Corporate Governance: The international journal of business in society

The influence of emotions and culture on accountability and governance

S. VelayuthamM. H. B. Perera

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S. VelayuthamM. H. B. Perera, (2004),"The influence of emotions and culture on accountability and governance", Corporate Governance:
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The inuence of emotions and culture on

accountability and governance
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S. Velayutham and M. H. B. Perera

Abstract Accountability has frequently been presented as a rational practice that can and
should be implemented in all governance structures including civil society, economic institutions
and organizations. In accounting, it has been identied as a primary objective of nancial
reporting. This paper examines two emotional states, i.e. guilt and shame that are likely to
inuence accountability. The paper argues that (a) accountability through information disclosure
is a cultural practice closely associated with the emotional state of guilt that is common in
certain cultures, and (b) in cultures where the emotional state of shame is common, accountability is likely to be weak and, people are likely to be negatively inclined towards information
disclosure. Studies in psychology have also shown that ``typical'' shame experiences were
common in collectivistic, large power-distance and high uncertainty avoidance cultures; while
``typical'' guilt experiences were more pronounced in individualistic, small power distance and
low uncertainty avoidance cultures.

Sivakumar Velayutham is at the

College of Business and
Management, University of
Sharjah, Sharjah, United Arab
Emirates. Fax: 009716-5050513;
E-mail: sivav@sharjah.ac.ae
Hector Perera is at the
Department of Accountancy and
Business Law, Massey University,
Palmerston North, New Zealand.
E-mail: M.H.Perera@massey.ac.nz

Keywords Governance, Management accountability, Culture (sociology)

Introduction
Accountability is one of the most important concepts in politics and economics today. The
exercise of governmental powers is legitimated by the requirements of public accountability
(Stewart, 1984), and economic and public sector reforms in many countries seem to be
driven by the need for deregulation whilst maintaining accountability (Jones, 1977; Normanton,
1966; Smith and Hague, 1971). Accountability as a primary objective of nancial reporting is
also widely documented in the accounting literature (e.g. ASSC, 1975; Bird, 1973; AARF/
ASRB, 1990; FRSB, 1993). Transparency and full disclosure are often described as essential
prerequisites for achieving accountability.
Most recently, a lack of accountability, as reected in huge overseas debt, wasteful use of
resources, speculative property investment, and the over expansion of industrial capacity, has
been attributed as the principal cause of the Asian nancial crisis that resulted in the collapse
of many East-Asian and South-East Asian economies (Economist, 1998; IMF, 1998). The
Economist (1998, p. 7) reports that ``the resulting nancial bubbles were inated further by
inadequate bank regulation and the close, sometimes corrupt relationship between banks,
rms and governments''. An International Monetary Fund staff report (1998, p. 19) identied
``a lack of enforcement of prudential rules and inadequate supervision of nancial systems,
problems resulting from the limited availability of data and a lack of transparency, as well as

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VOL. 4 NO. 1 2004, pp. 52-64, Emerald Group Publishing Limited, ISSN 1472-0701

DOI 10.1108/14720700410521961

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problems of governance'' to be principal causes of the nancial crisis. Choi (1998) argues that
nancial ows, effective regulatory oversight, securities market development, lending decisions
and management accountability are all dependent on the availability of reliable information,
implying that nancial reporting is essential for accountability. The problems highlighted in the
Asian nancial crisis have led to calls for improved systems of accountability from both within
and outside the Asian region. It is clear however that the term accountability has been used to
describe many facets of a complex problem
Accountability has frequently been presented as rational practice to ensure responsibility by
individuals and institutions, which should be implemented in all civil societies, economic
institutions and organizations. However, different societies may adopt different mechanisms
for ensuring the discharge of responsibility. In an analysis of the perceived lack of accountability in Asian countries, Velayutham (1999) argues that whilst the concept of responsibility
is as important in Asian societies as in Western societies, the mechanism through which
it is discharged in Asian countries is different from that in Western countries. In Western
countries responsibility is discharged mainly through accountability, which is associated with
individualistic values and the emotional state of guilt. He also points out that the assumptions
that underlie accountability are inconsistent with the fundamental Asian values which tend to be
collectivistically oriented and associated with the emotional state of shame or ``loss of face''.
Consequently, accountability may not be an appropriate mechanism for ensuring the discharge
of responsibility in Asian countries.
The purpose of this paper is to examine the concept of accountability by exploring its emotional
and cultural roots. The paper suggests that the practice of accountability as a mechanism for
ensuring responsibility is closely related to the emotional state of guilt, and that guilt is more
common in individualistic, small power distance cultures, than in collectivist, large power
distance cultures. It takes the view that, unlike in guilt-prone cultures, in shame-prone cultures
accountability would not only be weak, but people would tend to actively hide or prevent the
disclosure of information.
The rest of the paper is organized into six sections. The next section examines the concept of
accountability as it relates to responsibility, transparency and accounting. The third section
introduces the concepts of emotions and self. The fourth section explains the links between
accountability and the emotional states of guilt and shame. The fth section establishes the
cultural relativity of emotions. The sixth section summarizes the main relationships identied in
the paper, with some concluding remarks in the seventh and nal section.

