10(d) (i) Meaning of accountability and Mendelow.
Briefing notes for board meeting.
Prepared for Helen Duomo, chief executive.
By Emily Baa
Wednesday 20 June, 2012.
Accountability of the Hayho board
The two letters received raise important issues of accountability, and specifically, the issue of to whom the board of
Hayho is accountable. In reflecting on how to deal with this and how to frame our response, it may be helpful to consider
the accountability situation we face as a board.
Accountability is a key relationship between two or more parties. It implies that one party is accountable to, or
answerable to, another. This means that the accountable entity can reasonably be called upon to explain his, her or its
actions and policies.
This means that the accountable party can be held to account and may be required to actually give an account. This
has the potential to influence the behaviour of the accountable party, in this case Hayho, because of the knowledge that
they will have to answer for it when they give that account.
Whilst it is clear that the board is accountable to the shareholders as stewards of their investment, it may be the case,
nevertheless, that the board may need to account to WB because of its influence among politicians and in wider society,
as outlined below.
Influence of Watching Business
The Mendelow framework is a way of mapping stakeholders with regard to the two variables of interest and power. The
combination of these is a measure of any given stakeholder’s likely influence over an entity such as Hayho. The
framework is dynamic in that stakeholders move around the map as their power and interest rise and fall with events.
WB has a moderate degree of power and a variable degree of interest. Because its interest (in Hayho) has recently
increased, its overall influence has risen. Our response to WB must be responsive to this.
WB’s power derives from its ability to conduct research and mobilise opinion, including among policymakers and trade
organisations, against businesses like Hayho. We do not need to agree with its agenda to appreciate its power. Its power
is expressed as influence when its interest is also increased.
It was news of our possible investment in Jayland that increased WB’s interest in Hayho. This, combined with its evident
power, increases its net influence over Hayho. This makes WB difficult to ignore in our decision over whether to invest
in Jayland or Pealand.
(ii) Agency and demands from WB
Responsibilities to shareholders
The board of Hayho exists in an agency relationship with its shareholders, who collectively own the company and have
the legal and moral right to determine objectives. As agents of our shareholders and appointed by them, we have a
fiduciary duty to seek to manage the company’s resources for their overall economic benefit. In the case of Hayho, as
with most business organisations, this involves maximising returns consistent with our complying with relevant laws,
regulations and norms. Quark Investments, as one of our major shareholders, has every right to remind us of this duty
and we should take its reminder very seriously.
Lobby group demands
Whilst being well-meaning, the lobby group WB is against one of the investment options we have at this time. It claims
that an investment in Jayland would be damaging to human rights in that country. Without commenting on the accuracy
or validity of that claim, we should remind colleagues why we might think carefully about the investment, as it would
bring us into conflict with WB.
First, WB is respected and its views are trusted by many people. In terms of reputation, it has highlighted our problems
in Arrland and, as a result of that, has been monitoring our activities. We may need to consider public opinion before
going ahead with a potential Jayland investment as we need the general support of society to operate.
Second, WB has influence among politicians and policymakers both in this country and abroad. We risk the censure of
influential people and increase the pressure for increased regulation if we disregard or act against the lobby group’s
demands. Our reputation in international markets is one of our strategic assets and it may compromise our commitment,
given the Arrland incident, if we were not to uphold the highest standards of integrity, human rights and environmental
protection from now on.
Third, WB is very adept at mobilising public opinion through the media. This means that it can stimulate interest in
conditions in Jayland and we would be likely to be heavily scrutinised on an ongoing basis were this investment to be
made. This could attract public anger and risk disruptions, such as boycotts of our products.
Because of these issues, it would seem prudent to consider these issues as a part of our investment appraisal between
the Jayland and Pealand options.
