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Corporate governance is a broad concept that mainly focuses on the way organisations are managed and controlled, the OECD defines it as Procedures and processes according to which an organisation is directed and controlled. The corporate governance structure specifies the distribution of rights and responsibilities among the different participants in the organisation such as the board, managers, shareholders and other stakeholders and lays down the rules and procedures for decision-making (OECD 2005). One of the main reasons behind the increasing attention this concept is getting lately is the recent companies mismanagement and scandals, especially in publicly-listed companies in stock markets, such as the Enron case and the GFC, which triggered a crisis of confidence, leading to increased demands for the two most important principles of corporate governance, transparency and accountability, which are critical for the efficient functioning of a modern economy and for fostering social well-being (IMF 2005). Global collaboration and coordination is required to restore the publics trust, through creating standards and policies to protect investors (PWC 2011). This paper explains and discusses the principles of transparency and accountability. It starts by giving a definition of transparency, then a discussion of the reasons behind the recent interest in it, followed by explaining the importance of transparency, a discussion about the flip side of it, in-transparency is then provided. The corporate governance principle of accountability is then discussed, a definition of accountability is provided, followed by a three steps process view of the accountability, then a discussion on the importance of accountability, and a view of the debate of the scope of accountability, between only focusing on the shareholders interests, or the interests of a wider group of stakeholders. The paper ends by a conclusion on the importance of these two corporate governance principles in publicly listed companies.

Transparency can be defined as a principle that allows those affected by administrative decisions, business transactions or charitable work to know not only the basic facts and figures but also the mechanisms and processes. It is the duty of civil servants, managers and trustees to act visibly, predictably and understandably (Transparency International 2011). It is about ensuring that the needed information is available to all concerned stakeholders, such information have an effect on the relationships stakeholders have with the organisation, as it can be used to measure the managements performance and to make sure that power misuse can be detected, this means that transparency can help in achieving accountability. The importance of transparency in publicly listed companies increased in the recent years due to many scandals that involved members of top management, such as the collapse of Enron, which analysts believe it was the result of manipulations in the financial statements regarding the special purpose entities (SPEs), which enabled Enron to keep billions of dollars corporate debt off the balance sheet, the problem was that the US accounting standards at that time permitted this (Tricker 2009), which lead to creating policies and standards regarding the financial statements of publicly listed companies and the disclosure by bodies such as GAAP and IAS. The International Chamber of Commerce (ICC) suggests that transparency and disclosure should contain material information, which is information whose mis-statement or omission can influence the decisions made by the people who will use the information, such information should include the companys objectives, executives and members of the board, the voting rights and companys ownership, externally audited financial statements, management remuneration, governance structure, any other issues that could affect any of the stakeholders, and any anticipated risk factors (ICC 2004). Transparency is important, as recent years proved that transparency and disclosure have a positive impact on the relation between the company and stakeholders, which can lead to enhancements in the market share price of the company, hence reducing the cost of capital. Transparency also can help

in increasing the confidence and the quality of decision making within the company through timely and reliable information that can increase the profitability and the growth of the company. Disclosure of reliable information regarding the companys performance and future business strategies can also affect the decision making of lenders, investors, and shareholders, as this enables them to make fair assessment of the risks involved in placing their money. Transparency and disclosure can give the public an understanding of the companys attitude towards ethical and environmental standards, as well as the companys relation with the community. Probably one of the main reasons for the trend to have international standards for transparency and disclosure is to prevent corruption and fraud, which can be achieved with a good auditing, this allows companies to compete based on their best ways to differentiate themselves from companies that do not have good governance. Finally it is worth mentioning that research has demonstrated that transparency and disclosure can enhance stock market liquidity (ICC 2004). The history of corporations gives us some examples of applications of transparency, one of the classic examples is Johnson & Johnsons reaction to the Tylenol murders of 1982, they handled the problem in a brilliant way, through being transparent to all stakeholders, they pulled Tylenol (Johnson & Johnsons bestselling product) off the shelves, which was something unusual for companies at that time, then they re-launched the product with a new safety seal, Tylenol regained its market share, unlike the deceptive ways other companies such as Enron, WorldCom, and Lehman Brothers dealt with stakeholders, which resulted in them going out of business, so obviously transparency is a good thing, companies who follow the rule, get a chance to survive, while others who dont suffer (Morgan 2008). Some argue that transparency is not always the best thing to do, and that some information should be kept inside the company, they argue that in-transparency is important as well, but the risk of doing this is high, once the trust is broken, it is hard to re-establish it. Recently French right-wing MP Bernard Carayon stated that companies should be allowed to define for themselves which information remains secret (Pigeon 2011). Carayon wants to increase protection for "economic information" by introducing a three-year prison

