by Brett Scott, author of The Heretic’s Guide to Global Finance: Hacking the Future of Money
Last year, I had the privilege of being asked to talk on the future of accounting at the World Congress of Accountants. As part of the deal, the organisers of the event put me up in a five-star hotel. It was by far the most luxurious place I’ve ever stayed in, with every element designed to never offend the senses, from the colour of the walls, to the gentle tinkling music, to the fragrant soft towels and high quality biscuits.
Everywhere in the hotel were staff members, bent on making every aspect of the experience as smooth and – in their eyes – pleasant as possible. Like Ralph Fienne’s character Monsieur Gustave in the 2014 film The Grand Budapest Hotel, they were dedicated to the highest levels of professional service, creating an art form out serving high paying clients.
We might use this as an analogy for accountants and auditors. It’s an analogy that doesn’t perfectly cross over, but we might imagine the world of corporate dealmaking, M&A, large scale investment, and international trade as a global five star hotel club, facilitated by high quality professionals such as accountants, auditors, and lawyers.
While the accounting profession is obviously dealing with much more complex situations than a luxury hotel concierge, they do have a vision of themselves as members of an esteemed profession, maintaining very high professional standards, creating an art form out of facilitating the global activities of large firms, or presenting a true and accurate representation of their material reality.
Indeed, it often angers the accounting profession that many civil society groups and NGOs perceive it not as a profession, but as a profit-seeking industry captured by corporate interests, rife with conflicts of interest, facilitating tax avoidance, obfuscation of information, and exploitation of loopholes. To many activists, the big firms are agents of unequal globalisation, failing to account for the social and environmental costs of the firms they work for.
Accountants’ response to such activists is either one of dismissal: “You are naïve, and don’t know what you’re talking about”. Or it is one of defence: “We are an apolitical, value-neutral profession. We serve clients, and we do so to the best of our abilities whilst protecting the public interest. We have to maintain good relations with corporate management teams, whilst satisfying state regulators and protecting the interests of investors. This professional juggling act is what we do best, and the public benefits from it.”
It’s true that activists fixate upon examples of abuses – such as the Enron scandal – without noticing that on a day-to-day basis much good work goes on in the accounting profession. The frauds that are stopped, and that thus never get public attention, are ignored. It’s similar to the way airline safety gets critiqued every time a plane crashes, but never gets praised every time a plane lands safely. Furthermore, the activist narrative only really demands that the accounting profession ‘stop doing bad things’, without providing an accompanying positive narrative.
Still, there is one thing that the accounting profession all too often glosses over. Power. To explain this, we need to go back to the hotel example we started with.
The concierge or butler in a five star hotel, is not just serving any clients. They are serving very powerful clients, and that is a highly important detail. As I sat in my Roman hotel I kept being struck by a question: Why are you being so attentive to me? Would you treat the street-vendor outside these doors in the same way? On what grounds do I ‘deserve’ this service, relative to others who will not get it? What would you do if a homeless person wandered into the lobby?
The average person who spends time around a five star hotel does not technically represent ‘the public’. They represent a very particular element of the public. They are the dealmakers, the influencers, the richest individuals, the politicians, the CEOs, the fund managers, the pop stars.
One of the main roles of a concierge or butler in such a hotel is to mediate between hotel management, the esteemed guests, and the government inspectors of safety standards. They must help powerful people feel relaxed with each other, helping them negotiate deals with each other over expensive drinks, deals that impact the people who will never enter the hotel. It might sound noble to some, but there is nothing apolitical about this.
The accounting profession often starts from the position that corporate management, major shareholders and regulators are the key stakeholders they have to please. In this context, there is a tendency for the profession to slip into thinking that the ‘public interest’ is something roughly equating to investor interest, that the public interest is protected by making sure that company representations are true and fair.
In an unequal society though, the ‘investing public’ is not the same as ‘the public’, and ‘investor interest’ does not automatically equate to public interest. The main public interest issue with companies is not actually whether their financials are accurate or not. It’s whether they’re treating their workers fairly, how they’re impacting the people who use their products, and how they treat the planetary resource base that we all rely upon.
So, if I was allowed to give a blunt message to all new graduates entering the profession, I would want to say this: Don’t get caught up in the pretence that all you’re doing is honourably serving clients within a respectable profession. Get real and realise that your clients wield enormous amounts of power and that serving them is not an unproblematic, apolitical gesture. Stop acting like a butler at a 5 star hotel, sucking up to powerful guests and then feeling warm inside about that. Start thinking about those outside the hotel.”
The critical professional realises there is a difference between devotion to high quality service, and broader social justice and the public interest. Right now the profession starts from the former, and then adds in the latter. It should be the other way around.
In practice, this merely means the profession needs to become more holistic, critically analysing companies from a range of perspectives and then melding those perspectives into a snapshot that goes beyond whether or not the accounts are true and fair.
For example, in addition to standard reporting, why not include accounting from the perspectives of workers? Their experience of the firm is as material as any profits or losses to investors, but the corporate accounting structure presents them as mere expenses. And what about the broader public: Are they impacted positively or negatively via ‘externalities’.
And what about including accounting from the perspective of ecosystems? Forget the euphemism of ‘ecosystem services’ provided to firms. Ecosystems do not ‘provide services’ – they have services forcibly extracted from them without compensation. Look at a firm from the perspective of a wetland: does it represent a net drain or a net positive?
These ideas might sound highly unorthodox, but traditional methods of accounting fail to capture these broader elements of the material reality of a firm. Traditional accounts are not apolitical, value-neutral presentations. They provide a highly constrained snapshot of very specific types of stocks and flows, whilst obscuring others. The audit and accounting firm of the future should be hiring anthropologists, political scientists and ecologists to truly assess what the true and fair view of a firm is, and how it impacts different elements of a multi-faceted ‘public interest’ in the short and long term.
There is a lot of exciting work to be pioneered in the profession. For example, how can accounting firms be drivers of meaningful transparency, curating the raw piles of chaotic information emitted out of the corporate structure and turning it into something that people can actually use. I recently worked on such a project with Open Oil, sifting through the sludge of largely meaningless data that BP dumps into repositories like Companies House under the guise of transparency. This data is given the green light by auditing firms, but nobody in the general public knows what it means. Transparency is more than just the information – it is the meaningful presentation of information.
If accounting firms take the lead in driving forward these initiatives they will dispel the notion that they are a ‘private police force’ captured by those they are supposed to police, captured by a private profit motive that trumps a broader notion of the public interest. Rather, they will become seen as vital pillars of a democratic, sustainable society.
Brett Scott is a journalist, campaigner and former derivatives broker. He is the author of The Heretic’s Guide to Global Finance: Hacking the Future of Money (2013, Pluto Press). He has worked with diverse groups such as Action Aid, World Development Movement, OpenOil, and MoveYourMoney UK. He has written for The Guardian, New Scientist, Wired Magazine, Aeon and CNN .com, and provides commentary on financial reform and cryptocurrencies on media channels such as BBC and Arte. He is also a fellow of the Finance Innovation Lab and helps facilitate a course on power and design at the University of the Arts London.