Accountability
A review of the literature on the concept of accountability indicates the term to be as old as
civilization itself. Bird (1973) traces the concept to the times of King Hammurabi of Babylonia,
and the promulgation of his legal code around 2000 BC. Day and Klein (1987) trace the practice
of accountability to the Athenian state, where the ofcials charged with carrying out the
administration had to report ten times a year on their conduct in ofce to the assembly of the
citizens. If they failed to carry a vote of condence, in other words their explanations were
judged to be inadequate, they faced a trial by jury of their fellow citizens.
Responsibility and accountability
The concept of accountability is frequently related to the concept of responsibility (Baier, 1966;
Blatz, 1972; Niebuhr, 1968). The term ``responsibility'' is derived from ``response'' and has been
used in the context of ``response-relations'' (Horosz, 1975) while the term ``accountability''
is derived from ``account'' (Scott and Lyman, 1968). Niebuhr (1968, p. 35) denes the notion
of responsibility as ``the idea of an agent's action as response to an action upon him in
accordance with the interpretation of the later action and with his expectation of response to his
response; and all this in a continuing community of agents''.
The concept of responsibility is itself frequently explained in connection with the practice of
holding people to account (Baier, 1966). Blatz (1972) in an analysis of the term accountability
states that ``when we say to some person, P, in the face of some moral failing, S, ``you are

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responsible for S'', we are saying, ``You are accountable or answerable for S''. A closer reading
of the literature, however, indicates the general principle that ``one cannot be held responsible
for the moral failing, S, without the opportunity to account for S''. Blatz (1972) goes on to state
that the purpose of calling one to account is to determine whether one is blameworthy for the
relevant S. Baier (1966, p.58) states that prior to any form of punishment for wrong behavior,
one must be found to be responsible for the behavior and provided an opportunity to account
for one's action:
The practices, such as punishment, which involve the iniction of essentially unwanted treatment on
individuals, are particularly obnoxious if mishandled or misused. Special safeguards are therefore
particularly important. Holding a person to account is designed to provide such a safeguard.

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The need for responsibility makes accountability an essential feature of every facet of Western
society democratic government (Chrimes, 1953; Birch, 1964), corporate governance (Sutton,
1993), and social order (Scott and Lyman, 1968). Stewart (1984) emphasizes that those who
exercise the power of government or corporate ofce have to be publicly accountable for their
actions. Scott and Lyman (1968, p. 112) identify ``an account as a linguistic device employed
whenever an action is subjected to evaluative inquiry''. They dene an account as ``a statement
made by a social actor to explain unanticipated or untoward behavior whether that behavior is
his own or that of others, and whether the proximate cause for the statement arises from the
actor himself or someone else''. Accountability is not an end in itself, but a means to achieve
something, i.e. to ensure the discharge of responsibility. Scott and Lyman (1970) identify two
types of account: excuses and justications. An excuse is an admission that the act in question
was bad, wrong or inept, coupled with a denial of full responsibility. A justication is an
admission of full responsibility for the act in question, coupled with a denial that it was wrongful.
From a governance perspective, accountability is not only called for when there is unanticipated
or untoward behavior, but it is also called for when there are anticipated outcomes particularly in
a stewardship relationship (Day and Klein, 1987). Stewardship involves two manifest parties:
rst, the steward or accoutor, i.e. the party to whom the responsibility is entrusted and who is
obliged to present an answer to an account of its execution, and second, the principal or accountee,
i.e. the party entrusting the responsibility and to whom the account is presented (Gray and Jenkins,
1993, p. 54).

