Why Transparency and Accountability Matter in Corporate Governance

By Sharmista Thota

The phenomenon of corporate governance refers to the system of rules, practices, and processes by which a company is controlled by its shareholders, stakeholders, board of directors, and managers. Key principles of corporate governance include transparency, responsibility, and accountability. The amount of governance held may impact a company’s reputation and success.

The individuals who manage the corporate governance of a company have many tasks to concern themselves with. The board of directors maintains its tasks, like strategic oversight, monitoring management, and its fiduciary duty. Shareholders have major influence over the corporate governance of their company. The shareholders of a company withhold voting rights to make changes to the company, including approving mergers and sales, elections, etc. There is a critical relationship upheld between the executives, shareholders, and the stakeholders of a company. The executives manage the company day by day. The shareholders own some stocks in the company. The stakeholders consist of the other categories of employees and such. Maintaining this harmony in a company is crucial to ensure the success for a business.

The board of directors and management must be transparent and hold accountability while managing a company. This is needed to maintain the harmonious relationship between the board of directors and the shareholders of the company. If transparency isn’t maintained within the company towards its board of directors and management, there may be possible cases of the loss of stakeholder and shareholder trust. The lack of trust will also seep into the reputation of the company–negatively impacting it.

Accountability is maintained by the board of directors and the management so their actions could be trusted and justified. It is needed so that the board of directors and the management of a company are able to justify decisions made that may impact their company. Without upholding accountability, the harmonious balance of the three roles within a business also get interrupted.

Many companies have failed to uphold the trust and accountability to follow the rules of corporate governance. An example of that is the Enron Corporation. They falsified profits and generated billions of dollars of debt just to uphold reputations, but it ultimately tanked their company in the end.

It is of utmost importance that a company and the people within it uphold the corporate governance required to maintain trust with its shareholders.

Citations

Corporate governance: What it is and why it matters (2023) Pitt Law MSL Online Program. Available at: https://online.law.pitt.edu/blog/corporate-governance-what-it-is-and-why-it-matters (Accessed: 30 May 2025).

Enron (2016) FBI. Available at: https://www.fbi.gov/history/famous-cases/enron (Accessed: 30 May 2025).

Jamesju (2025) Corporate governance: Overview and expert legal resources, Thomson Reuters Law Blog. Available at: https://legal.thomsonreuters.com/blog/corporate-governance/ (Accessed: 30 May 2025).