, the objective of this rating which is open to any company in Sri Lanka is to establish a stronger commitment to approaching corporate accountability holistically.

By adopting a strategic approach, and by viewing the process as an integrated stakeholder engagement, it can be made to become a part of the culture of the organisation, thereby avoiding such costly blunders. This approach moves CSR from a pure project basis, to a business oriented engagement with all of its stakeholders.

“After all, what is the point of doing charity work if you are not accountable to your stakeholders, because eventually you will not have a business to run,” said CEO of STING Consultants Ruchi Gunewardena.

Indeed, Satyam and other failed financial institutions have been closely associated with philanthropic projects. Satyam in their website states :“creating value for society is an integral part of our business. We believe that contributing to the well-being and development of society is an extension of everything we do. While we undertake urban transformation initiatives through Satyam Foundation, we touch rural transformation through Byrraju Foundation.”

The Corporate Accountability rating initiated by STING Consultants is essentially a self evaluation scheme. However, those organisations which are looking at further consolidating this practice can do so through independent verification by STING Consultants as well as through identifying stakeholder perceptions, which will enable them to further strengthen their accountability standing in the future.

“Our rating provides assurances to stakeholders in these times of enormous turmoil, which provides confidence and builds reputation and the brand,” said Gunewardene.