Academic journal article Management Research and Practice

Accountability of Corporate Boards in Finland

Academic journal article Management Research and Practice

Accountability of Corporate Boards in Finland

Article excerpt


This paper focuses on accountability and reporting from a corporate governance (CG) perspective. Drawing on a theoretical framework, empirical analysis was conducted on a dataset collected using a questionnaire implemented with a sample of board members of Finnish listed companies. We had two study questions. 1) To whom are the board members accountable? and 2) What information is required to deliver adequate reporting to meet accountability requirements? The findings show that board members are accountable to shareholders and stakeholders, and their accountability encompasses responsibilities to society and the environment. They see that current financial reporting does not provide sufficient information on ethical, environmental and societal issues. Focusing on board accountability, the study provides empirical evidence to support the concept of accountability and explains the relationship between accountability and reporting in the Finnish context.

Keywords: Corporate Governance; accountability, financial reporting, boards of Finnish listed companies.


The nature of corporate governance (CG) has been defined as the processes by which organizations are directed and controlled. It relates to decision-making, accountability, controlling and board behaviour (Cadbury, 2000; Solomon and Solomon, 2004). The research on corporate governance has mostly polarised been between the shareholder perspective and stakeholder perspective (Brennan and Solomon, 2008; Letza et al. 2004). The shareholder perspective is a narrow framework, focusing on the board's responsibility to the owners of the firm. However, the framework for CG is not static, and companies have to be alert to changes in their circumstances. They have to take environmental and social effects into account as an example of how expectations in society change (Cadbury, 2000; Gray et al., 1988; Letza et al. 2008). The broader approach, the stakeholder-oriented framework, emphasizes that the company is responsible to all its stakeholders (Brennan and Solomon 2008; Letza et al., 2004; Pajunen, 2010; Werhane and Freeman, 1999).

Keay and Loughrey (2015) note that one of the key reasons for identifying what accountability means is that no other issues linked to CG, such as whom the board is accountable to and how accountability is to be secured, can be discussed without a definition for accountability. Accountability is understood as a core notion linked to CG. The premise is that accountability is the duty to give an account of those actions the board is responsible for. The question remains, to whom is the board accountable--shareholders, stakeholders or society in general (Benston, 1982; Huse, 2005; Keay and Loughrey, 2014; Sinclair, 1995; Cooper and Owen, 2007; Parker, 2007; Collier, 2008). The traditional and dominant approach to researching accountability from a corporate governance perspective is using a quantitative and positivistic methodology including studies that investigate a wide range of governance factors related to a board of directors and measuring performance (Brennan and Solomon, 2008). Quantitative analysis has contributed to corporate governance research by increasing knowledge about the quality and efficiency of board decisions (Gupta et al., 2008), the relationship between corporate governance and firm value (Carter et al., 2003; Garay and Gonzalez, 2008), the links between the composition of the board of directors and organizational performance (Brennan, 2006), and the relationship between CG ratings and company success (Bauer et al. 2004; Renders et al. 2010) among others. Qualitative and hermeneutic studies have examined relationships and conflicts between national culture and values, and the rationale of imported practices like corporate governance (Uddin and Choudhury, 2008). Such studies have also offered interpretative analyses of how corporate governance and the effects of the Sarbanes-Oxley Act (SOX) are socially constructed through autonomous agents (Stein, 2008), and shown that the UK lacks institutional structures and mechanisms to enable workers to secure a greater proportion of the firm's income (Sikka, 2008). …

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