Stewardship is thus established when a steward accepts resources and responsibilities

entrusted by a principal. A steward in addition to providing an account of his/her dealings with
the stewardship resources, must also submit to an examination (usually known as an ``audit'')
of that account by or on behalf of the person or body to whom the steward is accountable (Bird,
1973). It is emphasized that the steward must not only allow the audit to take place, but also
provide the evidence from which the auditor can verify the account rendered. Day and Klein
(1987) view this as mainly applicable to nancial responsibility.
Day and Klein (1987) also point out that accountability implies a shared set of expectations
and a common currency of justications. Accountability requires a code or codes which govern
the establishment, execution and adjudication of the stewardship: ``A code of accountability
is thus a system of signals, meanings and customs which binds the principal and steward
in the establishment, execution and adjudication of their relationship'' (Gray and Jenkins,
1993, p. 55).
Transparency and accountability
The concept ``accountability'' seems to have also gone through an evolution (Day and Klein,
1987). Initially, accountability was viewed as a process of exposition and justication to provide
visibility of actions. An audit is a crucial part of this model of accountability. The emergence of
the welfare state and the professional state, however, placed new stresses on this simple model
of accountability (Day and Klein, 1987). The complexity of services provided by the state
(e.g. medical services), challenged the ability of the lay citizen to evaluate the performance
of the stewards. For example, the new challenges contributed to the Poor Law Report of 1933

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in the UK (Checkland and Checkland, 1974). The report required the designation of ``welldened objectives'' and ``clear rules'' whose implementation could be monitored by inspection
and audit (Day and Klein, 1987). The lengthening lines of accountability also contributed to a
feeling that the state had become too centralized and congested (Royal Commission on the
Constitution, Cmnd 5460, 1973). The Commission recommended that the state:

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must involve more people in the government and policy process . . . It must mean, too, providing
adequate means for the redress of individual grievances against government and the service it
provides (Cmnd 5460-1, Para. 79).

The Royal Commission emphasized the view that accountability is only possible if there is
openness or transparency. Effective scrutiny implies access to information and any body
cannot be made accountable without publicity (Crick, 1972). This was especially highlighted
later in the environment that was characterized by privatization of public services, which
made the provision of these services invisible and immune from scrutiny (Owen, 1981). Choi
(1998, p. 4) in his analysis of the Asian crisis argues that no solution would be possible without
corporate transparency. He says, ``If capital needed to nance productive growth is to start
owing back to Asia, there must be greater corporate transparency for the private and public
sectors to properly assess risk''.
Accounting and accountability
As pointed out earlier accountability has become one of the main objectives of accounting and
the preparations of nancial statements (e.g. ASSC, 1975; Bird, 1973; AARF/ASRB, 1990;
FRSB, 1993). More recently, the importance of accounting and auditing in the public sector has
been driven by the need for better accountability (Stewart, 1984; Porter, 1997). Methods such
as disclosure studies (Alford et al., 1993) and transparency indexes (Transparency International,
2002) have also been developed in different areas to measure levels of accountability.
Just as accountability as an objective of accounting has gained prominence the relationship of
accountability to accounting has also been scrutinized closely. Roberts and Scapens (1985)
argue that accountability in organizations provides for the ``binding'' of organizational time
and space, by dening boundaries. They also highlight that accounting practices as a tool
for accountability denes the rights and obligations of different individuals in an organization.
Tower (1991) considers accounting regulation as an instrument of public accountability. From
a more critical perspective Roberts (1991) observes that different forms of accountability
produce different senses of our self and our relationship to others, for example, it is argued that
hierarchical forms of accountability serve to produce an individualized sense of the self.
From a cultural perspective Ndubizu (1984) questions the applicability of the notions of
accountability elucidated by the Corporate Report (ASSC, 1975) and Conceptual Frameworks
(e.g. AARF/ASRB, 1990; FRSB, 1993), within the context of west African culture and organizations. Baydoun and Willett (1995) observe that the prevailing Anglo-American concepts of
accounting and accountability are in conict with the essential tenets of Islam. Ahrens (1996)
identies different styles of accountability in different countries. It is pointed out that the UK style
privileges the reality of accounting information in judging proposals for operational action, while
the German style relies more strongly on separately conceptualized functional expertise.
The next section examines the inuence of the emotional states of guilt and shame on the
self.

