Recent accounting scandals such as Enron, Parmalat, and WorldCom have concentrated attention on the accountability and governance of corporations. Social accounting has been described and critiqued from a variety of positions, ranging from right wing neoliberal critiques all the way through to Marxist and deep green critiques. The different positions taken on the desirability or otherwise of social accounting can be understood by considering the type of change that each theorist advocates. The majority of writing and work in the area has come from those who see social accounting as a means of bringing about evolutionary change in capitalism.
What is Social Accounting?
Social contractarian perspective: evolutionary change. Social accounting is generally under stood as an attempt to investigate organizations more broadly. By scrutinizing the impact of the activities of organizations, social accountants seek to highlight the wider social and environ mental costs of their operations. The rationale underpinning this approach is that corporations have a wider responsibility than merely making profits for shareholders. Social accounting has similarly been described as an ”attempt to deconstruct conventional accounting, expose some of its more unpleasant characteristics and offer new accountings predicated on values wider than making rich managers and share holders even richer” (Bebbington et al. 1999). The key master concept underpinning social accounting is accountability. Whereas conventional accounting (allegedly) serves to make an organization accountable to its financial owners, social accounting seeks to discharge accountability to other stakeholders. These are groups that are influenced by or can influence the social, environmental, and economic impacts of an organization (Gray et al. 1996). The principal argument behind accountability is that stake holders have a right to information regarding the social and environmental effects of corporate economic activity. These rights to information may be enshrined in law, may appear in quasi legal or voluntary codes of conduct, or may be moral in nature (Gray et al. 1996).
Enhanced corporate accountability would ultimately require companies to temper their relentless pursuit of profit and competitiveness by considering their interactions with a wider constituency of stakeholder groups. Indeed, the rendering transparent of an organization does not set the parameters to the vision of the social accounting project. Gray (2005) has argued that social and environmental accounts are an essential precondition to a healthy and functioning democracy, warning that the absence of such accounts leaves society relatively powerless when compared with the power of modern day corporations. Thus something must happen once the accountability has been discharged. There is a radical intention in the social accounting project. The explicit intention is to increase democracy, but not necessarily as an end in itself. Underlying social accounting is a concern with the social dislocations and environ mental degradation caused by organizations in advanced capitalism. Increased accountability, although morally desirable in itself, is also seen as a means to move toward a more socially and environmentally benign order.
Neoliberalism: radical change (right wing). Critiques of social accounting emanate from a variety of theoretical positions. However, it has been very rare for those on the right to engage in the social accounting debate at all. One must return to Benston (1982) to find a critique of social accounting from a right wing position.
On a practical note, Benston suggests that the measurement of “externalities” is problematic and therefore cannot be relied upon. Notwith standing the practical considerations put forward by Benston (1982, 1984) and the logical inconsistencies therein (Schreuder & Ramanathan 1984), his arguments are primarily ideological: the primary responsibility of management is to shareholders and social accounting would impose unnecessary costs upon them. In any case, other stakeholders such as employees, customers, and creditors, Benston (1982) argues, are well served already by voluntary management reports. Social accounting may be useful with respect to corporate governance, exposing fraudulent dealings and misuses of shareholder assets by management. He holds that even the cost of an accounting standard would likely exceed the benefits to shareholders (see Benston 1984). As such, ”the responsibility of accountants would be best served by their forbearance from social accounting” (Benston 1982).
Expedients: marginal change. Moving away from a radical right wing position, another conception of what social accounting is and what it may do is offered by Parker (1986). Parker falls into what Gray et al. (1996) refer to as the ”expedient” camp. Parker notes that social accounting means different things to different people. To ”corporate defenders,” it is a means of defense against critics of the corporation. To ”corporate critics,” it provides a constraint upon socially irresponsible behavior and a positive motivation for the corporation to act in a socially responsible manner. Parker argues that standards could moderate and regulate the competing purposes of these groups, i.e., allow corporations to manage their image whilst restricting reporting bias and thereby facilitating a more informed and protected society. Whilst those of radical left wing persuasions would be horrified by the former, Parker sees the use of social accounting as an image enhancer as something that is actually good, as long as it is accompanied by the provision of substantive social accounting information. Although informed by a ”suspicion of powerful private interests” (Parker 1991: 32), Parker’s view emanates from an acceptance of the current essential structure of capitalist society (see Parker 1991: 27).
