Accounting, Accountants and Accountability: Poststructuralist Positions (Routledge Studies in Accounting)

Accounting, Accountants and Accountability

The accounting profession has recently been the target of a series of criticisms not least of which are its inability to account for intangible intellectual capital and its lack of transparent representations of key accounting data notably income and capital. This has precipitated a crisis in the accounting profession: the accounting representations relied upon for years can no longer be taken for granted. In this book, Norman Belding Macintosh argues that we now need to understand accounting in a different manner. Offering several different ways of looking at accounting, accountants and accountability, he draws upon the work of eminent poststructural thinkers such as Barthes, Baudrillard, Derrida, Foucault, Lyotard and Bakhtin. In doing this, he develops revolutionary insights into the nature of accounting, pioneering the introduction of contemporary poststructuralist ideas into accounting theory and practice. With a wide range of examples and case studies, this revolutionary new work will be essential reading for academic and professional accountants along with all those with an interest in the future of accounting. Norman Belding Macintosh, Professor Emeritus at Queen’s University Canada, has held visiting professorships at various international institutions, and has consulted for major corporations. He has been awarded the Canadian Academic Accounting Association awards for Distinguished Contribution to Accounting Thought, and for Outstanding Contribution to Accounting Education, and he has edited for and published in a number of accounting journals. He has served as chairperson of the Accounting, Behavior and Organizations section of the American Accounting Association. His previous books received world-wide acclaim.

Routledge Studies in Accounting

1 A Journey into Accounting Thought Lou Goldberg Edited by Stewart Leech 2 Accounting, Accountants and Accountability Poststructuralist positions Norman Belding Macintosh

Accounting, Accountants and Accountability Poststructuralist positions

Norman Belding Macintosh

London and New York

First published 2002 by Routledge 11 New Fetter Lane, London EC4P 4EE Simultaneously published in the USA and Canada by Routledge 29 West 35th Street, New York, NY 10001 This edition published in the Taylor & Francis e-Library, 2007. “To purchase your own copy of this or any of Taylor & Francis or Routledge’s collection of thousands of eBooks please go to www.eBookstore.tandf.co.uk.” Routledge is an imprint of the Taylor & Francis Group © 2002 Norman Belding Macintosh All rights reserved. No part of this book may be reprinted or reproduced or utilized in any form or by any electronic, mechanical, or other means, now known or hereafter invented, including photocopying and recording, or in any information storage or retrieval system, without permission in writing from the publishers. British Library Cataloguing in Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging in Publication Data Macintosh, Norman Belding. Accounting, accountants and accountability : poststructuralist positions / Norman Belding Macintosh. p. cm. Includes bibliographical references and index. 1. Accounting. 2. Poststructuralism. I. Title. HF5625. M345 2002 657–dc21 2001048667 ISBN 0-203-93005-3 Master e-book ISBN ISBN 0–415–27946–1 (Print Edition)

To Joan, Bruce and Cameron

Contents

1

List of figures Prologue Acknowledgements

ix xi xv

Introduction

1

Events of May 2 Traditional history 4 2

Structuralism and poststructuralism

7

Structuralism 7 Saussure’s semiotics 10 Poststructuralism 13 Genealogy 16 Critical history 20 3

Literary theory and accounting

23

Expressive realism 24 The new criticism 26 Structuralism 29 From structuralism to poststructuralism 32 Deconstruction 41 Four perspectives 47 Conclusion 52 4

Simulacra and hyperreality Phases of the image 55 Accounting examples 69 Implications 75

54

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Contents Surveillance, discipline, and punishment

78

The carceral society 82 Wedgwood 90 Hawthorne Works 95 Empire Glass 99 ITT 101 Johnson & Johnson 106 Conclusion 110 6

Accounting and truth

114

Conventional truth notions 115 Poststructural truth concerns 118 Accounting issues 122 Conclusion 126 7

Heteroglossic accounting

129

Appendix A Notes Bibliography Index

135 138 153 161

Figures

2.1 3.1 4.1 4.2

Saussure’s semiotics Sliding signs FASB 130 and 133 nomenclature Hyperreality in accounting for financial instruments

11 33 73 74

Prologue

My working hypothesis states that the status of knowledge has changed as societies enter what is called post-industrial and cultures are what can be said to be postmoderne. (Lyotard, 1979/1984)

As the new millennium dawned the accounting profession seemed to be in the throes of a crisis of unprecedented magnitude. Symptomatic of this was that the ratio of accounting book value to stock market capitalization had fallen precipitously since the 1980s while over the same period, price-to-earnings ratios, the traditional bellwether of a company’s worth, had tripled for the top 500 S&P companies and quadrupled for the NASDAQ index. Pundits lined up to criticize accounting for no longer providing useful information regarding the value and performance of today’s corporations, particularly those in the new information-rich economy.1 As an article in the popular press put it, accounting statements today ‘generally do an unacceptable job of accounting for the principle activities of Information Age companies.’2 It seemed as if accounting signs of capital and income had drifted far away from what the market believed to be realistic valuations of a company’s worth and performance.3 Yet if accounting information is no longer useful for its official decreed purpose of ‘providing information that is useful to present and potential investors and creditors and others in assessing the amounts, timing, and uncertainty of prospective cash flows,’4 then what is the legitimation for society to give the profession near monopoly rights on providing accounting services?5 Experts believed the problem lay mainly with the way accounting treated the most valuable asset new economy corporations owned – its bundle of intangibles or ‘knowledge assets.’ Intangibles include things like R&D, proprietary knowledge, brand names, organizational culture, employees’ technical and professional skills, goodwill arising from acquisitions, and, perhaps most crucially, the company’s skills at harnessing sophisticated

xii Accounting, Accountants and Accountability information system technologies. The problem was that the return on knowledge assets was now outstripping returns on physical and financial assets.6 Yet, for the most part, official generally accepted accounting principles (GAAPs) required expensing intangibles as soon as they were incurred. Knowledge companies, it is important to realize, are not limited to those producing and marketing sophisticated information and computer related products. Companies like the Ford Motor Company have been busy redefining themselves in terms of knowledge. Executives divested Ford of physical assets, purchased customer knowledge by acquiring marque brands (such as Jaguar, Aston Martin, Volvo, and Land Rover) and ‘went Internet’ to communicate in real time with suppliers, dealers, and customers. Profits, over and above the cost of capital, no longer came mainly from physical assets such as automobile assembly and parts plants and inventory – but from intangible assets. And Wal-Mart’s top executives, as another case in point, defined the company as a knowledge firm, pointing to its highly sophisticated information logistics systems as being at the heart of its remarkable growth in profits, sales, and stock market value over the past decade. Wal-Mart’s $250 billion market capitalization in 2001 was over seven times its book value. A plausible explanation was that ‘Wal-Mart’s main assets are . . . the intangible business process they have built around those computer systems.’7 WalMart’s computer system is the most powerful in the corporate world; only the US government has a larger computer network. Its web-based Retail Link network system, which is hooked up to suppliers and customers so they and Wal-Mart can track merchandise inventory and sales in any of its stores or regions, is the envy of retail marketers around the globe. These knowledge assets, however, do not show up on Wal-Mart’s balance sheet. Concerned accounting academics scrambled to investigate these large discrepancies in market to book value and perhaps find a solution. One ingenious scheme called for calculating the value of knowledge capital and incrementing balance sheet assets and owners’ equity by this amount, thus bringing book value more in line with market capitalization.8 Other academics argued that a ‘cash earnings statement’ should replace the traditional accrual income statement.9 Still others argued for publication of ‘forward looking,’ but unaudited accounting information such as is already available to insiders. And yet another scheme called for providing an information system which focuses on the fundamental phases of a company’s value chain and which would precede and complement the legally required, but no longer meaningful traditional accounting statements.10 Before experts could agree on a solution, however, in the early part of 2001 accounting came under siege again. But this time for a quite different reason. The market price of many of the high-flyer new economy companies had fallen precipitously within a very short period of time. For example, in the USA, Amazon Inc’s share price fell from a high of $115 to $18, Yahoo Inc’s shares dropped from $240 to $24, and Cisco Systems Inc’s market

Prologue

xiii

capitalization plummeted from nearly $500 billion to $115 billion. While, in Canada, Nortel Ltd’s market value fell from US$275 billion in July 2000 to $31 billion half a year later. Then, in July 2001, Britain’s Marconi PLC’s shares plunged wiping £3.5 billion in one day off its stock market value, onehalf of its total market value. And Nokia, Finland’s largest public company and one of the world’s leaders in telecommunication devices, saw its stock price take a nose-dive from a high of $62.50 to $22.00 even though its order book and revenues continued to grow according to forecasts. Similar meltdowns occurred throughout the rest of Europe and in parts of Asia. TLM Ericsson in Sweden followed suit. These setbacks wiped billions upon billions of dollars off stock market capitalizations around the globe and led to thousands upon thousands of workers being laid off. The major cause for all of this, the investment community charged, was not just shrinking demand for telecommunications products, but also faulty accounting which overstated actually reported earnings and gave overly optimistic forecasts of future earnings. Merrill Lynch, for example, reported that dozens of the world’s largest technology companies in recent years had reported earnings that were substantially distorted and overstated. Investment analysts and brokers blamed most of this on three dubious accounting treatments – not recording the cost of executive stock options at the issue date, capitalizing goodwill arising from acquisitions instead of writing it off when it arises, and treating one-time gains on divested assets as a part of current earnings. Accounting, accused of understating reported earnings only a year ago, was now charged with overstating them. Such was the situation facing accounting as the new millennium got underway. While some critics called for accounting to ‘mend thyself,’ others wanted the public sector to take charge. Security exchange commissions around the globe were frantically investigating a host of financial reporting shenanigans and accounting standards boards, including the International Accounting Standards Committee, were overwhelmed with researching and developing new standards to ‘fix’ accounting. But if there is a common denominator to the above concerns about the present condition of accounting, it is that of a crisis of representation along with a deeply felt loss of faith in the ability of accounting statements to any longer represent or to approximate some thing-in-itself (to borrow a phrase from philosophers like Nietzsche and Wittgenstein) such as income and capital. While this may or should be disarming to most individuals involved one way or another with practising, teaching or researching accounting, it would not seem so strange or off-putting to those familiar with poststructuralist ways of thinking. For the latter, the condition of postmodern contemporary society in the last part of the twentieth century has experienced a radical transformation in nearly all walks of life, not least of which is in the nature of knowledge.11 Knowledge societies, institutions, and organizations are no longer homogeneous, orderly, predictable or, especially, stable.

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So to expect accounting to produce reliable, unified, and stable signifiers of income and capital is no longer tenable. As the investment community has discovered recently, the accounting representations they used to rely on can no longer be taken for granted. In order to ‘fix’ accounting, we perhaps need to understand it differently than we have been used to traditionally. Simply seeing it as a set of procedural postulates or standards, or depicting accounting and accountants theoretically as commodities structured according to the laws of the market place, or demanding that double entry bookkeeping be the procedural method of choice may no longer be of much help. The pages that follow offer several different and perhaps contentious ways of looking at accounting and accountants by drawing on what are called poststructuralist positions. They also set out some radical reinterpretations of these phenomena. The hope is that these positions might inspire at least some of the next generation of practitioners and accounting researchers to use these insights to develop ideas that include political and social strands, to meet the challenges that face the profession in the current decade and the new century. An earlier version of this manuscript was submitted for the thesis requirement of the doctoral programme at the School of Economics and Commercial Law, Göteborg University, Sweden.

Acknowledgements

I would like to acknowledge the help of Barbara Czarniawska and Sten Jönsson who commented on earlier drafts of this book. Both made helpful suggestions for revisions and alerted me to what might have been a few serious misrepresentations on my part. Joan Harcourt edited most of the book in her usual impeccable fashion saving me from many mistakes in grammar, presentation, and facts. And without Linda Freeman’s superb organizational and word-processing skills the book may never have been finished. I also express my gratitude for three research grants from the Social Science and Humanities Research Council of Canada and to the School of Business, Queen’s University Research Programme for their support. Thanks are also due to those institutions where I acted as Visiting Professor, presented seminars, and was able to research, write about, and discuss the material in this book with faculty and graduate students, from whom I received many constructive criticisms as I was wrestling with various poststructural notions. I was also lucky to have excellent colleagues in the accounting area at Queen’s University, including Alan Richardson, Teri Shearer, Dan Thornton, and Mike Welker, who worked with me or commented on many of the ideas in the book. And the doctoral students in my PhD seminars, upon whom I inflicted these ideas, deserve more than honourable mention. These colleagues and students have been exceptionally tolerant in this regard, even though they did not always concur with the poststructuralist positions taken. And Carlos Prado of Queen’s University’s Philosophy Department inspired and helped me grasp the ideas in Chapter 6 about truth and accounting. Parts of Chapter 4 are taken from N. Macintosh, T. Shearer, D. Thornton and M. Welker, ‘Accounting as simulacrum and hyperreality: perspectives on income and capital’, Accounting, Organizations and Society, Vol. 25, No. 1, pp. 13–50, with permission from Elsevier Science. Finally, I would also like to thank, in absentia as it were, Mikhail Bakhtin, Jean Baudrillard, Roland Barthes, Jacques Derrida, Michel Foucault, JeanFrançois Lyotard, the eminent scholars whose work I have relied on in trying

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to work out how their ideas could be brought to bear on vital issues facing the accounting profession and academy today. I have tried to be faithful to their ideas and in this regard I read their works (with the exception of Bakhtin) in the original French versions as best I could, as well as drawing on the English translations.

1

Introduction

That things possess a constitution in themselves quite apart from interpretation and subjectivity, is a quite idle hypothesis: it presupposes that interpretation and subjectivity are not essential, that a thing freed from all relationships would still be a thing . . . the essence of a thing is only an opinion about the ‘thing.’ (Nietzsche, 1968: 302–3)

The knowledge domain of accounting has a reputation of being long on practice and short on theory. As the adage goes: ‘Accounting is a practice in search of a theory.’ This, however, may be overstating the case. In fact, a great deal of theorizing has ensued over the years, even if it has tended to be ignored by practitioners. Much of this has drawn on economics as the theoretical base. In fact, the late 1800s witnessed the introduction of economic theory into the accounting realm in the UK. And in the 1930s, scholars at the London School of Economics developed accounting theories drawing on neo-classical economic models, particularly regarding cost allocation issues and information usage for decisions.1 This ‘London Tradition’ had an important impact on academic accountants in the UK and spread to the USA where it was adopted with a vengeance. Germany also has a long tradition of its own of economics-based accounting theory.2 Accounting researchers in many other countries have drawn on economics for accounting theory development.3 Today, this approach is known as the ‘informational perspective.’ It has come to determine ‘what counts as accounting research’ in many institutions. While undoubtedly the informational perspective has added a lot to accounting thought and practice, it may well be, as one prominent academic of this approach has suggested, that it has run its course and that not a lot more can be mined from it.4 So this book aims to introduce a quite different perspective, one based on relatively recent developments in poststructuralist philosophy, sociology, history, and especially language, into the scholarly academic accounting world. The hope is that others will follow suit.

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Accounting, Accountants and Accountability

This is not the first attempt to introduce poststructuralist ideas into the realm of accounting thought, bits and pieces already have appeared here and there. But, as with nearly all new and radical initiatives, they have in general been met with stiff resistance, even disdain and disbelief, and more often than not dismissed without a real grasp of what it’s all about. Ironically, much of the opposition to a poststructural perspective has come from accounting scholars who have also challenged the informational perspective’s stranglehold and introduced accounting theories that draw on great thinkers of modernity like Karl Marx, Max Weber, and, more recently, Louis Althusser and Jürgen Habermas. As for proponents of the informational perspective, they seem to be unaware of the existence of postructuralism or assert that it has no relevance to accounting. Yet poststructuralism is already an important, if controversial, part of the woodwork and today is almost déja vu for many scholars, especially younger ones, throughout the humanities and the social sciences. The ideas drawn on in this treatise have had a profound, and many would say salutary, effect on discipline after discipline in the humanities, social sciences, and the arts in general. They include some of the central writings of several French intellects who helped pioneer poststructuralist thinking – Jean Baudrillard, Jacques Derrida, Michel Foucault, and Jean-François Lyotard and the works of Roland Barthes whose work is considered to bridge structuralism and poststructuralism. Each of them was profoundly affected by the ‘Events of May’ which refers directly to the riots and protests which took place in Paris and spread to other parts of France during May, 1968. It also refers more generally to somewhat similar events that took place around the world at about the same time. This book also draws on some of the ideas about language and literature that Mikhail Bakhtin, a Russian literary theorist, developed earlier in the twentieth century.

Events of May The French riots started out as a demonstration in the Paris suburb of Nantes by university and high school students protesting the conditions under which they were forced to work and live and the autocratic rule of the highly centralized ministry of education and university administrators. The police response was vicious and harsh, but only resulted in an escalation of protest by the students. Then, a remarkable thing happened. The students were joined by a rapidly growing number of factory workers, teachers, trade unionists, and professionals of all kinds who occupied factories, rail depots, hospitals, museums, and even the dance halls and night clubs. As police brutality escalated, the rioting and protests spread, not only in Paris but throughout France. Agricultural workers joined in and many of the 168,000 government soldiers brought in to suppress the rioting, along with some members of the police union, were openly sympathetic to the strikers.

Introduction

3

Factory workers by the millions across France voted to strike and they occupied factory after factory. Matters escalated when police stormed the factories to beat up the occupying workers and even killing some. France literally ground to a halt and the end of de Gaulle’s decade of rule was near at hand. But the protests and rioting in 1968 were by no means limited to France. Widespread demonstrations also took place in Warsaw. Students rebelled and rioted in Yugoslavia. In Italy, 60 per cent of the workers supported a general strike. Demonstrations of half a million strong broke out in Mexico just before the 1968 Olympic Games, while in the USA, race riots erupted in major cities and massive anti-Vietnam war marches were organized in Washington, as well as in Britain. In Spain, Franco was putting down the new workers’ movement and the Basque separatists with large-scale arrests, torture, and executions. The massive protests by students in Tokyo went pretty much unnoticed in the West, although the Russian invasion of Czechoslovakia to put down a democratically elected government shocked even the most ardent Marxists and Leninists. The world was powerfully shaken as the Events of May reverberated globally. As one observer summed it up: The year 1968 was a watershed. That was the year millions of workers in France struck in protest at police violence, bringing the government to the point of panic. It was also the year the black ghettos of the United States rose in protest at the murder of the leader of nonviolence, Martin Luther King. 1968 was the year of the Prague Spring, when students, workers and intellectuals challenged the Stalinist monolith – and were crushed by Russian tanks; the year of the Chicago Democratic Convention, when the use of teargas and billy-clubs ensured a US presidential candidate who had already been rejected by voters in every primary.5 The world, it seemed, had undergone some kind of a radical change in a few short years. Crucially, the social and philosophical theories that had dominated the French intellectual scene since World War II no longer offered much understanding of these events. Any attempt to fit them all into some kind of metanarrative, such as Marx’s dialectical historical materialism, did not work well at all, while more recent theories – such as Louis Althusser’s Marxism, Alexandre Kojeve’s Hegelianism, Husserl’s phenomenology, or Jean-Paul Sartre’s existentialism – had also lost much of their robustness for explaining the Events of May. For critical social philosophers, such as Barthes, Baudrillard, Derrida, Foucault, and Lyotard, who had been weaned on Marxism and who had joined the Communist Party in their younger days, it seemed that they would need either to substantially revise the now moribund theories of the likes of Hegel, Marx, and Gramsci or look in a different direction. Now highly

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Accounting, Accountants and Accountability

suspicious of universal truths, they chose the latter and turned for inspiration to the work of Friedrich Nietzsche, particularly his seminal book On the Genealogy of Morals, and his notion of discontinuities and ruptures in the historical trajectory of Truth and Reason. All five have always been quick to acknowledge their debt to Nietzsche and the Events of May proved to be a golden opportunity to break new intellectual ground. Each has produced a prodigious volume of published works stretching over three or four decades. While each looks at a quite different aspect of communication, language, and discourse, the golden thread running through their collective works is the idea that language itself, how it works, and how it gets used has a deep influence today on the lives of individuals, perhaps more so today than does the material world of producing and consuming material things. Collectively, these works make up an important part of what is known as ‘the linguistic turn’ taken in recent years by most of the social sciences and humanities. Linguistic turn refers to the use of language for the production and consumption of immaterial objects such as images, signs, models, and simulacra, as exemplified in media of all kinds, including TV, the Internet, and various computerized webs, as well as newspapers and magazines. And since accounting is accepted as the language of business, and more and more also the language of the public sector, it would seem to go without saying that much can be learned about accounting from these highly influential poststructuralist thinkers. What is at stake here, however, is not just a matter of a local set of crafts: it is part of the cultural history of the twentieth century, and it has implications for anyone who is interested in how our society and culture has come to assess and regulate itself. Thus, this book looks at accounting following Lyotard for its language games nature, Derrida for its duplicity in constructing meaning, Baudrillard for its hyper-textuality, Foucault for its punitive and disciplinary discourses, and Barthes for its semiotic nature. (Of course, none of them would want to be called ‘poststructuralist’ or any ‘post,’ as such labelling goes against the grain of poststructuralism.) The book also suggests a new way of accounting based on the works of Mikhail Bakhtin. Reviews of the methodologies of structuralism, semiotics, and Nietzschean genealogy are presented in Chapter 2 as a backdrop and entré to their radical ways of thinking. And, as their research methods are historical in nature, albeit radically so, the tenets of traditional history serve as helpful background.

Traditional history Traditional historians tend to follow four basic suppositions.6 The first of these is that history investigates only the real. History must be grounded on the fundamental and absolutely central distinction between established facts and fictions.7 The Black Hole of Calcutta, the Japanese rape and pillage of

Introduction

5

Chinese cities, the Gulag, the Holocaust, the US atomic bombing of Nagasaki and Hiroshima, and the ethnic cleansing in Kosovo did really happen in real places, to real people, by real people. These are the objects of historical documentation. The second supposition holds that the past is a permanent dimension of the human community and consciousness. We carry it around with us as a ‘sense of the past.’ The pull of the past as tradition and continuity is strong. Its patterns tend to get reproduced in what we consider today to be important about community and society. Judiciaries, bureaucrats, politicians, accountants, and members of other professions and trades frequently search for precedent when making judgements and taking decisions, thus bringing the past into the present. In fact, many people today have more in common with their forebears than with their contemporaries. Today’s second-hand car dealers, for example, are more similar to horse traders of medieval times than they are to, say, today’s computer scientists. And even when ideologues ‘invent’ or ‘distort’ the past, instead of improving on it, to suit their present causes, they retain a sense that the past is important. Societies, of course, do change. But, changes and innovations are made in comparison to the past, often in the hopes of improving on it. So it behoves historians to document, analyse, trace, and report about this sense of the past, including its transformations. History not only throws light on the past of earlier societies, but, more importantly, it illuminates the present. And even, or especially, when people do not seem to learn from what history can teach, historians must go on trying. Large-scale bombing is a case in point. The German blitz bombing of London early in World War II was designed to break the will of the English populace to fight on. Yet it had just the opposite effect. Their will got stronger. The reciprocal bombing by Allied forces a couple of years later only stiffened the resolve of the German people to carry on with the war in spite of inevitable and crushing defeat. History repeated itself again in Vietnam, where US bombers in one week dropped more tons of bombs, including napalm and fire bombs, than during the entire Allied bombing in World War II. Yet, the will of the North Vietnamese got stronger and stronger. Similarly, the so-called ‘United Forces’ bombing of Baghdad and other cities and towns in Iraq strengthened the will of its citizens to resist as well as exacerbating the already strong hatred for the Western world, especially the USA. And, more recently, history repeated itself once more in Yugoslavia when the United Nations’ bombing failed to break the people’s resolve. Historians should be in the business of trying to remove these blindfolds. The third supposition, closely related to the second, holds that history has much to say about contemporary society. It is a storehouse and repository of the experience, wisdom, follies, and moral precepts which can and should provide the ‘wiring’ for a better world today. While much of the human situation and temperament stay about the same from era to era, a lot of it gets

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better, based on lessons from the past. And even when politicians, generals, and others in key positions of power ignore the lessons of history, the historian must keep trying. History has a lot to say about the present. It is a case of, as the adage goes: ‘Fool me once, shame on you; fool me twice, shame on me.’ History repeats. We should pay attention to it. The fourth basic supposition contends that the past, present, and future constitute a continuum, and so the present and future are systematically chained to the past. The future is not merely a capricious and arbitrary imbroglio of circumstances and events. Thus, historians can, if they try, predict social trends and perhaps influence the future in important ways. As it turns out, prediction may not be all that hard. Today’s social structures and the pattern of reproducing them put a limit on the number of things that can happen tomorrow. Historians, as experts on the past, should be able to provide insights into what possibly might happen. And, if these future possibilities are deemed to be undesirable, historians should speak out. The past has important things to say about the future. In sum, traditional history rests on four basic suppositions. It concerns the investigation of real events and persons; the past has a strong influence on the shape of the present; it is progressive; humankind learns from the experience, wisdom, and mistakes of the past; and the past, present, and future represent a continuous process. So historians can and should predict important social trends which, when identified, might be acted upon to influence the direction of the future. Conventional accounting also ascribes to these basic suppositions. It claims to report only real events and transactions that did occur and thus accounting reports are deemed to be factual. It also holds, at least implicitly, that the past traditions of accounting are important for decisions and actions today. Double entry accounting, now centuries old, remains the basic mechanism for collecting, coding, encoding, and reporting accounting data; while the postulates of revenue recognition, historical cost, matching, conservatism, going concern, etc., are time honoured traditions that inform present day accounting practice and subsequently affect capital market decisions. And it is widely believed that historical cost-based accounting has lessons for the present in terms of resource allocations in society. Finally, accounting statements are seen to link the past (previous years’ comparative figures are required to be included) with the present and some accounts are based on estimates of future events and transactions, thus linking the present to the future. Conventional accounting wisdom, then, adheres closely to the basic suppositions of traditional history. This somewhat lengthy exposition of the presuppositions of traditional history provides a necessary backdrop for understanding how the work of poststructuralist researchers differs. Foucault, Derrida, Baudrillard, Barthes, and especially Nietzsche, as we shall see, each adopts a different and radical method of doing history known as ‘genealogy.’

2

Structuralism and poststructuralism

You become a card carrying structuralist only when you claim that the meaning of each image (sign) is wholly a matter of its relation to the other (images). The images do not have a ‘substantial’ meaning, only a relational one. (Eagleton, 1983: 94) Poststructuralists . . . are antagonistic to the concept of totality and in its stead emphasize fragmentation . . . they do not recognize a unity against which the fragments can be measured . . . poststructuralists also emphasize the local and the contingent and they have a hatred of all overarching theories. (Sarup, 1993: 186)

Structuralism Structuralism has been an important ontology in nearly all the natural sciences, the social sciences, and the humanities for some time. It holds that structures, the organizing properties or blueprints of any system, are ubiquitous in both nature and cultures. So everything that is not indivisible in its very nature can be shown to have a structure and to exist as a complex whole amenable to the analysis of its constituent parts. And while that structure is seldom visible on the surface of the system, its elements and the laws or rules which dictate their relationships can be discovered.1 Structuralism came into its own as a revolutionary movement and flourished as an academic fashion in the 1960s and 1970s, riding on the work of pioneering influential giants in many fields. These include the likes of: Claude Lévi-Strauss and Noam Chomsky in cultural anthropology; Ferdinand de Saussure, Ludwig Wittgenstein, and Roland Barthes in literature and language; Sigmund Freud, Carl Jung, and Jacques Lacan in psychology; and Emile Durkheim, Max Weber, and Karl Marx in sociology and political economy. It is noteworthy that at the time the ideas of these intellectual greats were introduced, they were received, not only as extremely radical, but also as highly subversive. Today, however, they are taken for

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granted as part of the status quo of many disciplines. Yet that earlier enthusiasm and attractiveness began to fade as structuralism came under sharp criticism from poststructural quarters. Nevertheless, structuralism is still the favoured methodology for many scholars in the social sciences and it remains an important strand of Western thought in general. Structuralism came to prominence in the social sciences and humanities in imitation of the ‘hard’ sciences where it had proven highly effective. Scientists assume an objective world exists ‘out there’ which they can observe, describe, and model mathematically. The elements and the form of the system (molecule, atom, quark, muon, DNA, whatever) can be identified and the laws which dictate their behaviour can be uncovered. The laws of electromagnetism, for example, direct the movement of the compass needle even though they are not apparent on the face of the compass. Similarly, it was thought in the social sciences that observable surface behaviour, which initially might appear to be random on the part of the agents of a particular social system, was assumed to be organized according to the laws of the system which could be unearthed and documented in scientific-like fashion. Freud’s three-tiered – id, ego, and superego – dynamic theory of the psyche is a classic example. The theory holds that the three parts struggle over control of the individual’s personality. The strong ego of a normally healthy psyche acts as the controller of both the id’s inclination to follow blindly its instinctual natural, libidinal urges and the superego’s demands to conform to the moral dictates of society. In contrast, an unhealthy psyche stems from a distorted working through of the Oedipus complex, whereby the infant envies the father’s sexuality, but fears castration. This psychological knowledge is dispensed in discursive practices, such as lengthy confessional-like sessions during which the individual becomes aware of these struggles lurking in the unconscious and emerges with a normal, healthy psyche. Economics offers another example of vintage structuralism. Economics: A structuralist theory Economic theory, which has been adopted by many accounting scholars as the theory of choice, is also paradigmatically structuralist. In fact, Ferdinand de Saussure (1857–1913) took economic theory as the model for his highly influential semiotic theory of language. And, as one influential scholar of structuralism put it: ‘Economics, be it noted, is the structural study par excellence . . . An economy is the ideal example of the functioning whole all of whose parts interact and depend utterly on one another,’ and econometrics, he proclaimed, ‘is unadulterated structuralism.’2 Economic theory explains the behaviour of any and all economic units – individuals, firms, families, organizations, etc. – in terms of the laws of supply and demand as guided by Adam Smith’s invisible hand of the market place. While on the surface these economic units seem to behave in a

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random, disorderly, and dynamic way, such pandemonium conforms, economic theory holds, to the laws of commodity exchange, competition, specialization of labour, and capital accumulation. Originally developed to model the small firm, economics has been adapted to explain the behaviour of almost any social system. These systems are treated ‘as if they were a small firm’ and so deemed amenable to the laws of economic behaviour. These laws guide the economic units who, heedless of the needs of society at large, vigorously pursue their own private passions and protect their own interests in a way that is congruent with the interests of society as a whole. And, over the long haul, the market, behaving like a wonderful social machine, steadily moves society towards a Valhalla of abundance for all as the laws of economics, operating unseen, structure the surface behaviour of firms and individuals within the system. An accounting structuralist theory Accounting theories which are based on economic theory followed suit. The most prominent of these come under the umbrella of the informational perspective. This refers to accounting theory and research that focuses on problems of measurement, including issues of valuation, recognition, and disclosure of accounting information, and the effects of accounting information or signals on security return distributions.3 This corpus of research includes event studies, information economics, agency theory, transaction cost economics, and more recently, economic value added (EVA) analysis. Agency theory has been highly influential in accounting research and so a brief exposition of how and why it is structuralist is outlined next. Agency theory, an offshoot of information economics, was introduced in formalized terms nearly half a century ago and came into its own in accounting theory in the 1970s. Within agency theory, information, accounting data, and managers are treated as commodities, thus rendering them amenable to the laws and calculus of neo-classical economics. Agency theory focuses on the market for managers, including the behaviour of the principal, the agent, and the contract between them. The owner/principal bids for and purchases the service of the manager/agent who sells his or her labour power to the owner. The owner-manager relationship is depicted as a contract under which the owner delegates decision-making authority to the manager who then performs services on behalf of the owner. The actions of the two parties are deemed to be governed by the economic laws of the market place. These dictate the rational, self-interested seeking, utility-maximizing behaviour of both parties. As with neo-classical economics, agency theory makes self-interest and survival of the fittest its basic platform.4 Given that managers are self-interested, rational, utility maximizers, they will not always take actions that are in the best interests of the owner.

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Instead, relying mainly on asymmetrical information to which they, but not the owner, are privy, they pursue self-interest with guile. This results in ‘agency’ or ‘transaction’ costs which arise from various phenomena known as adverse selection, moral hazard, shirking, and excess perquisite consumption. Adverse selection means that managers seeking employment exaggerate their abilities with the result that the owner pays too much for ‘lemon’ managers, while the best ones, the ‘plums,’ withdraw from the bidding as the price is too low. Moral hazard occurs when the manager exerts only enough effort to meet the contract requirements. Shirking and excess perquisite consumption occur since the owner is not always able to monitor the manager’s efforts and actions directly. The owner, however, can minimize these ‘agency costs’ by applying the calculus of information economics to the task of finding the solution whereby both parties are as well off as possible. So the owner invests in gathering information, designing monitoring systems, bonding, and sharing output with the agent up to the Pareto optimal position. In short, agency theory identifies the elements in the market place for managers and uncovers the economic laws which govern the behaviour of both owners and managers. The laws of the market place for managers and the rules of adverse selection, moral hazard, and information asymmetry, operating behind the backs, so to speak, of both owners and managers, organize and structure their behaviour. Agency theory is prototypically structuralist.

Saussure’s semiotics The structuralist theory that has had the most influence on the poststructuralist movement overall is that of Ferdinand de Saussure. His work has had a profound effect on developments, particularly structuralist ones, in field after field. In fact, in many quarters his theory is regarded as equally important to the social sciences as was Newton’s theory of gravity to the physical sciences. ‘An understanding of Saussure’s theory of the ‘sign’ is fundamental to all poststructuralism.’5 A brief exegesis of his theory of language will set the stage for poststructural frameworks and ideas coming along later. Saussure’s semiotics, alternatively known as semiology and structural linguistics, deals with the study and interpretation of linguistic signs. Saussure was primarily concerned with how any particular language system, what he called langue, such as French, English, Japanese, etc., worked to convey meaning within a community of speakers. In order to focus on langue, however, he had to bracket off what he called parole, how language and how words are used in concrete events when spoken or written. Parole can be thought of as the way members of the community draw on and use language during specific communicative events. Langue, in contrast, refers to the totality of a language system, including its elements and the laws of their relationships.

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Langue is seen to be ubiquitous in virtual time–space in that while it does not exist in its totality in any one person’s mind, it is a vital part of the social fabric whose speakers know how to instantiate it during communicative interactions and actions. Parole is part of the material world; while langue is part of the abstract world. Another important, and at the time radical, feature of Saussure’s scheme was his adoption of a synchronic approach. Most other theorists had taken a diachronic, or historical, perspective in that they studied the changes which had taken place in a specific language across time. Language, he believed, can be studied in terms of two axes. The diachronic axis studies the changes in a particular language across time; while the synchronic axis studies it at a particular moment of time, that is, statically. Following the latter, Saussure’s semiotics analysed the state of language as a formal system at any particular time.6 This synchronic perspective enabled him to put in place a universal theory of langue. The key element of Saussure’s scheme is the ‘sign.’ A sign is a two-sided entity consisting of paired elements – a signifier and a signified. The signifier is the printed or spoken word, the sound/image. Its unique and attached other, the signified, is the image it invokes in the mind. The signifier is either the letters on the page or the actual sounds in the air, while its signified is the image engendered in the mind. The sign points to some particular referent which exists as a real object or ideal outside the semiotic system. For example, the word ‘cat’ – chat in French and gatto in Spanish – conjures up a mental image of ‘catness’ in general; a picture of a particular (usually) domesticated creature – a four-legged feline, with fine ears and whiskers, a tail, and the ability to purr when happy. On the other hand, ‘real’ cats, the material referent, are of a particular breed or mixture of breeds. These ideas are depicted in Figure 2.1. Image in the mind

Letters on the page or sounds in the air

Semiotic realm signified Sign

Sign

signifier

Realm of real objects, ideas, and ideals Referent

Figure 2.1 Saussure’s semiotics

Real trees out there in the forest

-t-r-e-e -a-r-b-r-e -b-a-u-m

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This scheme led to a monumental discovery. The relationships of signifier to signified and of sign to referent is arbitrary and so unscientific. The signifier ‘cat’ could just as well be ‘dog’ and it would still conjure up an image of a cat and refer to what we know as ‘catness.’ So there is no scientific, inevitable, permanent, natural or pristine quality to these relationships. What a word means is not a result of its nomenclature role of simply naming something that exists before the naming of it and independently of the formal language system. Put differently, the meaning of a sign is not determined by its positive content, its meaning is not intrinsic to a particular sign. Instead, words are the result of the socially constructed linguistic conventions of a particular community. Yet, if signs do not stand for any pre-existing things or concepts, what is the source of their meaning? Clearly, they signify something to the community of speakers and writers who use them for communicative and thinking purposes. The answer, Saussure believed, is that since the referent, or real thing, is absent in langue, language must consist of arbitrary slices in an otherwise continuous flow of sound/images, each of which is packed into a closed system and, as with dominoes, leans up against its neighbours. So the meaning of any particular sign inheres only in virtue of its difference from all the other signs in the language system. Just as the particles of an atom, or the parts of a watch, have no meaning outside of their relationship with the other elements of the atom or the watch, a sign has no meaning outside its relationship to the rest of the signs in the system. A sign’s meaning is differential – not substantive. Saussure’s structural linguistics was adopted as a model by many intellectuals and researchers in the social and human sciences. Most prominent among these are Claude Lévi-Strauss, Jacques Lacan, Roland Barthes, Michel Foucault, Roman Jakobson, Jean Piaget, Noam Chomskey, Louis Althusser, and Edward Said, to mention only a few. It is not the intention to review the works of these scholars since this book focuses on poststructuralist perspectives. A snapshot of Lévi-Strauss’s structuralist anthropology, however, provides a flavour of the structuralist movement in general. Claude Lévi-Strauss (1908–1997), perhaps the most prominent and influential figure in the structuralist movement, was one of the first to realize the potential of Saussure’s structuralist approach. He took structuralist analysis to its extreme limits in reinventing modern anthropology. He believed that all human linguistic, economic, and social behaviours have a similar underlying structure which undergoes subtle modifications as it is instantiated in human actions and which represents a basic need in the human mind for order that is itself related to the order of the universe. In his thinking, Lévi-Strauss drew parallels between the way the genetic code, with its binary combinatory rules, operates in the brain and, through it, organizes human culture. These codes, rules, and structures, however, lie beyond human control and for the most part operate unbeknown to the individual.