Emotions and the self

Generally the concept of emotion has been of little interest to economists and accountants
since it is considered the opposite of what economics and accounting are all about, a rational
practice. Furthermore, the traditional literature has considered emotions to involve various
physiological reactions, predominantly involuntary and visceral (Popplestone and McPherson,
1988, p. 110). Early psychological theory on emotions such as the James-Lange theory
of emotion developed independently by William James and Carl Lange at the end of the
19th century held that the feeling of emotion was universal, and it represented a physiological

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response as a result of certain emotion producing stimulus (Figure 1) (Hayes and Orrell, 1987).
Emotions were also considered to have a disorganizing effect hence of little interest to
accounting research.
More recent theories on emotions such as the Schachter and Singer theory of emotion (1962)
assert that an emotional experience is a product of the appreciation of physiological changes
and of beliefs about the appropriate reactions under the circumstances (Figure 2). Further,
psychologists have also been interested in the motivational properties and organizational
aspect of emotions (Popplestone and McPherson, 1988, p. 110). Leeper (1948, p. 17) for
example pointed out that fright, may interrupt work, but it also mobilizes action that are
designed to deal with the threat ``emotional responses operate primarily as motives . . . they
are processes which arouse, sustain and direct activity''.
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Guilt and shame are two emotions of considerable interests to psychologists, and have been
identied as important emotions for the regulation of both the individual's transactions with the
environment and the individual's development of the self (Barrett, 1995). Shame and guilt are
both considered as ``moral emotions'' because of their role in fostering moral behavior and
inhibiting all forms of moral transgressions (Tangney, 1995). As such, they are:
J socially constructed; and
J invariably connected with (real or imagined) social interaction (Barrett, 1995).
They are also frequently included in the family of ``self-conscious'' emotions since they involve
self-referential processes with respect to some standard for self or behavior (Lewis, 1990).
Research has also found that although shame and guilt are negatively valanced emotions that
arise in response to some personal failure or transgression, the situations that give rise to the
two emotions are remarkably similar (Tangney, 1992).
The two emotions of shame and guilt seem to differ mainly in terms of their impact on the self.
Lewis (1971, p. 30) in her landmark book Shame and Guilt in Neurosis suggested that a
fundamental difference between shame and guilt centered on the role of the self in these
experiences:

Figure 1 The James-Lange theory of emotion

Emotionproducing
stimulus

Physiological
response

Feeling of
emotion

Figure 2 The Schachter and Singer theory of emotion

Emotionproducing
stimulus

Social and
environmental
influences

Physiological response

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Feeling of
emotion

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The experience of shame is directly about the self, which is the focus of evaluation. In guilt, the self is
not the central object of negative evaluation, but rather the thing done or undone is the focus. In guilt,
the self is negatively evaluated in connection with something but is not itself the focus of experience.

