Who are accounts actually for?<\/p>\n<\/p>\n
There was a time when it was easy to decide to whom an accountant reported: the law said it was the shareholders. The audit report (if there was one) was addressed to them. And in practice, the accountant liaised with the directors and\/or owners of the entity that they were working for, and pretty much delivered what they wanted.<\/p>\n
Then along came the Companies Act 2006<\/a>, in which section 172 introduced what might be called \u2018enlightened shareholder value\u2019.\u00a0<\/p>\n The directors of a company were now meant to have regard to employees, customers, society at large, the environment, reputation and other issues. But the truth was that nothing really changed.<\/p>\n Until now that is. Suddenly the world has noticed that everything is different. You could blame it on climate change, a decade of austerity, or the simple fact that nothing has seemed to change the behaviour of banks since so many needed bailing out by the state.<\/p>\n Whatever it might be, the world beyond accountancy is suddenly suggesting that reporting to shareholders alone is no longer sufficient.<\/p>\n The Financial Times has suggested that capitalism needs to be reset<\/a>, which is pretty radical for the Pink\u2019Un.<\/p>\n Even more radically, the US Business Roundtable of 181 CEOs of major corporations, including all of the Big Four accounting firms, suggested in August 2019 that the business of business was no longer making profit. It was instead, it suggested<\/a>,\u00a0about \u2018companies [being run] for the benefit of all stakeholders \u2013 customers, employees, suppliers, communities and shareholders.\u2019<\/p>\n And in November 2019, Professor Colin Mayer of the Said Business School at Oxford University wrote for the British Academy<\/a> suggesting something remarkably similar, saying that \u2018the purpose of business is to solve the problems of people and planet profitably, and not profit from causing problems\u2019.<\/p>\n Mayer also suggested that \u2018measurement should recognise impacts and investment by companies in their workers, societies and natural assets both within and outside the firm.\u2019 Measurement here does, of course, mean accounting.<\/p>\n So, is there a new role for accounting? I would suggest not, but only for a perverse reason.<\/p>\n My suggestion is that as accountants, we have always known we have a much broader duty than just to the shareholders alone.<\/p>\nDoes capitalism need a reset?<\/strong><\/h3>\n
Accountants have a \u2018broader duty\u2019<\/strong><\/h3>\n