sentence and a 375.000 fine for anyone found guilty of breaching the confidentiality of information of an economic nature, such information is defined as information that is not general knowledge freely accessible by the public and that has, directly or indirectly, an economic value for the company, and which has been protected with substantial secrecy measures by its legitimate owner, according to the law and common practices (Pigeon 2011). The challenge here is not to allow companies to use this law to hide fraud activities.

Accountability in corporate governance for publicly listed companies can be defined as ensuring that actions and decisions taken by management are subject to oversight so as to guarantee that their actions and decisions meet the shareholders interests. However, the trend in recent years is that companies should recognise some accountability to a wider range of stakeholders, including employees, customers, and the media (Tricker 2009). Accountability also means that companies should be prepared to give a justification or an explanation to relevant stakeholders for its judgments, actions, intentions, and omissions, when requested (Rasche & Esser 2006). Accountability can be viewed as a three steps process, the first step is accounting, which reflects the need to identify relevant issues, accounting means giving indicators on the companys performance. The next step is auditing, which is the process of verifying the quality and content of accountability related information, it can also mean taking corrective actions, to build trust with stakeholders, this can be done externally or internally, but recent regulations require the use of professional auditors. The last step is reporting, which is about communicating and measuring the impact of accountability related actions by getting feedback from stakeholders in order to improve processes (Rasche & Esser 2006). Accountability is important if a business is to be successful, as it provides the needed motivation to make sure people overcome their natural resistance, but there is a debate that managers would be more motivated if they were under less shareholders control, but the question is that without enough

accountability, will the managers know what actions to take in order to achieve shareholders objectives, and to which degree they will balance their self needs and shareholders needs, so obviously loosening the accountability will leave managers free to serve their interests, which will increase agency costs (Ribstein 2005). Accountability in terms of evaluating the effectiveness in which the business is run by management ensures that managers are performing to their full potential, which increases the confident of stakeholders. It is obvious that accountability is important, but the debate is on the balance between accountability only to shareholders or to a wider group of stakeholders in term of corporate social responsibility, so the issue is whether corporate social responsibility supports mandatory governance rules restricting the extent to which corporate governance arrangements can hold managers accountable (Ribstein 2005). Some studies showed that managers with higher levels of ownership take greater personal responsibility for the actions of their companies than those with lower levels, this can be justified by the lower agency costs such companies have (Ribstein 2005). Corporate Social Responsibility (CSR) is a behaviour that is encouraged, while accountability is a required behaviour.

Accountability, and transparency and disclosure, are crucial to good governance, without transparency and accountability, there will be a lack of trust between a company and its stakeholders, the result would be an environment that is less than favourable to economic growth. Companies today dont have a choice but to be transparent, as a result to the internet and social websites such as YouTube and Facebook, where what you dont admit to public, will hit the news in no time, so it is better to shape the news yourself, rather than having someone else shape them for you. History showed many examples of the effects of transparency in business, it is a fact that transparency leads to customer loyalty. Accountability and transparency can help in detecting and preventing fraud and manipulations, which result in protecting stakeholders interests, and they have a great effect on the public image of the company.