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At the height of his life, Lévi-Strauss went so far as to say that he personally felt that he had not even written his books, but rather that they got written through him. The human being, he concluded, is simply a passive place, a sort of crossroads where these codes happen. ‘I never had . . . the perception of feeling my personal identity. I appear to myself as the place where something is going on, but there is no ‘I’, no ‘me’ . . . there is no choice, it is just a matter of chance.’7 Structuralism, however, was not without its problems. For one thing, in its search for order, stability, form, and predictability, it had to bracket off turmoil, instability, content, and chance, all of which seem to be omnipresent in the world. As well, structuralism took the text to be the carrier of some stable and final, if complex, meaning that was objectively there and which a diligent and competent structuralist could find in it by setting aside any textual ambiguity and play. And instead of opening up the text to multiple interpretations, structuralism wanted to close down the multiple meanings and terrorize the text, as poststructuralists would put it, with some totalizing scheme. But perhaps the most pervasive problem was that structuralism believed that a competent reader could sort out the text’s true meaning from the pretenders where competence meant one particular way of reading and interpreting. In the wake of these conundrums, poststructuralism came on the scene in order to go beyond them and to stretch structuralism to new and radical extremes.

Poststructuralism Poststructuralism is ‘post’ in the sense of being past, coming after, or going beyond structuralism. Recall that structuralism holds out for the idea that the parts of any system are under the grip of some kind of grand structuring scheme or master plan which organizes and controls the parts. In Saussure’s scheme, as an important case in point, each individual sign (consisting of a uniquely paired signifier and signified) refers to some unique real or idealized referent and the unique meaning of each sign stems solely from its difference from all the other signs in the tightly packed system of signs. This is the basic model for all signs and for all systems of langue. A sign, then, is taken to be like an individual card in a 52-card deck, where the significance of each card stems from its relation to all the other cards. The Ace of Spades, for example, in the game of bridge ranks above the other 12 spades and spades rank above the other suits – hearts, diamonds, and clubs also ranked in that order. This meaning inheres in the Ace of Spades simply because it is not one of the other 51 cards. Analogously, in Saussure’s semiotics, any particular word has meaning simply because it is not one of the other words in its particular langue. For poststructuralism, however, this is a limited and naive way of understanding how language works. The argument is that such thinking assumes

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that there is nothing, no intermediate object or term, between the linguistic system and the individuals who use it. Poststructuralism argues that, instead, signs are filtered through ideologically tainted social discourses which play a large role in shaping their meaning in the minds of both writers and readers. In the game of bridge analogy, the Ace of Spades is the card-of-cards (ignoring no-trump contracts) only because of the socially constructed official rules of bridge which tilts the turf in its favour.8 Along similar lines, in the case of language systems, certain signs and signifiers attain a privileged status within particular discourses. Social ideologies appropriate signs and elevate them to places of privilege. So signs are not neutral when put in play. Rather they are contradictory laden and the focus of historical struggles. An important example is the accounting sign of net income, the so-called bottom line, which today is treated as the sign-of-signs – superior to and ranking over all the other accounting signs. And, crucially, as with the Ace of Spades, it is filtered through an ideologically socially constructed discourse that signifies in the minds of both preparers and users that the net income generated by the corporation in the current accounting period should accrue to the shareholder owners who can, but may or may not, legally extract it from the corporation’s assets and so transfer it into their own private personal store of wealth. Yet, for poststructuralists, such logic is only the result of the discourse which is currently ceded place of privilege. Poststructuralists aim to undermine such dominant discourses by revealing that they are not natural, but the result of human struggles in historical settings. So, at least potentially, net income is the turf for the struggle over meaning. Another discourse might construct its meaning as the usury account signifying the quantity of sin, as measured in monetary terms, committed by share owners – as was the case in some communities in medieval times.9 Yet another discourse might label net income the exploited labour account signifying the net loss, the money amount of exploited wage labour, to the employees and the workforce who produced the net income. Signs, in this sense, are material things and the site of struggles over their meaning. Poststructuralism also opposes the idea of the existence of any grand underlying system which acts as the controller of a text’s meaning. This could be the existence of a transcendental signifier – a sign-of-signs around which all the other signifiers would circulate, point towards, and serve as an anchor for the text’s ultimate, unquestionable truth and meaning.10 Transcendental signifiers are merely those which get elevated above the rest by human beings in specific historical settings. Poststructuralism challenges this on the grounds that such a sign would have to pre-exist its capture in language. It would have to ‘be there’ even if there were no humans around to observe it. Poststructuralism sees this as an impossible dream – a fiction – since there can be no meaning which is not formulated by language. We cannot

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somehow go beyond language to think, read, theorize, and write. There is no extra-linguistic position from which to find meaning. Thus, Derrida’s (often misunderstood) aphorism, ‘I’l n’ y a pas de hors texte,’ which simple means we live immersed in language.11 Meanings do not pre-exist their expression in language. Instead, it is language when used by humans that creates meaning. So meanings are ‘fictions’ in the Nietzschean sense that they are interpretations detached from their referents. The laws of nature, for example, do not actually exist in nature, but are only narratives, linguistic descriptions of the physical and material world of nature. Poststructuralism also challenges the idea of any one-to-one relationship of signifiers to their signifieds. Rather, it sees signifieds as constantly turning into signifiers. The upshot is that ‘there is an incessant sliding of the signified under the signifier.’12 This indicates that any meaning system is simply a network of free-floating signifiers which have no determinable, fixed or positive relationship to any signified or to some extra-linguistic referent. There is no final end-point to the system: ‘Words always refer to other words: signifiers form a chain along which we slip without ever reaching a fixed or definite meaning. A sentence can always be added to, and that addition can completely reverse its meaning. Metaphor and metonymy, both of which involve the substitution of one signifier for another, further disrupt the links between signifier and signified.’13 So, crucially, there can be no direct relationship between theories and reality. Language always comes between them. ‘There is no concept which is not embroiled in an open-ended play of signification, shot through with the traces and fragments of other ideas.’14 This is not to deny the existence of the world of objects and events, but rather to hold the referents (objects and events) and traditional history (events related to the material world) at bay temporarily in order to focus on the way that language shapes meaning. Nor is it by any means to say that meaning is not possible, but rather that texts and discourses mean something only in virtue of the conventions and common usages of a particular community of speakers. Poststructuralists also have a political agenda. They hope to arouse a radical awareness of the unnaturalness and mutability of the signs we use to live by, reveal how they are tainted by discourses, uncover the historical struggles over their meaning, and thus open up spaces for different meanings to come into being. This can be accomplished by exposing the role that discourse and discursive formations play in relations of power, such as the domination of the debt-ridden, impoverished third world by the advanced, industrialized, highly educated, ‘infotechized’ nations, by the discourse of a market driven world where the net income and the shareholder wealth of global, multinational corporations dominate the life world. The poststructuralist aim is to show how the ‘talk’ – the texts, discourses, and discursive formations – dominates the ‘walk’ – the relations of power and exploitation. If we talk in new and radical ways, the walk can and might be different.

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Finally, poststructuralists rebel against the structuralist idea that all systems are amenable to analyses which can uncover the deep laws and structures which dictate how the system works. While the latter views the role of the reader as that of finding these laws and structures, some final truth in or behind a text, poststructuralists deny that such things exist and shift the role of the reader to that of interacting with the text to construct a meaning. Readers need no longer be considered only as consumers; they can be and are also producers of meaning. This ontological presupposition commands a special epistemology which goes under the label genealogy.

Genealogy The term genealogy in its more common meaning is an investigation of one’s ancestry, including the intermediate persons or family tree. Along somewhat similar lines, in poststructuralist sociology and philosophy, genealogy refers to an investigation into the origins and historical descent of present-day dominant institutions, prevailing central ideals, values, and truths that are taken for granted, or major ways of thinking which have been reified as a natural part of the social fabric. Genealogists want to trace and establish the pedigrees of such social phenomena in order to show that they have no origins beyond the work of people and cultures. This mode of research aims to ‘de-naturalize’ them by showing that they are only the result of power plays by human beings. Genealogists also take umbrage with the traditional view of history as a continuous, linear trajectory on a journey, during which the human race is becoming progressively more enlightened. Instead, they argue for a view that sees history as a series of random events in which rupture, discontinuity, and chance are more the order of things than some teleological tale of linear progress. So they try to unearth the events that occurred at the time of the dissolution of previous knowledges, central beliefs, and even epochal eras, such as the demise of the feudal system with its ‘divine right of Kings’ and the dominance of the Christian Church, and the appearance of subsequent epochs, such as the Enlightenment with its ‘natural rights of Man’ and its rhetoric of Science, Reason, and the Individual. Accidents and discontinuity, not linear evolution, are seen as the major characteristics of such epistemic ruptures. The genealogist, then, tries to understand these, not by reference to some pristine, ahistorical, original truth, nor by situating it within some grand transcendental metanarrative, but instead by carefully documenting the minute, random, micro-events that made the radical disjuncture possible. They stress the uniqueness of the singular event and find accidents, deviations, reversals, and disparity at the origins. Moreover, the genealogist does not deem the subsequent knowledge or epoch to be better than its predecessors, but rather as merely different. The present could have been different

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and so is potentially malleable. The aim is to overcome the present and clear a space for a new and different future. Nietzsche is generally credited with charting the way to go about genealogical investigations. His thinking clearly had a strong influence on late twentieth-century critical social philosophers, including Baudrillard, Derrida, Foucault, and Lyotard. And, at the risk of oversimplification, it can be said that his thinking permanently undermined the philosophical tradition of metaphysics by debunking the belief that we could have some kind of an intimate connection to the transcendental foundations of existence through interpretations of Truth, Justice, Virtue, and Beauty. His corpus of writing altered the face of philosophy. As a boy, Nietzsche had wondered about the origins (ursprung) of Evil and at the time assigned it to the work of God. Later on, after he had abandoned traditional philosophy, he attributed it to worldly prejudicial value judgements. This prompted him to ask a bigger question, one which had not occurred to many traditional philosophers: ‘What is the value of value judgements and what is the value of the process of evaluating?’ The answer, he concluded, was that the value of values lies in its ability to promote, justify, and preserve a particular way of life. This in turn led to his stunning critique of ways of life in general and to question whether or not the values of Western civilization have been regressive for the enhancement of life. Nietzsche was educated as a classical philosopher but later came to harbour a deep suspicion of philosophy’s reverence for truth. While traditional philosophers believed they could undertake some kind of autonomous search for truth, Nietzsche saw this as nothing more than their instinctive and natural will to power. ‘Behind the acceptance of truth as an ideal, behind the will to truth, is a moral evaluation. The moral drive in this philosophy is a drive to maintain a certain type of life.’15 He defined values as those beliefs to which a society or a community grant esteem, honour, and nobility; power was the ability to control something or somebody; and will referred to the intentions behind the individual’s actions. Increasingly sceptical of the inherited values of Western civilization, Nietzsche mounted a trenchant genealogical critique of philosophers’ ‘self-evident’ truths and society’s values. This led him to conclude that these were created by living humans in virtue of their will to power. Values, he concluded, when stripped of their veneer, were simply ‘power towers.’ Nietzsche cites the Stoics as an archtypical example of prejudicial value judgements. The Stoics, an early Greek school of philosophy that survives to this day, claimed that their credo, ‘Live according to the order of Nature!’ resulted from their pure contemplation of Nature. Nietzsche, however, discerned that it was the other way around. Because they wanted order and stability in their monastic lives, the Stoics esteemed order as ‘good’ and turbulence as ‘evil.’ They imposed their will on Nature, so to speak, by dividing Nature into two parts – order and turbulence – and then jettisoned

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turbulence from their depiction of living naturally. Yet, Nature ‘is prodigal beyond measure, indifferent beyond measure, without aims or intentions, without mercy or justice, at once fruitful and barren and uncertain.’16 Nature is both order and chaos. The Stoic’s credo, then, did not mirror Nature. Rather it depicted Nature in such a way as to conform to the Stoics’ wish for a calm and orderly monastic existence. In this, Nietzsche concluded, they were regressive in that they had shut off half of life. It was their will to power that engendered a particular way of life which they wanted to preserve for themselves and for posterity. They invented the contemplative life in order to insulate themselves from the barbarous age in which they lived. The Stoics’ orderly monastic life took on value only in virtue of its difference from the turbulent and chaotic life that they saw for those outside the monastery and which they eschewed. In making this point, Nietzsche also observed that the Stoics had to split Nature into binary pairs. One side – order, God, safety, and so on – was good; while the other side – chaos, Devil, danger, and so on – was evil. But crucially, one side is nothing without its self-same opposite. For example, ‘good’ means nothing by itself but only because of its difference from ‘evil.’ So the Stoics cut themselves in half by privileging the ethereal, rational, Apollonian side of existence and ruling out the dangerous, exhilarating, Dionysian aspect of human nature. Exposing such rhetorical moves which give centre stage to one side of what is really a duality was to become a hallmark of many poststructural social philosophers. Nietzsche’s project was to unearth the historical appearance and subsequent metamorphoses of Western civilization’s central values and moral principles. He saw these as rooted in Platonic and Christian traditions which society later deemed as deserving of reverence and honour. So for Nietzsche, the history of a value is only ‘a continuous sign-chain of ever new interpretations and adaptations whose causes do not have to be related to one another but on the contrary, in some cases succeed and alternate with one another in a purely random fashion. The form is fluid, but the “meaning” is even more so.’17 Thus, genealogy was a method of unearthing ‘what is documented, what can actually be confirmed and has actually existed, in short the entire hieroglyphic record, so hard to decipher, of the moral past of mankind.’18 The critical intent in digging through the history of values and deciphering mankind’s moral past, is to expose how the current set of dominant values are just as strange as those of past eras. The aim is to undermine the self-righteousness of the reigning moral precepts in order to clear the way for the individual to develop his or her own moral code. This would provide a space for the ‘overman,’ the person who has overcome previous definitions of ‘man’ and who then can become his ‘own man.’ For when Nietzsche traced the descent of man to his origins, he found not something made in the image of God, nor something noble and pure, but rather an ape, in the form of Zarathustra’s monkey who accompanied him on his odyssey.

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For Nietzsche, then, the aim of tracing the historical origins and subsequent descent of beliefs, truths, and values went much further than simply identifying difference. It had the potential to enhance life. ‘We need history . . . for the sake of life and action . . . We want to serve history but only to the extent that history serves life.’19 But, history can also detract from the enhancement of life. The historical memory acts to chain the present to the past, making it difficult for the individual to seize and act on the present moment with joy and spontaneity. Paradoxically, then, the enhancement of a culture, people, or person depends just as much on forgetting part of history as it does on remembering it. Forgetting of some kind is essential for one to believe in oneself.20 But how can we both remember and forget at the same time? The answer, for Nietzsche, lies in using our ‘plastic power.’ This refers to the capacity of a civilization to interpret the past actively and creatively. It enables us to remember that part of the past that can help us to develop out of ourselves in our own way, and at the same time, to forget that part which we cannot effectively use. Harnessing this plastic power enables a culture or a person to turn history to the service of life. Nietzsche identified two modes of traditional history – monumental and antiquarian – which he believed could either foster or smother plastic power, and another – genealogical – which can enhance it. Monumental history, the first of these, focuses on those great moments, heroic persons, and marvellous deeds of the past which form a continuous network linking the past to the present. And those individuals with the need and the will to act in a powerful way see themselves as part of this chain. The knowledge of the greatness of the past inspires them: ‘If it happened before, I can make it happen again!’ While monumental history can be life enhancing, it can also be destructive. This was the case, for example, when it was embraced by Benito Mussolini. He wanted Italy to regain the lost glory of the Roman Empire era, but the ultimate result for Italy, just as it had been for the Roman Empire, was tyranny, revolution, war, torture, assassination, and the massive destruction of towns, cities, and the countryside. As well, in the hands of the impotent, monumental history absorbs them to such an extent that they deny that the present can ever equal the greatness of the past. Thus, they want to smother any current manifestation of the creative spirit because of their reverence for the past. For both the power hungry and the impotent, monumental history can be destructive of the human propensity to create oneself effectively and in one’s own way. But, Nietzsche warns, if one tries to remember both the greatness and the catastrophic moments of history, one may become paralyzed. For example, a person might want to emulate Alexander The Great, who built the largest empire in the early history of Western civilization. But one might also remember that he and his army wreaked havoc in Turkey, Persia, and India,

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that they engaged in the massive slaughter of civilians, looting, raping, and pillaging along the way. Moreover, Alexander never made it back home to Greece and died at the age of 30. If one remembers both the great and the catastrophic moments of history, one’s will becomes gridlocked. So, to be truly inspired by the memory of greatness of the past also requires actively forgetting its ignominy. It also requires ignoring the historical circumstance and random, chance events that made that moment of greatness possible. Alexander’s father, as a case in point, had set the stage brilliantly for Alexander’s ‘greatness.’ Such circumstances, the monumental historian forgets, cannot be reproduced today. Individuals banking on monumental history require a lot of forgetting. Antiquarian history, Nietzsche’s second example of traditional history, is no better. It features a greatly exaggerated reverence for roots and pedigree. Preoccupied with their heritage, antiquarians aim only to preserve a way of life rather than building on it so as to enhance the present. Antiquarians, whose souls, Nietzsche says, are possessed by the past, want to preserve their own heritage and pedigree as a way of life by reproducing it in the present and making sure it will continue to exist in the future. He mimics them this way: ‘Here we lived, he says to himself, for here we are living and here we shall live, for we are tough and not to be ruined overnight.’21 Antiquarians, then, must forget much of the present; but this ‘hinders any firm resolve to attempt something new, thus it paralyses the man of action who, as one who acts, will and must offend some piety or another.’22 Rather than building on the good of the past, the antiquarian reveres it to such an extreme as to endow it with reincarnation. On the one hand, antiquarian history serves to keep a check on enthusiasm for the new for its own sake; on the other hand, it rejects everything of the present that does not seem to live up to the glory of the past. Such esteem for the past, however, is simply the manifestation of the antiquarians’ will to power – to preserve for themselves and their offspring a particular way of life upon which they have bestowed esteem. At the end of the day, however, the antiquarian knows only how to preserve life; not how to enhance it.

Critical history Nietzsche believed that genealogical or ‘critical’ history could overcome the pitfalls of both the monumental and antiquarian modes. In the first instance, it differs from traditional history which usually draws on a totalizing, universal, teleological scheme of some kind and then imposes it on specific historical events and personages, which it claims are guided by their regulating principles. So traditionalists assume, crucially, that such grand ‘or meta’ narratives exist outside of the micro-particular historical events. The problem with this view, from a genealogical perspective, is that such allencompassing narratives would have to exist outside of and untouched by

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the handiwork of humans, cultures, and language. Traditional historians treat these principles as untouchable, absolute, universal, permanent, and existing beyond the human hand. Genealogists, in contrast, argue that such a place is not possible. It would have to be extralinguistic and beyond the play of language. The Augustinian biblical story is often cited as a prototype of the traditional approach. It begins with the Creation Story of Adam and Eve’s expulsion by God from Paradise, followed by the Incarnation of Christ, and thus the possibility of redemption for all, and ending with the Last Judgement. A more recent example is the ironic liberal picture, exemplified in the writing of Richard Rorty, that sees humankind as constantly progressing towards, but never reaching, a truly liberal, democratic social order and that reformulating philosophical conceptions in ways that will make them more useful for the self-description of a democratic society is the role of the pragmatist.23 In both instances, the micro-particulars (even those of the horrors of the twentieth century, the bloodiest by far in the history of civilization) get abrogated into the particular grand scheme. Such narratives bend all the differences and disparities of the time into a cumulative meaning. While genealogists find these grand schemes to be highly dubious, they are not so much interested in debunking them as they are in treating them as material things of great consequence. So they try to document the circumstances and conditions surrounding their appearance as well as any subsequent major changes in their essential nature. They hope such historical research will pave the way for deconstructionist critiques of today’s prevailing central values and ways of thinking about society and existence that are taken for granted. Moreover, although genealogists are suspicious of and tend to eschew grand historical schemes, they do not insist that no such things exist ‘out there’ beyond the play of language. It is not a question of whether or not these grand schemes are either true or false or out there or not. Rather, genealogists point out that the descriptions of them are not out there but are, and can only be, linguistically and subjectively produced by humans using language in specific historical circumstances. It is a matter of objecting to the idea that the truths about such schemes are also out there and that they can be discovered. Instead, genealogists see truth discourses as material, real things, linguistically produced and so available for analysis. So the critical historian wants to ask, ‘How and in what circumstances did such truth narratives come into being?’ thus casting doubt on the very possibility of establishing any objective knowledge of them and exposing the relations of power they produce. Nietzsche spent much of his life investigating the nature of values and puzzling over the value of values. He concluded that values are the result of the innate human instinctive will to power that humans draw on to promote, justify, and preserve a particular way of life. He also came to believe that

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there is nothing or no-thing of pristine purity at the origins of values and truths and their subsequent interpretations. They are simply the manifestation of the will to power. Through esteeming alone is there value. All of this is ‘man’s’ doing. So the work of the genealogist is to excavate, diagnose, and exploit the past in order to aid the present. Only thus, Nietzsche believed, can we move beyond good and evil. The ultimate aim of genealogy is the transfiguration of society and the individual by freeing them of the past so they can reconstruct an enhanced life. In sum, there are three major strands in the Nietzschean genealogical approach. First, it involves identifying the radical ruptures in the history of social phenomena like values and truths that have been taken for granted, rather than embedding them in a totalizing, linear progressive grand narrative. Second, it concerns revealing how one side of what is actually a duality – good/evil, white/black, order/chaos – is the result of duplicitous hierarchizing which devalues one side. (In the children’s Snow White story, for example, Snow White obtains her identity as the descriptors of goodness are packaged up – beautiful, young, pure, innocent, and good – and ranked (hierarchized) above the package of descriptors for the Wicked Queen – ugly, old, tainted, contaminated, and evil.) And, third, genealogy reveals how invoking grand historical narratives and hierarchizing dualities are the result of human actions in virtue of the will to power. It could be said, then, that Nietzsche inaugurated poststructural genealogy as it later came to be known. His trenchant critiques of structuralism, traditional history, and conventional philosophy, along with his development of the genealogical method of ‘doing’ history, proved to be the springboard for many critical social philosophers who followed in his footsteps nearly a century later. His general thesis, that the dominant values and truths of a culture or a society are the handiwork of humans, inspired others to think in new and radical ways about relations of power in society. But, above all, genealogy is a critique of the present. Against this background we turn to some of the works of several prominent latter-day genealogists and show how their ideas can be drawn on to derive poststructuralist critiques of current accounting practices and the profession as an institution.

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Literary theory and accounting

What we do when we read, however ‘natural’ it seems, presupposes a whole theoretical discourse, even if unspoken, about language and about meaning, about people themselves and their place in the world . . . the ‘obvious’ and the ‘natural’ are not given but produced in a specific society by the ways that society talks and thinks about itself and its experience. (Belsey, 1980: 3–4)

This chapter explores the way people talk and think about how meaning is given and produced in narratives such as novels and accounting reports. It explores the possibility that understanding the nature of accounting reports and information might be enhanced considerably by treating them as texts or narratives and analysing them from the perspective of different genres of literary theory and criticism.1 The chapter draws out some parallels between developments in literary theory and those in accounting. In doing so it follows the linguistic turn taken in many of the social sciences and humanities in recent decades.2 The linguistic turn treats the phenomenon of interest as a text and analyses it for its textual properties using methods from literary theory, semiotics, and linguistics. The aim is to understand the meaning inherent in, or arising from, the object and to uncover how that meaning came to be constituted. Such research ‘accords a fundamental role to language, and to cognitive facilities.’3 Since both preparers and users of accounting reports must rely on language as much as on numbers to construct and interpret accounting reports, it seems reasonable to investigate them for their narrative qualities.4 A literary turn for accounting, then, means treating accounting reports as texts, depicting accountants as authors, seeing professional auditors as literary critics, and looking at user-readers as both consumers and producers of the textual meaning in the reports. This approach differs sharply from the informational perspective with its economic theory underpinnings. Rather, it depicts accounting reports as narratives which tell an important story about specific firms, a story which frequently has widespread and major material consequences.

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Literary theory and criticism, however, is by no means a coherent, monolithic discipline. As with most academic fields, it consists of several competing genres and in recent decades has witnessed several major upheavals and a succession of dominant paradigms, each one emerging as a response to the increasing awareness of its predecessor’s drawbacks. The major paradigms include expressive realism, the new criticism, structuralism, and deconstruction. This chapter draws out some of their similarities with developments in accounting. While the latter are by no means isomorphic in either time or form with those of literary theory, there are some parallels which offer an opportunity to review some of the fundamental tenets of accounting theory and practice. Developments in oil and gas accounting are used to illustrate these parallels. The results may be extrapolated to other industries, especially capital intensive ones which have large up-front expenditures and uncertain revenue streams and returns which stretch out into an uncertain future. The recent history of new economy start-up firms in the computer, information services, Internet, and scientific genetic and biological fields which have not yet experienced revenues are dramatic examples. Virtually they all have very large start-up and R&D costs and ideas which get referred to euphemistically as intellectual capital. The first literary theory genre to be explored here is expressive realism. It is the most widespread, best known, and generally accepted way of thinking about literature. It takes a ‘good’ novel to be one that has something to say to the reader that is rich, plausible, life enhancing, and which resonates with the readers’ feelings about the way things are or should be.

Expressive realism Expressive realism is the common-sense view of literature. It takes language to be a transparent medium and assumes that a novel acts like a mirror to reflect reality. Language is seen as a way of naming things and, as with a clear window, gives access to the pre-existing world of objects and ideas. Just as the nomenclature slave (the ‘name-caller’) in ancient Rome announced each guest as she or he arrived for the banquet, expressive realism assumes that words provide a set of labels for things that pre-exist their being named. So a good literary work is seen as representing the world in a way that the reader recognizes as commonsensical and true. This view assumes that the world is out there available for all to perceive and represent in words. A successful novel purportedly produces intuitive immediacy that flashes between the narrative and the text. This follows the Greek idea of mimesis whereby a good work of art (poem, sculpture, epic, pottery) mimics (imitates) some aspect of reality and experience. The canons of literature, then, are those novels which are deemed to tell the truth about human nature, reflect the historical period that produced

Literary theory and accounting 25 them, provide deep insights about the world in general, and so, in a special way, are worth reading. These great works capture a literal mirroring of the reality and of our ideals about the world ‘out there’ which, it is assumed, exists independently of either the author’s intentions or consciousness or the novel itself. Expressive realism, then, assumes that these great authors have captured the world more insightfully and imaginatively than have run-of-the-mill writers. They have an extraordinary experience of life, a reverent openmindedness, an honest moral intensity, and near superhuman powers of originality and wisdom. Their rare subjectivity enables them to direct the reader’s attention to those of the myriad of things going by which are most worthy of concern and contemplation. They give form to their own particular experiences and world views in a manner that is more immediate, and more honest than the rest of the pack. Their narratives vividly and forcefully describe the realities of life and its metaphysical forces in a way that delights, instructs, and enables the reader. The literary critic, also a person of rare and visual sensitivity (not unlike, but not equal to the great authors) is able to ‘sort out the sheep from the goats, the genuine works of literature from the pretenders and the look alikes.’5 Like the oenophile, the critic can ‘taste and smell’ greatness, mediocrity or dross in the product. While it takes an exceptional author to produce a great work, it requires the eye of the sensitive critic to spot it. Expressive realism, however, brings with it a major conundrum. If the world exists for all to perceive and capture, why do different narratives (even by gifted authors) of the same pre-existing, objective reality come into being? If the objects and facts are there for all to perceive, why are there so many different versions? Are some true and some false? Moreover, literary critics have argued among themselves over which novels were or were not the great ones. The expressive realist response, ‘Reality can be represented in different ways without any of them being simply wrong’ seemed to many to be unconvincing. At the end of the day, expressive realism seems only to have led to an endless trail of different and competing interpretations – what its critics call a virtual sea of subjectivity – rather than to a clear window on reality and truth. The conventional or traditional perspective of accounting in many ways parallels expressive realism. It takes accounting to be a transparent medium used to present factual data to the world about an enterprise’s financial transactions and economic events. This perspective likens accounting to a telephone – a neutral medium that promotes the exchange of information from the enterprise to the user; and while it is not an actor in the exchange, it is important that accounting measures be representationally faithful.6 Accounting reports putatively carry information in a neutral and objective fashion. And the professional auditor can be seen as accounting’s counterpart to

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the literary critic. The auditor is considered to be qualified, competent, and equipped with an independent mental attitude which means that she or he is free from influence, interest, or relationships that might impair either objectivity or professional judgement. As with the literary critic, the professional auditor is able to sort out genuine accounting reports from flawed ones. This common-sense view of accounting also assumes that the financial reality of an enterprise is ‘out there’ prior to its capture in accounting reports. The proper way of ascertaining this reality is thought to be with objective and verifiable measurement processes. This realist, positivistic view of the accounting world, in the philosophical sense, assumes the reality of a corporation exists independently of accountants, auditors, and accounting reports. Yet accounting runs up against the same conundrum that faced expressive realism. Different equally qualified professional accountants come up with quite different financial statements for the identical transactions and events. In the face of the major drawbacks outlined above, a new literary theory – ‘the new criticism’ – came on the scene in the 1940s and 1950s as a promising new means of overcoming the problem of subjectivity in literature. And the accounting profession’s attempt to put in place a set of fundamental standards, postulates, and principles that all would follow is in many respects similar to the new criticism.

The new criticism The new criticism emerged as a short-lived successor to expressive realism as the dominant genre of literary theory. Its central tenet held that instead of assuming that a novel (text, poem, work of art, etc.) reflects some pre-existing reality or ideal, it could be appreciated for its aesthetic qualities as a genuine work of art. This called for focusing on the form of the text and the artistry with which it was constructed. A text could be read for its aesthetic qualities in accordance with generally accepted principles of good taste. Its true meaning, its essential property, was deemed to be its artistic internal organization, and this was considered to be more important than an accurate representation of some external reality or ideal. Thus, the new criticism concentrated on the relationships within the text, focusing on those elements which gave it its distinctive aesthetic form and character. This approach required establishing a distinct, unique literary language, a set of codes, and some standard criteria of excellence which all competent writers and readers could use. These would make it possible to arrive at a consensus among literary scholars and critics of the merits of a novel, and so put a stop to the endless stream of subjective reinterpretations of the great works. The achieved meaning was not necessarily in some outside reality; nor in the author’s mind or intentions; nor in the critic’s subjective interpretation.

Literary theory and accounting 27 It was an aesthetic accomplishment right there on the printed page. Extracting propositions and ideas from a particular novel – its content – was less important than artistic form. And paraphrasing a text’s meaning was heresy.7 Instead of reading a novel or poem as a reflection of reality or ideals, it could be appreciated as a work of art for its inherent aesthetic qualities and read for its beauty in accordance with the principles of good taste. For the new critics, this meant that a novel should be appreciated for the way it used literary devices such as: harmonized connotations, tones, images, symbols, and other semantic devices including parody, irony, and contradiction to create a coherent, balanced, solid, and artistic edifice. A great work could be spotted by its subtlety, integrity, and mastery of these textual elements which gave it a recognizable distinctive character all of its own. It was a carefully crafted, orderly object whose aesthetic form could be recognized by an objective, hard-headed, stringent, and critical decomposition of the work. Special attention needed to be given, for example, to repetition not only of images and symbols, but also of sound effects and poetic rhythms. A trained reader could, by means of a close reading, reveal whether or not a text was indeed a carefully crafted, orderly object containing observable formal patterns. So new critics treated the work like a Grecian urn – a self-contained, selfreferential, and exquisite work of art – the meaning of which is transhistorical, timeless, and universal. The critic’s job, then, consisted of using these standards and criteria to unfold and explain how the textual elements and details came together as an integrated whole, to search out the way the terms modified each other, and to discern how the linguistic materials coalesced into a thematic, organic, and aesthetic whole. Moreover, the achieved meaning lay not in some external, real or ideal world pre-existing its capture in the work, nor in the author’s intention or consciousness. Rather, it was right there on the printed page. While the new criticism emerged as the successor to expressive realism’s dominant position, its prominence proved to be short-lived. One major defect that became apparent lay in the claim that a text’s true meaning (even if complex and ambiguous) is its aesthetic value, which is permanent, unchanging, and timeless. The problem was that since language changes over time, as does the social-historical circumstances of readers and interpreters, so must the meaning of a particular text change. For most of the great novels, their own historical, cultural setting was too different from today’s to allow for valid interpretation in the present. Once out of its original context, a work’s meaning and relevance depreciates considerably. Another problem concerned the promise that a common language and standardized codes of excellence would reduce and even eliminate subjectivity. Instead, it seemed that subjectivity had merely shifted to competing

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interpretations of the artistry of the text. Sundry explications of the great works (paradoxically, each with its unchanging aesthetically appealing forms and universal truths) continued to appear. And, just as daunting, literary theorists began to realize that language helps to construct meaning rather than merely capturing it. Moreover, literary theory was out of step with the increasing demand within universities in general for scientific, objective, and rational inquiry. In consequence, as we shall see later, a new genre – ‘structuralism’ – developed in the hopes that literary theory might regain a place of respectability within the academy. The accounting profession’s undertaking more than half a century ago to develop and elaborate fundamental accounting standards, postulates, and principles has some parallels with the new criticism initiative. By the 1940s, while there continued to be a strong emphasis on the notion of accounting as an accurate, faithful representation of financial transactions and events, there was also a mounting desire to establish accounting as a deductive process in which fundamental principles could be recognized and from which unchallengeable rules and procedures could be derived. The goal was to reduce the number of alternative ways of producing accounting reports from the same data base. Just as the new criticism sought to develop a methodology of unequivocally determining the aesthetic merit of a work of literature, so, too, accounting academics and practitioners sought to develop a uniform set of postulates, principles, and standards for indubitably determining the proper way of presenting true and fair accounting information. In this, Paton and Littleton led the way. Observing that ‘existing practice is in conflict with itself at a hundred points’, they attempted to develop a consistent framework of accounting standards and to establish a distinctive and unique accounting language (e.g., matching, cost, earnings, realization, costs attach, accomplishment, and objective verifiable evidence) that all professional accountants would understand and rely on. This set of principles would, it was hoped, overcome the prevailing subjectivity and variations in reporting for similar transactions and events.8 Such a common system would result in self-contained, self-referential accounting reports that all could respect and admire as carefully crafted, orderly texts with observable formal patterns that readers would appreciate as solid pieces of professional work. Thus, it was hoped, accounting reports would feature ‘uniformity, precision, feasibility, objectivity, verifiability, freedom from bias, and so on.’9 Accounting at the time was also seen as an aesthetic endeavour. As May proclaimed: ‘Accounting is an art, not a science’10 (italics added). And the committee of the American Institute of Accountants asserted that accounting is ‘the art of recording, classifying and summarizing in a significant manner and in terms of money, transactions and events which are in part at least, of financial character’ (italics added). So accounting reports could be

Literary theory and accounting 29 judged for their artistic unity and the integrity of their elements as well as for following the prescribed postulates. Accounting’s postulates and standards initiative, however, encountered similar problems to those that upset the new criticism. For one thing, even though all accountants agreed to follow them to the best of their ability, quite different renderings of net income and capital were possible from the same (or very similar) data base of events and transactions even though the accountants closely followed the prescribed rules. Since the rules and standards could only be stated in general terms, the professional accountants still had to exercise considerable subjective judgement in applying them. In oil and gas accounting, for example, the selection of successful efforts versus full costing by the Financial Accounting Standards Board in the 1970s (see Appendix A) was a very subjective enterprise since no scientific theory could be used to decide which method was best. (This debate will be expanded on later.) At base, the choice was to decide which cost allocation strategy was best – successful efforts or full costing. Yet, any method of allocation is inherently atheoretical and arbitrary and so, in the final analysis, this choice must be subjective.11 Moreover, even within successful efforts, a great deal of subjectivity prevails in allocating costs to various hydrocarbon properties. As with the new criticism, accounting was faced with the general feeling in society that professions and academic subjects should be objective, rational, and scientific in nature and not left to the idiosyncratic whims of those individuals society relies on for truth and proper guidelines for action. Modern industrialism, advancing technologies, and scientific progress indicated that accounting, as with expressive realism and the new criticism, was in need of a wholesale and radical revamping. Not surprisingly, then, both accounting and literary theory came to adopt their own version of structuralism, the movement that had made huge inroads into most of the social sciences and humanities.