According to Lewis (1971), this differential emphasis on self versus behavior gives rise to very
different phenomenological experiences. She argues that in the emotion of shame, the ``bad
behavior'' is not taken simply as a local transgression, requiring reparation or apology; instead
the offending or objectionable behavior is seen as a reection more generally of a defective,
objectionable self. Accordingly, the individual is frequently motivated to avoid or lash out
defensively at others involved in the shame-eliciting situation. In contrast, guilt involves a sense
of tension, remorse, and regret over the bad thing done. It is further pointed out that the above
effects of guilt motivates reparative action confessing, apologizing, or somehow repairing the
bad thing that was done (Tangney, 1995).
Lewis (1987), extending her earlier observation of a split in self-functioning which is unique to
shame (Lewis, 1971), identies additional differences between shame and guilt. Accordingly,
shame concerns moral transgressions or defeats, whereas guilt only concerns moral transgressions. Further, shame involves a passive or ``helpless'' self, whereas guilt involves an active
self. Barrett (1995) emphasizes that shame typically involves hiding the head or face and/or
averting the gaze, whereas guilt involves trying to make amends. Barrett (1995) further points
out that gaze aversion, hiding and social withdrawal behaviors communicate deference and
submission to others. In contrast, it is argued that guilt helps teach the individual about himself
or herself as an agent rather than as an object. Since shame is more about the self rather than
the behavior, it is found to be more painful than guilt. It is further pointed out that people in the
midst of shame feel worthless or powerless, exposed (feeling observed by others) and
diminished in some signicant way. The above distinctions between guilt and shame are based
on a combination of qualitative case study analysis (Lewis, 1971; Lindsay-Hartz, 1984), content
analysis of shame and guilt narratives (Tangney, 1992), and participants' quantitative ratings of
personal shame and guilt experiences (Ferguson et al., 1991).
From a psychoanalytic perspective, shame is a result of the conict between the ego and ego
ideal, while guilt is seen as arising out of a conict between the ego and the superego (Piers and
Singer, 1971). They emphasize that shame involves shortcomings, rather than rule violations,
while guilt involves transgressions performing acts that violate the rules enforced by the
superego. Schore (1991) further observes that shame functions as an inhibitor of excessive
joy and/or intrest/excitement. Studies have also distinguished guilt and shame experiences
from physiological reactions. Ekman et al. (1983) found that the shame experience tends to
be accompanied by low heart rate and blushing; while the guilt experience tends to be
accompanied by high heart rate and skin conductance, and irregular respiration. Table I
summarizes the similarities and differences between shame and guilt.

Accountability and the emotional states of guilt and shame

Based on the differences between shame and guilt as described above, one could conclude
that guilt-prone individuals would be more open and ready to account or explain untoward or
unanticipated behavior. Barrett (1995) goes further by stating that guilt often moves individuals
to tell others about the wrongdoing and to show others that he or she understands the
standards and wishes to follow them. Guilt has also been suggested as an important outcome of empathy. Lindsay-Hartz et al. (1995) suggest that ``people who show more ability to
empathize will encounter more opportunities to experience guilt than people with more limited
emphatic abilities. The above would indicate that guilt-prone individual would not only be ready
to account for their actions, but also encourage accountability from others.
Shame-prone individuals in contrast, would not only be reluctant to provide an explanation, but
also seek to hide or avoid those they have to account to. Following from the earlier identication
between guilt and empathy, Lindsay-Hartz et al. (1995) predict that shame prone people may
evidence less empathy and therefore discourage accountability from others. In fact members
of a group may feel more comfortable when an untoward or unanticipated behavior is not
discussed to spare an individual needless embarrassment.

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Table I Key similarities and differences between shame and guilt

Features shared by shame and guilt
Both fall into the class of ``moral'' emotions
Both are ``self-conscious'', self-referential emotions
Both are negatively valanced emotions
Both are typically experienced in interpersonal contexts
The negative events that give rise to shame and guilt are highly similar

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Key dimensions on which shame and guilt differ

Dimension

Shame

Guilt

Focus of evaluation

Global self

Specic behavior

Degree of distress

Generally more painful than guilt

Generally less painful than shame

Phenomenological
experience

Shrinking, feeling small, powerless

Tension, remorse, regret

Operation of Self

Self ``split'' into observing and

observed ``self''

Unied self intact

Impact on self

Self impaired by global devaluation

Self unimpaired by global

devaluation

Counterfactual
processes

Mentally undoing some aspect of

the self

Mentally undoing some aspect of

behavior

Physiological reaction

Low heart rate, blushing

High heart rate and skin

conductance, irregular respiration

Social regulatory
function

Communicate difference/
submission

Communicate awareness of
proper behavior

Motivational features

Desire to hide or escape, or desire

to strike back

Desire to confess, apologize, or

repair

Conict

Between ego and ego ideal

Between ego and superego

Adopted from Tangney (1995)

