Summary by Christine Masek
Ph.D. Program in Accounting
University of South Florida, Spring 2004
This article’s purpose is to (hopefully) stimulate further discussion on the topic of “fairness” presented in Paul William’s 1987 article entitled “The Legitimate Concern With Fairness" AOS, Vol. 12, No. 2, pp. 169-189.
In Williams’ 1987 article, he points out two problems in traditional accounting research:
1. there is a tendency in the literature to couch accountability (a constraining principle) within the context of decision usefulness (a facilitating principle), and
2. the idea that accounting research can be “value free” is not sufficiently curbed with the notion of fairness.
Williams, as paraphrased by Pallot, points out on page 201 that the ideas of accountability and fairness probably “stem from different ethical frameworks and different, though complementary, assumptions about society.”
Alternative Ethical Frameworks
Pallot proposes we begin with “fairness” (versus Scotts’ 1941 notion of “truth”) as “the transcendent principle in accounting.” If we start there, she argues, we must have a clear definition of “fairness.” That is, are we talking about commutative (exchange) fairness (this is the “fairness” of communitarian society) or distributive justice (the “fairness” that is present in a more individualistic setting)?
Pallot points out that although Williams appears to be concerned with distributive justice, the accountability principle really falls under the umbrella of commutative (exchange) fairness. Further, accountability and distributive justice really fall under two different frameworks based on two different perspectives on (or models of) human nature. The first takes an individualist view (society is a collection of separate, equal people who interact through contracts) and the second is “organic” or collectivist (people are members of a community who hold common values).
The individualist model distinguishes between moral individualism and sociological individualism. The first, described on page 202, holds “that people are autonomous and have a capacity for moral choice that cannot be reduced to the performance of given roles.” The latter holds that “people are not connected by intrinsic social bonds (p. 202),” making society simply an aggregate of individuals.
Pallot argues that these two types of individualism fall under two different ethical frameworks:
Sociological individualism is associated with “utilitarianism,” an approach that focuses on decision usefulness and avoids the issue of fairness, and
Moral individualism is associated with “civic humanism” or “rights-based” approaches.
Society seems to be moving from the first framework (sociological) to the second (moral), and the accounting profession and related research have followed suit. However, both of the above frameworks are ultimately rooted in individualistic and contractual accountability, while “fairness,” Pallot says, is a collectivistic notion of “commutative justice.” Therefore, the individualist framework is incomplete. That is, the “ideal” ethical framework should include both individualist and collectivist (communitarian) perspectives.
Pallot suggests that accounting, as a profession, can both reflect and influence societal values, thereby effecting societal change when change is required. That is, if accountants, as a profession, adopt and blend communitarian values with individualistic ones, we can achieve the “ideal” framework where the two perspectives work together in harmony. Pallot bases this assertion on three things: 1) society is moving from an “I” to a “We” paradigm, 2) women are inclined to communitarian values, and the number of women involved in the accounting process is on the rise, and 3) “the pursuit of harmonization in international accounting exposes individualistic cultures to more communitarian ones (p. 204).”
Principles of justice and distribution of goods are closely associated. That is, accountants are concerned with the distribution of income (wealth), information, and power. Different principles of justice apply to different goods. For example, “effort” or “contribution” are aligned with “income.”
In short, on page 204, Pallot argues, “combining models of society and combining material principles of justice, whilst messy, is nevertheless necessary.”
Toward a Communitarian Perspective in Accounting
In order to align communitarian values with individual ones, Pallot suggests the following:
1. Give distributive justice higher status within accounting objectives, and
2. Give communitarian values more visibility by developing new accounting concepts.
With regard to #2, Pallot uses the example of common property. She suggests that accountants development the concept of a “community asset” (e.g., government managed facilities) and distinguish it from state assets (the private property of government entities). Developing this new accounting concept of “community assets” presents a number of benefits:
It will promote the furtherance of societal communitarian values as they relate to public works (e.g., the quality and safety of public streets and parks),
It will help keep existing property concepts from applying to situations outside their domain,
It provides “the ability to give different concepts different accounting treatments [leading to] improved analysis of financial position and fairer measurement of management performance (p. 206),”
By including the idea of community property in the property concept, we can reconcile the inherent conflict between the exclusive rights associated with private property and the “ethical goal of free individual development (p. 206)” (i.e., the right NOT to be excluded), and
It will promote the idea (an idea emerging in international law and politics) that mankind has a common heritage, and that, as a whole, society should protect this heritage and encourage its continuance in the future.
On page 206, Pallot concludes her argument by saying that “armed with a concept of common property, it may be possible to develop a different view of accountability than is generally envisaged in accounting research and agency theory. In a world where a commitment to shared values, rather than the pursuit of self interest, was the norm, accountability might be seen as a voluntary obligation in the public interest rather than a mechanism for constraining self seeking behavior and protecting rights.”
Pallot tells us she is in agreement with Williams’ notion of fairness, and recommends we as accountants carefully examine the assumptions that underlie our understanding of what “accountability” and “distributive justice” really are.
Cushing, B. E., editor. 1987. Accounting and Culture: Plenary Session Papers and Discussants' Comments from the 1986 Annual Meeting of the American Accounting Association. American Accounting Association. (Summary).
Estes, R. 1992. Social accounting past and future: Should the profession lead, follow - or just get out of the way? Advances In Management Accounting (1): 97-108. (Summary).
Handy, C. 2002. What's a business for? Harvard Business Review (December): 49-55. (Summary).
Jones, A. III. and G. A. Jonas. 2011. Corporate social responsibility reporting: The growing need for input from the accounting profession. The CPA Journal (February): 65-71. (Summary).
Jonsson, S. and N. B. Macintosh. 1997. CATS, RATS, and EARS: Making the case for ethnographic accounting research. Accounting, Organizations and Society 22(3-4): 367-386. (Summary).
Martin, J. R. Not dated. Chapter 1: Introduction to Managerial Accounting, Cost Accounting and Cost Management Systems. Management Accounting: Concepts, Techniques & Controversial Issues. Management And Accounting Web. https://maaw.info/Chapter1.htm#Framework:TwoGlobalVariantsofCapitalism
Martin, J. R. Not dated. Developing a new conceptual framework for management accounting. Management And Accounting Web. https://maaw.info/FrameworkPuzzle.htm
Martin, J. R., W. K. Schelb, R. C. Snyder, and J. C. Sparling. 1992. Comparing the practices of U.S. and Japanese companies: The implications for management accounting. Journal of Cost Management (Spring): 6-14. (Summary).
Reiter, S. A. 1994. Beyond economic man: Lessons for behavioral research in accounting. Behavioral Research in Accounting (6) Supplement: 163-185. (Summary).
Williams, P. F. 1987. The legitimate concern with fairness. Accounting Organizations and Society 12(2): 169-189. (Summary).
Zimmerman, J. L. 2001. Conjectures regarding empirical managerial accounting research. Journal of Accounting and Economics (December): 411-427. (Summary).