Structuralism Structuralism came into prominence in literary theory in the 1960s and 1970s. Structuralists contend, as outlined in Chapter 2, that the individual elements of any purposive system have no meaning in their own right, but only by virtue of their relationship with the other elements in the system. ‘The images do not have a “substantial” meaning, only a “relational” one.’12 This relationship is defined by the system’s structure, its organizing laws and principles, and its rules that set it in motion. While not visible on the surface of the system, these laws can be discovered (or uncovered) to reveal the system’s inner workings.13 So literary structuralists eschewed the traditional project of elucidating and evaluating the author’s message. Instead, they investigated ‘a text’s relation to particular structures and processes, be they

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linguistic, psychoanalytic, metaphysical, logical, sociological or rhetorical. Languages and structures, rather than authorial self or consciousness, become the major source of explanation.’14 The words on the page are a reflection of the organizing principles and rules which lie below the surface. Structuralists, then, are less interested in what a novel has to say on the surface than they are with the structure that allows it to say what it says. The structuralist, ‘refuses the “obvious” meaning of the story and seeks to isolate “deep” structures within it which are not apparent on the surface . . .’ so rather than taking the story at face value, ‘a structuralist analysis will try to isolate the underlying set of laws by which these signs are combined into meanings.’15 The surface imagery (essential for the expressive realist) and the aesthetic aspect (vital for the new critic) are seen as merely variations of some fixed, permanent, organized ordering of the elements below the novel’s surface, where its true meaning lies waiting to be excavated. Meaning and reference are the effects of deep structures and the organized play of language. The words on the page are a reflection of concealed depths. Northrop Frye was particularly influential in establishing structuralism.16 He argued that, ‘If you examined it [a novel] closely, you could see that it worked by certain objective laws, and criticism could itself become systematic by formulating them. These laws were the various modes, archetypes, myths and genres by which literary works were structured.’17 Earlier, the Russian formalists, such as Roman Jakobson, had pursued a similar line of analysis in looking for and uncovering what they believed to be the deep laws and structures underlying novels. Elsewhere, the Prague structuralists insisted on grasping the elements of a text as a function of its organic whole, thus insisting on its structural unity. Ahearn’s analysis of Jane Austen’s Pride and Prejudice is an exemplar.18 An expressive realist interpretation would see it as showing how the delaying of Elizabeth’s wedding brings about a good, happy marriage as the solution to a woman’s conflicts, desires, disappointments, and survival, and giving laudatory consent to the beauty of Darcy’s estate. New critics would acclaim the book for its aesthetic qualities. Ahearn’s structuralist reading, in contrast, claims to reveal the novel’s deep structure – the emerging capitalist mode of production with its inner laws of forces and relations which determine Elizabeth’s being and which reveals the political unconscious of the text, particularly ‘the new relations among the classes and increasing alienation among individuals, including vicious economic struggle and the unhappiness of women in what Marx and Engels sneeringly called Bourgeois marriage.’19 Structuralism flourished for a while in literary theory in the hopes that it could overcome the pervasive subjectivity of both expressive realism and the new criticism. It was also seen to be a response to the demand in universities in general for more scientific and objective modes of inquiry. Developments in accounting followed suit. Structuralism, in the form of neo-classical economic theory, emerged as an important theoretical base for accounting in the

Literary theory and accounting 31 1960s, gained momentum in the 1970s, and in the next two decades came to dominate research and practice, especially in the USA. That economics is a structuralist endeavour has been often overlooked, but as discussed in Chapter 2, economics is classic structuralism. An economy is the ideal example of the functioning whole, all of whose parts interact and depend on one another.20 By incorporating neo-classical economics into accounting, informational perspective researchers were able to integrate a whole range of contradictory and non-rational accounting practices, principles, and theories into a single model. Information economics, agency theory, transaction cost analysis, and efficient market research in accounting flourished. Moreover, economic theory found its way into generally accepted accounting principles (GAAPs) and practice as, for instance, in accounting for pensions, bonds, leases, and instalment sales. A key aspect of this development was the net present value (opportunity lost cost) model. Asset and liability accounts were seen not so much as representatives of past expenditures, but more as repositories of future streams of cash flows. As one influential study stated: ‘Since wealth is most basically an expression of future net economic benefit to be received by the owner of wealth, it seems most correct theoretically to measure wealth and its change (income) by appropriately discounting future transactions.’21 Regardless of what was reported on the face of financial statements, the true economic meaning could be revealed by uncovering the below-the-surface structure – which followed the rules and logic of the net present value model. Marxist-based accounting research, also referred to as political economy accounting (PEA), is also founded on structuralist presuppositions. PEA claims that the social relations of production structure accounting reporting; that political conditions predicate economic analysis; and that moral injunctions, or social precepts, underpin accounting reports. Moreover, ‘markets are not “free” but structured and we have to discern the structure if we are to explain the distribution of income.’22 Other PEA accounting scholars also argue that accounting is driven by society’s relations of power, that accounting information is used as a means to support the currently powerful institutions, and that accounting is a key political tool for the politics of the powerful.23 Marxist-based accounting scholars contend that by the nineteenth century, labour had become formally subordinated to capital and that the phases and crises of capitalism are systematically related to capitalist control of the technological knowledge of the labour process, as well as usufructing the knowledge of the costs and finances of wage labour production.24 These researchers argue that the organizing laws of the dynamics of the capitalist mode of production found below-thesurface structure accounting practice and reports. While the structuralist movement gave literary theory a boost and held sway for a time, a major drawback surfaced. The problem of subjectivity that

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plagued expressive realism and the new criticism had not, it seemed, gone away, but had simply once again shifted to another ground. In order to deploy structuralism, the literary theorist and the accountant had to preselect subjectively the particular theoretical framework which would illuminate the deep, hidden meaning of the object. As structuralist intepretations of the great works of literature and accounting reports mounted up, it became apparent that each was based on a ‘preemptive or biased reading’ and was ‘neglecting the distinctive themes of a work to find in it the manifestations of a structure or system prescribed by their discipline.’25 Different researchers looked to different structuralist theories (Marxism, Freudian and Lacanian psychology, various branches of philosophy, categories of cultural anthropology, etc.) to analyse a particular work. Each of these interpretations came across as equally forceful, yet yielded quite different meanings for any particular novel. So, on the one hand, structuralist scholars appeared rigidly and mechanically to extract the same themes and patterns from a variety of works, thus making every novel they analysed a carrier of the identical meaning. On the other hand, depending on which framework was deployed, a particular novel could mean almost anything. Structuralist analysis seemed merely to reconfirm the truth of the particular theory drawn upon, rather than unearthing the narrative’s achieved meaning.26 In the face of this conundrum, literary and linguistic theorists began to look for new ways to think about language and meaning. One of these was Roland Barthes (1915–1980) who is seen as a key figure in the emergence of poststructuralism out of the problematic groundwork of expressive realism, the new criticism, and structuralism.

From structuralism to poststructuralism Barthes was a major player in the structuralist movement that dominated French intellectual life in the 1950s and 1960s. Mythologies, published in 1957, was hailed as a seminal work of structuralist analysis.27 Even then, however, several strands of what today would be seen as poststructuralist can be detected in his early works. And as time passed his ideas moved more and more in a poststructuralist direction. As he commented in 1970: ‘It is a fact that over the last few years a certain change has taken place (or is taking place) in our conception of language and, consequently, of the literary work.’28 Language and signs were always his major focus, which he saw as historical and cultural artifacts, not the products of nature. One vital change, he believed, was a shift away from a ‘work’ to a ‘text’ as the phenomenon of interest.29 A work is a single book or piece of writing while a text can be the entire corpus of writing of an author, or a person, a flag, a university, and or even a shopping mall. Previously, as for the new criticism, a work was analysed using a second or meta-language which was assumed to float above the work. Barthes, however, saw the analysis of a

Literary theory and accounting 33 work itself as part of the text and so on the same linguistic level. In Mythologies he extended and radicalized this idea as well as Saussure’s semiotic scheme. Instead of the sign having a fixed but arbitrary relationship with its referent (as in Figure 2.1), he posited that as the final term in a first-order semiological system such as a myth, the sign ‘will become the first term of a greater system which it builds and of which it is only a part. Everything happens as if myth shifted the formal system of the first signification sideways.’30 The sign in the first system becomes the signifier in a second-order system and both are part of a larger semiotic chain as depicted in Figure 3.1. The red wine myth can be used as an illustration.31 Red wine is a signifier, its signified is the mental image of red wine and together they constitute the sign which refers to the good life of the French bourgeoisie – Frenchness – the referent. The sign, signifier and sign constitute a first-order semiological system. The sign, however, is pure form since the substance, the material life of the bourgeoisie, is not physically present in the sign. As such it is ‘empty’, and gets filled up with the Frenchness myth by any reader of the sign who is typical of the French population at large. The myth itself, however, consists of a constellation of signifiers. It is a language–object and exists before the reader pours it into the empty sign. It then becomes the signifier in a second-order semiotic system which in turn gives rise to a new sign. This new sign is also pure form and so a demystifier of myths, such as Barthes, can read it as a sign depicting France as an exploitive, colonizing capitalist nation. This latter language–object is also made up of linguistic material with its own sign and could be the material for yet another reading and another sign. Each of these signs is a link in a chain of meaning which can continue ad infinitum. So the meaning of each is a function of the language–objects that came before it and those that are to come after it.32 Meaning is always on the move.33 This proved to be a highly subversive and radical idea. The conventional views at the time, such as the new criticism and reader-response theory, tended to hold that the meaning of a novel exists independently as a literary (First order system) Signifier | Signified Sign

Signifier | Signified Sign (Second order system: Myth)

Figure 3.1 Sliding signs Source: Adapted from Barthes, 1988: 115

...

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object and so a diligent and careful reader can discern its major message or at least uncover the meaning the author intended to put into it. A hermeneutic reading, for example, correlates the textual elements of a work within a preliminary projecting of the meaning of the whole, reassesses the latter when any of the elements seem to grate on it, and repeats the circle of question and answer until all offensive parts are accommodated by the ever-deepening understanding of what meaning is there.34 While other theorists distanced meaning from the text and located it within the reader’s consciousness, they still held that meaning was an objective fact that could be observed by a critic and so was part of a shared institutional knowledge.35 Either way, meaning was seen to exist independently in the text, or in the author’s intentions, or in the reader’s mind, which the critic could discern. Barthes, in contrast, although he held that language–objects such as myths existed independently of the individual’s mind, argued that meaning is always sliding sideways as soon as it appears because signifieds become signifiers as soon as they are evoked. Any particular meaning is only one layer in an ongoing extended level of significance, out of which no final or even natural term can be stripped. Meaning shifts with the sands of time. In this, Barthes’s position had moved in a poststructuralist direction. These ideas also implied that the conventional notions about the role of the author in meaning production might need revision. For example, it began to look like the reader, not just the author, had a lot more to do with meaning than previously recognized. In an earlier book Barthes had argued, in structuralist fashion, that the then popular language of literature had been colonized by powerful conventions of institutionalized approved vocabularies, norms of taste, ranges of preferred references, stylistic rules, and standards for expression, especially those of the new criticism school.36 All these ‘signs’ of literature, he claimed, stifle the imaginative powers of authors and shackle their creativity and honesty. Literary form held authority over textual meaning and it ran through their pens leaving authors with no degrees of freedom. Writing for them had been reduced to ‘degree zero.’37 Later Barthes extended his thinking about the nature of the author. He observed that the notion of a person who has authority over the meaning of a novel, and all the prestige which goes with authoring it, emerged ‘from the Middle Ages with British empiricism, French nationalism and the personal faith of the Reformation.’38 Previously, the shaman, the village storyteller, the elders, or the cleric narrated the story which was an anonymous text. These official storytellers were never seen as authors nor as the authorities over the narrative’s meaning. This changed over the years until it came to be generally accepted that the author was the authority of a novel’s meaning. But, Barthes argued, it is not the author who speaks, but language and, moreover, once the words are on paper, the author is no longer in control of, nor the source of, the text’s meaning. From that point on meaning gets produced by

Literary theory and accounting 35 the reader. ‘The birth of the reader must be at the cost of the death of the Author.’39 But to say that the author is dead, however, is not to say that a novel is without someone who put the words on to the page. Rather, it means that the author can be separated from its interpretation by any readers who wish to render their own authoritative account of the structure of the work and to reveal the internal relationships between the various strands of textual material. Such ‘scriptors,’ as he called them, are free to rewrite the text on their own terms, to reconstitute its meaning without the author demanding a particular resolution.40 The death of the author does not mean the death of meaning. Rather, it signals that the reader produces meaning instead of simply consuming it. This idea is different in an important respect from Barthes’s earlier notion that readers of a sign import myths into its empty form. He now saw a more proactive role for the reader, to produce a text about the text in question – the ‘tutor text.’ Reading should not be taken as some kind of a hermeneutic or interpretive act, as reception theorists and others would have it, to arrive at some achieved meaning. A text, like a sign, is empty of meaning until the reader fills it up during the act of interpreting it.41 From this perspective the text is little more than a series of empty signs or clues which evoke different responses in each individual reader, who fills in the gaps thus ‘concretizing’ each sign in specific ways.42 By doing so, the reader is in effect rewriting the tutor text. Barthes refers to the result as the scriptible or writerly text, the narrative one would like to write about the tutor text. The latter is a product to be consumed. These include the masses of classic novels which traditional thinking considered to be closed, finished, reliable representational objects which are to be read passively in order to inhale their central meaning. In contrast, the writerly text is a reading that generates one’s own meaning and so subverts any such central meaning. The most important feature of the writerly text is that it does not try to elicit any ultimate structure or great final ensemble, but rather renounces structuring the tutor text into a large mass.43 Instead of seeking out the novel’s central meaning or reading it to extract its model and from this make one grand narrative – the Copy – which then can be reapplied to other narratives for verification by making them cohere to the Copy, thus draining away each novel’s difference, the reader operates on the text to interpret it in a new way, ‘interpretation in the Nietzschean sense of the word.’44 So producers of writerly texts do not approach tutor texts as if they were outside of them and then parasitically find and take away their meaning. Rather, they produce a narrative from inside the tutor text.45 Crucially, the writerly text is created anew by each reader. It is pure subjectivity with no master plan. It is ‘ourselves writing.’46 Barthes illustrates this in S/Z his bizarre and radical writerly text.47 S/Z is a synchronic semiotic analysis of meaning that not only radicalizes

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Saussurian semiotics in yet another direction, but also supplements the diachronic analysis of meaning he offered in Mythologies. Bathes carves up Sassarine, the tutor text, into 561 arbitrarily selected ‘units of reading . . . brief, contiguous fragments’ labelled lexia. Each lexia or zone of reading, consisting of only a few words or sentences is a signifier in its own right, ‘the best possible space in which we can observe meanings; its dimension, empirically determined, estimated, will depend on the density of connotations, variable according to the moments of the text . . . each lexia should have at most three or four meanings.’48 Barthes then interprets each lexia in terms one or more of five codes or voices. These are: proairetics (actions), hermeneutics (questions and answers), semes (powerful connotations), gnomics (cultural codes), and symbolics (the logic of reversibility and multivalence, and of dreams and fantasies).49 The tutor text is seen as an arbitrary collection of blocks of signification passing through a network or field of codes, picking up meaning and immediately dropping it as the words and pages unfold. The writerly text that emerges is pure subjectivity with no master plan. A couple of examples will be helpful at this juncture. Lexia #75 reads, ‘An anatomist would have promptly recognized the symptom of galloping consumption by looking at the skinny legs supporting this strange body. Seme, Monster (Extra-nature). **Hermeneutic. Enigma 4: theme and proposal (because of his body, the old man is the subject of an enigma).’ And lexia #221 reads, ‘without ever having encountered under the cold Parisian sky the rich, sweet creations of ancient Greece. *Cultural code. History of Art: classical statutory (art alone can establish the total body).’ These are the meanings Barthes brings into these lexias when he interprets them. Importantly, he does not interpret them in terms of any overarching theme or metanarrative into which each lexia can be integrated and woven into a whole cloth of meaning. Each stands on its own. Barthes seems to be demonstrating three claims in his interpretation of the semantic material in S/Z.50 First, he wants to show that the meaning of each lexia is not only usually plural, but also that its meaning is located, in large part, outside of and prior to the tutor text coming into being. These meanings are ‘absent’ from the text itself, but present when the reader fills up each lexia with them; they are, so to speak, the ‘absent/present.’51 Regardless of what meaning the author of the tutor text tried to put there, readers are free to import into a lexia whatever meaning their own subjectivity brings to mind. The reader does not take the tutor text to be an outside object, but rather operates inside of it producing his or her own linguistic subjectivity.52 Second, Barthes wants to show how a tutor text is more like a patchwork field of lexias whose multiple meanings flicker on and off than it is some kind of a closed entity containing a manifest discernible meaning. In strong form, the claim is that a novel like Sarrasine is irreducibly plural, an endless play of signs and signifiers. Meaning is scattered across the textual field and so the reader can enter the tutor text at any point and proceed with a writerly text.

Literary theory and accounting 37 The third claim is more subtle. Barthes appears to want to demonstrate, albeit indirectly, that binary oppositions also play a crucial role in the production of meaning. For example, the title S/Z refers to the two main characters in Balzac’s novel – Sarrasine and Zambinella – who are each other’s binary opposites. (Sarrasine is a castrato who cannot love while Zambinella is a lusty male who can. In addition, Zambinella lives only for Sarrasine, but also is murdered because to live is to die.) As well, the very notion of the writerly text ‘written’ by the reader indicates a binary opposition in which neither term – writing or reading – can have meaning in its own right, but only in virtue of their binary opposite number. So individual signifiers are, in a way, like myths and lexias. Their meaning lies just as much in their alterities. Empire of Signs, published the same year as Mythologies, extended Barthes’s thinking in yet another postructuralist direction.53 Based on his visit to Japan in the 1960s, he interprets various Japanese objects, events, and rituals as stressing form over substance and as being void of meaning.54 The Japanese ideogram Mu, which signifies emptiness or nothingness, is central to the notion of empty signs.55 While for Westerners finding meaning and filling up signs with meaning is a cultural fetish, a logocentric cultural impulse, for the Japanese, especially Zen Buddhists, the proper path of life is to empty oneself of meaning.56 This requires shedding ego, self-identity, desires, and rational ideas about the nature of things. When this is achieved, the person experiences satori – a sudden flash of insight – reaches a state of suchness (enlightenment and equanimity), and pens a haiku,57 a spontaneous expression of the feelings that accompanied the satori. The haiku’s meaning, however, evaporates the moment it is written.58 Then, according to followers, the world comes in as it is; not as it might be abstractly or theoretically.59 It is experienced directly, responded to spontaneously, and the individual fills up with reality – not language and concepts. The Empire of Signs consists of 25 short narratives about Japanese phenomena which are suggestive of Mu. In the bowing ceremony, for example, the two participants face each other and in turn bow slightly lower than the other, conforming to implicit and subtle, but precisely coded degrees. The process continues until both heads nearly touch the ground and the ‘correct’ person is slightly lower than the other. With each lowering, both are emptying themselves of the outward signs of importance and status assigned to them by social custom.60 Each takes a turn indicating they are lower than the other in outward status until both heads nearly touch the ground signifying that they are nothing (no-thing) and empty of status. This is in sharp contrast to the Western habit of bowing or otherwise ingratiating oneself before someone who is ‘full of him or herself,’ such as a member of a royal family, a celebrity of some kind, or even a professor. Similarly, in gift giving, a very popular activity in Japan, the package and

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the wrappings are much more important than the present inside, which is often insignificant. The Emperor’s palace is in the centre of Tokyo, but the Emperor is empty of power; unlike city centres in the West, where the powerful are enclosed in high-rise towers. Rooms in a Japanese house have no central purpose such as a living room, family room or bedroom; instead, the room’s purpose changes from each of these functions at different times of the day. A Japanese meal has no ‘main’ course. And Zen Buddhism is a religion without a God or main deity. For Barthes, Japan was a joyous revelation, and a vast improvement over Western civilization; an empire of empty signs.61 These insights into the way linguistic signs are involved in the production of meaning by authors, readers, and critics can be appropriated to develop a few non-traditional ways of looking at accounting, accounting reports, and accountants. For example, the conventional view holds that the professional accountant’s role is to report factually about the entity’s economic and financial transactions and economic events in a neutral, objective fashion, as reflected in the decision usefulness conceptual framework that requires accounting information to be not only of relevance to users, but also be reliable, verifiable, and representationally faithful.62 The Barthean idea that authors are severely constrained by powerful institutionalized approved rules, standards for expression, vocabularies, etc. which shackle their honesty and creativity seems somewhat descriptive of the accountant’s situation. In the case of the accountant as author, he or she is shackled by the approved and conventional rules, standards, and principles, so the accountant is more like an artisan than an original author. That is to say, the accountant cobbles together the various parts of the financial statements according to what are today fairly specific GAAPs which dictate the rules and standards for handling each of the reported accounts. The very idea of promulgating these GAAPs was to reduce the accountant’s degrees of freedom and bring uniformity and consistency to the production of accounting reports, as discussed above. While the accountant is by no means reduced to ‘degree zero’ in this (there is still some judgemental subjectivity in the process) her or his creativity is detoured from a direct, fresh, and creative rendering of the statements.63 The accountant’s role today is neither artist nor scientist, but that of a bricoleur.64 Some of Barthe’s other ideas can be drawn on to formulate a radical view of the nature of important accounts in financial statements, particularly the net income and capital accounts. Net income, for example, is a signifier, its signified is a specific bundle of money, and together they constitute the sign which refers to the good life created by free enterprise and global capitalism as instantiated by private sector global corporation – the referent. As the final term in a first-order semiological system, Net income is the first term of a larger semiotic chain as in Figure 3.1 above. The sign, however, is pure form as the substance, the material life of individuals, is not physically

Literary theory and accounting 39 present in the sign and so gets filled up with the free market myth by readers such as shareholders and investment analysts. The myth, as in the red wine example, consists of a constellation of signifiers, a language–object that exists prior to its being poured into the empty sign. It becomes the first term in a second-order semiotic system which a demystifier of myths can read as a sign depicting globalized capitalism as a highly effective exploitive, neo-colonizing force existing outside of the jurisdiction of nation states, that systematically exploits cheap labour in third world countries, places them in perpetual debt, to say nothing of accounting’s role in the egregious degradation and destruction of the environment. This, too, as a language–object is pure form and so could be the material for yet another reading and another sign, and so part of a linear chain of meaning that could continue ad infinitum. Meaning, including accounting ones, never stands still. The notions of writerly texts and lexias can also serve as the material for a non-conventional way of thinking about accounting statements. From this perspective an accounting report (such as an income statement or a balance sheet) would be seen as an arbitrary collection of blocks of signification – lexias – passing through a field of accounts, each picking up meaning and dropping it as the accounts unfold on the statement. And the statement itself is deemed to have no overarching theme into which each block of signification can be integrated or woven as a whole piece of cloth.65 Regardless of what meaning the accountant tried to put into the statement, or the meaning the designers of the GAAPs meant them to have which the accountant draws on, any user/reader is free to import into each lexia whatever meaning their own subjectivity brings to mind. Each account or cluster of accounts (such as ‘property, plant, and equipment (PPE),’ ‘intangible assets,’ or ‘long-term debt (LTD)’ stands on its own as a separate piece of signification. Moreover, the meaning of each accounting lexia is plural. In the case of the PPE, intangible assets, and LTD accounts, they can be interpreted, on the one hand, as the depreciated historical cost of the properties and, on the other hand, as the container of future net cash flows. These accounts can be read in light of their gnomic (cultural) histories – accounting and economic theories; and both accounts have semes (powerful connotations) – physical material objects for the PPE and money owing for the LTD. It is possible to interpret all the accounts in the statement in a similar way and thus produce a writerly text. Importantly, this way of interpreting accounting statements differs from that of the efficient markets school of thought. The latter holds that investors can use financial statement data to find mis-priced securities by noting a market inefficiency in pricing a security when that price departs from its intrinsic value, taken to be the true or real value of the uncertain cash flows to owners of the securities.66 Thus, the efficient markets theory holds to the idea that an enterprise has a real or true value existing somewhere outside of the

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accounting statements and, moreover, that it can be ascertained at least in part by interpreting the financial statements. In contrast, the lexia approach holds out for no such overarching meaning. It casts a large shadow of doubt on such theories. But perhaps the most tantalizing, if the most illusive, of Barthe’s ideas for rethinking accounting is the notion of empty signs. While the purpose and usefulness of financial accounting information over the years has been, and remains, the topic of controversy and debate, the conventional position held by the accounting profession in most countries is that accountants should, ‘provide information that is useful to present and potential investors, creditors and other users in making rational investment, credit and similar decisions.’67 Moreover, financial reporting should ‘provide information to help present and potential investors and creditors and other users in assessing the amounts, timing, and uncertainty of prospective cash receipts from dividends or interest and the proceeds from the sale, redemption or maturity of securities or loans.’68 Clearly, securities markets and other financial instruments are given centre stage. Yet, if accounting signs are empty of meaning, then the production and use of them is much like a religious ritual without a God. Accounting information is the sound of one hand clapping – empty of sound, that is to say, of meaning. If, indeed, this is the case, questions like ‘Do accounting reports reflect some truth about the enterprise and its related financial securities?’ are irrelevant, perhaps even no longer interesting. The more helpful question, put in a Rortean way, is ‘Can we reformulate philosophical conceptions of accounting information in ways that will make them more useful for the self description of democratic organizations and a democratic society in general?’69 One such pragmatic possibility is to invoke the drama metaphor.70 The metaphor ‘can be used for unmasking, which can be seen not only as a moral activity but also as a sense making operation that helps us to understand the world in which we live and which we create.’71 One such dramaturgy would be to depict the accountant as the major scriptor and the annual financial statements as the major script for the staging of a drama played out at the annual shareholders’ meeting.72 The curtain opens and the drama begins with the CEO at centre stage narrating the firm’s many financial accomplishments, hurdles, and prospects (usually glowing) for the future. The CFO then takes centre stage and the plot unfolds with the narrative of the income statement and its many sub-plots (revenue, gross margins, G&A expenses, EBIT, and even a shadowy, enigmatic character in the form of ‘deferred income taxes’) until the main story line – the ‘bottom line’ – of the net income is revealed and the plot is brought into a meaningful whole. This is the highlight of the drama, the dramatic moment for the audience of shareholders. The point or moral of the narrative is announced – the outlook for an increase in owners’ wealth as reflected in earnings per share and stock market prices – is good.

Literary theory and accounting 41 Other acts follow in the accounting script. First, there is the sub-plot of the balance sheet, which, along with the statement of cash flows, plays a supporting actor role. Both statements are meant to reinforce the main plot. And, throughout the performance, various asides are made to the audience in the form of sundry Notes to the Financial Statements most of which are highly cryptic, even for the trained professional, and even though they frequently problematize the main plot, more often than not they remain enigmatic or get ignored. It is beyond the scope here to fill out such a dramaturgy more fully except to say that the upshot could be to make it clear that accounting reports are fictive and can be used as a way to close down on meaning in an undemocratic way that puts owners and top executives in a favourable light. Derrida, whose ideas are drawn on next, might not disagree with this dramaturgic metaphor, but he is more interested in unravelling, in deconstructive fashion, the web of meaning in several highly influential narratives that have come on the stage over the ages in Western civilization. His deconstructive method of textual analysis can also be appropriated as a way for one to act as a literary critic of accounting and accounting statements.

Deconstruction Deconstruction is essentially a poststructuralist way of understanding how the central meaning of a particular text came to be constructed. ‘Text’ refers to any essay, book, poem, narrative, etc. that relies on language and words to convey meaning. A deconstructive reading dismantles, takes apart, or ‘unpacks’ the textual material to reveal, first, how any such central meaning was constructed, and, second, to show how that meaning cannot be sustained. This contrasts with the traditional way of reading and analysing a text in order to grasp the central meaning therein. A deconstructive reading presupposes that language itself is unstable and so meaning cannot be nailed down. In offering deconstruction as a way of understanding how language is used to construct meaning, Derrida shows his indebtedness to Nietzsche in that a deconstructive reading reveals the genealogy of the text. Whereas Nietzsche produced genealogies of the central values or morals of society, Derrida produced genealogies of particular texts, especially those deemed to be particularly important in Western civilization. Derrida’s huge intellectual achievement included challenging the very foundation of traditional philosophical thought by problemalizing the relationship between thought and language by playful interrogation of the borders between literary writing and philosophy. Deconstruction emerged, especially in the USA, in the late 1970s and early 1980s as an avant-garde, radical genre of literary theory and criticism. Developed by Derrida as a poststructuralist strategy for reading a text of any kind, a deconstructive analysis proceeds by unpackaging (or un-constructing) the text in order to reveal how it came to construct some

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central, coherent meaning. Thus, it exposes the struggle over the centrality of meaning embedded therein.73 Importantly, however, it does not attempt to destroy or destruct the text. Rather, it opens it up in order to reveal its plenitude of meaning. A deconstructive reading also hopes to reveal the politics of the text. Deconstruction is, ‘ultimately a political practice, an attempt to dismantle the logic by which a particular system of thought, and behind that a whole system of political structures and social institutions, maintains its force.’74 While expressive realism, the new criticism, and structuralism attempted to interpret a text in such a way as to construct some sovereign meaning, package it up neatly, and present it to the reader as a neat bundle with a central, coherent, and final substantial essence, a deconstructionist reading, in contrast, reverses this process to show how that meaning came to be constructed. The deconstructor scrutinizes and interrogates the text to ferret out the linguistic moves and literary ploys used to arrive at that meaning. The goal is neither the ‘destruction nor the demolition but the de-semination, the de-construction’ of the text.75 A deconstructive reading also attempts to expose the implicit or explicit metanarratives or logocentric impulses which underpin the achieved meaning. Logocentrism refers to the felt need or drive to find and bring some permanent, final meaning about how things are, or should be, into the present and to ground that truth in some ultimate origin.76 A deconstructionist reading exposes these metanarratives and logocentric moves in order to show how they were defined and legitimated by what they marginalized or excluded. It attempts to disrupt, disturb, and sabotage that hierarchy. Deconstruction proceeds by uncovering the way transcendental truths get (con)structed by arranging binary philosophical oppositions so that one set is deemed superior and the other demeaned. This is often accomplished by means of the cunning art of supplementation – a key concept in deconstruction. A supplement can mean an addition to something that is already complete – for instance, a supplementary reading list for a course. Or it can refer to a ‘top up’ to make up for a deficiency, as in a dietary supplement for a house pet. It can also refer to a substitute for something else, as when ‘cultural’ man replaced ‘natural’ man. And a supplement can mean that too much has been added, resulting in an overflow. Thus, ‘supplement’ is a slippery term and can be cunningly or unwittingly used to privilege one side of a text’s metaphysical hierarchy. Once such a move is uncovered, the deconstruction proceeds to reverse the hierarchy temporarily. This sets the stage for showing how neither side can claim any permanent kind of privilege. Deconstruction involves producing a historical narrative to show how a particular text got constructed in the way that it did. This history is ‘genealogical’ in the sense of beginning with the achieved, central meaning and going back in time to uncover the rhetorical steps taken to arrive at it. Deconstruction, however, is often misread as a form of relativism. Whereas

Literary theory and accounting 43 relativism holds that there are different, self-contained traditions, ways of life, and world views, each of which should be judged in accordance with its own standards,77 deconstruction takes a text on its own terms and writes about its historical construction.78 The first step consists of carefully sifting through the textual material to reveal something already there. In particular, the deconstructor looks for the way that some crucial words (signifiers) got hierarchized by ceding them a place of privilege over their binary opposites such as: good/evil, white/black, man/woman, heaven/hell, young/old, culture/nature, and which comprise its metaphysical hierarchy.79 So good, light, God, white, mind (soul), and culture get piled up on one side while evil, dark, Satan, black, body, and nature get piled up on the other. Then the two sides, instead of being treated simply as binary opposites, get ‘hierarchized’ in the sense that one side gets privileged as being better, more originary, more pure, and so on, and so reigns over the other side. Derrida calls this doing violence to the system of philosophical oppositions. In a traditional philosophical opposition we have not a peaceful coexistence of terms, but a violent hierarchy. One of the two terms controls the other (axiologically, logically, etc.) occupies the commanding positions.80 Terms which are equal as a dualism (in the Nietzschean sense as discussed in Chapter 2) get rearranged so that some are given privileged status over their binary, self-same opposites. The metaphysical hierarchy, however, can only be sustained by, first, casting the key signifiers of the argument in terms of binary oppositions and, then, proceeding to privilege the first term as more originary, more grounded, more fundamental, more permanent, or more central than its binary opposite. The first terms are always on the side of the good or the truth, while the secondary term gets subordinated. It must be negative for the first term to be positive. So it is deemed to be deficient, lacking, derivative or corrupt, and seen to be the enemy of logos.81 So the second step involves temporarily reversing the text’s metaphysical hierarchy by privileging the opposite side. The third and final step reveals how the struggle for dominance is undecidable. J. Hillis Miller’s analysis of Milton’s Paradise Lost illustrates this cunning move. He shows how Milton incorporates Eve within the biblical metanarrative of creation where she is depicted as inferior to Adam and he in turn as inferior to God. Miller then points to an earlier description of Eve in the poem, one which depicts her in a luxuriant, wanton, untamable state of Nature. This reverses the metaphysical hierarchy by showing that this latter Eve existed happily and free in nature prior to Creation. This Eve is more natural and originary than, and thus superior to, Milton’s biblical, subjugated Eve. Thus, the harmony of the Creation metanarrative is disrupted and the doubleness of Eve’s meaning (already there in the poem) is revealed. In the third and final step, Miller shows how the poem is undecidable as to any final, permanent meaning. The struggle between natural Eve and the Eve of

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the Creation story is embedded in the poem and so is permanently undecidable. The two Eves are forever symmetrical and irreconcilable. Miller also reveals the politics of the poem, the man-made construction of women as inferior and subjugated to men. His deconstructive reading shows that neither can be inferior or superior.82 The biblical story of the Garden of Eden is also a striking example of the use of cunning supplementary moves. God created the Earth, the story goes, and he made ‘man’ in his image. And it was good. But on second thought, believing that man was incomplete, God took one of Adam’s ribs and made a woman (Eve) out of it. Eve, then, is constructed as a supplement to and derivative of man, and so also a supplement to the Garden of Eden story. She, however, the metanarrative continues, urged Adam to disobey God, listen to Satan, and to bite the apple. So he did; and paradise was lost. God banished them both and humankind was doomed to an eternity of struggling for a living instead of living in paradise. Ever since, humans have had to survive in a harsh, jungle-like world. Eve as supplement, then, enables the story to construct its metaphysical hierarchy, placing God above man and man above woman. God, good, man, and paradise are piled up over Satan, evil, woman, and jungle. Yet, if man was complete, why did he need a supplement? Was Eve given to Adam to make him complete? Was Eve made by God to make up for some deficiency in Adam? Or was Eve to be a substitute for Adam? But we can easily reverse the metaphysical hierarchy to show how woman merits top place. Could it be that man is derivative of woman? After all, man comes out of woman and so she is prior and more originary than man. Yet at the same time it is man who fertilizes the seed from which woman is born. The issue seems to be permanently undecidable. It all depends on how one uses the supplement. Deconstruction has been advocated as a way to analyse accounting reports, theory, and texts.83 Arrington and Francis, for example, deconstructed Jensen’s seminal text to show how it privileged positive agency theory research over normative principle-agent research only by evoking a normative, moralistic structure. They also revealed the politics of Jensen’s text which claims that the positive research tradition originated in the 1970s at the University of Rochester when, in fact, the University of Chicago is generally given credit for its appearance in the 1960s. Similarly, Tinker and Neimark deconstructed Oliver Williamson’s influential text which privileged capitalistic production organizations (hierarchies) over governance by bilateral transactions in the market place (markets) by invoking the survival of the fittest tautology.84 ‘It is only when the concepts of rhetoric, metaphor and deconstruction are introduced [to analyse three different accounting firms’ written opinions on a real-life revenue recognition issue for a funeral home company] that a deeper insight might be gained into the complex tapestry of accounting.’85

Literary theory and accounting 45 Product costing can be used as a simple accounting example. A small firm produces and markets body oil in half-litre bottles (its only product) and produces 10,000 bottles in the most recent accounting period. The cost data are as follows: Variable production costs Fixed production costs Variable selling and administration costs Fixed selling and administration costs

£105,000 20,000 25,000 50,000 ––––––––––– £200,000 –––––––––––

Following conventional full cost accounting practice, the cost per bottle would be £20;86 while following tradition marginal (variable) costing practice the cost would be £13 per bottle.87 The full costing narrative gives centre stage to the signifiers historical, past, fixed, and full; while the marginal costing narrative gives centre stage to the signifiers future, next, marginal, and partial. The former is claiming that the present truth, the true cost, lies in the past; while the latter claims it lies in the future. Both hierarchies use key dualistic signifiers (past/future, full/partial, fixed/variable) in their favour. A deconstructive reading, however, might deny that the truth can be brought into the present and attribute any desire for a true cost to a logocentric impulse for some kind of final word. Yet, for such a truth to exist it would somehow have to be outside of and prior to its capture in either accounting or economistic language. The bottled oil, then, is the turf for a struggle over meaning between competing discourses. The politics of the struggle could be that marketing personnel would prefer the £13 cost (given that the market will only bear a £14 price) arguing that the fixed costs are sunk and so irrelevant; while the accounting people might prefer the £20 cost arguing that all costs must be recovered for the firm to maintain its capital. Either way, the true cost is undecidable. Another, but much more complex illustration, is oil and gas accounting. The principles and practices of oil and gas accounting offer a richer territory to illustrate some of the parallels of accounting with developments in literary theory. This in no way is to imply that such parallels are either isomorphic in form or occurred in the same time period. Rather, it is simply to say that making such comparisons might help bring the issues and conundrums surrounding oil and gas accounting into bold relief. Moreover, these are symptomatic of accounting in general. Oil and gas exploration and production firms are capital intensive. They incur large sums of money in the search for oil and gas reserves before the results – successful or unsuccessful – are known. These expenditures (which in general tend to be much greater than the ‘lifting’ costs on production) are often referred to as ‘intangibles’ and include the costs of: acquiring property;

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government permits and the like; geological and geophysical work; drilling; casing pipe; road construction; interest charges; site clean up; and legal fees. The revenue stream from successful exploration projects ensues over many years and many wells continue producing oil and gas decades after the costs to find them have been expended. These enterprises, then, face uncertain pay-offs from these expenditures, with the revenue streams extending well into the future. Accounting for these firms poses formidable problems.88 Four main accounting models have been used by the industry to deal with these issues: (1) immediate write-off of all costs; (2) full cost; (3) successful efforts; and (4) reserve recognition, also referred to as discovery value accounting. Under immediate write-off, all costs of exploring for and discovering oil and gas are expensed as incurred, while revenue is recognized when reserves are produced. (This violates the matching principle and is seldom used today.) Under the full cost method all costs, including intangible expenditures and dry holes, are capitalized in one account and written off as depletion expense (on a unit of production bias) while revenue is recognized as reserves are produced. The major objection to full costing is that it results in long-term assets on the balance sheet – dry holes and abandoned properties – that have no value. Under the successful efforts method, intangible costs are allocated to specific cost centres such as individual wells, oil fields, and geographic territories. This method calls for expensing all costs during the exploration and development stages unless they can be associated with capital assets (e.g., a specific well, a specific property, a property right, a structure, or some tangible equipment). Costs are capitalized, however, if they can be reasonably associated with specific actual or potential reserves of oil and gas and written off later on a unit of production basis. Revenue is recognized when reserves are produced. While this method results in a better measurement of assets on the balance sheet than does full costing, it violates the matching postulate since dry holes are necessary to find productive wells. Reserve recognition accounting (RRA) deviates radically from these three methods. Following economic theory, RRA deems net income to be the increase in value during the accounting period of new reserves discovered, along with the changes in the present period in the value of previously discovered reserves, both measured in terms of an estimate of their future net present value. Anchored in a current value concept, RRA avoids the problem of cost allocation and, while it accords with economic theory, several highly uncertain factors (e.g., when the reserves will be produced and in what quantities, what the price will be then, and what the cost of capital will be during that period) make the measurement problem in RRA formidable and its results tenuous. Since each of these methods has major drawbacks, no one emerges as clearly the best. It is not surprising that accounting principles setting bodies, especially in the USA, became embroiled in lengthy, contentious, and

Literary theory and accounting 47 politically infused debates during the 1970s in the wake of the OPEC oil crisis, in attempting to develop a uniform standard for the industry (see Appendix A). Against this background, we will look at oil and gas accounting from each of the four perspectives outlined above.

