Transparency and Responsibility
Should managers be expected to be able to account for each and every one of their actions? As far as HEC professor Martin Messner is concerned, the short answer to this question is no, because managers sometimes react intuitively. Still, transparency is indispensable in this day and age, so Messner advocates promoting personal responsibility and combining formal and informal reporting practices.
Business Ethics as Practice, the book recently coedited by Martin Messner, affirms, “in business, moral questions are not just theoretical; they arise in practice and have to be dealt with in practice.” Accountability, or the giving and receiving of accounts of people’s actions, is one such moral issue and one of M.Messner’s principal fields of interest. He explains that on a basic level, when a person or organization’s actions have consequences for others, the latter have the right to know and understand why particular choices have been made. “Accounting is necessary in order to find out whether a manager’s actions have been appropriate and/or legitimate,” he continues. But can all actions be explained? Though M. Messner views the current trend toward increased accounting requirements and practices in a positive light, he cautions against excessive demands in the way of accounts. His research has led him to argue for allowing managers leeway in terms of reporting, because innovative leaders in particular may not be able to spell out the exact reasons for their actions. In fact, an effective accounting policy requires combining demands for justification with healthy doses of common sense and personal responsibility.
THE LIMITATIONS OF EXPLANATIONS: ALLOWING LEEWAY FOR HUMAN OPACITY
Corporate scandals and increasing criticism of executive compensation have raised public consciousness— and demand—for managerial accountability and transparency. Such events also sparked Professor Messner’s interest in the capabilities and limits of accounting and accounting practices. Is it legitimate to ask managers to justify their actions in every detail? What about the fact that an account that satisfies one stakeholder may not content another? Incongruent demands and interests make accountability a complex issue. According to Martin Messner, one of the principle limits of accountability is rooted in the instinctive, inexplicable side of human nature. Intuitive decision- making is considered a sign of “great” leadership, and innovation and out-of-the-box thinking are currently considered to be the keys to competitive edge. Consequently, today’s managers are far more likely to be praised for intuitive rather than rational decisions. But by definition, intuition is something that cannot be fully explained; it implies an opaqueness that must be recognized. Yet the business world behaves paradoxically and even hypocritically toward instinctive managers. They are called miracle workers when they are successful… yet brutally condemned when their intuition proves wrong. It is in the latter case that managers are asked to provide detailed justification for each and every one of their actions. They are reprimanded when unable to do so and chastised for not having followed “the rules”. Such a paradoxical perspective needs to be recognized, for unrealistic expectations are both unfair and bound to disappoint.
FORMAL VS. INFORMAL PRACTICES
Still, Martin Messner comments that more and more companies are complying with demands for more thorough accounting. Consumer blogs and better organized stakeholders are responsible for this increase in demand, so along with traditional reports destined to shareholders, companies are now providing accounts of social and environmental action and justification of executive compensation. Greater transparency is even being transformed into competitive advantage, which is not to be begrudged, though it does reveal a catch in the trend toward increased reporting. M. Messner refers to Michel Power, author and professor at the London School of Economics, who has used auditing to highlight the risk of accounting practices becoming “ceremonial”. M. Power points out that audits are perceived as guarantees that everything is the way it should be, but the more people trust formal accounts, the more vulnerable they become to wrongdoings that are not visible in such frameworks. In response, Professor Messner says that informal reporting practices and discussion within formal schemes should be recognized and promoted as complementary aspects of an effective accounting system. Discussions among managers about various ways of reporting (e.g. market vs. historic vs. forecasted values) will ultimately contribute to the value of accounts by recognizing their inherent selectiveness. Furthermore, such discussion contributes to a dynamic that encourages responsible management.
RESPONSIBILITY: AN ANSWER TO THE LIMITS OF ACCOUNTABILITY
“Even if we cannot expect someone to account for each and every detail of his or her work, we can still demand responsible behavior,” M. Messner continues. “There must always be space for responsibility that goes beyond the convention always of giving and demanding accounts—simply because we know that accounts have limits.” Responsibility is not merely a matter of articulating an explanation. It implies a willingness to go beyond this minimum and means reflecting on the rules you are following. In fact, responsibility would cease to exist if it were considered tantamount to giving an account. In practice, that means that if managers feel that an account does not reflect what is genuinely important, or if they find fault with certain organizational policies, being responsible involves voicing criticism and striving to rectify the situation. M. Messner explains that as important it is to distinguish between giving an account and acting responsibly, the latter notion is difficult to teach. Though teachers can—and should—tell students to take time to reflect on situations that come up, it takes experience and even expertise to develop good judgement. In many ways, it is a quantitative matter. When you have been repeatedly exposed to a certain type of situation, you are in a better position to respond to it appropriately. M. Messner offers the example of doctors. When it comes to making diagnoses, they do not refer solely to their medical studies but rely far more significantly on previous experience with similar symptoms. Would this suggest that it might not be a good idea to give even “high potentials” too much power too early in their careers? That is the premise of Henry Mintzberg, author of Managers Not MBAs. He argues that people can only become good managers through practice. M.Messner admits that there may be some inherent dangers in giving people too much power, too soon, but he adds that business people’s participation in the education process at schools lik HEC moderate this danger. They provide real life testimony, offering food for thought and encouraging students to think ahead about issues they are likely to have to handle during their careers. M.Messner says that people’s actual behavior is far more influenced by the power they hold than by the accounts they must provide, but he believes in the positive influence of transparency and visibility. In the case of managerial misconduct, while a person who is aware of another’swrong doings may lack the means to sanction him or her, detailed reporting requirements may well influence wrong-doers to change their ways.
Interview with Martin Messner based on the book chapter “Being accountable and being responsible” (from Business Ethics as Practice: Representation, Reflexivity, and Performance , Edward Elgar Publishing, 2007) and on two working papers.
Martin Messner’s research has consisted of in-depth theoretical exploration of social and philosophical theories on accountability and related practices in both business and other social settings. M. Messner is currently working on a formal theory of the limits of accountability based on contemporary social and philosophical theory. He is also working with David Bevan of the University of London, Royal Holloway to explore the “controllability principle”, a concept that links managerial responsibility to controllability. In the future, M. Messner would like to carry out empirical research on these issues to find out how managers experience and deal with accountability issues on an everyday basis.