LEADERSHIP AND CORPORATE ACCOUNTABILITY

LEADERSHIP AND CORPORATE ACCOUNTABILITY

Today’s highly competitive global business environment places unprecedented demands on

companies from a range of stakeholders. Far beyond merely meeting the needs of their customers,

organizations are compelled to consider the interests of their employees and investors, the various

governments that regulate their markets, and society on both a local and global scale. In this interview,

Rohit Deshpandé, Sebastian S. Kresge Professor of Marketing at HBS, discusses the growing

demand for accountability and the benefits of the Leading Corporate Accountability—India program.

What are the corporate accountability challenges facing firms that do business in India?

Leaders in organizations across the world, and particularly in countries like India, are facing three sets of challenges. The first is a global best-practice challenge. This has to do with understanding the thinking, the knowledge, and the frameworks that drive high performance. Second is a competitive challenge. Increasingly, an organization’s marketplace is not just domestic but also international. More and more, sales are coming from exports to international markets, and companies are competing against leading global players in addition to organizations from their home territory. To succeed, they need to know how to differentiate themselves competitively in the global arena.

The third challenge—which might be very specific to countries like India—is the notion of moving your game up a notch in terms of responsibility and transparency to multiple stakeholders. In India, this might be referred to as the Anna Hazare challenge. 

Companies must be proactive, rather than react after there is a public outcry about responsibilities and the lack of accountability. In other words, business leaders need to get out in front of corporate accountability issues and differentiate their organizations in a new environment.

How can organizations create the right framework for analyzing their responsibilities?

The right framework starts with shifting from a shareholder view of the organization to a stakeholder view of the organization. This requires executives to be more aware of claims from all of the different stakeholders—not just investors, but also the public,customers, and employees—and to understand how to balance these multiple claims. At the same time, they have to think about their organizations from more than a short-term financial perspective and consider issues related to sustainability over

the long term.

What key governance tools do organizations need to deliver on their responsibilities?

We can put governance tools into two buckets: external governance and internal governance. External governance has to do with all outside stakeholders—that is, interactions with government regulators, with society, and with customers. To deal with these external stakeholders, companies need different mechanisms such as legal counsel, risk management systems,consultants, and auditors. Then there are internal governance tools—the incentive system, the rewards system, and, perhaps most important, the value system—that are put in place to move the organization forward.