Four perspectives An expressive realism perspective of oil and gas accounting would assume accounting to be a neutral, translucent medium that can be used to reflect in a transparent manner a real world of objects, events, and transactions that exist ‘out there’ prior to their capture in the accounts and their representation in accounting statements. It would also assume that some accountants, especially those with professional designations, would give form to the accounts in a manner that mirrors reality and so instructs and enables the user–reader of the financial statements. Thus, it was taken for granted, at least in the 1950s and 1960s, that either successful efforts and full costing accounting reports were a transparent medium that mirrored the true cost of pre-existing reserves of oil and gas in the ground owned by the company, as reflected in the balance sheet in an account usually labelled Oil and Gas Property. It also was taken for granted that the Net Income on the income statement reflected the firm’s real profit for the period. And it was assumed from this common-sense view that these referents existed prior to their capture in accounting language on the financial statements. At the time, accounting standards setting boards, at least in the USA and Canada, had not issued an opinion statement on the matter. So both methods were acceptable and certified to by public accounting firms as ‘presents fairly’ or presents ‘a true and fair view.’ The fly in the ointment, however, was that while both approaches seemed commonsensical, the resulting accounting reports usually differed significantly. Full costing, for the identical set of events, transactions, and circumstances, usually reported higher net income and a larger asset account on the balance sheet, while successful efforts tended to present a lower and significantly more volatile pattern for reported net income than did full costing. As with the expressive realism, oil and gas accounting practice engendered a major conundrum. If the events, transactions, and circumstances existed ‘out there’ for all qualified accountants to perceive and capture in the reports, why did such different accounting ‘narratives’ of the same pre-existing, objective reality come into being? If verifiable objects and facts about them are there for all to detect, why are the two versions so different? Is one true and the other false? And the response that these objects and facts can be represented either way without either being simply wrong seemed unsatisfactory, especially to the US Congress, as outlined in Appendix A. In this, the Congress seemed to believe, albeit implicitly, that the financial

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statements were a ‘linguistic picture’ of facts in virtue of the way its linguistic elements are arranged. So an accounting report is deemed to be true because it is thought to represent the facts. For example, what makes the sentence ‘The boat is in the water’ true is the fact that the boat actually is in the water. So what makes the accounting statement ‘The cash account at the year end is £X’ true is the fact that the company owns and has access to £X of cash. So the truth of a statement is deemed to be an accurate replication of a fact by a set of words (and numbers) in a certain configuration. This is Ludwig Wittgenstein’s ‘picture-theory’ of meaning that holds a sentence has meaning and is true because it is a linguistic picture of a fact in virtue of the arrangement of its textual elements. On this view, accounting reports that represent facts are deemed to be ‘true or approximately true.’ They are assumed to have relationships with something outside of accounting language and accounts, something extralinguistic. So Congress, in general terms, was concerned with the problems and issues of linking accounting signs to some real realm which is taken to be autonomous from the reports which are manufactured about that realm. This, of course, is the basis of Cartesian epistemology, which claims that how things are in some uninterpreted ‘brute’ reality is where the truth exists. The problem remained, however, that both successful efforts and full costing results differed markedly. The new criticism as an approach could be seen as a way out of this dilemma. Recall that it holds that a narrative should be read for its aesthetic qualities in accordance with accepted principles of good taste. The problem with expressive realism is that there seems to be no way of telling whether or not some relation of correspondence holds between a fact and a sentence. We cannot somehow get outside language to compare what the sentence says with how things really are independently of what we think, say, or write, all of which must use language. The new criticism, in contrast, makes a more modest claim about truth. It holds that a sentence is true if it does not grate on the other sentences which comprise an accepted set or subset of utterances. A false sentence is one which does not fit or fails to integrate readily with the set. While expressive realism explains truth in terms of the relations that words, phrases, and sentences supposedly bear to the world or parts of the world, the new critcism explains truth in terms of the relations these bear to all the other sentences. Expressive realism is extralinguistic, while the new criticism is intralinguistic. Taking a new criticism position, oil and gas accounting statements can be held to be true if the various accounts fit or hang together with the other accounts in the statement. So as long as revenue is recognized in accordance with good practice, and the costs of obtaining that revenue are properly matched with it, and the statements are prepared in accordance with other generally accepted accounting principles, then it is fair for

Literary theory and accounting 49 auditors to comment that the statements present a ‘true and fair’ view or ‘present fairly’ the situation. As an aside, the issue of the so-called expectations gap also can be seen in this light. Given that the general public at large believe accounting reports should accurately reflect some extralinguist reality existing independently of the financial statements, the accounting profession can claim that the accounts were perfectly consistent with generally expected accounting principles as prescribed by the profession. Yet the major concern with the expressive realism argument did not disappear. Both successful efforts and full costing could pass the hanging together test and still report quite different net income and asset accounts. For oil and gas accounting, another possible solution would be to adopt a structuralist position. The FASB’s selection of successful efforts as the official, uniform method, and the Security and Exchange Commission’s (SEC) tacit endorsement of it, alleviated some of Congress’ concerns regarding the lack of uniformity of reporting practices. It did not, however, overcome the prevailing disquiet regarding either full cost or successful efforts accounting for oil and gas enterprises.89 This opened up some space for SEC chairman Harold Williams, who was ‘a strong advocate of current economic values rather than historical costs in financial reporting.’90 to press for reserve recognition accounting. In consequence, the SEC issued ASR #5878 (26 October 1978) which confirmed SFAS-19 as a commission regulation but, importantly, also required RRA as supplementary, unaudited information. Four years later, FASB issued SFAS-69 which required as supplementary information both the quantities of proven, and probable, oil and gas reserves as a standardized measure of the present value of their future cash flows. The economicsbased structuralist model had become an integral part of oil and gas enterprises’ financial reports. The discovery value accounting initiative, however, came undone when the price of oil fell from around $40 a barrel in 1980 to about $17 in 1988. (Experts earlier had predicted a price of at least $50 by the mid-1980s and such estimates were used in RRA statements.)91 The wide swings in discovery value based reported income of oil and gas companies, due in large part to price movements, cast a large shadow of doubt on the net present value model. Consequently, in the 1980s both the SEC and the FASB dropped these reporting requirements. And while successful efforts was deemed the preferred method, a form of full cost (country-by-country cost centres) was also acceptable.92 Moreover, the problem of subjectivity that plagued oil and gas accounting in adopting the approaches of both expressive realism and the new criticism had not gone away. Now accountants had to make subjective judgements about a highly uncertain future such as the future price of oil and gas when the reserves would be produced, and what interest rates would be in play.

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The economist’s structuralist model, which had seemed so promising, came along with a different set of serious subjectivity concerns which seemed insurmountable. Some of Barthes’s notions about signs put this problem in a new light. For Barthes the subjectivity issue was not a problem since subjectivity and language are all we have in producing meaning. The accountant as author of financial statements for an oil and gas company is duty bound to follow the most current GAAPs in rendering the statements, and so has limited, if not zero, degrees of freedom. At first glance, then, it may seem as if subjectivity has been eliminated or severely restricted. This, however, is not the case. The GAAPs themselves are containers of subjectivity in that they carry with them the collective subjectivity of the FASB committee members who put them in place and who in doing so incorporated, to some extent, the subjectivity of other parties who influenced them such as SEC officials, lobbyists, politicians, and even academics who entered into the debate. While following GAAPs may appear to be objective and to rid the process of subjectivity, the GAAPs carry with them a chain of historic subjectivity of the various players in the accounting standard setting process. From a Barthean standpoint, there is no extralinguistic subject position from which to author accounting statements. Given that all is subjectivity and language, it seems reasonable to adopt the writerly approach and subjectively carve up the financial statement in question, the tutor text, into lexias and interpret each in terms of the five codes. A glance at any actual annual report of an oil and gas company reveals that it consists of many lexias, each of which can be interpreted but which do not cohere into any major overarching theme or message. And it seems that the net income sign for such companies is indeed empty of meaning. Analysts seem to recognize this and to pretty much ignore net income in evaluating these firms and treating cash flows as more important. Deconstruction can also be employed as a radical way to read the accounting reports of oil and gas companies. The first move is to identify the metaphysical hierarchy in the statements. This is identified as a struggle between the accountant’s historical cost presupposition and the economist’s future cash flow one. The metanarrative underpinning both successful efforts and full cost is the traditional historical cost accounting story. Its basic principle holds that historical (original) cost is the primary basis for the measurement of productive assets and for incurred liabilities at the time they were acquired. Historical cost is deemed to be objective when there has been an arm’s length transaction between an entity and an outside party and is verifiable when there is documentation (invoices, vouchers, receipts, bank cheques, contracts, etc.) of that transaction. In contrast, RRA, underpinned by a neo-classical economics based metanarrative, holds that what is crucial in terms of information is the marginal

Literary theory and accounting 51 (next, future, incremental) cost which should be the basis for the measurement of assets and liabilities. While it is recognized that subjective judgements must be made to arrive at and predict these future costs, they are nevertheless seen to be more relevant than past costs which are ‘history’ and so ‘sunk.’ RRA attempts to bring future events and transactions into the present in a financial report. RRA, however, was deemed to be merely supplementary information and inappropriate for income measurement and so was relegated to a lower position in the hierarchy of accounting methods. The next deconstructive move is temporarily to privilege RRA. At the time, RRA had received a great deal of support as being more relevant for users than historical cost. For example, SFAS (No. 1, 1978) declared that economic decisions of users of accounting reports are best facilitated by information regarding future cash flow prospects. And Harold Williams, chair of the SEC in 1977, reported that before coming to the commission as a member of the Board of Phillips Petroleum, he ‘had some sense of the inadequacy of the various methods [successful efforts and full cost] of accounting . . . When it came to oil and gas accounting neither of the [historical cost] methods that were in use gave you much information of any economic value . . .’ and while cost is ‘certainly a lot safer in some respects it is useless, or next to useless.’93 Along similar lines, Richard Adkerson, a partner in Arthur Andersen & Co. and the SEC Professional Accounting Fellow, testified: ‘My conclusion was that you could not make significant improvements in the basic financial statements without abandoning the historical cost concept.’94 Clarence Sampson, the SEC’s chief accountant at the time, stated: ‘My own views run towards giving people value information. The people who are trying to make decisions about investments ought to know what the assets are worth.’95 And Arthur Andersen & Co.’s official position at the time stated: ‘There is substantial support in sound business logic for the application of discovery value accounting in the oil and gas industry . . .’ which would, vis-à-vis historical cost accounting, ‘(1) provide an improved measure of the capital position of the entity, (2) accord with the economic facts of the industry, (3) result in a more useful and meaningful statement of operations, (4) permit better comparison among companies in the industry, and (5) present the facts in a fair manner.’96 Research also supported the RRA model. For example, one important study found that revenue recognition accounting had a significant effect on stock market prices and that this reaction was more pronounced than the market’s response to traditional historical cost earnings disclosures.97 And as one well-respected textbook contended: ‘The oil and gas production industry is an industry whose financial performance is not well portrayed by traditional historical cost accounting . . . Both methods (successful efforts and full cost) are subject to the fatal flaw that they do not measure the real success of the enterprise.’98 It goes on to argue that, ‘the information most relevant to the financial position and operations of an oil and gas producer

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concerns its producible reserves . . . If it were possible to recognize the value of reserves when discovered, there would be a much closer correlation between the economic fortunes of an enterprise and the operating results as expressed in accounting statements.’99 These points of view clearly privilege RRA over historical cost methods. The RRA method, then, was to be a supplement to the historical cost method. But as a supplement, was it information that added meaning to the latter, or was it information to make up for a deficiency, or was it information to substitute for historical cost? In deconstructivist terms, the RRA report resulted in an overflow of meaning that made the problem of deciding even more difficult. The final deconstruction move involves permanently disturbing the oppositional metaphysical hierarchy. While future cash flows may seem more important today than past costs, they would not be forthcoming if the past expenditures had not been made. Arguably, future cash flows are very much a function of past expenditures and so cannot be privileged over past costs. Conversely, past expenditures were made in order to acquire future cash flows and the decision to incur them was based on estimates of future cash flows. So while the future depends on the past – the past anticipates the future. Neither side of the oppositional hierarchy seems able to claim superiority. The meaning of the accounting report is the struggle embedded therein between the historical cost and RRA narratives. Although a deconstructivist reading can result in increasing our awareness of what is at stake in constructing and in reading accounting reports, it does not say much about what might be done to improve on current oil and gas accounting practices. For this we will turn later in Chapter 7 to the work of Mikhail Bakhtin (1895–1975), particularly to his conception of the heteroglossic novel, to speculate about a quite different kind of accounting report.

Conclusion This chapter attempted to draw out parallels to important historical developments in accounting with those in literary theory. The traditional view of accounting as an objective, neutral portrayal of a pre-existing reality seems akin to the presuppositions of expressive realism. The postulates, principles, and standards movement in accounting appear to have similarities to the new criticism’s attempt to establish standard aesthetic criteria for literary theorists, critics, and authors alike to follow. Structuralist approaches to accounting, such as neo-classical economics and Marxist political economy, bear some resemblance to the structuralist movement in literary theory. The work of Barthes acted as a bridge from structuralism to the poststructuralism of deconstruction. And literary theory’s deconstructivist analysis seems to be a promising way of unearthing the inherent instability of accounting information and of destabilizing dominant accounting theories.

Literary theory and accounting 53 In this, it is important to understand that this position does not claim that these accounting developments are isomorphic in either form, space, or time with those of literary theory; nor that the latter influenced accounting developments, or vice versa. Rather, it hopes to show how a literary theory perspective might lead to a different view of the nature of accounting and accounting reports than those of the conventional approaches. The aim is to deepen our understanding of this integral aspect of contemporary society. The following chapter goes even further in this direction by looking at accounting from some of the ideas put forth by Jean Baudrillard, who emerged as a high-profile poststructuralist theorist who has achieved guru or high priest status throughout the world.100

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Simulacra and hyperreality

The simulacrum is never that which conceals the truth – it is the truth which conceals that there is none. The simulacrum is true. (Baudrillard, 1988: 166)

This chapter draws on Baudrillard’s genealogy of the historical transformations of the sign to referent relationship from feudal times to the present. It presents an analysis of the ruptures in the basic nature of the information in accounting reports, particularly those of income and capital, over that time. The analysis produces some startling conclusions about accounting in what Baudrillard calls the simulation era of today’s world.1 Three key concepts underpin this genealogy – simulacrum, implosion, and hyperreality. A simulacrum is a sign, image, model, pretence, or shadowy likeness of something else. Implosion occurs when the boundary between two or more entities, concepts or social realms melts, dissolves or collapses inward and their differences disappear. And hyperreality refers to the current condition of postmodernity where simulacra are no longer associated with any real referent and where signs, images, and models circulate, detached from any real material objects or romantic ideals. Hyperreality designates today’s social order in which more and more areas of life are dominated by reproductions of models organized into a system of signs which functions according to the codes (rules) of poststructural semiotics. It is a world in which nearly everything is a simulacrum and ‘where the image or signifier of an event has replaced direct experience and knowledge of its referent or signified.’2 The individual is constantly bombarded with images rich in information and copes by accepting them only as signifiers without signifieds. The result is that the difference or tension between the real and the illusion has imploded. We live in a world of free floating signs where ‘there is nothing behind the flow of codes, signs and simulacra.’3 Put differently, the borderline between the imaginary and the real has dissolved and with it the principle whereby we can check our ideas about things and matters against stable referents has been subverted. ‘The principle of simulation wins out over the reality principle.’4

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In this hyperreal world, simulacra are produced, consumed, and circulate just as commodities did in the Industrial era. For example, people buy designer label merchandise, such as Gucci luggage, more for their sign value than for their material use value. The luggage’s meaning has little to do with how it functions as a utilitarian object for carrying clothes. Rather, it derives its meaning as a sign and its place in a wider semiotic system of designer label merchandise that includes a series of designer label merchandise (e.g., Izod, Versace, Ralph Lauren, Calvin Klein, Salvatore Ferragano, etc.) and its related series of automobiles (e.g., Jaguar, Aston Martin, BMW, SAAB, Alpha Romeo, Mercedes, etc.). The specific meaning of the object consumed signifies differentially and arbitrarily via its relations with the other objects in these series; not via its utilitarian or personal function.5 Another case in point is an original Van Gogh sketch, one of many that he drew, but found unsatisfactory in terms of its aesthetic value as the master sketch for a painting he had in mind. Today, however, that sketch takes on its meaning, its value, simply because he signed it. This causes the sketch not to be seen and valued for its artistic merit as a great work of art, but rather to be recognized and evaluated as part of a series of works done by him and a wider series of works done by other impressionist painters of that period. Without his signature, it is unlikely that many of his sketches and paintings would attract the great amount of attention that they receive today by galleries and collectors.6 Their ‘sign’ value is important, not what they portray artistically. This picture holds that society today is dominated by the linguistic and textual sphere. Thus, it follows the ‘linguistic turn’ taken in many of the social science and humanities. Linguistic turn means treating the particular phenomenon of interest – in our case accounting information and reports – as a text, discourse, language game, novel, narrative, etc., and analysing it for its textual properties and semiotic content. ‘We are now in a new era of simulation in which . . . the organization of society according to simulations, codes, and models, replaces production as the organizing principle of society.’7

Phases of the image This depiction proposes four successive phases of the sign’s relationship to the referent.8 In the first phase, the sign is a good appearance of the object or profound reality which it faithfully and transparently reflects. In the second phase, it masks and denatures a profound reality and so is a poor or distorted image. In the third phase, the sign masks the absence of any profound reality and, as in magic, it only plays at being an appearance of reality. Finally, in the fourth phase, the sign has no rapport with, nor any resemblance to, any reality. And in some cases it even precedes reality – it is its own pure simulation.

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These successive phases of the image are evident in the history of accounting. Early on, accounting gave clear, transparent signs of a physical and a social reality in space–time. As successive eras emerged, however, momentous ruptures in accounting mirrored those in society, radically altering the spatial and temporal characteristics of accounting signs. A genealogical account of income and capital, two key accounting signs, reveals how the sign–referent relationship that gives them meaning underwent a series of historical ruptures that can be usefully interpreted as different phases in the relationship of the sign to the real. Each coincided with radical changes in the spatial and temporal dimensions of the referents to which accounting signs purport to point. Today, however, accounting signs no longer appear to reflect reality; rather, they create a hyperreality by an operation of hyperrealization that is more real than reality itself. Yet, even today, the idea of accounting as a sign, a faithful representation of physical and social realities in space–time, remains pervasive. Indeed, the assertion that historical cost accounting keeps track of resources (a physical reality) under the control of entities (a social reality) is an axiom in virtually every accounting text following Paton and Littleton’s highly influential monograph. In fact, as far back as ancient Sumerian times (3,500 BC) people ‘did accounting’ by making kiln-fired tokens which represented physical assets such as cows, goats, and wheat, pressing them into the soft, clay surface of urns which left visible impressions, and depositing them in the urn to represent real objects that were in the care of or owned by other landowners. This crude, but effective accounting system relied on a one-to-one correspondence between the accounting sign and the physical reality (a sheaf of wheat or a cow) and the social reality (the liability) that it tracked. Accounting today deals with much more complex transactions and uses money as a numéraire. Yet the idea persists, mistakenly, that every dollar, pound, yen, franc, etc. on a balance sheet can be traced to some actual resource or social obligation of an accounting entity, just as every token in an urn or impression on an urn could be traced in ancient Sumerian times. Baudrillard extended this phase of the image scheme into a grand genealogy of the successive historical stages in the history of Western civilization from feudal times to the present. These eras or ‘orders of simulation’ are the counterfeit, production, and simulation orders. The counterfeit order is the dominant scheme of the classical period from the Renaissance to the Industrial Revolution. The production order is the dominant scheme of the Industrial era. And the simulation order is the dominant scheme of the contemporary scene. Each of these eras or orders (except the present one) has experienced a radical eruption and reformulation of its social, economic, and political realms. In sketching out his orders of simulation scheme, Baudrillard closely follows Marx and Engels’s ideas relating to epochs of history. The latter argued that ‘the early epochs of history’ featured ‘a complicated arrangement of

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society into various orders, a manifold gradation of social rank.’9 They go on to observe that ‘the modern bourgeoise society that has sprouted from the ruins of feudal society’ established new forms of oppression and struggle ‘in place of old ones . . .’ and describe the transformation of the social this way: Our epoch, the epoch of the bourgeoisie, possesses this distinctive feature: it has simplified the class antagonisms. Society as a whole is more and more splitting up into two great hostile camps, into two great classes directly facing each other: Bourgeoisie and Proletariat.10 Baudrillard adds the counterfeit and the simulation orders to Marx and Engels’s scheme. The feudal order Similarly, in the feudal order, the relationship between signs and their referents were, for the most part, fixed, clear, and transparent. Social position and status were obvious from appearances. The king’s crown and castle, like the peasant’s cap and hovel, clearly signalled one’s social position respectively at the top or bottom of society’s many-layered and rigidly enforced hierarchy. In this society of caste and rank, one was assigned a place irrevocably, and so class mobility was non-existent. ‘An interdiction protected the signs and assured them a total clarity; each sign then refers unequivocally to a status . . . Any confusion of signs is punished as a grave infraction of the order of things.’11 In feudal England, which was characterized by large, self-sufficient manors, and in Italy by its new, thriving merchant class, accounting signs by and large referred to real physical objects and real social arrangements. In the case of the former, on the agriculturally-based farms and fiefdoms, the predominant accounting method was the ‘charge and discharge’ statement, a report prepared by manorial stewards to attest to their own integrity and competence in the discharge of their duties. The report usually contained a money-based account such as rents and receipts according to types (e.g., cattle, wheat, wool, etc.). It indicated the beginning balances for each item and then showed how the steward ‘charged’ himself for receipts and increases in animals, grains, and textiles, and indicated how he ‘discharged’ himself by deducting losses, other uses of these resources, and dispenses of cash from these accounts. The charge and discharge account was much like the Sumerian urn impressions. It bore a direct and transparent relationship to an underlying physical and social reality occurring contemporaneously in space and time. The physical reality reflected in the accounting statement was the transference of assets to, or by, agents of the manor, while the social reality was the obligation of stewardship grounded in the social hierarchy of the feudal

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order. So transparent was the correspondence between the accounting sign and the physical or social referent that cash values were combined with physical quantities. This suggests that the obligatory and transparent nature of the accounting sign pointed unambiguously to tangible assets and real social obligations under the stewardship of an identifiable individual. Under charge and discharge accounting, however, maintaining a distinction between income and capital was neither straightforward nor even meaningful. The owners of the manors and estates viewed their property more as sources of economic, social, and political power than as sources of income. Production and consumption were nearly inseparable and changes in land ownership were virtually non-existent. While owners were advised to ‘hear’ the accounts once a year, the need to know the profit or loss for the estate ran second to that of monitoring and controlling the agency relationship with the steward. Accordingly, little in the accounting practices of the time facilitated the calculation of income, nor did it distinguish income from capital. Summary statements of profit and loss and balance sheets were not needed, nor much used since they did not provide better control than the charge and discharge statements. Charge and discharge accounting served much more to acknowledge and discharge accountability than it did to provide information about income and capital. Meanwhile, on the Continent, especially in Venice and similar city states and principalities in the earliest days of trading, each trader or merchant usually accompanied his own goods abroad, so most did not need much in the nature of accounting records. But, with the increase in trading activity that accompanied the Crusades, the ‘commenda’ or silent partnership quickly became the norm. Silent partnerships were popular due in large part to the desire on the part of many nobles and clerics to engage in trade without sullying their own name in public since the general view, as with Shakespeare’s Jew, saw the merchant as a parasite on society. Moreover, the Church decreed profit making and taking interest on capital as cardinal sins. Either way, the investment of capital by a non-active partner created the need for some kind of agency accounting similar to the accountability reporting of feudal England. Significantly, these early trading partnerships were a series of discrete ventures with the profit or loss materializing at the conclusion of each one. This was ‘profit’ in the true sense since it was the result of liquidation of the leftover proceeds at the close of the venture, not a periodic calculation of a going concern with continuing operations. Income, then, was not distinguished from investment capital – except to the extent that each partner’s share of the proceeds differed from the cost of his initial investment. Accounting signs were transparent reflections of the receipt and disposition of goods in agency. Income was the reflection of the liquidation outcome of a concluded commercial endeavour. As for the medieval merchant, the ‘Italian method’ of accounting – double entry bookkeeping – had been used in formal form since the 1300s. By the end of the

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fourteenth century, it was commonly used, as described in detail in Lucas Pacioli’s classical treatise On Double Entry Accounting. Double entry bookkeeping was much more elegant, precise, and sophisticated than the cruder English charge and discharge accounting. But, as with the latter, the entries in the ledgers, day books, and journals of double entry bookkeeping referred by and large to real referents including the merchant’s physical inventory of goods, his land and buildings, and all his other chattels and liabilities. These accounting signs reflected, in a transparent and unambiguous manner, real objects and social relationships. As the feudal era gave way to the Renaissance and the Enlightenment, the first order of simulacra – the counterfeit – made its appearance. In this new era, the sign was to be transformed from a good image of the referent to a counterfeit of it. The counterfeit order The key feature of the counterfeit era was the appearance of signs that imitated real objects and ideas and, in some instances, distorted them. Evidence of this was the emergence of human-made materials that substituted for natural ones. The advent of stucco, for example, led to imitations of nature in that it created simulacra of natural building materials. Thus began the practice of using imitations of nature in buildings, churches, art objects, and even the creation of artificial waterways such as canals. In semiotic terms, these signs began to ‘play’ at reflecting the real, pretending to be an original and so imitating nature. Simulacra, however, were more than theatrical games played out with images and counterfeits; they also suggested social position and power arrangements. The counterfeit order also witnessed the appearance and rise of a new social class – the bourgeoisie. The many-tiered feudal social order regrouped mainly into three layers: nobility, bourgeoisie, and the rest. Situated between the aristocrats and the lowest segment of society, the bourgeoisie claimed that the ‘natural’ rights, embedded in Nature’s laws, should be the referent for social arrangements; not the ‘divine’ rights of monarchs and the Church. The bourgeoisie also had an appetite for simulacra-type goods such as Josiah Wedgwood’s ‘Queen’s Ware’ line of china. It was a high-quality imitation of the real set of china he made for the Queen of England, so it signified the bourgeoisie station in society above the hoi-polloi. As with stucco, clay could be made into fine china (the sign) so that the bourgeoisie could ‘play at’ being royalty and aristocrats (the referent). Coincidentally, the idea of value underwent a transmutation. Previously, Church officials had been able to construct ‘just’ and ‘fair’ cost-based prices for local merchants. But, as trade with distant foreign territories increased, local customers could not ascertain foreign costs accurately by relying on

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canonist principles.12 Prices came to be conceived of in terms not of canon law, but of value-in-use or utility to the buyer, both of which depended on the free individual’s subjective judgements. Price determination had entered the secular realm. As medieval Italy’s burgeoning trade evolved, accounting practice was undergoing a concomitant change. The Italian merchants’ joint ventures had begun to take a more permanent form and the significance of this for accounting was substantial. The merchants and their bookkeepers were coming to realize that the business was a unit in itself and that accumulated profits and capital represented a claim of the owners. This necessitated keeping track of changes in the owner’s capital, which meant periodic reckoning of profits (or losses) in part to be able to distribute them amongst the various partners. This called for the systematic integration of nominal accounts with real ones. While many accounts, such as inventory and land, still referred to real objects and social relationships, the profit account was unreal, that is to say nominal, since it was not distributed. Crucially, this meant that for the first time Italian merchants needed to keep track of and observe the interaction between capital and income. It had dawned on them that any ‘income’ that accumulated in the nominal accounts would not be ‘real’ until it was ultimately distributed in money or goods. In England, however, things were different. Commercial ventures had not yet acquired the continuity that double entry is uniquely suited to portray. Production and trade were not continuous undertakings but a series of separate, one-off ventures, including joint stock companies, that resulted in either a profit or a loss upon completion. The proceeds from each such undertaking were divided and new stock solicited for subsequent ventures. In consequence, income was not distinguished from invested capital except that each of the participants could infer his or her income by deducting the proceeds from the initial investment. Thus, as in early Italian trading, to put it in semiotic terms, income was the transparent and obligatory sign of a realized referent that was co-determinate with the sign itself. But this was to change dramatically with developments initiated by the East India Company in the early 1600s. The company issued four-year subscribed stock whereby the subscriber paid one-fourth of the purchase price in each year, which was used to fund that year’s voyages. This marked an important step away from the one-off venture idea of financing and a turn towards a going concern arrangement, which included the ability of investors to sell their capital investment. In 1661, East India announced that future distributions would consist of the profits earned. This was the beginning of putting into practice the principle of permanently invested capital. Now the company had to distinguish income from capital. Italian style double entry bookkeeping, waiting in the wings, would be the means of doing this. The shift to permanent investment and the simulation of earned profits

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would radically change the understanding of commercial activity through time. It led to an appreciation of the business entity as a going concern and an accompanying radical change not only in accounting technique, but also in accounting theorizing. Previously, accounting was conceived of as recording only historical events and transactions for a completed venture. Now, however, it came to be seen as recording these as segments of a continuous stream of business activity with an eye on the future. Income was only the likeness of ‘real’ profit. Accounting had entered the simulacral order of the counterfeit. Conceptually, although the accounting income sign had lost its correspondence with ‘profit’ in the sense of liquidation proceeds, it remained grounded in the idea of income as the profits that would, or could, have been distributed if the venture had been terminated. This was most evident in English partnerships, where undistributed profits were transferred to the owners’ capital accounts on an annual basis. This ‘balance sheet’ or ‘proprietorship-centred’ approach to the calculation of income served well as an ‘imitation’ of distributions. But it was less well suited to joint stock companies where undistributed profits did not merge with contributed capital, but instead were accumulated in a separate account, such as ‘earned surplus.’ The advent of the going concern joint stock company had other ramifications. It posed serious problems for the prevailing socially constructed notion of ownership. The proprietor (or partnership) principle viewed capital as the personalized entrepreneurial contribution of the proprietor or partner, instead of as an anonymous aggregation of all the property that is active in a business. This preoccupation with the balance sheet meant that capital and profit were viewed as belonging to the shareholder-as-counterfeitproprietor. The accounting sign of income still served as an analogy of the feudal era’s liquidation proceeds. But with the advent of the separation of ownership from control, the idea that the shareholder occupied the role of proprietor or entrepreneur became highly problematic. Rather than serving as the obligatory and transparent reflection of the proprietor’s profit, as in the feudal order, income had entered the order of imitation and counterfeit. The accounting income sign could henceforth only play at being real, as the rationale began to fade for why double entry accounting had originally relegated the components of income to ‘nominal’ accounts. This problematic relationship was to change dramatically with the advent of the Industrial era in the late eighteenth century. The production order The Industrial Revolution ushered in the order of production featuring the appearance and the perfection of serial, mass-production technology. Accompanying this was another transmutation of the sign-to-referent

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relationship. Recall that in feudal times the sign referred in a direct and transparent manner to its object, while in the counterfeit order the sign ‘played’ at being the referent. In the order of production, however, the sign came to ‘absorb’ the object. This can be explained by reference to the impact on society of serial production with its logic of the political economy. Serial production made it possible to produce identical commodities ad infinitum. These objects were no longer, as in previous eras, reflections, counterfeits, nor analogues of any original thing. Rather, they were simply images of all the other objects manufactured by their particular serial production process. As such, they were simultaneously both sign and referent, that is to say ‘sign–objects.’ Thus, a new sign–referent relationship came into existence whereby the sign and the referent coalesced into a relationship of equivalence. The sign was now the object and the object was now the sign. Crucially, the social order, too, came under the sway of technical rationality with its rules and codes of serial manufacturing. Just as material goods were produced ad infinitum, now both workers and bourgeois owners were serially produced, that is to say, commodified without limit.13 This meant the decline of the concept of the natural rights of man with its code of the counterfeit and the emergence of a new code based on political economy, whose rules and laws were instantiated into the social realm.14 The individual was no longer considered as being in the image of God, nor as a counterfeit of the aristocracy, nor as nature’s sentient being. Rather, the individual now was seen to be merely the image of other workers or bourgeoisie, as the case may be. Serial production not only mass-manufactured commodities; it also mass-produced class-situated commodified individuals. The advent of serial production and the code of political economy also brought a transmutation in the nature and the laws of pricing and exchange. In previous eras, prices were struck according to the code of canon law, labour exchange or value-in-use. Now, however, every sign–object referred only to the other self-same commodities in its particular serially produced manufacturing chain, and pricing came under the code of the political economy, with its laws of supply and demand, whereby exchange value determined price. In sum, the code of serial production came to dominate the social realm just as it dominated the material, economic realm. The industrial machine now corresponded to the rational, functional, historical consciousness of society and the sign coalesced into the referent. Accounting was to follow suit. The order of serial production also precipitated a significant transformation of the signs of income and capital. The proliferation of long-lived assets used for the mass production of identical goods, which came along with the Industrial Revolution, meant the growth of the going concern corporate form and the severance of ownership from control. These events exacerbated the accounting problem inherited from the counterfeit order. Whereas

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income had served as an analogy for a proprietor’s liquidation proceeds and was deemed to be a reward for entrepreneurial effort, it came to be reconceived as the serialized periodic return to depersonalized capital. This seemingly subtle distinction masked a profound transformation in the relationship between the accounting sign and the real. Income and capital had relinquished their grounding in the productive endeavours of an entrepreneur. The logic and the code of the market now governed them instead. This code stressed reproducibility and comparability as the end and measure of the new society of mass production. For accounting, this meant that the ownership right of one company’s income was the same as that of any other company, adjusting for risk as signalled by the market’s assessment of its price-to-earnings ratio. So the balance sheet approach of the counterfeit era was no longer suited to reckoning the periodic profit of an ongoing business concern. When applied to a corporate entity, the balance sheet no longer adequately distinguished between operating income and increments to capital. This was true not only because of the difficulties that stemmed from estimating current or liquidation values for the assets of a going concern, but, crucially, also because of the ambiguity of whether prior years’ undistributed earnings were income or capital. A radical transformation of the signs of income and capital did not, however, occur overnight, nor all at the same time, nor all in one place. Until the early nineteenth century, British industrial firms continued to treat income as a reward for entrpreneurship instead of a return to capital because, according to the prevailing view, entrepreneurs used capital, for which they paid the market rate of interest, as a tool just as they used labour as a tool for making profits. Thus, accounting’s ‘capital’ was very different from today’s marketbased conception. For the latter, the price of a financial claim depended crucially on risk and investors’ expectations of the value of their contributions to increase with time as management invests in operations that generate positive net present value. The concept of future cash flow of capital had not yet replaced that of the entrepreneurial past effort. Even so, well into the first half of the nineteenth century, accounting signs of income and capital continued as counterfeits of the proprietor’s true liquidation proceeds. But, as the influences of the Industrial Revolution spread, changes in the nature of production and organizational forms prompted a rethinking of accounting income and capital. The introduction of mechanized mass production permanently decoupled production from sales, replacing lot-production with continuous manufacture. With the continuity of production, the financial reporting period became increasingly arbitrary and artificial, and allocations with little operational import became crucial for computing income. The upshot was that the sign of accounting income slipped another notch away from its original referent–disposition of venture proceeds. This rethinking precipitated further distancing of these signs from their