The cultural relativity of emotions

Studies in cross-cultural psychology suggest that the construction of the self and the
specic implementation of social relationships are cross-culturally variable (Bruner, 1990; Fiske,
1991; Shweder and Bourne, 1984; Sampson, 1985). Accordingly, any phenomenon such as
emotional experience that has the self as its anchor, target or referent is likely to be culturally
sensitive. Emotions then are viewed here not as natural or biological events that are prewired
and self-contained (e.g. Ekman, 1984; Davidson and Cacioppo, 1992), but rather as amalgams
of component processes that reect the functional relationship between the organism and the
environment and, in the case of self-conscious emotions such as shame and guilt, the
relationship between the self and the cultural environment (Kitayama and Markus, 1994).
Wallbott and Scherer (1995) found that the two emotions of shame and guilt are closely related
to Hofstede's (1980) cultural dimensions of individualism, power distance and uncertainty
avoidance[1]. They argued that ``typical'' shame experiences were common in collectivistic,
large power-distance, and high uncertainty avoidance cultures; while ``typical'' guilt experiences
were more pronounced in individualistic, small power distance, and low uncertainty avoidance
cultures. Hofstede (1980) as well as Wallbott and Scherer (1995) concluded that Anglo-Saxon/
Nordic countries tended to be individualistic with low power-distance, while South American
and Asian countries tended to be collectivistic with high power-distance.

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Kitayama et al. (1994) found that in Japan generic happiness was more closely associated with
social engagement, whereas in the USA happiness was more closely related to disengagement.
In another study Kitayama et al. (1992) found that failure in Japan was based more on otherappraisals (shame) rather then self-appraisal (guilt), whereas in the USA the reverse was true.
They concluded that among those with predominantly independent (individualistic culture)
selves (i.e. in the USA), self-appraisals were far more common than other appraisals; and
among those with predominantly interdependent (collectivistic culture) selves (i.e. in Japan)
other-appraisals were more prominent than self-appraisals.
The cultural specicity of guilt and shame is also reinforced by studies that indicate that these
emotions are acquired through socialization experiences (e.g. Ferguson and Stege, 1995).
Accordingly, the use of different parental disciplinary techniques can have major impact on the
development of an internal versus external moral orientation. For example, Ferguson and Stege
(1995) found that parents who frequently wield inuence through power assertion or love
withdrawal is likely to encourage an external moral orientation in a child. This can be contrasted
with the internal moral orientation encouraged in a child when parents make children aware of
``other'' observation in the development of moral values, e.g. ``If you do such things, people will
laugh at you''. Miyake and Yamazaki (1995) found this to be the case in Japan.
Cultural anthropologists (e.g. Mead, 1937; Benedict, 1946) also support the above ndings.
For example, Benedict (1946) pointed out that the Japanese culture is not a tsumi (guilt) culture,
but one based on haji (shame). The Japanese consider shame to be ``the root of virtue''
(Benedict, 1946, p. 224). In China shame is related to a ``loss of face''. Lin (1935, p. 200) refers
to face as ``abstract and intangible, it is yet the most delicate standard by which Chinese social
intercourse is regulated''.
Benedict (1946) emphasized that European cultures are based on the understanding that
people must take nal responsibility for their actions before God, who is regarded as the single
absolute being; making each individual aware of his or her own guilt. By contrast, Japan is a
realm of multivariate Gods, lacking a single absolute being. Thus, being shamed in front of
others (haji-o-kaku) is regarded as the most powerful driving force for the Japanese.

Benedict (1946, p. 223) identies a close relationship between confession and guilt and
emphasizes that true guilt cultures rely on an internalized conviction of sin. He says, ``A man
who has sinned can get relief by unburdening himself. This device of confession is used in our
secular therapy and by many religious groups which have otherwise little in common.'' In
contrast, he points out that:
where shame is the major sanction, a man does not experience relief when he makes his fault public
even to a confessor. So long as his bad behavior does not `get out into the world' he need not be
troubled and confession appears to him merely a way of courting trouble. Shame cultures therefore
do not provide for confessions, even to the gods.

Benedict (1946) further points out that true shame cultures rely on external sanctions for good
behavior, not, as true guilt cultures do, on an internalized conviction of sin; ``Shame is a reaction
to other peoples criticism (real or imaginary).
From the above discussion we can conclude that there would be a high degree of accountability in ``guilt cultures'' frequently found in individualistic, small power distance societies, and
low degree of accountability in ``shame cultures'' found in collectivistic, large power distance
societies. This conclusion is also generally supported by Transparency International's Corruption
Perceptions Index 2002. Other studies on the relationship of culture and accounting (Gray,
1988; Perera, 1989; Belkaoui, 1989) also support this inference. The above studies predict
that collectivistic, large power distance societies would show a preference for condentiality
and the restriction of disclosure of information about the business only to those who are
closely involved with its management and nancing as opposed to individualistic, small power
distance societies with a preference for a more transparent, open and publicly accountable
approach.

