New Paper Posted: “Unpacking Accountability in Business and Human Rights: The Multinational Enterprise, the State, and the International Community

(Pix © 2018 Larry Catá Backer)

I have just posted a draft of a paper.  It is entitled  Unpacking Accountability in Business and Human Rights: The Multinational Enterprise, the State, and the International Community.  It considers the complex set of premises that together create the modern notion of accountability and then considers the ways those premises contribute to the construction of accountability systems in the context of the responsibility to account for the human rights, sustainability and labor effects of economic activity.

The ideas developed here were first presented in more summary form It was first presented at the Conference: Accountability and International Business Operations: Providing Justice for Corporate Violations of Human Rights, Labor and Environmental Standard held at the Utrecht Center for Accountability and and Liability Law (UCALL) on May 18-20 2017 (Conference information HERE; original PowerPoints HERE).

The Abstract and Introduction follow.  The full draft paper may be accessed HERE. Comments, reactions, engagement gratefully appreciated.

“Unpacking Accountability in Business andHuman Rights: The Multinational Enterprise, the State, and the InternationalCommunity”

Larry Catá Backer

 Abstract: The emerging hard and soft law frameworks for regulating the human rights, labor and environmental responsibilities of economic enterprises (whether public or private) are operationalized, to some extent, through mechanisms of accountability. Accountability, then, occupies a central place within the complex of regulatory trends that are shaping the organization of economic (and to some extent social, political and cultural) life within a globalized order. The purpose of this essay is to unpack the concept of accountability as it is deployed in governance, and then to repack it in a way that makes the concept more useful.  The thesis of the essay is this: accountability must be understood a shorthand for a set of multiple reciprocal relations, manifested in actions responding to expectations that are grounded in normative standards actualized in the context within which the actors are connected, and directed toward general (communal) and specific (individual) ends. A working system of accountability centered on corporate violations of human rights and sustainability, requires mutual and simultaneous accounting by all stakeholders to bring (1) each other to account, (2) oneself to account, and (3) to be brought to account.  Part II examines the strands of premises that constitute the complex of concepts for which one used the shorthand term “accountability.” It examines a core set of orienting principles central to the concept of accountability as a governance norm and as the instrument of that norm. It examines a core set of orienting principles central to the concept of accountability as a governance norm and as the instrument of that norm. The first touches on the behavior core of accountability as (a) the act of answering to, explaining of in relation to an expectation, (b) to a specific and functionally segmented objective, (c) manifested as conduct, norms, methods, consequences, (d) directed to oneself to others, and (e) to the specific ends of making right, disciplining behavior to ensuring order.  These rational and functionally constrained actions then suggest the ways that rendering accounts can be manifested to the intended beneficiaries of the accounting. Part III of the essay, “Rendering Account,” then re-bundles accountability.  Section A looks to its objectives (why account). Objectives include norm generation, good governance, institutional legitimacy, and remedial mechanisms. Section B considers the systemic elements of accountability systems. Its methods of accountability (institutional and formal or informal) and its governance sources (law or norms)—shape the expression of accountability and define its context. And Section C then considers the subjects of accountability systems (who accounts; who is accountable): states, enterprises, international organizations, and civil society/NGOs.

I. Accountability.

Etymology sometimes carries with it the culturally powerful norms with give a word a complex set of social meaning beyond its quotidian use (Broekmann and Backer 2013).  Such is the case with the words “account” and “accountability.”  Consider an “account,” and “to account;” accounting carries with it the sense of a thing (the noun) and of an act (the verb).  It is the body of a statement answering for conduct; it is a disclosure, a confession, a memorial of past actions rendered in accordance with a generally accepted framework for rendering such account. It serves as the basis for monitoring, for compliance, for contrition and for the reckoning under the standards of conduct to which the accounting relates.   At the same time, it is the act of rendering account itself; it is the act of explanation, of confession, of recalling past actions; it is the act of reckoning. The concept then ties a series of complex ideas: it serves as a nexus points for concepts of transparency, of monitoring and reporting, of normative standards that trigger and structure those.  At the same time, it suggests confession and contrition, and bears within it the underlying sense of a set of standards against which both report and reporting are undertaken, and the rules that vest some with the responsibility to engage in such acts (Anderson, 2011).    

Accountability, then, is the condition of being accountable, of bearing an obligation to account, that is of the duty, expectation, act and form of rendering acts up for judgment.  Accountability is the condition of being required to explain and the act of explanation itself. But it is a social act that produces judgment and is rendered in the context of expectations from which judgment can be made and consequences exacted.  The implication is that such accounts and accounting, and such amenability to account, are social acts.  This is emphasized by the history of its construction—its ancient derivations “from Latin computare "to count, sum up, reckon together," from com "with, together" (see com-) + putare "to reckon," originally "to prune," from PIE [proto-Indo-European] root *pau- (2) "to cut, strike, stamp."” (Online Etymology Dictionary, n.d., account). To speak of accountability, then, in the common parlance, is to suggest a set of actions and objects bound up in an obligation to undertake both the acts and to deliver the object—a set of disclosures from which judgments may be made in the context of the reciprocal obligations that bind those who account and those to whom the accounting is owed.   Those clusters of acts and objects are the means through which one brings another to account, but as important, they serve as the means through which one is brought to account, and the forms through which one brings oneself to account. The three are united in their fidelity to the forms of accountability, even as each  points to quite distinct forms of rendering account.