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original referents. Income came to repudiate its claim to be the analogical equivalent of termination proceeds. Instead, it became a standardized, serialized production commodity in its own right, the principal value of which was to facilitate the market exchange of depersonalized capital. Another significant change that impacted on the transformation of these accounting signs was the change in organizational forms. The growth of the large corporations effected an abrupt transformation of the notion of the firm, especially with respect to its temporal characteristics, and the very nature of capital changed. The corporation was no longer thought to consist of tangible properties, goods, and obligations, but came to be seen as built in the past and available to function in the future.15 The impact of this corporate form meant that the source of value of a corporation’s assets was no longer cost, nor liquidation value, nor current market value. Value was now seen to stem from the firm’s future earning capacity, which was reflected, if only imperfectly, in its current reported income figure. This nominal account came to be seen at least as important, if not more so, as the real accounts, and certainly no less ‘real’ in terms of a reflection of shareholders’ wealth. Accounting principles and thinking experienced a radical transformation following the acceptance of this future-oriented view of asset valuation. The belief that the ‘real’ value of an enterprise is its earning power gave rise to the appearance and justification for the ‘realization principle’ which became the basic building block for accounting techniques. It held that in measuring income, profit is realized at the point of sale (or its equivalent) given that the proceeds of the transaction are reasonably assured. This then required matching the associated costs incurred with the revenue so earned. Other closely related and interlocking principles, postulates, conventions, doctrines or standards followed, including the going concern, the entity, the historical cost, and the conservatism ideas.16 Accompanying these shifts, the income statement deposed the balance sheet as the main focus of accounting. The balance sheet was relegated to the role of simply being the connecting link between periodic, consecutive income statements. This reversal in the relative importance of the two statements followed directly from the reconceptualization of capital that occurred with the rise of the large corporation. Limited liability and the separation of ownership from control changed the meaning of capital from a personalized, proprietary investment to a depersonalized, aggregated concept, encompassing all of the property used in a business. Profit, the distribution of which remained discretionary, stemmed from the deployment of capital, not the efforts of an entrepreneur-proprietor. These shifts marked a transition in accounting from the proprietary view to the entity view of accounting that persists even to this day. Along with the adoption of the entity theory, income measurement assumed a more economic form. Abandoning any pretence of an analogical

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relationship to liquidation proceeds, the accounting income sign itself became an exchangeable commodity, serially produced and used to facilitate the allocation of capital in a (stock) market exchange. In this role, its most important attributes were those of its reproducibility – objectivity, verifiability, reliability, consistency, and comparability. This serial production of income signs fed the market’s valuation of capital according to the commercial law that governed value in the order of the serial reproduction of sign–objects. No longer partaking of a nostalgia for a natural order, income sought not to imitate the natural conclusion of a business endeavour, but to dominate it. The imperatives of market exchange dislodged recourse to Nature as the legitimating social principle. All this, however, was to undergo another radical transformation with the advent of the order of simulation. The simulation order The hallmark of this most recent transmogrification proved to be the coming into prominence of the non-material, sign realm over the material, commodity realm of the Industrial era. With society now dominated by signs and simulations, it became necessary to understand it for its textual properties. So linguistic theory and semiotics, albeit of a radical kind, replaced economics as a more cogent way to analyse this new order. Along with this epistemological switch came a momentous change in ontological assumptions about the basic nature of being. In this new era of simulation ‘the organization of society according to simulations, codes and models, replaces production as the organizing principle of society.’17 The individual and the masses need to be understood as a system of signs. Homo semioticus replaced homo economicus.18 According to this new perspective, the individual is literally bombarded with non-referential images, prototypes, and simulations made possible by the explosion of information technology devices and telecommunication media. This ‘cyberblitz’ of idealized models covers all aspects of life and living, ‘interior design manuals, exercise video-cassettes, child-care books, sex manuals, cookbooks and magazines, newspapers and broadcast media all provide models that structure various activities within everyday life.’19 The ‘real’ individual of previous eras (man made in the image of God, nature, or class warrior) has dissolved as the individual, now without centre, becomes an image alternatively of these sundry simulacrums. As the postmodern saying goes, it is ‘the end of the [unified] individual.’ This explosion in the amount of information bombarding the individual and the masses, however, did not result in more useful information, but rather in ‘useless information.’20 This useless information does not inform, misinform, or even disinform. Instead, it gave rise to a new ‘species’ of uncertainty that stemmed not from a lack of information, but instead from an excess. Unlike the conventional notion that more information reduces

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uncertainty, in the new hyperreal world, this plethora of information merely increased uncertainty. Moreover, no matter where the individual is located, the same non-representational signs pour in. In consequence, attachments to place no longer count for much. Local values, childhood, and schoolmate friendships, sentiments for institutions, along with aesthetic feelings for those things that were so important in previous days, have become disposable and are readily discarded. Most people now live much differently from their parents or grandparents. What were ‘goods’ even a few decades ago (red meat, fried potatoes, fur coats, church doctrines, hard liquor, etc.) are ‘noxients’ today. Just as individuals no longer bother to fix a broken appliance, but throw it out and replace it with the latest model, they now discard the past. As another postmodern maxim puts it, ‘The individual is de-historicized.’ Only the present counts as time and the past is compressed into the present. The future, too, collapses into the present. Corporations, individuals, and governments use new techniques to parry the effects of potential shocks. Many corporations, for example, use financial-engineering technology (implemented with options, futures, and other derivative securities) to hedge or sell-off uncertainty. Clearing houses pass on the risk to individuals or to different companies that will buy it – for a price. The buyers then ‘reinsure,’ selling smaller chunks of the risk to additional investors. Other corporations discount the future by securitizing their accounts receivable or other expected future receipts, bundling them up together as synthetic securities and selling them to financial institutions without recourse for a negotiated ‘present value.’ Individuals participate in innovative insurance contracts, welfare programmes, marriage contracts, funeral packages, and even cryogenic preservation sperm banks to ‘presentiate’ things once and for all. As with the past, the future no longer counts. It is dis-counted. The past and the future implode into the present. In sum, with no clear boundary to time and space, no fixed centre, and no emotional anchors, the individual is at once everywhere and nowhere. It is the appearance of the virtual person. As distance melts and time gets compressed, the individual is dehistoricized and decentred. Communication has also undergone a momentous transformation. The order of simulacrum features the mass consumption of signs and images that contain senseless meaning which the masses simply absorb.21 This cyberblitz of information also precipitated a sea change in politics and power relations. In electing a prime minister or president, the candidate’s image is more important than his or her substance. Media spin doctors, public relations experts, and pollsters transform political campaigns into image (sign) contests. Conversely, documentaries and live television coverage of events like the Gulf, Yugoslavian and Afghanistan Taliban Wars, the O. J. Simpson trial, and the President Clinton impeachment hearings become entertainment as much as hard facts and politics. And sporting events such as the Olympic

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Games and the World Cup Football (soccer) tournament become politics. Advertising, documentaries, politics, and sport all implode into ‘infotainment.’ TV soap opera characters and plots are taken as the real. Fact and simulation, politics and entertainment, are no longer distinguishable. One crucial consequence of this is that the masses are neutralized and depoliticized. Their hyperreal situation is more real to them than the fact that children work in sub-human, slave-like factory conditions, paid a pittance, while super star celebrities like Michael Jordan and tennis teen-idol Anna Kornikova earn more from global sports equipment companies in one year than do the workers in all their third world factories. In the same vein, TV images of Iraqi soldiers and Bosnian civilians being hit by rockets and missiles are met without emotion. Living in hyperspace and hypertime, the masses just passively absorb these non-referential simulations; then demand more. The masses are decontextualized, dehistoricized, depoliticized and desentitized. This communication and information revolution, then, meant the massification of society as the difference between the two major classes of the production order (the working class and the bourgeoisie) imploded. Society today is just one huge mass. Previous differences, so crucial for social bonding in past orders, are no more. The rigid, multi-tiered social hierarchy of the feudal order, the three-tiered social order of the counterfeit era, and the twoclass conflict system of the order of production have gone by the wayside. If this view holds, then sociology as a meaningful science has lost its relevance. The sociological theories of modernity – Smith’s invisible hand, Marx’s dialectic materialism, Weber’s bureaucratic iron cage, Gramsci’s hegemonic elite and control, Foucault’s panoptic, carceral society, Habermas’s false conscious ridden underdogs and the ideal speech situation, Lévi-Strauss’s incest taboo – all the grand theories that were well suited to explain the production era are now obsolete or moribund. It signals the end of metaphysics and the appearance of the era of excess senseless information, hyperreality and simulation where the sign world rules.22 If the above depiction of the simulation order also holds, there is good cause to believe that the nature of the accounting signs of income and capital have also experienced a momentous change. As with other signs in the postmodern era, it seems likely that they, too, have slipped free from their putative referents and now circulate in the hyperreal realm where selfreferential accounting models and images transact without ground. And there are indications that accounting standard setters are beginning to sense, if only intuitively, this radical shift. In spite of this, much of today’s generally accepted accounting vocabulary and conventional wisdom remains grounded in beliefs and assumptions forged during the production era, while accounting practice clings to double entry techniques that emerged in formal form five or six centuries ago in the feudal and counterfeit eras. And much extant accounting theory and practice

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remains wedded to the idea that accounting signs are related to some ‘real’ economic activity or production process, and that costs can be marshalled into clusters which possess real significance in that they signal the efforts made to add value to materials, labour, and non-direct costs, and then get attached to revenues realized from these efforts. This assumes that the signs ‘cost’ and ‘revenue’ successfully portray their putative referents – the incoming and outflowing of goods and services. There is also reason to believe that conventional management accounting theory and practice also remains grounded in production era thinking. Activity-based costing (ABC) is a case in point. Many, if not all, management and cost accounting textbooks make the claim that conventional or traditional costing systems, which rely on volume or throughput methods for allocating overhead and service department costs to products on the basis of direct labour and machine hours, yield inaccurate and distorted product costs and result in poor decision making. In contrast, these textbooks assert that ABC systems provide more accurate and less distorted product costs.23 Both claims, importantly, are founded on the belief, albeit implicitly, that true or real costs exist ‘out there,’ which the Baudrillardian perspective negates. The conventional wisdom also holds that financial accounting signs, such as costs, revenues, income, and capital, should reflect their underlying events and transactions in a transparent manner. Even as late as 1998, the chairman of the Securities and Exchange Commission called for ‘technical rule changes by regulators and standard setters to improve the transparency of financial statements’ and he stated that ‘corporate management and Wall Street need to undergo a wholesale cultural change, rewarding those who practise greater transparency and punishing those that don’t.’24 And the Financial Accounting Standards Board exposure draft on accounting for financial instruments and hedging activities identified ‘lack of transparency’ as a fundamental flaw in current accounting practices. In fact, the words ‘transparent’ and ‘transparency’ appeared seven times in that document. The assumption that costs and revenues, and indeed accounting statements in general, should transparently reflect something real, existing ‘out there’ before its capture in the accounts, indicates that conventional accounting thought remains wedded to the proposition that there is an underlying objective reality to which accounting signs should correspond and against which their faithfulness may be judged. The SEC’s and the FASB’s continued quest for transparent reflections divulges their realist ontology that accounting signs should correspond to some independent reality (as in Sumerian and feudal times) which would be the standard for judging their truthfulness. This realist ontology still dominates accounting theory and practice and shows little danger of waning.25 Recent attempts, as noted in the Prologue, to calculate and record in the balance sheet the real value of intangible knowledge assets is indicative of this entrenched belief. But in the hyperreal economy of simulations, the serial production of

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sign–objects has yielded to the generation of accounting signs which no longer refer to any referent, nor do they absorb the object. Instead, they are their own pure simulation. This radical conclusion is considered next by looking at some accounting issues and topics which have been the object of much debate and controversy – stock options, earnings management, and sophisticated financial instruments like derivatives.

Accounting examples Traditionally, generally accepted accounting practice has called for the expensing of stock options at the time they are exercised, with the details disclosed in notes to the financial statements when issued. The logic holds that newly granted stock options be recognized at their ‘intrinsic’ value, this being the difference, if positive, between the market value of the stock at the grant date and the ‘strike’ price. It is well known, however, that this intrinsic value grossly underestimates the true value of any option. Executives nearly always get options that are either ‘at-the-money,’ since the stock price at the grant date equals the strike, or at the ‘out-of-the-money’ price, since the strike exceeds the grant-date stock price. And they are more than willing to forgo salary and other compensation benefits, which are usually immediately exigible for income taxes, in return for these options. These options are valuable, then, if there is any chance that the stock price will exceed the strike price before they expire. Boards of directors readily grant both kinds, presuming, correctly in most cases, that such options will induce executives to think like owners and strive to enhance the probability that the stock price will indeed exceed the strike price before the options expire. But, under currently required practice in the USA, companies do not need to recognize any expense at the grant date since the option’s intrinsic value at that time is either zero or negative. The recent FASB draft proposal recognized that there was, indeed, an expense at the date of granting. So it called for recording the value of any newly granted stock options as an expense of the period in which they were granted. The logic in the proposal, however, is a straightforward extension of ideas from the production era. It sees the corporation’s income as the periodic return to capital and as a portent of future returns to capital. So income falls because executives have a right (but not an obligation) to buy shares for an amount that could be below future market values. Measuring this expense is not a problem; a Black and Scholes type model will yield the current market value of the option, thus giving accountants a feasible remedy to what is deemed to be a measurement problem.26 With this modification to practice, the FASB proposal believed that the income sign would then better reflect the ‘real’ referent to which it purportedly points – an actual expense to the shareholders. However, neither users nor producers of accounting statements were swayed by this argument. Of the 348 valid comment letters that

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the FASB received commenting on its exposure draft, only one favoured recognizing stock options as a compensation expense in the year of issue. This overwhelming opposition effectively defeated the proposal. The important message in this is that corporations do care about the actual income amount reported in the income statement. So, crucially, the current stock of informational perspective accounting theories, such as the ‘efficient market hypothesis,’ do not provide much leverage on explaining this outcome.27 If investors can ‘see through’ accounting reported income and discern true intrinsic market value, it follows that the information included in notes to the financial statements should convey the same message as that reported in the income statement were stock options to be expensed according to the exposure draft. Readers could readily adjust the income reported to reflect disclosures in the notes if they so desired. Yet corporations were very concerned about the way the FASB proposal would affect official reported income. The reason for this is that in the hyperreal financial economy, as we shall show below, accounting signs have indeed lost their association with ‘real’ referents, such as true intrinsic value. There is nothing to see through to. But, since reported earnings are related to stock prices which are crucial to executives’ stock options and bonuses, they do matter, even though it does not matter to them that the income sign does not refer to any real referent. It is important for its ‘sign’ value, not for its ‘intrinsic’ value. It should not be surprising, then, that corporations are prone, as we shall see next, to ‘manage’ reported earnings. Accounting signs are a vital part of the ‘earnings management’ process. As one influential reporter of the investment community put it: ‘The simplest, most merciless measure of corporate success in the 1990s has become this one: Did you make your earnings last quarter?’ The presence of this yardstick (a simulation) demands the practice of ‘managing earnings’ in order to report official earnings (another simulacrum) that pretty much matches analysts’ forecasts, presumably in the hopes of simulating value in the eyes of investors. Bolstering the price of a company’s stock price (another simulacrum) is of practical importance. While the practice of managing earnings is by no means new, the extent and nature of the practice appears to be escalating in recent years. In fact, as the chairman of the SEC remarked, ‘this process [earnings management] has evolved into what can best be characterized as a game among market participants.’28 He goes on to describe the self-referential process surrounding the production and consumption of earnings numbers this way: This is the pattern earnings management creates: companies try to meet or beat Wall Street earnings projections in order to grow market capitalization and increase the value of stock options. Their ability to do this depends on achieving the earnings expectations of analysts. And analysts seek constant guidance from companies to frame those

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expectations. Auditors, who want to retain their clients, are under pressure not to stand in the way.29 The General Electric Company (GE) provides a striking case in point. Due to its large size, wide spectrum of technologies, and its global diversity, GE enjoys ‘a very large amount of flexibility to deliver strong, consistent earnings growth in a myriad of global economic conditions’ and is recognized as one of the world’s leading ‘aggressive practitioners of earnings management.’30 Indeed, GE often develops a model of how an acquisition, a divestment or the restructuring of a division would affect official earnings before going ahead. In effect, unlike the traditional thinking where strategy is implemented and accounting after the fact reports the results, in GE’s case, the accounting model (the sign) precedes the implementation of the strategy (the referent).31 As Baudrillard puts it: ‘The territory no longer precedes the map . . . the map engenders the territory.’32 So instead of GE’s accounting reflecting the real outcomes of strategic decisions, the ex-ante accounting model, itself a simulation of analysts’ expectations of earnings, precedes and engenders the strategy which in turn recirculates into reported earnings. Along similar lines, companies like Walt Disney forecast reported earnings when deciding when to release videocassettes of hits like Snow White. By carefully timing videocassette releases, they maintain the smooth trend in earnings that analysts can easily forecast. Analysts’ earnings forecasts, in turn, sustain stock market value. In general, the process works this way. Analysts look for clues about a company’s future earnings in its current financial statements and investment decisions. But management simultaneously take analysts’ earnings forecasts as yearly targets and select investments and accounting practices that are likely to produce reported income equal to or exceeding those forecasts. In turn, the market capitalizes analysts’ earnings forecasts into stock prices. So it seems that the company’s investment decision model, the analysts’ forecasting model, and investors’ valuation models circulate simultaneously in the hyperreal financial realm in a Möbius strip like fashion. They refer to each other but, for investors, they lack any relation to a real referent such as cash flows or ‘true’ income. The company’s investments, of course, would not generate any earnings if they did not also generate cash flows, but neither analysts not investors know how earnings relate to cash flows and hence to value. Rather, they produce and consume accounting earnings which, when coupled with a ‘price-to-earnings multiple,’ can be used to simulate value. This finding suggests that many of today’s cherished accounting principles and theories are poorly equipped to address many of the issues confronting accounting today since they are based on antiquated presuppositions about the relation between accounting signs and underlying referents. In the order of simulation, the surplus of non-referential signs such as earnings has exploded, especially in the hyperreal financial economy.33 Accounting no

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longer can be seen, as in ancient Sumerian times or in the feudal era, as a ‘reality check’ on investment decisions. Instead, earnings create a simulated reality of their own because investors’ valuation models still treat earnings as if they have the underlying referents of bygone eras. So official reported earnings do matter. To recognize a transaction or an event in the income statement, even if it is only hyperrealized, provides that transaction or event, and thus the income statement itself, with an aura of ‘reality’ in this realm of self-referential models. The debate and controversy surrounding the issue of accounting for sophisticated financial instruments, including derivatives, provides an even more striking example of the problematic nature of accounting signs in the simulation era. Accounting for financial instruments has been on the agenda of accounting standard setting boards around the world for more than a decade. Indeed, it has been seen as one of the most important financial reporting issues to be addressed in recent years, it has consumed vast amounts of time and energy, and it has all but dominated standard setting debates in the 1990s. Traditionally, companies accounted for these transactions by means of notes to the balance sheet and delayed making any entry until the contract was consummated or dropped. No entry was made upon entering into such contracts because at that time the transaction is a ‘zero value’ one. By the late 1990s, however, the dollar value of the annual trading in sophisticated, hybrid financial instruments in three weeks recently exceeded the annual GNP of the USA. And for many large corporations, the gains (or losses) on these instruments amounted to a significant percentage of total net income for the year. In consequence, standard setters came to believe that the potential liabilities (or assets) for these instruments should be recorded on the balance sheet, and the resulting unrealized losses (or gains) included in income, even though these amounts were not ‘real’ at the time. The chief issue was ‘When and how to recognize the value of these instruments?’ The FASB solution was to use the ‘mark to market’ rule, which states that the balance sheet should carry (most) financial instruments at ‘fair value.’ Fair value, the thinking holds, is the financial market’s assessment of the present value of future cash flows emanating (directly or indirectly) from the instrument, discounted to reflect current interest rates and the market’s assessment of the risk, again calculated by means of Black and Scholes modelling, that the cash flows will not be forthcoming.34 The FASB standard setters, then, seemed to sense the hyperreal nature of these relationships. The new GAAPs (SFAS 130 and 133) call for augmenting the traditional notion of ‘retained earnings’ (RE) by a construct called ‘accumulated other comprehensive income’ (AOCI). The total carrying value of owners’ equity, then, consists of the sum of these two amounts (RE + AOCI), plus the carrying value of contributed capital. As for the income statement, ‘comprehensive income’ (CI) reports the change in equity during a period from transactions from non-owner sources. Thus, CI is the sum of

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net income (NI), which increases RE and ‘other comprehensive income’ (OCI), which in turn, increases AOCI. Thus, when changes occur in the fair value of some hedging derivatives, the resulting gains and losses are to be shunted through OCI and thus into AOCI, where they will be held in abeyance and suspended until such time as the option is exercised, sold or dropped. If the hedge loses its negative correlation with the risk exposure it is intended to hedge, it is said to be ‘ineffective.’ Then, the gain or loss to date is immediately recycled through the income statement (reversing the OCI it has caused) and thus into RE. If the hedge is effective, the company waits until the hedged transaction in the underlying item occurs. Then, the cumulative loss or gain on the derivative is again recycled through the income statement, but this time it is matched with income or loss on the underlying transaction. These transactions are depicted in Figure 4.1. The upshot is that the change in the value of the derivative will not affect total shareholders’ equity at that later time. Rather, it will be transferred from AOCI to RE. Thus, the timing of income recognition and total capital accre-

Contributed Capital +

Income or losses on transactions in the underlying

Retained Earnings (RE) + Accumulated Other Comprehensive Income (AOCI)

The hedge either (a) becomes ineffective or (b) was effective and the underlying transaction occurs

Net Income

+

Other Comprehensive Income (OCI)

Gains and losses (changes in fair value) or derivative hedges

Total Owners’ Equity

Comprehensive Income (CI)

Figure 4.1 FASB 130 and 133 nomenclature Source: Reprinted from from N. Macintosh, T. Shearer, D. Thornton and M. Welker, ‘Accounting as simulacrum and hyperreality: perspectives on income and capital’, Accounting, Organizations and Society, Vol. 25, No. 1, pp. 13–50, with permission from Elsevier Science.

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tion will no longer be linked. Moreover, the OCI and the AOCI signs are ambiguous as they can be either, neither, or both income and capital. The difference between income and capital has imploded. But market players and investment analysts use the signs in financial statements to gauge whether or not the market value of the company’s stock has strayed from its fundamental or intrinsic value, that is to say, from the market value of its ‘underlyings.’ In sum, the accounting sign of the financial instrument is based on the market price of the instrument, while simultaneously that market price is based on the accounting signs. Seen from a Baudrillardian perspective, accounting for financial instruments is an extreme example of hyperreality in financial markets and a paradox of self-reference. The market uses accounting earnings, as explained in the case of earnings management, along with other information, to value a company’s stock and other securities. The prices of these securities then become the underlyings that sustain the derivative prices, which determine the company’s earnings, as in Figure 4.2. In short, neither the accounting sign nor the financial market sign appear to be grounded in any external reality. Instead, each model appeals to the other model for the only ‘reality check’ available. Accounting signs model market signs, which in turn model accounting signs. Thus, in the hyperreal financial economy of simulation, the difference between the sign and the referent implodes. The signs become images of themselves in an imbroglio of ungrounded, self-referential simulation.

Accounting Earnings

Valuation models, other information

Fair value accounting

Derivative Prices

Security Prices No-arbitrage conditions

Figure 4.2 Hyperreality in accounting for financial instruments Source: Reprinted from from N. Macintosh, T. Shearer, D. Thornton and M. Welker, ‘Accounting as simulacrum and hyperreality: perspectives on income and capital’, Accounting, Organizations and Society, Vol. 25, No. 1, pp. 13–50, with permission from Elsevier Science.

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Implications In the order of simulation, the distinction between the accounting sign and some underlying reality has fallen by the wayside. The accounting sign now precedes, and even creates through its ‘sign value’ the referent which it once purported to represent. It is no longer an abstraction or an appearance of any ‘real’ thing. It is its own pure simulation, making circular references to other accounting-related signs. Just as individuals in the order of simulation become images of models which precede them and the difference between the real person and the image implodes, accounting signs become images of models of itself. In more general terms, accounting is one among many models that precede and subsequently create a hyperreal financial economy characterized by fundamental changes in global financial markets. These transformations have unmoored the financial economy from the real economy of labour and production of the previous era. Contemporary accounting and finance seem to circulate on their own plane, parallel to, but insulated from the material economy of labour and production.35 Thus, it seems that the most recent shift in the sign-to-referent relationship for the accounting signs of income and capital has occurred. Accounting has entered the simulation era as an important image in creating and sustaining the financial economy. It needs to be recognized, however, that the predictability and apparent exogeneity of these signs play a crucial role in this today. They provide a ‘reality check’ of sorts. Nevertheless, simulation era accounts are clearly at odds with traditional accounting thought. This chapter drew on two genealogies, a phases of the sign to referent relationship and an orders of simulacra scheme, set forth by Jean Baudrillard, to develop a radical genealogical analysis of the successive historical ruptures in the nature of the accounting signs of income and capital. The analysis indicates that vital accounting information in large part no longer refers to real referents. The pretext that accounting should transparently reflect underlying events and transactions is no longer sustainable. And accounting’s claim to give a ‘true and fair’ picture of or to ‘present fairly’ the financial condition of any enterprise in determinate space–time must go by the wayside. Nor does it, as is claimed by the sundry critiques of accounting’s litany of unscrupulous reporting such as those of Abraham Briloff, hide the truth.36 The above genealogy indicates, as Baudrillard might put it, that accounting has lost its bet on representation. There is no truth to conceal or to reveal. This claim is expanded on below. If this is indeed the case, then the implications for accounting practitioners and theorists alike are far reaching. They represent a telling subversion of currently on-top accounting theory and research. Instead of theories based on the neo-classical economics of the order of production, it argues for

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adopting paradigms and methodologies from linguistic theory and radical semiotics. These seem better suited to understanding the nature of accounting in the order of simulacrum. Finally, the analysis and conclusions from this neo-Nietzschean and neosemiotics platform should sound the alarm that today’s financial markets now operate on the basis of images reflecting images. This seems to be a stunning realization. There is nothing solid supporting the financial economy in the order of simulacrum. It floats ungrounded in hyperreality. We seem to have come a long way from the clay urns and figures of ancient Sumerian civilization, and from the double entry bookkeeping of feudal times. In some ways this genealogy of accounting is more similar to the children’s story about the king who had no clothes than it is to critiques about income smoothing and earnings management and manipulation.37 These latter suggest that accounting’s clothes are soiled, as Abraham Briloff ’s careful and detailed research over the years indicates, and that the profession must clean up its act by purging and reviving its sacred covenant with society. In contrast, the genealogical assessment of accounting indicates that today accounting has no clothes at all nor any underlying covenant. Briloff, nevertheless, seems to have sensed the hyperreal nature of accounting in the order of simulacrum when he wrote: So it is that our economic thought has evolved from thinking of real things, land, property and objects, to their intermediate stage, during the ‘Dark Ages,’ development of the coin of the realm, which, to the extent it involved precious metals, might be deemed tangible property. Then, coinciding with the late fifteenth century Renaissance and the Age of Discovery, Western economic thought proceeded to measure value in terms of abstractions, hence, double entry reckoning. This could be recognized as the seeds of the alienation which has proliferated at an exponential rate over the intervening five centuries – attaining what might be called its apogee during the twentieth century. Comes now the computer and aside from the alienation of the money managers from the ultimate owners of the shares, they have become alienated from the entities in which they have invested other people’s resources. They are counseled to ignore fundamentals and to engage in computer trading. Stepping back, even the traditional individual investor has been alienated from the entity in which he is presumed to own a stake. There was a time when he could at least go to his safety deposit box and count his stock certificates and clip the coupons from his bonds. All these are vestiges of a bygone era, along with the ‘runners on Wall Street’: almost all now is on a ‘book entry basis only’ – the ownership stake is somehow reflected in some disembodied alienated computer network.

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It is this abject detachment from reality that [permits] phantom profits . . . [in these circumstances] we have nothing but fantasy rooted in greed. Come to think of it, even the scoundrels in the ‘Emperor’s New Clothes’ saga were constrained to weave their fantasy from real gold.38 Perhaps it does not take a Baudrillard to make us see that the king has no clothes, not even soiled ones. But at least it makes us aware that accounting signs no longer represent transparently any objective, profound reality. Rather, they reflect other simulacra, which in turn are simulacra of those simulacra. And financial markets arrange for the buying and selling of these signs, which themselves are simulacra circulating in the hyperreal financial economy, while accounting standard setters, SEC officers, and academic accountants debate the merits and demerits of various accounting treatments which are only simulacra. More simulacra chasing simulacra. The vast financial economy in which trillions of dollars are traded each day is based only on an economy of signs chasing signs. It is this highly volatile and ungrounded economy of simulacra upon which today’s society is resting, while billions of people around the globe live in abject poverty and starvation under ruthless regimes and the planet’s air, water, forests, and agricultural land are egregiously polluted. Surely this is cause for concern. Accounting’s role in this badly needs understanding from a poststructuralist perspective. The genealogy of the accounting signs of income and capital presented in this chapter might be a beginning.

5

Surveillance, discipline, and punishment

We are much less Greeks than we believe. We are neither in the amphitheatre, nor on the stage, but in the panoptic machine . . . Is it surprising [then] that prisons resemble factories, schools, barracks, hospitals which all resemble prisons? (Foucault, 1979: 217, 228)

Michel Foucault (1926–1984) was heavily influenced by Nietzsche, to whom he frequently acknowledged his debt, particularly the latter’s will-to-power thesis and his genealogical method. He readily accepted ‘the Nietzschean view that the will-to-power is universal, and supported it by arguing that since the seventeenth century in the West societies have continually extended their power over the lives of their members.’1 His genealogical research into the impersonal, but pervasive apparatuses of power in society’s central institutions – hospitals, insane asylums, prisons, factories, military, schools – led him to conclude that power relations (rapports de force) go hand-in-hand with society’s relations of production (rapports de production). Unlike Nietzsche, however, while he exposed the pervasiveness of these apparatuses (‘biopower’ as he called them) and described how they render the individual subject submissive, how they bring about the subjection of bodies, and how they achieve control of the population, he did not advocate the Nietzschean enterprise of recovering the Dionysian side of life rather than choosing merely to submit to these impersonal relations of power. At best, he concluded, all the individual can do is to transgress biopower. More specifically, Foucault’s genealogical investigation involved documenting the appearance in the eighteenth and nineteenth centuries of the so-called human sciences. These discursive formations, or regimes of truth, as he also referred to them, treat the human subject as an object to be studied, examined, diagnosed, and corrected. While the conventional perspective sees them as purgatives relied on to cure the non-normal, Foucault sees them more in the nature of noxients since their power effects inflict surveillance, punishment, discipline, and normalization on the individual. Behind their canopy of a seemingly scientific, objective neutrality lies ‘instinct,

Surveillance, discipline, and punishment 79 passion, the inquisitioner’s devotion, cruel subtlety, and malice . . . the violence of a position that sides against those who are happy in their ignorance,’ and he hoped that his genealogies – historical narratives of their appearance and development – would reveal ‘that all [such] knowledge rests on injustice . . . and that the instinct for knowledge is malicious . . . it creates a progressive enslavement to its instinctive violence.’2 Foucault argued that such knowledge became power in that it was used as a blueprint to discipline individuals who seemed to deviate from what the knowledge deemed to be normal. In this, he supplemented Nietzche’s willto-power notion with the idea of the will-to-knowledge and combined the two into his famous neologism ‘power/knowledge’ (pouvoir/savoir).3 Power/ knowledge is the will to know the true nature of what it means to be a normal human being and to use that knowledge to correct individuals along the lines of that knowing. Thus, Foucault saw the appearance of various institutions including the medical clinic, the insane asylum, the military academy, Victorian age sexuality, the factory, and the prison as a result of human power struggles; not the discoveries of some timeless, primodial or pure presence that always existed in dazzling pristine form waiting to be discovered so that society could progress. His genealogies uncovered their origins, traced their descent to the present, and established their pedigrees as the handiwork of humans during periods of conflict, dissention, happenstance, and error. This chapter draws on these ideas to look at accounting as a disciplinary formation and to trace some of the ruptures and transformations in this particular disciplinary formation from medieval times, to the early days of the Industrial Revolution, to the factory of the early 1900s, to the single industry national firm, to the appearance of the global, diversified multinational firm, and finally, to the near perfection of disciplinary controls in a global corporation specializing in the health care industry. Thus, it presents a genealogy, albeit an idiosyncratic one, of the descent of accounting regimes of truth over the past six centuries. It offers a description of the role of double entry accounting in the life of the medieval merchant, followed by an account of the development of Josiah Wedgwood’s comprehensive management control system in the early days of the Industrial Revolution, and it then recasts the famous account of the design of the Relay Assembly Test Room of the Western Electric Company’s Hawthorne Works, not as a miracle of human relations, but rather as a paragon of a disciplinary formation embedded in a carceral-like organization. This is followed in succession by descriptions of accounting regimes of truth at Empire Glass (circa 1950s), ITT (circa 1970s), and Johnson & Johnson (circa 1990s). In doing so, this chapter relies heavily on some of the major ideas in Foucault’s most famous and seminal book Discipline and Punish: The Birth of the Prison. The book argues that the economic take-off of the West, which

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featured the rise and dominance of the capitalistic mode of accumulation of wealth, was accompanied by the appearance of a subtle, calculative new technology of subjection which was universally administered for the accumulation of men and women: In fact, the two processes – the accumulation of men and the accumulation of capital – cannot be separated; it would not have been possible to solve the problem of the accumulation of men without the growth of an apparatus of production capable of both sustaining them and using them; conversely, the techniques that made the cumulative multiplicity of men useful accelerated the accumulation of capital.4 Foucault begins Discipline and Punish with a vivid and gory description of a disciplinary formation in the eighteenth century – the amend honorable – a public execution in France: On 2 March 1757, Damien the regicide was condemned to make the amende honorable before the main door of the Church of Paris, where he was to be ‘taken and conveyed in a cart, wearing nothing but a shirt, holding a torch of burning wax weighing two pounds’; then, in the said cart, to the Place de Grève, where, on a scaffold that will be erected there, the flesh will be torn from his breasts, arms, thighs and calves with red-hot pincers, his right hand, holding the knife with which he committed the said parricide, burnt with sulphur, and, on those places where the flesh will be torn away, poured molten lead, boiling oil, burning resin, wax and sulphur melted together and then his body drawn and quartered by four horses and his limbs and body consumed by fire, reduced to ashes and his ashes thrown to the winds.5 The role of double entry accounting in the Middle Ages in Venice bears some resemblance to the amende honorable, but in a much less dramatic and more quiet way. As with Damien, the aim of disciplinary power/knowledge was to save the merchant’s soul, by making amends for his usury, and deliver it to God in heaven. The descent of accounting in double entry form has been traced back to ancient times in Mesopotamia, Babylon, and Egypt, and a rudimentary form is said to have existed in Roman times. By the mid-fourteenth century it had been widely adopted by many merchants and bankers in Italy, especially around Venice and in nearby states and countries and in 1494, Luca Pacioli had committed the ‘method of Venice’ to paper.6 Historical documents also show that in the mid-sixteenth century double entry came into use by some merchants and estates in England, alongside the widely used ‘charge and discharge’ form of accounting. And, today, it is ubiquitous around the globe with pretty much the same principles and form as in Pacioli’s treatise.