Marxian critique: radical change (left wing). As long as one accepts the need for a more socio democratic form of system, Benston’s and Parker’s views do little to disturb the rationale for social accounting. More shaking critiques of social accounting come from those theorists that put social justice (however this is defined; e.g., Puxty, 1986, 1991; Tinker et al. 1991) and eco logical sustainability (e.g., Maunders & Burritt 1991) at the heart of their analysis. The essence of Tinker et al.’s position is that a better accounting can only come about after a change in structural conditions. The structure of society, and of capitalism in particular, is such that social accounting will be captured by vested interest groups and used to mask those vested interests. These structural inequalities, argue Tinker et al., are overlooked by Gray et al. by virtue of their commitment to pluralist thinking and ”middle ground theorizing.” The middle ground is characterized by Tinker et al. as concerned with ”what is pragmatic and socially acceptable; not what is socially just, scientifically rational, or likely to rectify social ills arising from waste, exploitation, extravagance, disadvantage or coercion” (1991: 29).
Tinker et al. explain how the history of social accounting shows the middle ground shifting in specific directions, in response to definite social conflicts and struggles. This swaying in the tide minimizes and mystifies the structural inequalities of contemporary capitalism (1991: 36). Social accounting thus serves a political quiet ism function which ”mask(s) the affinities of many right wing positions and middle of the road research” (p. 37). Gray et al.’s middle of the road approach is therefore rejected. The middle ground is contested and unstable and Gray et al. refuse to examine the basic contradictions of the social system that cause this instability; Gray et al.’s approach has not been shown to be productive, Tinker et al. argue, and ”the political quietism implicit in their viewpoint is empirically unsubstantiated” (1991: 47).
As an alternative, Tinker et al. advocate a critical accounting that speaks about social antagonisms and structural inequalities. The examples given by Tinker et al. are recasts of the accounting records provided by firms in terms of, in one case, the role that a mining company played in colonial exploitation and, in another, an analysis of General Motors’ use of their annual reports as ideological weapons.
If there is any role for social accounting from a Marxist viewpoint, then one infers that it would be through external social audits. These are social accounts prepared about an organization by people outside of that organization. Examples of this particular type of social accounting are evident in the work of Social Audit Ltd. (see Medawar 1976) in the 1970s who, without the cooperation of the organizations whom they were auditing, constructed a series of detailed exposes of the social and environmental impacts of those organizations in the UK. In a similar vein, though with a much more Marxist slant, Counter Information Services compiled a series of Counter Reports of large multinational organizations in the 1970s (see Gray et al. 1987 for examples of these). Similar exercises have been carried out recently by Christian Aid and Friends of the Earth, who have produced “alternative” versions of social accounts of organizations such as Shell and Exxon.
Tinker et al.’s (1991) critique emanates from a view of society that focuses on conflict and power struggles. A similar viewpoint on social accounting is reached by Puxty (1986, 1991), who, following Habermas, argues that it owes its very existence to the needs of the powerful within society (1986: 103). This “capture” of social accounting is inevitable given the non pluralistic makeup of society. Society has dominant interests. Social accounting does not dissolve these power relationships, as its proponents hope it might, but reenforces them: ”Accounting is part of a system of distorted communication that reflects the social system. Any extension of accounting through the processes of that system can thus be no more than an extension of that systematic distortion” (Puxty 1986: 108). Puxty repeats these views through a later article where he ”reject(s) the possibility of progress of society through current pluralist institutions, and corporate social information that might be generated through them” (1991: 41).
Deep green critique: radical change (ecological). Maunders and Burritt (1991) take a deep green perspective when considering how to account for the environment. They argue that any attempt to solve ecological problems through an accounting that is an extension of conventional accounting may be doomed to failure. This is because of the neoclassical ideological foundations on which conventional accounting rests: selfishness of maximizing individual utility; contrived consumer demand (wants over needs); and anthropocentrism. It is argued by Maunders and Burritt that a much more radical accounting is needed that actively challenges these cultural values.