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These linkages are depicted in Figure 3. The lack of openness and transparency will not
only impact on the disclosure of poor outcomes but also good outcomes and results because
shame cultures also tend to emphasize modesty. Furthermore as highlighted by Benedict
(1946) as long as poor results are not disclosed and others are ignorant of it, no shame exits.
This is reected in the actions of Japanese banks refusal to disclose and write off bad loans,
until they are forced to do so.

Conclusion

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Accountability has frequently been presented as a rational practice that can and should
be implemented in all civil societies, economic institutions and organizations. During the
Asian economic crisis many analysts identied that accountability is a major weakness in Asian
political and economic institutions. In this paper it is shown that accountability is a cultural
practice closely related to the emotional state of guilt. The paper points out that guilt is more
common in individualistic, small power distance cultures, compared to collectivistic and large
power distance cultures where shame, not guilt, is more prominent. It is also pointed out that
in shame-prone cultures (common in Asian countries) accountability would not only be weak,
but people would be actively engaged in hiding or preventing the disclosure of, information.
It is concluded that guilt cultures would show a preference for accounting values exhibiting professionalism, exibility, optimism and transparency; while shame cultures will show a
preference for accounting values exhibiting statutory control, uniformity, conservatism and
secrecy.
This study has important implications for political and organizational reform. For example, it
raises questions about the appropriateness of the adoption of Western political and economic
institutions with the emphasis on accountability as a solution to a problem in a non-Western
environment. The analysis in this paper suggests that there are deeply rooted impediments to

Figure 3 Accountability, culture and the emotional states of guilt and shame
Emotional State

Guilt

Shame
Societal Values

Individualism, Small Power

Distance;
Weak Uncertainty
Avoidance

Collectivism; Large Power

Distance; Strong
Uncertainty
Avoidance

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Accountability

High

Low

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the success of such a course of action. The paper supports the argument that accountability is
inconsistent with shame prone cultural values such as those found in Asian countries. This
indicates that, as pointed out by Velayutham (1999), the demand for more accountability may
not produce the expected outcomes in Asian countries. In shame-prone cultures, shame
or ``loss of face'' is emphasized as an important mechanism for ensuring the discharge of
responsibility. The paper also suggests that accountability is often associated with value
systems that emphasize guilt in instilling a sense of responsibility in peoples' minds. One could
argue that culture and cultural norms determine or even ``construct'' emotional experience
(Averill, 1980), or in turn emotions may contribute to the fuzzy set we call culture. For example,
adopting a two-valued logic, often associated with the Western way of thinking, one could
argue that in improving responsible behavior in organizations, the Asian countries should either
make an effort to bring about a cultural change so that emphasis on accountability would
be effective, or concentrate on the application of culturally specic indigenous practices.
However, the complexity of the issues involved is such that the argument and the logic behind it
seem too simplistic. On the one hand, bringing about a major change in fundamental emotional
states, cultural values and practices that are deeply rooted in a society is not feasible within a
short period of time. On the other hand, given the increasing trend towards globalization, driven
by Western values, countries or regions can no longer afford to adopt policies and practices
that are unacceptable to the global markets, on the grounds of cultural differences. As the
recent events in many countries including Japan, clearly showed, the market would be brutal in
punishing the recalcitrants. This paper draws attention to some of the fundamental issues
associated with this dilemma, and provides some insights into our understanding of those
issues, which are becoming increasingly important in the current economic environment
characterized by global integration of markets.

Note
1 Individualism versus collectivism the extent to which people are supposed to look after themselves and
their immediate family only, or whether people belong to in-groups or collectivities which are supposed to
look after them in exchange for loyalties; power distance the extent to which less powerful members of
institutions and organizations accept that power is distributed unequally; uncertainty avoidance the
extent to which people feel threatened by ambiguous situations and have created beliefs and institutions
that try to avoid these (Hofstede, 1980).

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