Surveillance, discipline, and punishment 81 As a technique, double entry accounting has a long descent and a distinguished pedigree. Its role as an important disciplinary regime in Pacioli’s time, however, has by and large gone unrecognized. The ‘good’ merchant, Pacioli insisted, needs a reputation for integrity and substance. Such a rank, however, cannot be bestowed, but must be earned in virtue of the merchant’s faith in God and his ability to please God by living an orderly and God-fearing life. A vital part of this is ‘to be a good accountant and sharp bookkeeper and to arrive at this . . . we have regular rules and canons necessary to each operation [transaction] which any diligent and careful reader can understand.’7 With his business affairs thus arranged in good order, the merchant would find peace of mind and freedom from mental stress. Pacioli then enjoins the merchant that, while making a lawful and fair enough profit is important, it is also crucial to please God. Thus, the merchant ‘must always commence his affairs in the name of God, whose name must appear at the beginning of every manuscript, always bearing his Holy Name in mind.’8 Pacioli provides examples such as ‘In the name of God on the 8th day of November 1493, Venice. The following is the inventory of myself of Venice, of the Street of the Apostles’ and ‘Therefore, in the name of God you shall begin to put in your Journal the first item of your Inventory.’9 Renaissance ledgers opened with some such exhortium. Each ledger page included a header like ‘Praise God’ or ‘Christ be with you all.’ Many were much more elaborate. For example, one fourteenth-century Florentine company’s ledger started: ‘In the name of God and the blessed Virgin Mother Madonna St Mary, and of St John the Baptist and the Evangelist and all the Saints, male or female, of Paradise, that by their holy pity and mercy they will grant us grace for a holy, long and good life, with growing honour and profit, and the salvation of our spirit and body.’10 (This merchant seems to have been covering all bases.) Such evocations created the appearance that the merchant pursued profits in an ethical and spiritually sensitive manner. To make a profit was doing the Prophet’s work and a sign that one was a good Christian person and headed for heaven. This rhetorical side of accounting was vital as a means of justifying the merchant’s occupation and to impress others in a favourable way. Many scholars have drawn attention to the prevailing cultural attitude at the time which saw merchants as parasites preying on the community to purvey unearned and undeserved gains.11 In fact, the most prevalent view matched Dante’s depiction of the merchant as a loathsome serpent with a scorpion’s tail and rapacious claws, all the while pretending outwardly to be kind, honest, and God fearing. And the merchant’s business was known pejoratively as the ‘Jewish Profession’ as typified by Shylock in Shakespeare’s The Merchant of Venice. The merchant’s activities were widely regarded as avaricious and as a sin against the cardinal virtues of justice and the theological

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dictum to love one’s fellow man. Profiteering put the soul in mortal danger. The merchant, rebuked in public during church services and in private in the confessional, desperately needed some way to account for his life in ways that would convince Church, aristocracy, the public at large and, indeed, himself, that he was a person of honesty, integrity, and honour. In a way that bears some similarities to Damien’s public execution, which aimed to destroy his body but save his soul, double entry accounting was seen as a way to save the merchant’s soul by bringing order and honesty into the merchant’s sinful life. As such, accounting was an important disciplinary formation at the time. It aimed at turning the avaricious, sinful merchant into a normal, God fearing Christian, deserving of heaven. As the Middle Ages gave way to the Industrial Revolution, the secularization of society gained momentum and the nature of accounting as a disciplinary formation was to undergo a radical transformation, this time paralleling the appearance and subsequent development of techniques in the treatment of criminals, which are governed by the general principles of surveillance, discipline, and control.

The carceral society One of Foucault’s great insights was his observation that Western society had experienced a radical shift, concomitant with the appearance of the Industrial Revolution, from a traditional social order to a disciplinary prisonlike society featuring surveillance, discipline, and punishment: Under the surface of images, one invests bodies in depth; behind the great abstraction of exchange, there continues the meticulous, concrete training of useful forces; the circuits of communication are the supports of an accumulation and a centralization of knowledge; the play of signs defines the anchorage’s of power; it is not that the beautiful totality of the individual is amputated, repressed, altered by our social order, it is rather that the individual is carefully fabricated in it, according to a whole technique of forces and bodies.12 So instead of the Enlightenment belief in a teleological progression to ultimate truths, utopia, and freedom, Foucault’s genealogies pointed to dystopia and unfreedom. The hope was that critical engagement with the present might lead to wholesale transgression of the present order of words and things and open up spaces for a different kind of social order. The idea of a society-wide disciplinary, prison-like modality of power can be seen as a supplement to the idea of a Marxist capitalist mode of production driving the social and political order. (Supplement is used here in its ambiguous sense as either something added to something that is already complete, or something that makes up for a deficiency, or something that

Surveillance, discipline, and punishment 83 substitutes for something else.) It is not only economic conditions that profoundly influence social and political life, but also carceral-like institutions. From this perspective – and this is a crucial poststructuralist point – neither process is either infrastructure nor superstructure; but both play a vital role in social and political life. Against this general background, the principles of discipline and control organizing the prison-like process are outlined next. Principles of discipline and control The principles which follow were extracted and systematized from Foucault’s celebrated book, Discipline & Punish: The Birth of the Prison, which detailed the emergence from the classical era of an all-encompassing disciplinary drive that became ubiquitous during the modern epoch. Three general principles underlie the way the disciplinary society functions: the principle of enclosure, the principle of the efficient body, and the principle of the disciplined mind. These achieve the maximum effect within the architectural arrangements of the panopticon.13 Discipline proceeds initially by the careful distribution of individuals over general purpose, self-contained places of confinement. These include monasteries, poorhouses, prisons, schools, universities, factories, hospitals, office buildings, military bases, asylums, and so on. Once accumulated in the general enclosure, the monk, the pauper, the criminal, the pupil, the scholar, the worker, the sick, the clerk, the soldier, or the mentally deranged can be controlled in a sheltered, monotonous disciplinary state. General enclosure by itself, however, is not sufficient to achieve disciplinary spaces. It is also necessary to partition the enclosure into smaller, self-contained locations, partitions or cells in which it becomes possible to know, master, and make useful each and every individual. (This cellular principle can be traced back to the monastery of the classical era where each monk had his own cell.) Partitioning also makes it possible to effect the rule of functional sites, whereby each location is defined in terms of the specific, regular, useful function to be performed therein. In a factory, for example, each workstation is assigned a particular task. A university library contains various rooms, each with a particular function: reserve reading, periodicals, archives, and study cubicles. Partitions are also arranged horizontally and vertically. In the first instance, each is serialized within the general enclosure in a perfectly legible fashion and its usefulness is identified in relation to all the other partitions in the functional chain. In a factory, work moves from one workstation to another in serial fashion. Similarly, in a university, students are shunted from one building to another and from one class to another. Each partition is also defined in terms of the rank it occupies in the hierarchy and by the space that separates it from the partitions immediately above and below it. The

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result is the formation of a relatively permanent grid of functional, useful, serialized, and ranked spaces. The crucial consequence is that each individual becomes defined by the physical space he or she occupies. When put into practice, the cellular principle produces a living picture, a tableau vivant, of useful spaces which is both real and ideal. It is real in the sense that it governs the disposition of material objects (machinery, inventory, furniture, cabinets, etc.) and ideal in that it defines the function, serial relationship, and rank of each space. With each space having a fixed identity, individuals can be distributed in and circulated around a network of real and ideal locations. The spaces retain their identity, while the individual is identified by the space he or she occupies. This art of distribution with its cellular power transforms a mass of individuals, otherwise confused, useless, or dangerous, into an orderly assembly of live subjects arranged in a purposeful useful grid in which the individual is dominated by the partition he or she occupies. The enclosure principle disciplines space and paves the way for the efficient body principle, which dictates the individual’s time within any specific partition. The efficient body principle works according to three practices: the timetable, which programmes the individual; the manoeuvre, which defines the precise timing of body movements; and dressage which produces automatic responses to signals. The timetable has a long heritage as a disciplinary practice. Religious orders such as the monasteries of the Middle Ages employed it to great advantage to establish a meticulous timetabling of the monk’s daily life. Vespers, lessons, Bible study, chores, and contemplation time were ritualistically scheduled to ensure regular cycles of devout activity. The timetable later came into use in schools, hospitals, poorhouses, prisons, and workshops, where it established rhythms of actions, regulated cycles of repetition, and effected a clockwork repetition of useful activities. Since time was now measured and paid for in the factory, it ‘must also be a time without impurities or defects! A time of good quality, throughout which the body is constantly applied to its exercise.’14 The individual was enmeshed in a constraining chain of detailed minute actions. The rules of one factory, for example, required all personnel to start the day by washing their hands, thanking God for their work, and making the sign of the cross. Such pious exercises gave legitimacy to the timetable. Sanctions were invoked for being 15 minutes late for work, for talking or joking with co-workers, or for leaving one’s workstation. Even during meal breaks, no conversation was permitted that might distract workers from their duties. Every attempt was made to ‘assure the quality of time used: constant supervision, the pressures of supervisor, the elimination of anything that might disturb or distract: it is a question of constituting a totally useful time.’15 Time penetrated the worker’s body, rendering it docile, obedient, and efficient.

Surveillance, discipline, and punishment 85 The manoeuvre, which also became widespread in early modernity, emerged as a technique to intensify time even further by articulating the body with the work object. The manoeuvre links the individual’s body and the pen, rifle, wagon, machine, or tool into a man–object–machine by specifying the precise way to perform the task, as well as the exact timing required to complete the job. In schools, for example, the correct technique for handwriting was spelled out in detail. The position of the feet and arms, the movement of the hand, fingers, eyes, elbow, and even the chin were rigorously prescribed. Each movement was assigned a direction, a range, and a duration within a prescribed sequence until handwriting resembled microgymnastics. The result was a systematic and meticulous meshing of the body with the pen. Along similar lines, the French Army prescribed the precise body movements for various manoeuvres such as marching and shooting. In the sixteenth century, the orders simply called for the troops to march in file, raising their feet in unison to the rhythm of the drum. In contrast, 100 years later, the regulations detailed four different sorts of marching steps: short, ordinary, double, and oblique. The oblique step had to be 18 inches, measured from one heel to the other, and had to take slightly longer than one second. The instructions for firing fusils contained precise details for various stages of preparing, aiming, and shooting. The user-friendly instructions and software of today’s ubiquitous personal computer, although more subtle, can be seen as a present-day manoeuvre, tying the individual to the computer keyboard and screen. Dressage also emerged as a highly effective mechanism for disciplining time. While dressage today refers to the habitual training of an animal such as a horse in obedience and comportment, it was applied to human beings in schools, the military, and the factory at the beginning of the modern era. In the case of the disciplined soldier, a hand gesture or a whistle from the officer called for immediate and blind obedience to carry out a specific action. The least delay was considered a crime. And in the school, at a particular signal from the teacher (a bell ring, a clap of the hand, a nod, or a glance), the student became instantly attentive to its implicit but unambiguous command – recite the catechism, open the workbook, put down the pen, and so on. Today, the factory whistle, the prison bell, and the coach’s signal give similar messages to workers, prisoners, and athletes. The signal elicits a reflexive response from the disciplined body. Dressage is not applied as a celebrated triumphant power, but works in a quiet modest way, and is exercised gingerly so as not to weigh too heavily on the individual. It places the body in a world of signals, each with a moral imperative and each requiring instantaneous response. It also works on groups of individuals, such as workers on an assembly line, prisoners in a chain gang, or athletes on a team, linking them together to multiply their usefulness, as with a team of horses or a pack of sled dogs.

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The intensive and exhaustive use of time by means of timetables, manoeuvres, and dressage received the warm endorsement of society. In premodern times, the principle of non-idleness prevailed and to waste time was deemed economic dishonesty in the eyes of one’s fellows and a mortal sin; God counted time and man paid for it. So the secularization of these practices in modernity came easily. The efficient body principle became an important strand in society’s disciplinary carceral fabric. Time penetrated the individual’s body, rendering it constantly useful. While the enclosure principle organized and controlled space, and the efficient body principle organized time, the correct comportment principle emerged to hold sway over the mind. It works according to three mechanisms: hierarchical surveillance, normalizing sanctions, and the examination. Hierarchical surveillance refers to a disciplinary practice which spread across the social landscape in the late eighteenth and early nineteenth centuries. Previously, architecture was concerned with designing buildings which permitted their occupants to look out on a spectacular view, or to be seen for their splendour, or to protect the inhabitants from attack. The new configuration, in contrast, called for a geometry of enclosure that permitted the establishment of a constant gaze which looked in on each of the inhabitants. Hospitals, schools, prisons, poorhouses, and factories adopted similar architecture to become human observatories. The geometry of the military camp served as an ideal. An artificial, shortlived city populated by armed men, the military camp required intense disciplinary power. The officers’ tents looked on to the main gate and the arms depot; the captains’ tents faced rows of tents of their own companies; and the noncommissioned officers’ tents fronted the lanes of the soldiers’ tents. This layout produced a relay of observation and information with no missing links. It brought into play an all-encompassing network of hierarchical surveillance whose constant gaze disciplined as it watched. The emerging factories also called for intensive discipline and control. Previously, the master in the workshop worked alongside the apprentices and helpers, keeping a close eye on them. And government inspectors checked occasionally to see that laws and regulations were followed. But, as the size of the work force, the complexity of the work flow, and the sophistication of machinery grew significantly, a different kind of surveillance was necessary. This gave rise to a new cadre of supervision composed of overseers, supervisors, and clerks. While they also kept a close watch over inventories, machines, tools, and quality of output, their major function was to provide an intense and constant surveillance on each worker’s skill, zeal, promptness, and comportment on the job. Thus, a new regime of surveillance came into existence alongside the physical system of production. Although running parallel to the actual work flow of machines, inventories, locations, and workers, it remained separate from the latter. This cadre of watchers, who looked on from raised stands

Surveillance, discipline, and punishment 87 over the heads of the workers (thus the origin of the overhead account), treated the employees with severity and contempt. Hierarchical surveillance worked as an uninterrupted, anonymous, automatic, and indiscreet disciplinary gaze which played out over the entire organization. In order to make their presence felt more deeply, incumbents in the supervisory hierarchy relied on systems of normalizing sanctions, that is, meting out various rewards and punishments in accordance with a set of arbitrary rules (like the confessional in the Catholic Church). These rules and sanctions were created without reference to any philosophical ideals; they constituted, in effect, a private system of justice which operated outside the state’s legal judicial system. Together, hierarchical surveillance and normalizing sanctions functioned as a miniature penal mechanism. The practice of normalizing sanctions spread throughout society in the eighteenth and nineteenth centuries. Schools, military establishments, prisons, hospitals, factories, state bureaucracies, and so on, all developed their private systems of justice. Regulations covered timeliness (lateness, absences, task interruptions), attentiveness (negligence, laziness, lack of zeal), comportment (disobedience, impudence, rudeness), speaking (idle chitchat, insolence, rudeness), appearance (dress, cleanliness, gestures, posture), and sexuality (lewdness, impurity, indecency). Even the smallest departure from correct behaviour, or not measuring up to a certain required level, became the basis for a subtle range of penalties, including petty humiliation (standing in the corner or wearing a dunce cap), minor deprivations (no recess), or light corporal punishment (a tweak of the nose). The individual was enmeshed in a network of disciplining sanctions. Sanctions were not meted out so much for expatiation or repentance as to induce the individual to conform with established norms of correct behaviour. They were designed to motivate the individual to strive for a higher level of competence, as in the case of punishment in the form of repetitive, intensified learning exercises. They functioned to reduce the gap between actual behaviour and the norms. Offences became opportunities for correcting and training. The individual became constantly available for normalization. The use of penalties was to be avoided whenever possible. The teacher, master, jailer, overseer, or reformer tried to dish out positive recompenses much more frequently than painful ones. Favouring rewards over penalties followed the principle that a deviant individual could be motivated more by the desire to get rewarded in the same way as were the diligent ones, than they could by the fear of punishment. The positive use of sanctions was much preferred. Many institutions devised intricate regimes based on this principle. In the Christian Brothers’ schools during the eighteenth century, for example, the brothers gave out merit points to students for correct catechism answers. These points could be inventoried and used later to gain exemptions for penances imposed in the future. And military schools in France

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introduced sanctioning systems of colour-coded epaulettes. A silver epaulette signalled very good; a red silk one, good; a red wool one, mediocre; and a brown wool one, bad. No epaulette, but a sackcloth jacket, identified shameful cadets. Moreover, the silver epaulette holder could make military arrests and mete out punishments to other cadets, including solitary confinement. These techniques of quiet sanctioning induced all but the most recalcitrant students and cadets to strive constantly for a better ranking until reaching the top.16 Along similar lines, in the early 1800s Robert Owen, the famous utopian social reformer, replaced whippings and strappings by overseers in his experimental Scottish cotton mill with a silent system of ranking the daily conduct of each worker.17 He hung a four-coloured small block of wood (called the telegraph or silent monitor) over the head of each worker whereby black denoted bad; blue, indifferent; yellow, good; and white, excellent. Overseers turned the block each morning according to their judgement of the worker’s conduct the previous day. By simply walking through the factory, the telegraph informed Owen of each worker’s general diligence. Such judicious mixtures of gratifying and negative sanctions became widespread as an integral part of repeating cycles of knowing and correcting the individual. A carefully managed mixture of sanctions worked automatically, silently, and without physical force to induce individuals to want to correct themselves and conform to standards of comportment and improvement. Quiet sanctioning produced self-normalization. So that sanctioning appeared objective, masters, overseers, sergeants, wardens, and so on, came to rely on examinations. Previously, the scholar or apprentice worked alongside the master and after a long period of tutoring, presented a masterwork for examination. If the master deemed it worthy, the novice became a fully fledged member of the academic community or guild. This intimate ritual changed when the examination emerged as a constant and pervasive procedure in schools, workshops, prisons, military establishments, hospitals, asylums, and professions. The examination combined with normalizing sanctions was an integral part of the principle of correct comportment. The new examination process featured a system for testing, interrogating, and inspecting each and every individual. The Christian Brothers, for example, examined their pupils every day of the school week on a particular subject and twice on Wednesdays. They also administered a monthly examination to select students deserving to be examined by the government inspector. Examination results guided and legitimated the sanctioning process. The student had become an object offered up for compulsory visibility and for perpetual examination and sanctioning. An important part of the examinatory process was the writing and numerical grading of each individual. The keepers (teachers, sergeants, physicians, psychiatrists, wardens, supervisors, etc.) administered the examination,

Surveillance, discipline, and punishment 89 assigned a numerical grade, and made out a written report, thus accounting for the individual. Moreover, each individual became written in a permanent archive of records, results, files, report cards, and so on. Collectively, this array of documentation formed a grand register and a total field of comparison, thus making it possible to calculate averages, create categories, designate classifications, and establish norms and stages of development. Anyone and everyone could be defined in terms of normalcy and located at a particular stage of development. Compulsory objectification and perpetual examination became a natural part of the social fabric. Embedded in a cumulative system of observation, examination, writing, and grading, the individual had no place to hide. The records and archives also made it possible for the various human sciences to accumulate large and ever-growing fields of knowledge, each of which made the human being knowable in terms of the special attributes, characteristics, and capabilities measured by the examinations. Moreover, any individual could be treated by the expert professional of a particular discipline as a case study, an object to be measured, described, compared, and judged according to the norms and averages of the general population. Knowledge about the individual became power, power over the very individuals from whom it was extracted. The individual existed as a thing to be corrected, normalized, and treated in accordance with the discursive practices of that particular discipline. Hierarchical surveillance, normalizing sanctions, and the examination were most effective when applied within the panopticon. Panopticism refers to the unique architecture of Jeremy Bentham’s (1748–1831) renowned panoptic prison. The geometry of the prison called for a central tower in the middle of a peripheral-ringed building which was divided into solitary cells, each one facing the tower. Every cell had two large windows, one at the rear to light up the cell from the outside, and one in the front, facing the tower. Thus, the prisoner stood out against the backlighting of the peripheral ring while the sidewalls prevented any visual contact with fellow prisoners. The cells acted as tiny theatres, putting each inmate on the stage, alone and individualized, but constantly visible from the central tower. Unlike the dungeon, which hid prisoners in a dark hold, the panopticon brought them out into the light, where they could be observed and corrected. Panopticism also called for a constantly visible but unverifiable gaze. The central tower, always clearly in sight from each cell, was designed so that the occupant could never tell whether or not someone in the tower was gazing in. This was accomplished by installing venetian and zigzag openings so that any small noise, movement, or ray of light in the tower seemed to indicate the watcher’s presence. A petty clerk, a janitor, an inspector, a visitor, or even a tourist moving in the tower was enough to instill in the occupant’s mind the feeling of being constantly watched. Under the power of an

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all-knowing, all-seeing gaze, the prisoner’s anxiety rose, making him or her amenable to normalizing sanctions and prescriptions. The panopticon design had further advantages. After various treatments of correction had been administered to the prisoner, their effects could be readily observed. Criminologists discreetly experimented with different punishments, work regimens, and drugs. Moreover, wardens and administrators could easily monitor the guards and watch correction workers with an eye to devising more efficient methods. The panopticon, in its ideal form, was a highly efficient and effective laboratory of power. It could be put into place in schools and military encampments and, importantly, in factories and business enterprises. Electronic surveillance in the workplace can be seen as a postmodern electronic panopticon with its constant watching. With the advent of the Industrial Revolution, capitalism, and the carceral archipelago, the role of management accounting and control was to take on an entirely different role than that of disciplining the merchant and saving his soul from the cardinal sin of usury. The Christian discourse regarding usury had undergone a series of changes in the ensuing years until in the eighteenth century it no longer counted for much.18 By that time, profit making in any form (within the law) was, following Adam Smith, the central bonding agent of society. And in the mid-eighteenth century, factories began to take on a prison-like disciplinary regime in which double entry accounting played a key role. A prototype of this was Josiah Wedgwood’s pottery which he named ‘Etruria.’

Wedgwood19 Wedgwood started his pottery operation in 1759 with only a couple of leased sheds, two kilns, a small amount of financial backing, and one employee – his cousin. The operation grew rapidly under the traditional, feudal guild system with a dozen men and boys, a rudimentary division of tasks, and a relaxed master–apprentice hierarchy. There were no formal rules and output consisted of a small quantity of undistinguished pottery sold to local gentry. In a few short years, Wedgwood’s pottery was to undergo a radical transformation and it would serve as a prototype for large-scale, serial production of almost any commodity. Wedgwood, a small, lame, God-fearing man, harboured greater ambitions than to remain a small potbank. He foresaw a golden opportunity in the rapidly growing demand for fine pottery precipitated by the general increase in the English economy, the spectacular rise in the populace’s standard of living, the rapid growth in tea and coffee drinking habits, and the penchant in the colonies for imported fineries from the motherland. Wedgwood reckoned he could monopolize this burgeoning market by manufacturing large quantities of very high quality earthenware and selling it at a price lower than his competitors. After extensive experimentation, he

Surveillance, discipline, and punishment 91 developed the formulae for what was to become his famous label, the Queen’s Ware line, so named because it graced the table of the Queen of England. Armed with a product of superior quality suitable for the upper class, he sensed that if he could mass produce it, he could cash in handsomely on the rapidly growing bourgoise class market. Wedgwood never forgot that he was in business to make money. Profit making, no longer a sin, had become, thanks in large part to Adam Smith’s treatise on the wealth of nations, almost a religion. Sales soared and Wedgwood’s pottery became a huge commercial success. In order to keep up with demand, however, Wedgwood had to change his production system radically. Amending the guild system, he built his dream factory, Etruria, along the lines of his friend John Bolton’s highly efficient, assembly-line-like, metal manufacturing operation. Wedgwood now had his dream factory, a reliable transportation system, a unique product, a brilliant competitive strategy, and a solid marketing operation run by his partner in London. But one more stumbling block remained: how to turn an obstinate, slovenly, intemperate band of employees into a disciplined and productive work force. The English working class at the time consisted of peasants and serfs who had been driven off the farms and pressed into unfamiliar non-agricultural work. On the whole, they tended to be illiterate, ignorant, and lazy. Drinking and carousing on the job was the norm. Work habits were slipshod and wasteful. As was their custom, they would work for a few days and then take off with their earnings for long bouts of debauchery and gambling. They also participated in the frequent fetes, fairs, and holy days which featured cockfighting, bullbaiting, and visits to brothels. Every Monday was a Saint Monday, a holiday for merrymaking, gambling, drunkenness, gluttony, and carousing. All of this was a source of great distress for the ambitious and religious Wedgwood. Something was urgently needed to tame and discipline his recalcitrant workforce. Wedgwood’s run of good fortune continued. John Wesley, the founder of the Methodist movement (a very severe brand of Protestantism) had just moved to Staffordshire. He and Wedgwood became fast friends. Wesley’s inspired preaching soon attracted larger and larger congregations. He specifically railed at the working class, chastising them that their savage, drunken, licentious, and gambling ways were sinful in the eyes of God, exhorting them to give up their evil habits in favour of a pious life, and warning them that unless they uplifted themselves spiritually, they would never reach the kingdom of heaven where they could be with Christ for eternity. Over time, Wesley’s influence proved remarkable. Little by little, Wedgwood’s workers began to give up their supposedly egregious vices to live sober and respectable lives. At the same time, Wedgwood instituted a series of controls at the factory. He wrote a book of potter’s instructions and had it printed. It described in

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fine detail the specific rules that were to be followed for each task in the production process. Such meticulous spelling out of duties and procedures was essential to making quality pottery. A little dirt, a marred piece of clay, some small error at any stage of production spoiled the entire batch. The instructions also contained detailed descriptions of proper decorum while at work. There was to be no drinking, gambling, swearing, or debauchery at Etruria. In order that there be no mistake about the instructions and rules, Wedgwood spelled out a system of stiff fines for specific misdemeanours and disobedience. For example, a worker could lose 10 per cent of his weekly wages for bringing ale into the factory, for writing obscenities on the wall, or for gambling on the premises. Habitual violators and anyone abusing an overlooker were sacked. Wedgwood also kept an eye out for any natural leaders in the workforce and the moment they challenged him or his potter’s instructions, he got rid of them. However, the pottery soon grew too large for Wedgwood to keep a personal watch over the workforce. He solved this problem by installing a layer of overseers, clerks, and supervisors to make sure that his instructions and rules were carried out to the letter. Wedgwood also designed a career structure whereby the more obedient and better workers could advance to more highly skilled jobs and subsequently join the ranks of supervisors. (In fact, some historians credit Wedgwood with inventing hierarchical supervision and establishing the traditions of the overseer or overhead cadre.) The idea of such supervision proved so successful it was soon copied in other potteries and industries. Wedgwood’s next disciplinary mechanism was a primitive clocking-in system. Employees were issued tickets with their name on them. They put these in a box when reporting for work in the morning and when returning after lunch. Overseers merely recorded times of arrival on a board, checked the box, and investigated any absences. This was an early instance of management by exception. Wedgwood followed up his instructions in person. He could be found almost any day stumping through his five sheds telling, showing, and scolding his workers. He was well known for raging over a speck of dirt, smashing sub-standard batches of pottery, and writing on the workbenches in chalk, ‘This won’t do for Josiah Wedgwood.’ He also constantly harassed his clerks and overseers to be diligent in the extreme when watching the workers, making sure that no dirt got into the clay and that the potters followed his instructions to the letter. Unlike most owners at the time, Wedgwood also paid close attention to his employees’ quality of life at home as well as on the job. He made sure that his shopfloor conditions were clean, dust-free, and well ventilated, and so better than other Staffordshire manufactories. He also offered a wage scale that was the highest in the area. He went out of his way to encourage and praise those individuals who worked hard and made a good effort, while

Surveillance, discipline, and punishment 93 chastising them for shoddy output, thus maintaining a judicious balance between sticks and carrots. And he also took a keen personal interest in the spirituality and health of his employees and their families. Wedgwood’s system of discipline and surveillance paid handsomely. Although he demanded more from his employees, worked them for longer hours, and supervised them more closely than was usual in other potbanks, the workers believed him to be a good employer. Wedgwood’s measures were not purely altruistic. He asked and got much more from his employees, who worked a great deal more diligently and productively than did workers in competitive firms. Competitors frequently tried unsuccessfully to hire away his best employees, not least because they hoped to steal Wedgwood’s secret formulae for fine pottery. In mid-1772, however, something went wrong at Etruria. That year a major recession swept through Europe, causing sales of fine pottery to plummet. Wedgwood believed if he could calculate the costs for his various pottery products, it would help his firm survive the depression without his having to lay off any of his carefully trained workforce. Yet something was amiss. Wedgwood had worked out in great detail the costs of overseers, clerks, incidentals, and other indirect expenses and estimated their loading on specific products. He then meticulously developed the cost for each product down to a halfpenny. Next, he calculated the profit margins for each piece and every batch of pottery, using selling prices. Yet, in the aggregate, they did not agree with the overall costs and profits included in the financial accounting reports prepared by his head clerk. He went over his calculations again and again until he convinced himself they were accurate. For some time Wedgwood had harboured an uneasy feeling about the head clerk’s propriety. He was suspicious, for instance, about the cash accounting. It always arrived a couple of months late, yet came up spot on whenever the head clerk produced a bank reconciliation and cash report. He decided to launch an inquiry into the affairs of the counting house. His hunch proved accurate. The difference in Wedgwood’s figures was not due to any miscalculations on his part. The head clerk, in cahoots with his underlings, had been stealing cash and fixing the books for some time. But that was not all. A detailed investigation revealed a distressing state of affairs. As Wedgwood described the situation in a letter to his London marketing partner, Bentley: ‘The Plan of our House in Newport Street is rather unfavourable to virtue and good order in young men,’ the housekeeper was ‘frolicking with the cashier,’ the head clerk was ‘ill with the foul disease’ and had ‘long been in a course of extravagance and dissipation far beyond anything he has from us [in a lawful way] would be able to support.’ Embezzlement, blackmail, extravagance, and debauchery were the order of the day. Wedgwood acted without hesitation. He dismissed the head clerk, replacing him with a trusted employee from his own office. He sacked the cashier

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and most of the other employees. He set up a new system of weekly cash reporting and bank reconciliations. He put into effect a policy that customers’ accounts must be settled weekly and that all receipts be taken to Bentley for depositing. He soon ‘put things to right in the counting house.’ As the depression eased and sales recovered, Wedgwood continued to use his new management accounting system to maximum advantage as a powerful tool in managing his business. Cost accounting and control proved an essential ingredient in Wedgwood’s success in the subsequent period of high demand, rising prices, and spectacular profits. The man who single-handedly invented his own detailed cost accounting became a legend in his time for this and other innovations in the techniques of management control. In many respects, Etruria’s design accorded closely to the principles of discipline, surveillance, and punishment. The pottery’s general enclosure was portioned into five cellular-like, self-contained locations: the raw material shed at one end on the canal; the pottery wheels, equipment, and sheds in the middle; kilns, and packing, and shipping at the other end, also on the canal – and so handy for shipping to London on the new canal system (for which Wedgwood had petitioned Parliament). Each building was a useful space and linked serially with the others. The previously undisciplined workforce was now enclosed in an orderly assembly of workers arranged in a purposeful useful grid in which each one was dominated by the partition he occupied. Etruria also brought into effect the efficient body principle. This is evidenced in the clocking-in system with its time-tickets and sanctions for lateness or absenteeism. Wedgwood’s potter’s instructions book acted as a manoeuvre in that it clearly defined each task in the production chain. And Wedgwood’s routine tours of the buildings served as a form of dressage, in that the least diversion from the potter’s instructions received an immediate sanction and elicited a reflexive corrective response from the disciplined worker. Etruria can also be seen as prototypical of the correct compartment principle. In the first instance, Wedgwood not only embodied hierarchical surveillance himself, but he also installed a layer of overseers who kept a close eye on the workers. He also operated a detailed system of normalizing sanctions that included fines and harassment for improper task completion or impropriety on the job. But he tempered this with positive inducements such as clean working conditions, higher than the going rate of pay, promotion to the overseer positions for exemplary work habits, and a genuine concern for the quality of his workers’ life at home. With this judicious mixture of gratifying and negative sanctions, he maintained a delicate balance between stick and carrot so as not to put too much pressure on the individual worker. And while he had no need of relying on a system of examinations, John Wesley’s preaching and insistence on church attendance served as an examination of sorts. Altogether, these repeated cycles of knowing and correcting induced the workers to correct themselves and to conform to standards of

Surveillance, discipline, and punishment 95 comportment and improvement at work and at home. Self-normalization was the order of the day. In sum, Josiah Wedgwood’s system of surveillance, discipline, and punishment effected a panoptic-like physical, social, and mental architecture on Etruria. His elaborate and detailed accounting system played a vital role in his prison-like operation. While the traditional view is that Etruria was a remarkable success story, the poststructural perspective is much less sanguine. It exposes Wedgwood’s management control system of surveillance, discipline, and punishment as the precursor of techniques which were refined and extended during the next two centuries, especially with the advent of the scientific management movement founded by Frederick Taylor in the early part of the twentieth century. Scientific management treated the worker like a machine, meshing with the smallest mechanical details of the job. ‘The growth of a capitalist economy gave rise to the specific modality of disciplinary power, whose general formulas, techniques of submitting forces and bodies, in short, political anatomy,’ could be operated in the most diverse political regimes, apparatuses, or institutions.20 The relay test assembly room in the Hawthorne Works of the Western Electric Company in Chicago almost perfected the principles of surveillance, discipline, and punishment. When seen from this perspective, a very different picture emerges from that told by followers of the human relations movement.

Hawthorne Works21 Between 1924 and 1927, management at the Hawthorne Works, already noted for being ‘progressive,’ were looking for new ways to increase wage labour productivity, in addition to simply speeding up production lines and instituting piece-work wage schemes. In previous years they had put into practice Tayloristic industrial engineering studies for most jobs. Now they were experimenting with working conditions such as changes in lighting and illumination and different length rest periods. The results, however, were confounding and inconclusive. As a consequence, they organized an experiment to control for as many working conditions as possible. The result was the famous ‘relay assembly test room’. The management at the Hawthorne plant seem to have put into practice the principles of surveillance, discipline, and punishment almost to perfection in the relay assembly test room. Five assemblers and one layout operator who assigned work and procured parts for the assemblers were moved on 10 March 1927 to the test room, where they were kept under continuous observation until they were laid off in August 1932. The assemblers, all female, worked at regular-sized workbenches, each sitting at her own workstation with the assembly apparatus in front of her. The

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task consisted of putting together 35 small parts in an assembly fixture and securing them by four machine screws. The parts were placed in small bins in front of each worker who, using both hands, picked up the parts for one relay, put them in a pile, assembled each in about one minute and finished nearly 500 per workday. There were several hundred different kinds of relays, which made it difficult to normalize and compare output data. The task was highly repetitive. The assemblers and the layout operator were carefully confined to their self-contained workstations, useful spaces where they were sheltered in a monotonous disciplinary state. The enclosure principle was effectively brought to bear on the relay assembly room. The efficient body principle was also employed in a highly effective manner. Each workstation on the bench had a hole in front of it with a chute through which the assembler dropped the completed relays which fell into a separate bin. ‘Considerable attention was given to the exact time taken by each girl to assemble each relay.’22 A device was attached to each chute to record the day’s output for each assembler. The task necessitated the use of both hands and considerable skill was required in picking up the pieces for one relay, putting them in a pile, and then selecting the appropriate piece at each stage of the assembly operation. Before the experiment began, the technical branch, in charge of piece-rates and work layout, had designed the workbench and detailed the correct body moments and sequence for assembling relays. The assembler’s body was meshed systematically with the assembly apparatus and the parts to form a highly efficient manoeuvre. In addition, the ‘academic observer’ supplemented the recording device with his own record, known as ‘the log sheet,’ which ‘gave a daily chronological account of each operator’s activities, and on it were entered the particular type of relay worked on, its exact time work began on the type, the time at which changes from one type to another were made, and all intervals of non productive time such as time out for personal reasons, repairs, and so forth.’23 As well, the layout operator prepared the regular daily departmental form which recorded for each assembler the type of relay, the number completed, the time to complete 50 relays, and the time for breaks and repairs. And readings were taken from the automatic recorder each halfhour, totalled daily, and checked against the operator’s long-term performance record. These formal records were supplemented from time to time when the foreman called in the operators to reprimand them for ‘the amount of talking indulged in . . . [which] . . . instituted a problem [that] involved a lack of attention to work and a preference for conversing together for considerable periods of time.’24 The ‘problem’ did not go away. And the foreman, believing the amount of talking to be excessive, required each operator to call out when she made a mistake, thus preventing the women from talking. Two operators were threatened with disciplinary action such as loss of rest period privileges, subjected to continual reprimands, and chastized for low output.