Accountability has always played a major role in the management of enterprises.  Enterprises have long been required to render account to its stakeholders. Business partners account to each other, the managers of business account to their principals. The scope and form accounting has changed substantially over the years.  For business enterprises the scope of accounts and accounting have been guided by a sometimes-tense relationship between two core principles—the first principle is the obligation of enterprises to maximize the welfare of their owners; the second principle is the obligation to conform to law. Both have inherent within them the obligation to conform to social and contextual expectations—if only because the failure to so conform could produce business risk (e.g., negatively impact enterprise performance (and thus in this century the source of the so-called business case for human rights (Kurucz, Colbert, and Wheeler, 2008)), and might also produce legal risk as well (sometimes through legal changes in the wake of social scandal—for example the U.K. Modern Slavery Act of 2015)). Business enterprise is certainly accountable, yet for much of the contemporary history of the enterprise the focus of the accounting of business has focused directly on the its financial condition, guided by generally accepted accounting principles and its variations (GAPP), the normative framework developed by the profession that has grown up around the duty to account, and to judge its consequences (Financial Accounting Standards Board (FASB) 2014), as well as by those conditions that might impact financial performance built into the disclosure regimes of many legal structures for the management of markets for securities (e.g., U.S. Securities Act 1933).

But just as globalization substantially changed the relationship of the law of enterprise organization and its governance (Backer, 2006), so has globalization also transformed the character of accountability itself. From the rendering of accounts in specific instances, accountability has become, in some sense, a central concept in governance legitimacy (Woods, 2006; Koppell, 2010, ch. 2).  Accountability has also become both the expression of governance and the act through which governance is conducted. Objectives based regulation, regulatory governance (Backer 2018) and the rise of data-algorithmic systems of compliance by enterprises (Pasquale, 2015) and states (Hvistendahl, 2017), reward and punishment have substantially broadened the scope of accounting as well as the range of those who must account, and the scope of the actions with respect to which an accounting is now expected. With respect to economic activities in general, and enterprises more specifically, the transformation of the scope and utility of accountability has also shifted from a singular emphasis on the financial effects of activity to those that touch on a set of emerging social, philanthropic, sustainability, and human rights items. That shift also underlines a number of other transformations from the centrality of the state in governance through law to a more diffused regulatory system (Rhodes, 1996; Backer 2012) and from the focus on law making and enforcement to systems of regulation based on disclosure and compliance (Hodge, 2016).   In a networked weaving of governance systems, one in which the government of the state no longer sits at the center, accountability becomes the means for producing order without a center (Germain, 2007; Backer, 2016).

Accountability, then, occupies a central place within the complex of regulatory trends that are shaping the organization of economic (and to some extent social, political and cultural) life within a globalized order (Black, 2008). It frames the relationship between actors, established and emerging and gives them substance within regulatory environments (Koops et al., 2010). This is all the more important in the context of the human rights responsibilities of enterprises and the concurrent human rights duties of states relating to their respective economic (and regulatory) activities (Deva, 2013).  Yet, the effective imposition of accounting regimes in governance requires a more nuanced understanding of the structures of the character and ecologies of accounting.

The purpose of this essay, then, is first to unpack the concept of accountability as it is deployed in governance, and then to repack it in a way that makes the concept more useful.  The thesis of the essay is this: accountability must be understood a shorthand for a set of multiple reciprocal relations, manifested in actions responding to expectations that are grounded in normative standards actualized in the context within which the actors are connected, and directed toward general (communal) and specific (individual) ends. A working system of accountability centered on corporate violations of human rights and sustainability, requires mutual and simultaneous accounting by all stakeholders to bring (1) each other to account, (2) oneself to account, and (3) to be brought to account.  

After this brief introduction Part II examines the strands of premises that constitute the complex of concepts for which one used the shorthand term “accountability.” It examines a core set of orienting principles central to the concept of accountability as a governance norm and as the instrument of that norm. To that end it considers the behavioral core of accountability as (a) the act of answering to, explaining of in relation to an expectation, (b) to a specific and functionally segmented objective, (c) manifested as conduct, norms, methods, consequences, (d) directed to oneself to others, and (e) to the specific ends of making right, disciplining behavior to ensuring order. These in turn suggest the relational structures of accountability; one brings to account, is brought to account, or brings oneself to account. Relational behaviors then suggest a scope of accountability.  This “for what ends” of accountability describes a functionally based set of constraints that give accountability its direction and coherence. These rational and functionally constrained actions then suggest the ways that rendering accounts can be manifested. This is determined by context and embedded in formal institutional structures of state and society. That brings accountability to its end point—those to whom accounting is rendered. The beneficiaries of accountability (to whom accountability duties flow) can determine the specific character of accounting.

The multi-level, multi-dimensionality of accountability as a dynamic and relational concept is then considered as a function of objectives, methods and subjects. Part III of the essay, “Rendering Account,” then re-bundles accountability.  The multi-level, multi-dimensionality of accountability as a dynamic and relational concept is then considered as a function of objectives, methods and subjects. Section A looks to its objectives (why account). Objectives include norm generation, good governance, institutional legitimacy, and remedial mechanisms. Section B considers the systemic elements of accountability systems. Its methods of accountability (institutional and formal or informal) and its governance sources (law or norms)—shape the expression of accountability and define its context. And Section C then considers the subjects of accountability systems (who accounts; who is accountable): states, enterprises, international organizations, and civil society/NGOs.

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