These ”radical” critiques variously place notions of social justice (Puxty 1986, 1991; Tinker et al. 1991; Cooper 1992) or environmental sustainability (Maunders & Burritt 1991) and/or Mother Earth (Cooper 1992) at the heart of their analyses. What is common to each of them is that they see social accounting, at least corporate self reporting, as not a mere irrelevance but something that could actually exacerbate ecological problems and further entrench social inequality. Social accounting hides and disguises deeper structural inequalities that must be critiqued and transcended. As such, corporate social accounting is counterproductive. In seeking to disempower corporations, it actually seeks to bolster the interests of corporations. If there is any place for social accounting, then it must be through externally produced social audits. The problem, argues Lehman (1999, 2001), is in according a privileged status to corporations as the agents of change. Gray et al. seek to put corporations at the center of their theorizing as the entity that prepares the social/environmental analysis of its own operations. The radical left wing critique curiously comes to the same opinion on social accounting as the radical right wing critique. In Cooper’s ecofeminist (and Marxist) critique of environmental accounting, she concludes that ”in the present symbolic order accountants should not attempt to account for the environment” (1992: 37).
In the wake of accounting scandals and increasing concern over the environmental sustainability of the current economic orthodoxy, social accounting is likely to figure more widely in policy and academic debates. The contours of the debate on social accounting are currently configured around the responsibilities of corporations and the limits of reformist pluralism in the wake of corporate power.
- Bebbington, J., Gray, R., & Owen, D. (1999) Seeing the Wood for the Trees: Taking the Pulse of Social and Environmental Accounting. Accounting, Auditing, and Accountability Journal 12(1): 47-51.
- Benston, G. J. (1982) Accounting and Corporate Accountability. Accounting, Organizations, and Society 7(2): 87-105.
- Benston, G. J. (1984) Rejoinder to ”Accounting and Corporate Accountability: An Extended Comment.” Accounting, Organizations, and Society 9(3/4): 417-19.
- Cooper, C. (1992) The Non and Nom of Accounting for (M)other Nature. Accounting, Auditing, and Accountability Journal, 5(3): 16-39.
- Gray, R. H. (2002) The Social Accounting Project and Accounting, Organizations, and Society: Privileging Engagement, Imaginings, New Accountings, and Pragmatism Over Critique? Accounting, Organizations, and Society 27: 687-708.
- Gray, R. H. (2005) Taking a Long View on What We Know about Social and Environmental Accountability and Reporting: Of Don Quixote, Placebos, and Capitalism. Electronic Journal of Radical Organization Theory.
- Gray, R. H., Owen, D., & Maunders, K. T. (1987) Corporate Social Reporting: Accounting and Accountability. Prentice-Hall, Hemel Hempstead.
- Gray, R. H., Owen, D., & Adams, C. (1996) Accounting and Accountability: Changes and Challenges in Corporate Social and Environmental Reporting. Prentice-Hall, London.
- Lehman, G. (1999) Disclosing New Worlds: A Role for Social and Environmental Accounting and Auditing. Accounting, Organizations, and Society 24(3): 217-41.
- Lehman, G. (2001) Reclaiming the Public Sphere: Problems and Prospects for Corporate Social and Environmental Accounting. Critical Perspectives on Accounting 12: 713-33.
- Maunders, K. T. & Burritt, R. L. (1991) Accounting and Ecological Crisis. Accounting, Auditing, and Accountability Journal 4(3): 9-26.
- Medawar, C. (1976) The Social Audit: A Political View. Accounting, Organizations, and Society 1(4): 389-94.
- Parker, L. D. (1986) Polemical Themes in Social Accounting: A Scenario for Standard Setting. Advances in Public Interest Accounting 1: 67-93.
- Parker, L. D. (1991) External Social Accountability: Adventures in a Maleficent World. Advances in Public Interest Accounting 4: 23-34.
- Puxty, A. G. (1986) Social Accounting as Immanent Legitimation: A Critique of a Technicist Ideology. Advances in Public Interest Accounting 1:95-111.
- Puxty, A. G. (1991) Social Accountability and Universal Pragmatics. Advances in Public Interest Accounting4: 35-45.
- Schreuder, H. & Ramanathan, K. V. (1984) Accounting and Corporate Accountability: An Extended Comment. Accounting, Organizations, and Society9(3/4): 409-15.
- Tinker, T., Lehman, C., & Neimark, M. (1991) Falling Down the Hole in the Middle of the Road: Political Quietism in Corporate Social Reporting. Accounting, Auditing, and Accountability Journal 4(2): 28-54.
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