Surveillance, discipline, and punishment 97 Finally, after 11 weeks of disciplinary measures and eight months into the experiment, these two were dismissed from the test room for gross insubordination regarding talking, hostility, and poor output. Thus, the operators were enmeshed in a constraining chain of minute actions. As Foucault might put it, every attempt was made to ensure that the workers’ time was totally useful. Time penetrated the operators’ bodies and minds rendering them docile, obedient, and, above all, efficient. The principles of correct comportment and disciplined minds were also very much evident. Hierarchical surveillance occurred in the form of the regular official chain of command – running from works manager, superintendent, assistant superintendent, general foreman, foreman, assistant foreman, section chief, and group chief to the operators. Officially, the test room came under the command of a foreman whose main duties were outside the test room. Unofficially, it seemed to be under the informal authority of the academic test room observer, or ‘investigator,’ who was constantly present and who assumed responsibility for most of the day-to-day supervision. So the regular foreman did not have to be present at all times, but rather appeared from time-to-time to take care of normal matters such as rate revision, accounting, and paper work. The investigator played the role of ‘good cop’ in the hierarchical surveillance. He was ‘chiefly concerned with creating a friendly relationship with the operators which would ensure their cooperation.’25 He talked informally with them daily, conversing about work matters, attitudes towards the test room, and sometimes personal matters. He tried always to show an interest in their personal problems and was always ‘sympathetically aware of their hopes and fears. He granted them more and more privileges.’26 He was seen more as a friend than a boss. He arranged for them to be paid hourly rates for the half-day Saturdays that they did not work and he assured them that rest periods would be reinstated in later phases of the experiment. The foreman, and later the superintendent, played the role of ‘bad cop.’ They were the ones who threatened the women with disciplinary action and meted out reprimands for talking and insufficient output. An elaborate system of sanctions – rewards and penalties – was used throughout the experiment and it was altered in each of the eight separate experimental periods. These included changes in hours of the working week, rest periods, free lunches, small parties, consultation on some of these matters, and, crucially, wage payment schemes. The women were granted more privileges than in the regular department (of about 100 workers). At one stage all the new-found privileges were withdrawn, except the preferred wage incentive system, and the group was assured this would only be for three months, whereupon their work deteriorated immediately and they deliberately kept their output low. Throughout the experiment, the supervisory style went through several shifts. At the outset, during the ‘running in stage,’ every attempt was made to

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establish a freer and more friendly supervision style than in the regular department. After five months, however, the supervisor believed an excessive amount of talking resulted in ‘lack of attention to work.’ As a result, he began reprimanding the operators for talking too much and even threatened to take away some privileges such as the free lunches. Throughout this period, output of the group remained static or declined. Two operators resisted the more severe measures and, after 11 weeks of disciplinary measures and eight months from the start of the study, these two were dismissed from the test room. The two replacements, experienced assemblers from the general department, were eager to join the group. They proved to be excellent workers and immediately out-produced the other operators as well as the dismissed pair. The new operators had been friends in the main shop and one wasted no time in taking on a strong and effective informal leadership role, stressing increased output. (She led the way in output until the end of the study.) As output increased, formal supervision became friendly and relaxed once more. Even so, she continued to be a strong, task-oriented, and effective informal leader, constantly urging the others to work hard, and reminding them that they were under a group output wage incentive scheme. The operators worked under a regime of almost constant examination of surveillance.27 One aspect of this was the ‘bogey’ system. A bogey, established by the industrial engineers for each operation for the entire plant, was set at ‘a level of performance which could be sustained by a skilled and efficient operator.’28 Each operator’s performance throughout the plant, as well as in the test room, was recorded daily and once a week each was compared to the bogey. The aim was to detect irregular performance and identify exceptional (both good and bad) performance. As well, every piece of equipment had to be inspected by employees in the Inspection Branch. The operators were under a constant panopticon-like gaze. The results of the experiment are controversial. The relay assembly test group ran from 25 April 1927 to 29 June 1929 and was divided into two start-up periods and 11 periods where some change was made in working conditions. In period three, for example, a group piece-work pay scheme was introduced. And in subsequent periods systematic changes were made in the length and time of rest periods, the length of the workday, and lunches. The output increased about 30 per cent over the entire period. Two more experiments (the second relay assembly group and the mica-splitting test room) followed, but the results were disappointing. Output did not increase. The experimenters attributed the original output increase to personal factors such as friendly supervision, group cohesiveness, and positive sentiments towards the work environment. This ‘good human relations’ thesis did not go unchallenged. Several critics pointed out that the operators had easier tasks to complete than typical of those in the general factory; others pointed to the economic incentives

Surveillance, discipline, and punishment 99 available in the relay assembly room (but not in the factory); while still others argued that the introduction of the two new operators, one of whom turned out to be an excellent leader, who out-performed the others, probably accounted for much of the superior performance,29 and one analysis concluded that gender difference was crucial to the Hawthorne experiments (both the successful and unsuccessful ones).30 Moreover, as one critic summed it up: ‘In general, the researchers were confused and admitted it.’31 Nevertheless, the Hawthorne Study came to be treated as proof positive of the tenets of the human relations school of management. From a disciplinary formation perspective, in contrast, a quite different conclusion emerges. The relay assembly test room bore a striking resemblance to an ideal panopticon. The room served as a small theatre, putting each worker on the stage and constantly visible. The presence of the investigator, the coming and going of the foreman, and the omnipresence of the inspectors would be enough to instil in the operators’ minds the feeling of being constantly watched, disciplined, and sanctioned, making them amenable to the normalizing prescriptions for work technique, output, and demeanour. Various treatments were administered and their effects closely observed. The test room was a highly efficient and effective laboratory of a power/knowledge regime reaching near perfection. Little wonder that output increased. This is not to say, importantly, that other factors were not at work. For example, take-home pay was very important. Most operators came from working-class families and were important wage earners for their homes. The task had been analysed and designed by the industrial engineering department, and the innovative chute for finished relays was unique to the room. And the group cohesiveness, forceful leadership, and positive attitude to the group incentive scheme surely came into play. Nevertheless, the experiment followed closely the principles of disciplinary space, time, and bodies, and can be seen as a prototype of a highly effective disciplinary formation. While the Hawthorne experiment illustrates vividly the principles of surveillance and discipline at the lower levels in organizations, the control system put in place by executives at Empire Glass in the 1960s exemplifies how they can be applied to dominate a large, divisionalized corporation.

Empire Glass In the post-World War II era management accounting as a disciplinary formation developed to such an extent that a small group of executives at headquarters could control large companies without physically observing employees at work as was the case at Eutria and Hawthorne. The Empire Glass Company (EG), the Canadian subsidiary of a giant US packaging company, was typical.32 In May of each year the process of budgeting for operations for the next year began with headquarters staff forecasting in

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detail sales for each product division, based on an estimate of the general economic climate for the next two years. These forecasts were circulated to the divisions and to top executives. The product divisions then developed their sales budget based on district sales managers’ estimates of each customers’ orders for the year. These sales budgets were reviewed at both the divisional and headquarters levels, discussed and adjusted ‘until everyone agreed that the sales budget was sound.’ The final approved sales budget was then used to allocate sales among the plants across the divisions. Plant managers broke this down into monthly forecasts of dollar amounts and quantities, and used them to develop the cost side of the plant budget. Costs were broken down in great detail, including materials, direct labour, overhead, and discretionary spending, and also including machinery maintenance and replacement. The cost standards for manufacturing jobs and products were developed by the plant industrial engineers, who also budgeted for cost reductions, unfavourable variances from standards, and fixed costs for the plant. Before each plant sent its final detailed budget to headquarters, a group of head office executives paid a short visit to each plant ‘to acquaint themselves with the thinking behind the figures’ that each plant would send in to headquarters, and ‘to give guidance to the plant managers in determining whether or not their numbers were in line with what the company needs to make in terms of profits.’ The executives also ‘wandered through the plant to see how things were going.’ When all the numbers were consolidated at headquarters, plant managers had to adjust their figures if overall profits were not enough according to divisional and headquarters managers. In September the divisional executives sent their budgets to the president, who accepted them or sent them back for revision. The final budget was approved by the board of directors in December. Then, beginning in January, headquarters received six reports each month from every plant for the current month and year to date, including actual and budgeted data. The reports included details of manufacturing direct and indirect expenses; plant fixed expenses; sales and profits; analyses of raw material usage, spoilage, and cost reductions; and sale analyses by product groups and profit/volume ratios. Headquarters also received similar detailed reports from each division, as well as the status of all capital expenditure projects. And plant managers were required to submit a report of operating variances which headquarters used to compile a comparison of the variances of all plants and divisions. These variance reports were reviewed by headquarters executives who decided if any ‘timely actions’ were required. Any ‘sore spots’ identified then required daily reporting, as well as in some cases a visit to the plant by division staff specialists. In addition, headquarters put together a bar chart showing the ranking of each division and plant in terms of manufacturing efficiency. Plant managers used this to run competitions within their plant to reward foremen and department

Surveillance, discipline, and punishment 101 heads. Plant managers and their staff received a substantial bonus at the end of the year if they achieved their profit target and their efficiency ratios, which they usually did. Empire Glass executives pointed with pride to their management accounting and control system, and in recent years had enjoyed above average profitability and growth compared to competitors in the glass industry. EG’s elaborate and detailed management accounting and control system can be seen as a highly effective and efficient apparatus of surveillance and discipline which conforms closely to the disciplinary principles identified by Foucault. EG carefully distributed its personnel over both general purpose enclosures (headquarters, divisional offices, plants, and sales departments) which were further divided into self-contained places of confinement. Within the plants, for example, the cellular principle took hold within each space (department, staff office, work unit, and even each manufacturing machine to which workers were attached). The budget time tabling and standard cost data made for the effective disciplining of time in each enclosure and employees at all levels performed the budgeting ‘dressage’ exercise according to a strict time schedule. EG was an orderly assembly of live subjects arranged in a purposeful hierarchical grid in which each was dominated by the organizational space they occupied. EG also put into play a highly effective hierarchical surveillance from top to bottom in the form of the budgeting and standard costing systems which effected an all-encompassing network of near constant surveillance which disciplined as it watched. These systems ran parallel to the physical system of production and marketing of glass products. And normalizing sanctions in the form of rewards for meeting budget and standard cost targets served as a regular form of examination. The management accounting and controls at EG provided a panoptic gaze spreading from the central office so that each unit, from top to bottom, knew very well that they were under almost constant surveillance. Thus, it could be said that humans and capital were effectively and efficiently accumulated within EG’s apparatus of surveillance and punishment. These techniques would be utilized and refined a few years later at ITT under the era of the ‘Geneen machine’ exemplifying how they can be executed to control a huge, diversified, multinational corporation.

ITT In 1956, Harold Geneen, a professional accountant with many years of hard-nosed business experience, was appointed as the new chief executive of ITT. At the time, the company was a large, but loosely-run company with a shadowy and sinister past, involved mainly in manufacturing and marketing of telecommunications products and running telephone systems for various countries in Europe, Latin America, and South America.33 The company was founded in 1920 by the Behns family of sugar brokers who acquired, in

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lieu of a bad debt, a tiny telephone business in Puerto Rico. Sosthenes Behns and his brother Hernand soon expanded into Cuba and also founded a small company in the USA which they deliberately named IT&T to confuse it with AT&T, the giant US telephone company. Their aim was to build an international telephone company to rival and complement the American system. In these early days, chance seemed to be on their side. In 1923, ITT won the contract to develop and run Spain’s chaotic telephone system.34 In 1925, the company was the successful bidder to acquire all of the international holdings of Western Electric Company, a large subsidiary of AT&T, including its Standard Telephones and Cable operation in Britain. At the time, AT&T faced an anti-trust and monopolies action and had to divest Western Electric. Part of the deal included a cartel arrangement with AT&T whereby the latter would not compete with ITT abroad and vice-versa, while ITT would act as export agent for AT&T. This windfall gave ITT a solid base from which to expand throughout Europe, Latin America, and South America. As telephone and related systems became an essential part of a nation’s infrastructure during the 1930s, ITT prospered and grew. So with the advent of World War II, ITT was well situated to supply both Allied and Axis countries with the telecommunications equipment and networks that were essential to their war efforts and vital to military and intelligence operations. ITT successfully played both sides off and emerged from the war with its empire pretty much intact.35 The postwar period proved to be much more difficult for ITT and Behns. New government regimes were nationalizing their telephone systems and the international scene was in a state of flux and uncertainty. As ITT’s profits shrunk Behns attempted, with disastrous results, to diversify and expand, especially in the USA which enjoyed a relatively stable political climate. Dissatisfied shareholders eventually brought in a new president in 1947, but it was not until 1976 that Behns, now 74, finally left ITT. The company continued to flounder and in 1959 the board hired Geneen, who already had a legendary reputation for ‘making profits,’ to pull the company together.36 At the time, ITT was operating mainly as a holding company with a hands-off style of managing its far-flung subsidiaries. Thus, it was a series of random events that brought ITT to Geneen and Geneen to ITT with a mandate to turn the company around. Geneen seemed to be the perfect person for the task. He had set up strict systems of financial control at Bell & Howell, Jones & Laughlin, and Raytheon. He also had extensive experience in mergers and takeovers. Although still profitable, he was appalled by the lack of discipline, control, and management at ITT and was determined to put in place, on a much larger scale than he had ever done before, a system of control and surveillance which would ensure that he could oversee this scattered empire and rule it with the logic of accounting:

Surveillance, discipline, and punishment 103 Geneen gradually set up the most intricate and rigorous system of financial control that the world has ever seen. Weekly meetings, monthly meetings, annual meetings, were called to keep check on managers; a special room with a great horseshoe table was constructed where Geneen could inspect and question the managers and their accounts. The head of each company was required to submit to headquarters a monthly report of such complexity that it often required a special department to compile it; five-year plans were prepared, targets set, profits compared. Each detail was analysed and cross-checked so that Geneen could tell exactly which of his products, in any part of the world, was failing to reach expectations. He made it clear that he had to know about everything.37 Once installed as CEO, Geneen partitioned ITT into self-enclosed profit centres with the manager in charge of each fully responsible and accountable for financial performance. Each profit centre manager was required to obediently acquiesce to ‘the discipline of the numbers,’ in which case the accounting regime of truth, Geneen preached, would ‘make him free.’ All managers in both the line and staff organizations were required to submit in great detail two-, three- and five-year plans expressed mainly in accounting numbers.38 From his panoptic tower at headquarters, the entire organization could be watched and disciplined with his accounting numbers regime of truth. The cornerstone of the system was the operating report which each profit centre manager, staff division head, and product line manager submitted to headquarters by the fifth working day of each month. It included details of sales, earnings, inventory, receivables, employment, marketing, competition, and R&D, along with any current or anticipated trouble spots. The manager also reported on the current political and economic situations in his territory. Divisional and profit centre controllers also submitted a monthly report to the headquarters comptroller regarding the general situation in their part of the company. Geneen personally, along with his headquarters staff, read, studied, and made queries about each and every report. For him this was management and ‘Management must manage.’ Technical staff experts in all aspects of ITT’s business operations at headquarters also reviewed and analysed the monthly reports. Their mandate was to identify any trouble spots anywhere within their function anywhere in the organization, to visit them without invitation and to report back to Geneen on their findings, including the actions taken to correct the situation. Geneen described it this way: These staff men out of headquarters cut through the structured rigidity of the formal organization, monitoring each of the subsidiaries. The accounting staff man monitored the profits, the engineering staff

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Accounting, Accountants and Accountability monitored the engineering department, and so on with marketing, personnel, legal, etc. The staff people worked very closely with the men out in the field, and they made their reports and recommendations, and they were held equally responsible for whatever went well or poorly in the unit they were monitoring.39

Geneen also appointed several senior product-line staff managers to monitor the competitive ability of an ITT subsidiary in the market place. They were to look at operations with a cold impartial eye, to raise any questions they thought should be raised, and to speculate on how things could be done better. They also had to report their findings directly to Geneen. His panoptic all-seeing gaze, as Foucault might put it, played its normalizing gaze over the surface, lines, and fibres of the entire organization. Geneen supplemented his colossal ‘regime of reason’40 with face-to-face meetings with top executives and managers of the business operating units. A typical monthly meeting, with 150 European general managers of business units and 40 headquarters staff executives from New York, took place in a large room with a large U-shaped table where everyone could see each other’s faces, and a big screen constantly flashed table after table of accounting and financial data. Each manager took his turn presenting his results and plans. Geneen set the pace, from time-to-time pointing a small black arrow to a number on the screen and interposing a question: ‘Why has a target not been reached, why is an inventory figure too high?’ When the manager being grilled replied, Geneen ‘nods or swivels around or utters some mild reproof. The arrow moves on to the next incriminating figure.’41 For Geneen, it was not enough to just see the figures – he wanted to see the facial expression of the person presenting the figures. Geneen was also a master of dressage. The others present were also supposed to join in with similar queries. They were trained to meet face-to-face, to look into each other’s eyes, to listen carefully to the other’s tone of voice, and to pay attention to their body language. Everyone had to show they were believers in management by numbers and had to take part in the ritualistic grilling of their colleagues. For many, the meetings were terrifying. Stories circulated that one new manager had fainted when his turn came, while others rushed out afterwards to get blind drunk for several days. And for the seasoned and hardened ITT man it was, as one manager put it: ‘You have to be prepared to have your balls screwed off in public and then joke about it afterward as if nothing had happened.’42 While Geneen called these ‘help sessions’; managers called them ‘hell sessions.’ But the heart of the system was a panopticon within Geneen’s panopticon. This was the elaborate system of surveillance and discipline inflicted on the controllership part of the organization, which by 1977 included nearly 23,000 accountants, auditors, and comptrollers, 325 of whom were at headquarters. (At the time ITT had grown to 400,000 employees, most of whom

Surveillance, discipline, and punishment 105 were enclosed in 250 profit centres.) Each field controller was rated in terms of an effectiveness score based on 30 identified areas of controllership.43 Each of the 30 areas spelled out in detail the exact actions and behaviour required of the controller. Once a year each field controller answered nearly 1,600 self-evaluation questions in completing the required forms, while divisional controllers answered over 150 questions. The scores for the two ratings were summarized and a final score out of 100 was calculated for each of the 250 field controller units. The ratings became the basis for a colour-coded ratings spreadsheet with blue the highest, followed in order by green, yellow, and red. A red rating indicated unacceptable performance and another rating in 3 months. Geneen could tell at a glance how well each unit was rated: ‘The Comptrollership Grid provided an exhaustive, automatic examining, partitioning, ranking, sanctioning and promoting or demoting of the comptrollers.’44 A similar grid was in use for each of the 250 profit centres. Geneen’s system of surveillance, discipline, and self-normalization was a distinctive competence and a key plank in ITT’s new competitive strategy. By 1963, Geneen had transformed ITT into a disciplined, disciplinary panoptic machine and he felt that the company was now ready to embark on his Acquisition Philosophy. At the time two-thirds of ITT’s profits came from Europe, where Common Market policies were calling for compulsory bidding on all telephone, telegraph, and postal operations, while new nationalistic, anti-American governments threatened companies’ revenues, profits, and ownership. The strategy called for acquisitions of American companies in high growth industries such as chemicals, pharmaceuticals, insurance, food, and services. Geneen went on an acquisitions binge of colossal size, using ITT’s high price-to-earnings ratio to buy up company after company and paying in ITT stock. The late 1960s featured a tidal wave of acquisitions and mergers, with ITT on its crest as the conglomerate craze swept across the USA. Under Geneen’s regime of accounting truth, ITT by 1977 was the world’s largest conglomerate and ranked number nine on the Fortune 500 list of US companies.45 And Geneen was hailed as the master manager of the 1970s. It was not clear, however, that Geneen’s methods actually added to its financial performance and it is likely that its growth in profits would have been little different if it had concentrated on its original businesses that Geneen inherited without the diversifications. Moreover, many of the companies he acquired turned out to be spectacular failures and post-Geneen, ITT experienced major financial crises which led to massive divestments for which Geneen was blamed by his successors. What needs to be recognized, in spite of this, is that Geneen’s system merely followed the established practices used by companies like Du Pont and General Motors in the first half of the twentieth century and he put them into practice with a vengeance. He did, however, foresee ‘that ITT

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could become the forerunner of a new generation of multinationals, combining global activities with rigid controls . . . For in swallowing a succession of companies, and imposing his ingenious system of control, he helped create a new kind of industrial animal, a conglomerate that was multinational; a company that could make anything anywhere.’46 Disciplinary regimes of accounting truth had come a long way from the days of Pacioli, Wedgwood, and Hawthorne. And they were to be transformed once again as we shall see next in describing the system developed by Johnson & Johnson.

Johnson & Johnson47 In the late 1980s and early 1990s surveys consistently rated Johnson & Johnson Inc. ( J&J) as one of the best-managed companies on the Fortune 500 list. The reason for this lies in large part with its commitment to, and the sophistication of, its unique management accounting and control system featuring a tight linkage of its business planning system, its profit budget system, and its decentralized organizational philosophy. J&J operated a global conglomerate that developed, manufactured, and marketed a wide variety of health care and related products.48 Unlike ITT, the company operated with only a small group of headquarters executives, including eight executive committee members (ECMs), the chief financial officer (CFO), the vice-president of administration, the president, and the chief executive officer (CFO). Each of its 155 subsidiaries reported to one of the eight ECMs. The subsidiaries operated in the main as completely independent and autonomous business units and were staffed and managed, where possible, by host nation citizens. Each subsidiary was responsible for its own plans and strategies. Headquarters officials did not get involved in their business decisions, nor was there any overall strategic plan, nor a strategic planning department at headquarters. The corporate strategy was deemed to be simply the sum total of all the subsidiaries’ strategies. The major controls were the business plan and the operating budget. The business plan included a mission statement, a marketing plan, a simple financial forecast, and a five- and ten-year projection. The mission statement included an overall description of the subsidiary’s general goals, products, and markets.49 The marketing plan included details of the subsidiary’s marketing strategy as well as brief synopses of competitors’ market strategies together with estimates of their sales volumes, sales dollars, and profits. The financial forecast consisted of four numbers – return on investment, net income, sales revenue, and sales volume – and a description of how these numbers would be achieved. The five- and ten-year projection part of the business plan was more intricate. The process commenced in January and continued for several months. Financial estimates were developed for the four key figures and the

Surveillance, discipline, and punishment 107 planning horizon focused on two years and remained fixed for a five-year period.50 This was done for each major business segment of the subsidiary, such as R&D, production, finance, and personnel. Each unit prepared their own part using the marketing plan for guidance. Work on this began in January and continued for about six months. Draft plans were collected into a binder including sections for mission, strategies, opportunities and threats, environment, and financial forecasts. In May, the plans were the focus of several meetings of the subsidiary’s president, board of directors, and key managers. Then, in June, the headquarters ECM visited the subsidiary to review the five- and ten-year plan and to grill its executives about its assumptions, strategies, and forecasts. When a finalized plan was agreed upon, the president prepared a two-page summary and sent it to J&J’s CEO, where it was presented by the subsidiary president to the Executive Committee members who debated and approved it in September. Discussions at both meetings were known to be challenging, frank, and thorough. The five- and ten-year plans of the business plan provided the guidelines for the profit plan which consisted of an annual budget and a two-year forecast statement. These were prepared at all levels, including expense centres and lower level departments. Revenues and expenses for each month and some balance sheet accounts, such as inventory and accounts receivable levels, were part of the annual budget. Lower level managers were actively involved in this process, which was referred to as being on ‘a bottom-up basis.’ Profit plan goals were tied into the targets in the approved five- and ten-year plan and the second-year forecast of the previous year. The departments prepared their own one- and two-year part of the profit plan, but did so in light of the first year of the subsidiary’s approved strategic five- and ten-year plan for the current year. The production budget, for example, relied on established standard costs as well as planned development and improvement programmes. The R&D department budget usually proved the most problematic since their project lists were usually very ambitious, and not infrequently had to be trimmed by forcing the department, in consultation with the subsidiary’s executive team, to rank-order projects and to cut those that fell below the amount the subsidiary could afford and still meet its profit target. The department budgets were then consolidated by the Information and Control Department into a master profit budget plan which was compared to the target in the previous year’s second-year forecast. If the consolidated profit budget showed a shortfall from the latter, special budget sessions were held with each department. The aim of these presentations, as one subsidiary executive put it, was ‘to remove slack and ensure our earlier target could be met if possible. The commitment to this process is very strong.’51 These activities took place over the summer months. Early in the Fall, the ECM met with the subsidiary’s president and

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executive team to review and discuss the draft profit plan, which was often adjusted on the basis of these meetings. The ‘discussions’ focused on any deviations from previous years’ forecasts and the overall J&J profit requirements for the forthcoming year. During these meetings, the ECM and the subsidiary’s president negotiated the amount of a special ‘contingency expense account’ based on the perceived uncertainty surrounding the profit numbers and their underlying assumptions. The subsidiary could draw down this account during the forthcoming year if actual profits fell below targets. This was seen as a unique and innovative aspect of J&J’s controls as it gave the subsidiaries some leeway in meeting profit targets. In November, the ECM presented the agreed upon profit plan to J&J’s Executive Committee for final approval. During the year, the ECMs closely monitored the subsidiaries’ actual financial performance relative to the approved profit plan. They received a weekly sales revenue report and a monthly report of income highlights and key balance sheet figures and ratios, including comparisons with the previous month’s numbers and with the profit plan forecast. They also received a narrative summary from each subsidiary president explaining any significant variances. The profit plan was revised three times during the year. In March, the headquarters Executive Committee were updated by all ECMs on the most recent estimates of sales and profits for each subsidiary. The ECMs relied on the subsidiary presidents for this information. The June update required subsidiary executives to re-budget for the rest of the year. This involved rechecking all numbers down to the lowest levels and, if necessary, also revising the second-year forecast. The final revision took place at the November update, which focused on results for the first ten months and any newly revised projections of profit plan numbers for the rest of the year. This, too, required updates from all departments in the subsidiary. The Executive Committee watched this update very closely. The importance of J&J’s planning and control system was indicated by comments from headquarters executives. For example, the corporate president stated: ‘Johnson & Johnson is extremely decentralized, but that does not mean that managers are free from challenge as to what they are doing . . . Salary and Bonus reviews are entirely subjective and qualitative and are intended to reward effort and give special recognition to those who have performed uniquely.’52 While one ECM commented: ‘The planning and control systems . . . allow us to find problems and run the business. This is true not only for us at Corporate, but also at the operating companies where they are a tremendous tool. Once a year, managers are forced to review their businesses in depth for costs, trends, manufacturing efficiency, marketing plans and their competitive situation. Programmes and action plans result.’53 He also commented on the overall process: ‘Our long-term plans are not meant to be a financial forecast, rather they are meant to be an objective way

Surveillance, discipline, and punishment 109 of setting aspirations . . . I visit at least twice a year with each operating company board. We usually spend the better part of a week going over results, planning issues, strategic plans, and short and long term problems. The Executive Committee . . . never issues quantitative performance targets before the bottom-up process begins.’ Regarding motivation, he believed that ‘Our systems are not used to punish. They are used to try and find and correct problems. Bonuses are not tied to achieving budget targets. They are subjectively determined, although we use whatever objective indicators are available.’54 While the corporate controller commented this way: At the Executive Committee review meetings, we always review the past five years before starting on the forecast . . . On almost any topic, we start with forecast versus past track record . . . The committee never dictates or changes proposals – only challenges ideas. If it becomes clear to the individual presenting that the forecast is not good enough, only that person decides whether a revision if necessary. These discussions can be very frank and sometimes acrimonious . . . This process cascades down the organization. Executive Committee members review and challenge the proposals of Company presidents. Company presidents review and challenge the proposals of their vice-presidents.55 While some managers in the subsidiaries complained that they spent most of their time working on plans and budget matters and that the systems restricted innovation, the president of one subsidiary neatly summed up the ethos of the system: ‘It is important to understand what decentralized management is all about. It is unequivocal accountability for what you do. And the Johnson & Johnson system provides that very well.’56 J&J’s management accounting and control system has been widely admired and is certainly one reason why J&J earned its reputation as being one of the best-managed companies in the world. And its success at producing earnings levels year after year that meet stock market expectations can be attributed, at least in part, to the role played by its control system.57 What stands out in all of this as perhaps remarkable is that a small group of executives at headquarters can manage and control a highly successful (in terms of profitability) vast commercial empire that operated in nearly every country around the globe. A Foucauldian perspective, however, might be less sanguine and trace this ‘success’ to the way J&J put into play, in virtue of its management accounting and control systems, almost to perfection the principles of discipline and control. For example, at J&J the enclosure principle came into play as executives and managers were carefully distributed over the general purpose, self-contained subsidiaries, each with a unique mission in the health care industry. Space was further partitioned in the usual way for present day corporations – divisions, departments, expense centres, and so on. Each

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partition had a fixed identity and a relationship in rank and function with the other partitions. The result was a purposeful, useful grid that defined each executive and manager by the particular ‘cell’ they occupied. The efficient body principle was also evident. The five- and ten-year plan and the profit budget systems dictated a strict timetabling of the executives’ and the managers’ time. These systems also engulfed them in the profit planning and seeking ‘manoeuvre’, eliciting an almost automatic dressagelike response to the demands of the management accounting and control system. The principle of correct comportment and the disciplining of minds also came into play. J&J’s controls were indicative of a clear-cut system of hierarchical surveillance. (‘The process cascades down the entire organization.’) While the quiet system of sanctioning promoted self-normalizing behaviour by these employees. (‘Our systems are not used to punish. They are used to try and find and correct problems.’) The executives and managers were almost constantly tested, interrogated, and inspected within J&J’s examinatory accounting panopticon in terms of their profit making and planning abilities. In sum, J&J’s management accounting and control system can be seen as providing headquarters with a panoptic-like constant accounting gaze that looks out over the far-flung empire of subsidiaries, each of which acts like a small theatre putting its executives and managers on stage and almost constantly visible from the central ‘tower.’ Foucault’s description of the regime at Mettray, a prison for young boys, could be appropriated and applied fittingly to sum up J&J’s system of surveillance and discipline: Training was accompanied by permanent observation; a body of knowledge was being constantly built up from the everyday behavior of the inmates; it was organized as an instrument of perpetual assessment . . . They [the chiefs and their deputies] were in a sense technicians of behavior: engineers of conduct, orthopaedists of individuality. Their task was to produce bodies that were both docile and capable.58 J&J was a highly efficient ‘laboratory of power.’

Conclusion In many respects, today’s management accounting and control systems parallel the principles of surveillance, discipline, and punishment, especially as they are depicted in conventional management accounting textbooks. While these descriptions may be idealized characters of actual organizational practices, they are not without empirical foundation, as field studies have increasingly revealed. And while management accounting and control systems are not a carbon copy or an exact correspondence in form and conduct

Surveillance, discipline, and punishment 111 of principles of surveillance, discipline, and punishment – they are more like an inscription of them – many of the central ideas are reflected in them. In the first instance, the principle of enclosure is very much evident in the management accounting concept of responsibility centre accounting. The organization, the general enclosure, is partitioned into responsibility centres (divisions, strategic business units, investment centres, profit centres, responsibility centres, discretionary cost centres, engineered cost centres, departments, and workstations), each of which is defined in terms of the useful function to be performed therein and in terms of its serial relationship with the other responsibility centres. The manager and employees in each centre are defined by the place they occupy. The cellular nature of the organization is captured and reinforced by management accounting reports and practices which idealize each partition in terms of its use, serial relationships, and hierarchical ranking. As one popular textbook states: ‘A management control system is a total system. That is, the plans developed encompass the whole organization, and one important aspect is that plans for each part of the organization must be so coordinated with one another that the various parts are in balance.’59 The principle of the efficient body and the disciplining of time are also manifested in management accounting and control systems principles and practices. Industrial engineers use the techniques of management science (stopwatches and analysis of body movements) to determine the normal time and precise bodily movements required to perform jobs in factories and offices. Accountants combine this information with data collected on labour time-cards and tickets and payroll records to develop standard cost systems. Scientific management and standard costing establish a rhythm and regularity to the work, blending the worker’s body movements with the machine, tool, or filing system into a ‘man–machine.’ These regimes of truth produce docile and obedient production workers and clerks. The strict timetabling, systematic procedures, and precise rhythm of the management control process bears more than a little resemblance to dressage. In the management control process, the conventional wisdom goes, decisions are made according to procedures and timetables that are repeated year after year. The first step in the sequence is to formulate a strategic plan; then one year of the strategic plan is translated into a budget; next, operations take place, usually more or less guided by this budget and prescribed by policies and procedures. Actual results are then compared with this budget, evaluated, and corrective action is taken if necessary. These steps are labelled strategic planning, budget preparation, execution, and evaluation. The activities of each of these steps can be described, and for many of them, written instructions are provided.60 Most large corporations also follow precisely timetabled reporting procedures. It is not unusual that on the same day of the year, the sundry managers spread around the globe enact the ritual for budget approvals,

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submission of results, and sending in reports regarding variances and outlooks for the rest of the year. And the practice of rolling budgets, whereby each month continuous budgets compel managers to think specifically about the forthcoming 12 months is prevalent. A silent signal from the calendar triggers prompt obedience from managers throughout the organization to perform the budgetary dressage. Management accounting and control practices also mirror, in the abstract, the principle of correct comportment. When managers present their budget plans, upper level executives grill them closely about the assumptions, trends, and calculations in the budget targets. Managers also undergo a rigorous examination when presenting their strategic plans. And they are examined again by upper executive and financial officers when they report their monthly results. These examinatory practices serve to normalize managers according to the mould of hardheaded, results-oriented, entrepreneurial executives who produce financial results for the organization. Management control systems also function as an important apparatus for upper level executives to measure, describe, judge, compare, and rank each responsibility centre manager. They are an important apparatus for diagnosing managers and classifying them as ‘normal’ or in need of closer, more detailed examination. Furthermore, each manager leaves behind a perpetual accounting track record and archive which accounts for his or her working life. Managers are constantly examined, sanctioned, and normalized by means of management accounting and control systems. Finally, management accounting and control systems provide for a panoptic, all-seeing, all-knowing, constant gaze over each and every manager: ‘The management control system pervades an organization and consists of four parts . . . an observation device that detects, observes and measures . . . an assessing device that evaluates the performance of an activity or organization, usually relative to some standard or expectation . . . a behavior modification device for altering or changing performance . . . [and] a means of transmitting information within and among the three parts.’61 Management control systems, as with the panopticon, put into play surveillance, evaluation, punishment, normalization, and constant communication throughout the entire organization: ‘The accounting eye is indeed a significant and omnipresent one.’62 This chapter offered an idiosyncratic genealogy of the descent of accounting systems as major mechanisms of surveillance and discipline from Pacioli’s days to the present. Drawing on Foucault’s description of the relatively recent carceral nature of Western civilization, these systems were seen to constitute a network of permanent observation that today enables giant multinational corporations to operate around the globe with impunity. Their surveillance abilities have been further enhanced with the remarkable advances that have taken place in telecommunications and information processing in recent decades. Moreover, these systems give off an aura of

Surveillance, discipline, and punishment 113 scientificity and which are supported by quasi-juridical apparatuses of examining, questioning, judging, sentencing, and meting out sanctions when, in fact, they operate outside of the law. As Foucault sums it up: We are in the society of the teacher-judge, the doctor-judge, the educator-judge, the ‘social worker’-judge; it is on them that the universal reign of the normative is based; and each individual, wherever he may find himself, subjects his body, his gestures, his aptitudes, his achievements. The carceral network, in its compact of disseminated forms, with its systems of insertion, distribution, surveillance, observation, has been the greatest support, in modern society, of the normalizing power.63 Is it any wonder, then, that today’s corporations resemble prisons?

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For many theorists signs [a term which of course includes all forms of representation] are the most important constitutive element in the contemporary world . . . [but] the representations we used to rely on can no longer be taken for granted . . . this crisis in representation has far reaching consequences. (Bertens, 1995: 11)

A common thread running through the earlier discussions is the claim that accounting today is in the grip of a crisis of representation. If this is the case, there are far-reaching consequences for accounting in general. Yet conventional accounting wisdom still clings resolutely to the premise that accounting reports and information should present a ‘true and fair view’ of, or ‘present fairly,’ the financial condition of the entity. And accounting standard setters and SEC officials remain committed to the basic idea that accounting information should represent reality in a transparent manner. The ideas presented in the preceding chapters, however, cast a long shadow of doubt on such claims. A crisis of representation refers to the widespread loss of faith in the belief that language, writing, discourse, discursive practices, and so on, can adequately bring the true meaning of some out-there thing-in-itself into our presence. In its most extreme form, this claim holds that the whole structure of human knowledge is in doubt, except that such knowledge is itself a reality constructed by humans. Yet the longing for truth remains strong. It reflects the long-standing human preoccupation in the history of Western civilization with the search for truth and the logocentric impulse to bring some final, permanent meaning into our presence.1 In this, accounting is not alone. Poststructuralism sees this as affecting all of society.2 This longing for absolute truth, however, seems an impossible hope. We can only think, write, read, research, and speak about any kind of objective knowledge using language, and language must always come between us and any final Word. So poststructuralism aims to dispel and undo ‘the ruling

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illusion of Western metaphysics that reason can somehow dispense with language and arrive at a pure, self-authenticating truth or method.’3 As Nietzsche makes the point, a thing-in-itself does not possess an intrinsic meaning on its own apart from interpretation and subjectivity. To claim that it does, ‘presupposes that interpretation and subjectivity are not essential, that a thing freed from all relationships would still be a thing . . . [this is] a dogmatic idea with which one must break absolutely.’4 In his view, access to the final truth of reality is unattainable. If this claim holds, it would seem that the Enlightenment bet on faithful representation has been lost. Accounting, as indicated, albeit in different ways, in the preceding chapters, is not exempt from this claim. Literary theory, for example, demonstrates how what gets taken as the true meaning in an accounting text cannot be sustained under the weight of a deconstructive reading. The phases of the image theoretic goes even further. It indicates that in the current simulation era, accounting signs no longer refer to any real referent, but rather are only reflections of themselves. And disciplinary formations are seen to be the handiwork of humans designed to create disciplinary places where the individual self-normalizes according to the dictates of discursive regimes of truth, not to any final true existence. And the notions of textual heteroglossia and centripetal forces, presented in the following chapter, echo this claim. These ideas give notice that, indeed, accounting is in the grips of a deep crisis of representation. This does not, however, signal the ‘end’ of accounting, as with the other poststructural ‘ends’ such as those of the Author, the Novel, God, and History. Instead, it clears a space for posing a new set of questions. Crucially, these do not include concerns such as: ‘Can accounting reports be prepared that reflect in a transparent manner true income and capital?’ Rather, very different concerns surface, including genealogical investigations into issues such as: ‘How do relations of power relate to the truthfulness of accounting regimes of truth and discourse?’ ‘How do accounting regimes of truth get appropriated as truth perspectives?’ and ‘What is the value of valuing accounting information and accounting regimes of truth?’ These questions precipitate new ways of thinking about accounting and truth.

Conventional truth notions The poststructural response to these issues contrasts radically with traditional accounting thought. The objectivist thesis, for instance, insists that accounting must represent reality in as transparent a manner as possible. This tenet, it is important to realize, is underpinned by philosophy’s theory of correspondence. Truth, of course, is the phenomenon that philosophers of all kinds and ages have investigated.

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Correspondence theory would hold that the truth of institutional facts, such as income and capital, exists independently of their capture in linguistic and other representational media. And the criterion for judging the truthfulness of its representation is whether or not it faithfully mirrors – that is to say, corresponds to – the intrinsic nature of the object ‘out-there’ or, in weaker form, that the representation should not be misleading about its intrinsic nature. A true representation is deemed to be one that corresponds to reality as it exists in its own right. This reality–representation distinction is vital to the objectivist accounting position. It holds that a sentence is true by being a linguistic ‘picture’ of a fact in virtue of the way its linguistic elements are arranged. Sentences that correspond to facts are deemed to be true. They are assumed to have relationships with something outside of language; that is to say, things that are extralinguistic. So the objectivist ‘believes objects of knowledge to be free of subjective components contributed by the knower and so not conditioned by psychological or historical factors or other elements to do with their apprehension or mode of apprehension.’5 The correspondence notion, however, begins to weaken when faced with the question, ‘How can one ascertain whether or not a statement corresponds to a fact?’ For in order to do so, one would somehow have to achieve a position outside of language where one would be able to compare what is represented in language about how things are independently of how the statement says things are. The correspondence notion, however, is only a metaphor and so is also embedded in language. It seems doubtful, then, that such a notion of truth explains anything at all.6 But this is not to claim that there is no ‘brute reality’ out there. Rather, it is to say that it is an impossible task to represent the truth of it in language. We live in language and cannot get outside of it to describe reality. In the face of this seemingly insurmountable hurdle, some philosophers turn to what is known as the ‘coherence’ theory of truth. The coherence notion rejects correspondence theory as the latter can only provide reasons for the belief that a linguistic representation corresponds with some thing-in-itself. Since these reasons are also linguistic, they must come between it and its linguistic representation. But these reasons are also beliefs and so the correspondence notion begins to look more like an infinite regress of linguistic reasons and beliefs about the properties of the thing-initself than it does about its true nature. All that is left is an imbroglio of arguments, principles, opinions, and beliefs. Coherence theory tries to circumvent this by taking a stance that recognizes the problem that language must always come between us and the true nature of objects ‘out-there.’ It does this by claiming that ‘what is true is simply the statement or belief that best coheres with, or fits into the overall network of our experience and beliefs.’7 A true principle is one that fits with our other principles; a true argument is one that follows from our other beliefs

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and conclusions; and a true piece of evidence is one that fits into our hypotheses. Our principles, arguments, evidence, and hypotheses add up to a coherent picture. Coherence theory also differs from the correspondence idea in that it recognizes that there can be different self-contained versions of truth. It takes each of these to represent different traditions and ways of life and argues that each is to be judged only by the criteria of, and in accordance with, its own standards.8 The argument is that different versions of the truth come into being and circulate in virtue of following the rules and traditions of that particular community, culture, society, nation, and so on. These rules and customs shape what is taken to be the intrinsic nature of the reality. Coherence theory also differs from correspondence theory in its assumptions regarding the criteria to be used to judge the truthfulness of the representation. For objectivists, the criterion is whether or not it is an accurate sign of a fact. For example, the Raw Material account is taken to be true if it corresponds to the fact that the inventory is indeed in the warehouse and the money value represents the actual cost. So a statement is deemed to be truthful when it corresponds to what is ‘really’ the situation of actual events and objects. In contrast, adherents of the coherence school argue that the truth of a linguistic representation can only be judged by whether or not the statements about it fit with, that is to say, cohere with, the other sentences which make up the accepted package of sentences. So a statement is deemed false if it fails to cohere with the other statements in the set. Last-in-first-out (LIFO) inventory, for example, was seen by the highest court in Canada as not cohering with the reality of inventory physical flows and so to this day is not allowed for income tax purposes. As such, coherence theory adopts an intralinguistic position in contrast with the extralinguistic position of correspondence theory. The coherence notion, however, comes over as less ‘commonsensical’ than the correspondence idea in that it seems to be non-realist. This, however, is a misunderstanding. It only claims that a thing-in-itself may well exist outthere, but that the truth of it is beyond our ability to represent it in some single, absolute, final way. Against this, traditional philosophers like to say that the relativists have fallen into a logical contradiction of their own making. On the one hand, the latter say that truth is only true relative to the particular regime of truth of the particular community, culture, society, and so on, used to construct it; but, on the other hand, they also hold this claim to be absolutely true because it applies to every regime of truth. So it seems they want to, but cannot, have it both ways. Conventional accounting thought is also caught up in this debate. On the one hand, it seems to hold to the correspondence notion.9 The idea that accounting should objectively reflect in a transparent manner the

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underlying reality of the entity, is prevalent in traditional accounting thought. For example, FASB #133, which outlines the procedures for accounting for sophisticated financial instruments such as derivatives, includes many instances where the words ‘transparent’ and ‘transparency’ are invoked.10 It states clearly, for example, that the Board’s objective is ‘to increase the transparency of derivatives and derivative securities.’ And, as discussed earlier, accounting experts continue to call for improved transparency and for rewards for those corporate managers who practise greater transparency. On the other hand, conventional accounting also holds to the coherence notion. For example, it acknowledges that different accounting representations of key accounting information, such as income and capital, can result from the same data base depending on which rules and procedures are followed. In the oil and gas case, successful efforts, full costing, and discovery value each produce quite different accounts of income and capital. Yet each version is coherent within its own rules and standards. This is also evident by comparisons of accounting principles and practices across nations.11 Each nation tends to have its own set of rules and principles for financial statement preparation. What counts as accounting truth for the same set of events and transactions in Germany is different from what counts in Sweden or the USA. While this may be worrisome to adherents of the correspondence notion, from the coherence point of view, it is not seen as troublesome, so long as each version conforms to that particular nation’s rules and principles and that they are applied consistently. The public at large, however, do not seem to be aware of this. So a misunderstanding arises which accountants refer to as ‘the expectations gap.’ This gap is the difference between the public’s beliefs about the nature of accounting reports and the claim that accountants and professional bodies are wont to make to the effect that all that is guaranteed is that the reports are prepared in accordance with the currently prevailing generally accepted accounting principles and standards of that country. At the same time, paradoxically, conventional accounting also holds out for transparency. So it, too, wants it both ways. This background serves to put some poststructural concerns with truth into bold relief.

Poststructural truth concerns Poststructuralists are concerned with a number of truth-related issues. Crucially, however, these are not attempts to find out what truth is nor with how to find it. Instead, they want to understand why Western civilization has such a ‘truth fetish.’ Put slightly differently, why has objective truth been given such a high value instead of, for example, everyone being satisfied with notions that simply work? In order to respond to such questions, poststructuralists first want to understand several more mundane issues and

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concerns. In coming to grips with these, two central ideas need to be foregrounded. First, poststructuralists deny the very idea that there is something like truth ‘out-there’ existing independently of and before its capture in language or in other kinds of representations. Second, poststructuralists do not offer any kind of a theory of truth, such as the theory of ideological truths which distorts, in the interests of the elite in society, the way things really are, or the theory of how true class relations are mystified in the commodity, production process. Such truth claims depict ideologically conditioned truths as distorting or hiding the truth. Poststructuralists, in contrast, while remaining agnostic about ideological theories in general, reject the very idea that hidden or absolute truths exist. And while they do not necessarily repudiate traditional relativism with its idea that there are different culturally determined versions of what passes for truth, they do not find such a position to be relevant. Put in an accounting context, a poststructuralist perspective rules out the contention that accounting information and reports should, or can, reflect, some real, out-there reality. It sees persistent calls for transparency as futile and so irrelevant. Yet, if the correspondence and coherence perspectives are to be bracketed off, just what is left to research and understand? The answer from poststructuralist quarters is that there is rather a lot. The focus shifts from attempts to provide true accounting reports to investigating various issues surrounding accounting regimes of truth. The object of a poststructuralist critique is to produce genealogical accounts of different accounting regimes of truth and their related discourses.12 By focusing on regimes of truth as the object of historical investigations, poststructuralists would problematize conventional correspondence, coherence, and relativist theories to open up new spaces for thinking about accounting truths. One vital issue involves identifying the mechanisms that participants in a society, culture, or community rely on to distinguish between true and false statements.13 As discussed in Chapter 5, a regime of truth consists of various discourses and knowledges which a particular society takes and accepts as true. These include: the procedures accorded value in acquiring what passes for truth, such as scientific hypothesizing and observation; the mechanisms relied on to distinguish true from false representations, such as analytical philosophical reasoning, or consulting the I Ching or the Tarot cards; the rules which dictate who is permitted to speak the truth and who is not, such as the church minister at a Christian wedding, or the shaman who decides in which direction to hunt; or the norms which decree some linguistic utterances licit and others illicit, such as the rules for parliamentary procedure. Each regime of truth also has its own criteria or mechanisms – rules, procedures, and rituals – used by its members to distinguish true from false statements. These include the unique rules which designate certain members as able and authorized to say what counts as true. For example, the witch

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doctors performed various procedures and rituals by means of which they identified the source of evil or sickness. In today’s society, the medical doctor (but not the nurse) is accorded the right, and indeed the duty, to diagnose and prescribe for the sick. Similarly, the court judge or the jury today is designated as being responsible to determine the truth or falseness of alleged criminal acts. Poststructuralist research focuses on these mechanisms. The aim is to develop genealogical narratives about their historical coming into being, thereby calling into question their legitimacy. This stance sees truth as what is deemed to be true within regimes of truth and it sees them as imposed on the world as the handiwork of humans. The vital point to underscore is that poststructuralists treat regimes of truth as real, material objects in their own right, cultural artifacts that are sustained in discourse and can be studied as such. So the interest is in understanding how they catch on; how individuals form attitudes and beliefs about such discourse-determined and sustained truths; how they come to take them as factual; how they appropriate them as their own perspectives; and how the consequences of this affect the individual. One main concern is to investigate those mechanisms or criteria which agents use that enable them to designate discourses and statements as either true or false. These include the procedures that get accorded value in acquiring truth, and the rules which legitimate some agents with the task of telling the truth. Importantly, this concern differs from the traditional relativist stance which holds that while there are different versions of what passes for the truth of a thing-in-itself, each is a representation of the ‘true truth,’ even though any absolute truth may be forever out of reach. In contrast, the criterial truth notion denies the very possibility that any such absolute, unreachable truth exists, even in relativistic form. So even considering such meanings is no longer interesting or relevant. Instead, poststructuralists recognize that the mechanisms and procedures used to acquire ‘truths’ are real objects in themselves and thus available and relevant for genealogical research. A closely related concern for poststructuralists involves the relations of power surrounding the appearance of regimes of truth and their related discourses. Since each society has its own specific regimes of truth, they must have been shaped by the relations of power at the time they came into existence and which subsequently sustain them. These relations also determine the strategies that enable and constrain discursive social intercourse. The ‘truth’ power produces, then, determines the correctness of discursive acts where correctness is similar to how pieces are positioned and can move in a chess game. Licit moves are those made that follow the rules, while illicit ones are those disqualified by the rules. Speaking the truth is making the right moves in a discourse.14 So, power relations structure social interaction, including what may be said, how it may be said, who may say it, and when, thus enabling and constraining social acts. Power

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relations are real objects and so amenable to, and also relevant for, genealogical analysis. Appendix A provides a case in point. In the accounting context, licit moves are those prescribed in the GAAPs that professionally designated accountants are required to follow. In the oil and gas example, the licit procedure today is successful efforts, while full costing and discovery value accounting are deemed illicit, although still permissible in certain special circumstances. Thus, even though most accountants recognize that the net income figure is only a result of the successful efforts procedure and that other methods would yield a quite different result, they still follow the rules. Similarly, in the case of executive stock options, most professional accountants would likely agree that the expense occurred at the issue date should be recorded then and not, as required by the current GAAP, at the exercise date. Nevertheless, they would follow the prescribed procedure. This issue brings up the dilemma of ‘true and fair’ accounting reports. Accountants can violate the GAAP and report the stock option as an expense at the issue date, thus giving a ‘true’ accounting. Or they can be ‘true’ to the GAAP and follow it to the letter. A genealogical history of such accounting GAAPs and how they undergo radical transformations over the years would reveal that much of accounting today is a result of relations of power, rather than a matter of neutrally providing guidelines for truthful reporting. Another poststructuralist concern with truth would investigate how what passes for truth in regimes of truth and discourses are taken on board by individual participants as their own perspective. Since there are no foundational, permanent, transcendental truths, all there is are interpretations. But, if that is all there is, what are these interpretations of ? The response is that they are interpretations of intersubjective beliefs and attitudes and so are objects in their own right. This is the realm of shared objective knowledge that exists independently of any knowing subject. This idea is similar to the Popperian notion of a ‘third world’ of objective contents of thought. Popper’s first world is that of physical objects and states; his second is the world of consciousness, mental states, and dispositions.15 This does not mean, however, that all members of a community or a culture believe the knowledge to be true. Some may be agnostic, while others may believe it to be false. Either way, this intersubjective realm is a cultural artifact, an object about which individuals develop perspectives. This intersubjective realm, then, is seen as an important focal point for genealogical research. It differs, however, from the Popperian approach that takes it to consist of the current stock of truths that have withstood the ‘falsification–corroboration’ criterion test and which still holds to the belief that there are truths out-there and, even though we can never ‘prove’ them onceand-for-all, we should continue to search for and document them if only to eliminate falsehood and get closer to them. Poststructuralists, in contrast, deny that such truth claims are meaningful in their own right about some

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noumena, but unknowable world. So they shift attention to the realm of intersubjective interpretations. The interest is to reveal how individuals appropriate this intersubjective realm as part of their own set of truth beliefs and states of mind and, more importantly, to investigate the effects of such perspectivist appropriations on the individual. To recapitulate, while the poststructuralist perspective neither asserts nor denies that a thing-in-itself exists, it does reject the idea that some permanent truth of it exists ‘out-there’ somewhere, a truth that might be discovered. This presupposition leads to a radically different set of concerns than those of the correspondence and coherence theories. Crucially, these concerns are in no way an attempt to offer some theory of truth. Rather, they involve investigating and documenting the ways the regimes of truth of a society, culture, institution, or community are employed and the effects they have on its individuals. The discussions in previous chapters can be used to illustrate some of these concerns.

Accounting issues The claim that accounting today is in the grips of a crisis of representation is signalled, albeit in different ways, in previous chapters. Deconstruction, for example, proposes that the very possibility of constructing some central textual meaning for key accounting signifiers, such as net income or capital, is an impossible dream. It shows how any such meaning can only be constructed by relying on cunning linguistic manoeuvres. Oil and gas accounting is a case in point. The current FASB GAAP calls for the use of successful efforts. Thus, it privileges the accountant’s metanarrative of using past, historical costing over the economist’s net present value of future cash flows. So it silences the voice of discovery value accounting information that was required in the early 1980s, but which is no longer formally required. Yet, future cash flows are the result of past expenditures and past expenditures were made, in large part, in the expectations of future cash flows. So neither accounting procedure represents any final truth about income or capital. The truth in accounting reports is always only different and deferred, never present.16 Sophisticated financial instruments offers another example of this crisis. The accounting here is based on their current market price, while the current market price is based on the reported accounting valuation. So the accounting sign of income merely reflects itself rather than some true income existing out-there before its representation in accounting information. (It is of more than passing interest to note that in the case of oil and gas accounting, the accounting for the discovery of reserves can also be readily treated as a future option with a hedge and derived by means of Black and Scholes modelling.) In both of these examples, the accounting sign of income has no relation to any real thing-in-itself out-there, nor to any truth about such an object.

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The representation crisis is also signalled in the financial reports of hundreds of companies in today’s burgeoning new economy sector of computer software, internet technology, website marketing, genetic engineering, biotech firms, and the like. The accounting book value of such companies typically is vastly different from that accorded them by the stock market. For example, Yahoo! Inc had a price-to-earnings ratio of 1,382:1, while eBay Inc’s was 3,351:1 – compared to a typical price-to-earning ratio of between 20:1 and 30:1 for so-called old economy companies. And Amazon Inc had not turned a profit by 2000, yet its market capitalization had reached nearly $30 billion. Such discrepancies between conventional accounting’s book value story and the stock market’s capitalization is another clear indication of accounting’s crisis of representation.17 In the face of these insights, poststructural accounting research might well abandon both the correspondence and coherence approaches and turn to the other truth concerns discussed. The result could be new understandings of the way accounting and management control systems actually work. The advent of double entry bookkeeping (DEB) in Pacioli’s time provides a template. The mechanisms of DEB, including its procedures, rules, and principles, had a double purpose. In the first instance, if the merchant followed them religiously, his accounting records would be in good order and would reveal the truth of his operations to him, thus bringing order and reason into his life. These mechanisms were to be followed in virtue of the power relations of the ruling secular class and the Church. The beliefs and attitudes about DEB existed in an intersubjective realm where they could be appropriated by the merchant as his own perspective. If he took them on board, he would be transformed from a loathsome, grasping, greedy, usury-practising sinner into a God-fearing, honest business person doing God’s work and whose soul would be saved for eternity.18 From a poststructural perspective, however, this is not all to the good. Nietzsche might have depicted such a Christian epiphany as the breeding of a ‘most ridiculous type, a herd animal.’19 In the name of truth, DEB and its related relations of power, produced a well-fed, clothed, and sheltered person whose powerful instincts, strong passions, and instinctual cunning were tamed and tethered. Robbed of his precious Dionysian side, the merchant no longer relished transgressions, nor did he delight any longer in a world of disorder without a punishing God. And he had lost the exuberant feelings of the forbidden. Drained of his lust for money, power, and the thrill of executing a cunning deal, the merchant could not stand in a Dionysian relationship to existence and becoming.20 He became a member of the herd. Similarly, a Nietzschean perspective would not endorse Wedgwood’s Etruria. The latter’s potter’s instructions and supervisory hierarchy, together with Wesley’s strong preaching, provided the necessary power relations and mechanisms to turn a Dionysian-like band of workers into a docile, diligent,

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useful and God-fearing highly disciplined workforce. Nietzsche would not likely see this as progress, but on the contrary: ‘Theirs is a totally disenchanted world – a world stripped of everything splendid and sublime. They have nothing to worship and nothing to fight and die for.’21 And he would likely see the Hawthorne Plant relay assembly test room, Empire Glass, ITT, and J&J in the same light. Jean-François Lyotard (1914–1998) picking up on Nietzsche’s ideas, defined ‘desire’ as an impulse in the psyche that works as a primary energizing force.22 Desire, however, has become the prisoner of institutions – including family, school, university, place of employment, church, state, and so on – which work to deintensify it with an ensuing loss of the individual’s creative energy and vitality. Lyotard hoped that exposing the way institutions routinize its debilitating effects on daily existence might lead individuals to unleash desire, recover a Nietzschean vitalism, and reaffirm the free flow of Dionysian life energies. What is at stake, more generally, is the fate of the natural human energies which, Lyotard claims, are essential to creativity and are especially important in the realms of art and politics. On the one hand, desire’s release evokes and intensifies those libidinal effects which facilitate living life to the fullest. It can kindle and cultivate innovation, provoke liberation movements, and act as the motor of revolutionary forces to combat the terror of society’s unrelenting commodity production and impenitent consumption of material objects and signs. On the other hand, desire’s release is also manifested in heinous crimes, religious wars, racial intercine conflict, and environmental annihilation. Unleashing desire is a double-edged sword. These ideas, when appropriated into an accounting context, yield some nontraditional interpretations of income smoothing and goal incongruent actions, issues which have bothered academics for decades. At first glance, it would seem that the accountant is indeed the prisoner of institutionalized GAAPs, professional standards and postulates, and double entry bookkeeping mechanics, all of which the accountant is duty bound to follow. As a consequence, she or he seems to be little more than a professionally trained, rule-following slave. Instead of being enervated, accountants suffer a loss of life energies and vitalities. There are, however, important instances where these energies can be released. This may occur, ironically, when the financial accountant engages in income smoothing for financial reporting or when the divisional or profit centre controller and general manager tamper with their operating budgets. While such actions get labelled as, respectively, profit manipulation and goal incongruent behaviour (about which there is a vast corpus of literature and research in the conventional textbook and scholarly literature which need not be reviewed here), these actions do unleash the vital desire force enabling the accountant to escape from the prison of GAAPs, standards, and bookkeeping. Releasing desire enables the accountant to recover the Self – the artistic

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innovator – while shedding, at least for the moment, the Other – the rulefollowing slave. Income smoothing and profit manipulation can have life-affirming propensities. While this may be all to the good for the individual accountant, there is a dark side. This concerns the consequences of such actions for society at large. In most nations today, the accounting profession has been granted a near monopoly on accounting and auditing services, legitimated on the basis that accountants will act in an objective, unbiased, and professional manner so that society at large can ‘count on’ the financial information produced for public consumption. But if these data are tainted by earnings management, then the public trust is violated, and if budget fiddles can badly mislead upper management who have the overall corporate interests in mind, what redeems accountants in private does not necessarily bring justice to the public.23 A poststructuralist position could also be taken to engage in genealogical research into the way specific accounting signs, such as net income, come to be taken as ‘facts’ by exposing that they are part of a long, arduous, agonistic journey featuring disputes, alliances, and politicization. Any particular accounting issue must be put on a standards board’s agenda. Many issues, however, do not make it. Those that get by this first hurdle, in virtue of the power relations of the board’s makeup, are studied and debated by the board and the general accounting community is solicited to participate. The board eventually produces a draft pronouncement which it promulgates, again requesting comments from the general network. Finally, the board issues a GAAP – an official procedure – which all members of the profession are duty bound to follow. The accounting statements that result from following the GAAP are very much a product of a highly political process rife with power relations. Also, and not infrequently, company executives and the company’s auditors square off over how to interpret the GAAP. It is these power relations which determine the accounting outcome – not the discovery of truth. They would be the focus of genealogical research. The oil and gas accounting controversy is a case in point. The issue came off the back burner in the mid-1970s as a result of Congress’s concern over the OPEC oil crisis. Learning that there was no one established best accounting procedure for determining the true cost of oil and gas reserves, Congress charged the SEC with coming up with the correct method. The SEC, not wanting to carry out this charge since it would mean that for the first time accounting GAAPs in the USA would be made by a public sector organization, nominated the FASB to do the job. Pressed into service and with a very short time line, the FASB, which is ceded by law the power to promulgate GAAPs, decided to endorse successful efforts by a four to three vote. Under severe political pressure from advocates of full costing, FASB ruled that companies could continue to use full costing until some future date, to be decided later. In the meantime, the

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current SEC chair, who came to believe that neither method produced useful facts and information upon which decisions could be made, successfully proposed that some form of discovery value or reserve recognition accounting should be included in accounting reports, but as supplementary information only. Clearly, then, these relations of power had a strong hand in influencing the way accounting reports come to portray a ‘true and fair view,’ or ‘present fairly,’ the financial aspects of oil and gas enterprises. The resulting reporting requirements became part of an intersubjective realm, where professional accountants appropriated them into their own perspective of beliefs and attitudes about oil and gas accounting. While some members did disagree with the promulgated GAAP, they still followed it in preparing their financial statements, but included a discursive comment indicating their disagreement. As a societal information network, accounting converts physical commodities and socially constructed events, transactions, and GAAPs into ‘facts’ and ‘truths’ which then get appropriated into the financial markets network. Yet, today, the agonistic and combative history behind the income and capital ‘facts’ in the annual report is forgotten.

Conclusion This chapter proposed that accounting today is in the grip of a crisis of representation and that it has lost the Enlightenment view of a world in which it is possible to represent the truths of some out-there things-in-themselves. This thesis was examined from various philosophical perspectives which indicated that the correspondence and coherence theories are no longer relevant for understanding the nature of accounting. This does not mean, however, that accounting and truth is no longer a pertinent issue, but instead that investigating it from a poststructuralist vantage point can clear a space for a different set of issues which, indeed, do have relevance today. Even though accounting information is no longer pertinent for its referentiality to some objective domain, it remains highly relevant for social and commercial relationships. In fact, it seems fair to say that the information in accounting statements is highly valuable because it imparts a sense of exogeneity and reliability to society at large and thus is useful for social interactions. Nonreferential accounting information, as part of an intersubjective domain, provides arbitrary but seemingly exogenous anchors which are appropriated as perspectives and, as such, facilitate complex commercial, economic, and social exchanges. In fact, in the corporate world such information is the basis for a host of arrangements. These include: loan covenants; stock options; executive bonuses; union contracts; taxation levies; government subsidies; bank loans; leveraged buyouts; corporate downsizing; employee layoffs; joint venture agreements; and international transfer pricing transactions, some of which may be designed to avoid local tax burdens or even to facilitate money

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laundering deals. Although accounting numbers are arbitrary and nonreferential, they are serviceable for commercial and social arrangements. They have the properties of observability, verifiability, and predictability. They give off an aura of tangibility and reliability.24 Yet, it will not do to leave matters there. Such a conclusion would be too much like a reified, neo-pragmatic reactionary scenario of rationality. Poststructuralist critiques should go beyond merely consecrating the current state of accounting. For starters, they can be used to challenge systems of thought founded on metaphysical metanarratives and commensurability claims. They provide grist for the mill of resourceful subversions of dominant value systems.25 They can be used to de-theologize dominant accounting research paradigms such as those based on the neo-classical economic theory metanarrative, which has virtually dominated accounting research and theory building in recent years. Furthermore, instead of constantly confronting such theories with other modernistic metanarrative-based theories, poststructuralism can promote genealogy as method and set a different agenda. And, given that the ontological, epistemological, moral, and political representations of the status quo are ungrounded and free-floating, new opportunities should appear for uncovering and deconstructing the relations of power that support this state of affairs. Poststructuralist critiques of contemporary society also emphasize the importance today of the image and the sign, the immaterial over the real, the material. A recent auction of a painting signed (supposedly) by Vincent Van Gogh fetched $80,000,000. Clearly, in material terms, neither its use nor labour value is anywhere near this sum. It was a case of pure ‘sign’ value. Along similar lines, the signatures of the partners of the Big Five global accounting firms on the financial statements of annual reports of today’s humongous multinational enterprises fetch significant sums of money. While few of us would be able to identify or even know these individuals, their signatures are valued at sums far in excess of either their use or labour value. They are precious for their sign value. Finally, poststructuralism also shifts the emphasis from scientific and philosophical foundations to historicism. This epistemological move depicts the accounting profession, not as a product of the means and relations of production, nor as ideologically self-fettered, but as a function of a series of historical struggles over the ownership of accounting principles and practices, including auditing services and a host of related, lucrative consulting by-products.26 Historical contingency would replace Enlightenment rationality with a radically democratic perspective, respectful of and honouring differences of gender, sex, race, ethnicity, class, and region. Such a mixture of interests could radically change matters. What poststructuralism teaches us is that the legitimacy for the current state of accounting stems not from any sacred covenant with society, but

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rather is the result of the historical and ongoing battles of discourses which were and are historically embedded in society and its institutions, including legislative bodies around the world. It could have been, and still can be, different. One possibility is the heteroglossic accounting text, an idea that is briefly sketched out next.

7

Heteroglossic accounting

In producing this book the aim was not to signal ‘the death of accounting.’ Such a conclusion would fly in the face of one of the main lessons that seemed to emerge. This message is not that meaning is no longer meaningful, but rather that meaning never stands still; it is always on the move. If this claim holds, then it also gestures towards the possibility of a different kind of accounting than is currently practised, which might be called ‘heteroglossic accounting.’ Clues about what heteroglossic accounting might look like can be found in the work of Mikhail Bakhtin (1895–1975), the Russian literary theorist who emerged posthumously ‘as one of the leading thinkers in the twentieth century.’1 Bakhtin’s ideas suggest that instead of ‘affording us a point of verbal stability, the literary text casts us adrift in semantic space.’2 Moreover: ‘Bakhtin, it might be said rewrote the history of western civilization by developing a new typology of literary discourse, which itself is based on a new postSaussurean theory of language.’3 Thus, it seems appropriate to introduce some of his ideas into this treatise on accounting and poststructuralism. Bakhtin is considered to be a harbinger of poststructuralist literary theory. He identified two major genres of novels – the monologic and the heteroglossic. In the monologic, the author dominates the characters and events. He or she knows everything about them, including things the characters themselves do not know. Bakhtin sees Tolstoy as the master of the monologic novel. In Three Deaths, Tolstoy describes and analyses the lives and deaths of a noblewoman, a coachman, and a tree. He knows all about them and gives each, including the tree, a definite and final meaning. He ‘finishes’ them and ‘finalizes’ the plot. The heteroglossic novel, in contrast, gives equal weight to the voices of both the characters and the author. The latter is not the ultimate authority and does not impose any unique, final meaning or ideological view on either the characters or the plot. For Bakhtin, Dostoevsky is the master of the heteroglossic novel. His characters exist as autonomous, self-conscious, unfinished beings who interact dialogically and on an even plane with the other characters and with Dostoevsky himself. Moreover, the characters’ and the author’s views are contradictory, developing, and unfinished.

130 Accounting, Accountants and Accountability The reason for this, Bakhtin contends, lies in the nature of ‘speech utterances’, a key concept in his theoretic.4 A speech utterance (or slovo) denotes any concrete conversation, discourse, thought, or word as it is uttered in social settings. Utterances are two-sided social acts with a speaker (author, character, etc.) on one side and a listener (reader, responder, character, etc.) on the other. Words do not arrive with a pre-existing meaning before they are uttered, rather ‘it [meaning] belongs to a word in the position between speakers . . . meaning is realized only in the process of active, responsive understanding . . . The specific concrete utterance is the locus for understanding the dynamic and creative forces of the life of language.’5 Words, when uttered, are alive. Utterances, Bakhtin explains, contain two major contradictory forces – centripetal and centrifugal. The centripetal is a centralizing force which tends to drive the novel towards a unified, central, final meaning. The centrifugal force, in contrast, is a decentralizing power which tends to drive the novel towards contradiction and complexity. These two forces interact to produce ‘heteroglossia’ – defined as multi-voiced, discursive acts. Heteroglossia ensures that meaning stays alive, in-process, unfinished, and engaged in a continuing social dialogue with a ‘carnivalesque irreverence towards all kinds of authoritarian, repressive, monologic ideologies.’6 Moreover, life itself is heteroglossic; ‘a force field created by the general ceaseless Manichaean struggle between centripetal forces, which strive to keep things together, unified, the same; and centrifugal forces which strive to keep things various, separate, apart, different.’7 Any utterance is a continuation of the dialogue which preceded it as well as the one which will follow. ‘Only the current of verbal intercourse endows a word with the light of meaning.’8 Utterances arrive imprinted with a social history and leave with a social future. Bakhtin’s ideas can be applied to accounting reports. In the first instance, it seems clear that current practice strives to produce monologic accounting statements. Financial statements attempt to present a single meaning for each of the accounts including, importantly, income and capital. Furthermore, the auditors’ report certifies to the authenticity (truth or fairness) of this final meaning. And the Congress’ call for one method for all, along with the FASB’s initial declaring of successful efforts as the only method, bears witness to the monologic impulse in traditional accounting. These favour the centripetal force, with its penchant for monologic meaning, by using the voice, so to speak, of historical full costing. Preparers and auditors, it seems, strive to tame the centrifugal force embedded therein, which wants to keep the meanings of the statements open, alive, and unfinished. Yet, as discussed above, this can be achieved only by suppressing the other ‘voices,’ in this case the centrigufal force in the annual report. The most obvious of these is the RRA statements, which get degraded as presenting only supplementary, unaudited information unsuitable for either determining earnings or making investment decisions. Along similar lines, the replacement

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cost accounting information required in some countries also gets marginalized as putatively supplementary and not useful. Following Bakhtin, then, an argument can be made that accounting practice, principles, and theory should move towards heteroglossic accounting. This could entail giving the various voices equal expression. In the oil and gas instance these are immediate write-off, successful efforts, full costing, and RRA. In fact, it would not be very difficult to prepare financial statements which included each of these narratives along with a succinct explanation of how each was prepared and an outline of the theory behind it. The report could also outline the major points of disagreement and contradiction between them, with each method having a rejoinder. The result would be an open, dialogic, and multiple perspective report. The basics of such a heteroglossic accounting report for an oil and gas exploration company could be as follows. In the first instance, the accountant would not attempt to package all the events and transactions (both past and future) into one final, monologic report. Rather, the aim would be to produce a report that allows the various ‘voices’ currently embedded, but muffled in the monologic report to ‘speak.’ The report could include four different statements of net earnings and balance sheets, each of which could be deemed to ‘present fairly’ or provide a ‘true and fair’ view of the enterprise’s state of financial affairs, prepared in accordance with its particular presuppositions. The report could include a general preamble describing the problems involved in accounting for oil and gas exploration along the following lines: Oil and gas exploration and development enterprises present two perplexing questions in accounting for their operations. As the industry is highly capital intensive, the first issue concerns when and how to expense the normally substantial up-front expenditures on property acquisitions, geological and geophysical expenses, drilling and testing costs, and general administrative expenses. The second issue concerns the matter of when to recognize the revenue involved in the discovery of recoverable quantities of oil and gas reserves. Accountants have relied on four major different and incommensurable methods of dealing with these two issues, each of which holds certain advantages and limitations. Moreover, each method stands in its own right as a reasonable and understandable way to account for oil and gas exploration and development operations. The four methods are known as: 1 2

3

immediate write-off which expenses costs as incurred and recognizes revenues when reserves are produced; full costing which capitalizes all exploration and development costs and expenses them over the production of all oil and gas reserves discovered with revenues recognized when reserves are produced; successful efforts which traces all such expenditures to either specific

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Accounting, Accountants and Accountability successful properties or to specific unsuccessful properties and expenses the costs of unsuccessful exploration immediately when the property is abandoned, while expensing the costs of successful efforts over the production of the oil and gas reserves discovered on successful properties and recognizing revenue when reserves are produced; and discovery value or reserve recognition accounting which capitalizes the fair value of the recoverable reserves at the time they are discovered along with all exploration and development costs, and amortizes these amounts against the income collected from the sale of their subsequent production.

In this way, the various voices would be allowed full expression. Immediate write-off is the voice of most taxation authorities. Successful efforts proponents (such as the FASB) prefer balance sheets which do not include properties (assets) that have been abandoned and have no value. Full cost advocates prefer income statements which include all the costs of discovering oil and gas reserves. And economists (along with some public accounting firms and SEC officials in the 1970s and 1980s) favour RRA accounting which deems future net cash flows as the relevant information for decision makers, particularly those in the capital market. A heteroglossic accounting report would present each of these voices and let them engage in a social dialogue.9 Heteroglossic accounting can be underwritten by pragmatism, a position seen as America’s distinctive contribution to the world community of philosophers.10 In the first instance, pragmatism negates the idea of finding some purely objective truth.11 It argues instead that the function of philosophy is to address concrete, practical problems where ideas and meanings can make a difference in achieving a satisfactory solution. So ‘the test of whether a belief is true is whether acting upon it leads to practical consequences which are satisfying.’12 Pragmatism also tries to go beyond the centuries-old idea that the truth is made rather than found or discovered. So pragmatists are not interested in questions such as: ‘Can a linguistic representation correspond to some thing-in-itself out there beyond language?’ Or: ‘Does this linguistic representation cohere with the other linguistic statements in a package of statements about the particular thing-in-itself?’ Nor are pragmatists interested in offering arguments against correspondence, coherence, or positivist theories of philosophy since that would mean they would have to use their vocabularies to show how these are inconsistent on their terms. Instead, the pragmatist is interested in understanding how linguistic representations of what are deemed to be truths lose their habits of using certain words and start using other words to represent the same thing. Importantly, this is not to claim that there is no truth out there beyond language – that would be to claim to know something about what pragmatists claim cannot

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be known. Rather, it is to say that while the world is out there, descriptions of it are not. This means that what gets taken as true or fair is the property of words and sentences, which are part of vocabularies, which are made by humans – truths are historically contingent and the handiwork of people. It is the same with accounting representations of income and capital. So liberal ironists, to use Richard Rorty’s term,13 talk about a ‘final vocabulary.’ A final vocabulary consists of those words which one uses to describe and justify personal opinions, sentiments, viewpoints, and outlooks on life in general, especially the ‘big questions’ about life. Some of these words are elastic in that they get used pervasively in all kinds of contexts (e.g., ‘true,’ ‘right,’ ‘beautiful,’ ‘good,’ ‘ethical,’ and their counterparts ‘false,’ ‘wrong,’ ‘ugly,’ ‘bad,’ and ‘reprehensible’); while others are used in a more narrow or parochial sense (e.g., ‘professional,’ ‘America,’ ‘Christian,’ ‘the Church,’ ‘communist’). These are ‘the words in which we tell, sometimes prospectively and sometime retrospectively, the story of our lives.’14 Such words are ‘final’ in that they are as far as one can go with language to describe and justify personal beliefs. So it may seem that there is no recourse that is non-circular and that the words of any final vocabulary are as far as one can go with language. But since all vocabularies are historically contingent, ironic pragmatists realize that they can invent or create new final vocabularies, usually for the benefit of the public sphere. They must, however, tread lightly here since they face ‘the problem of how to overcome authority without claiming authority.’15 They also recognize that in creating a new final vocabulary, they must harbour private and continuing doubts about it recognizing ‘that arguments phrased in [their] present vocabulary can neither underwrite nor dissolve these doubts.’16 They also realize that their final vocabulary is contingent and fragile, and that in their private spheres they will never quite be able to take themselves seriously. Moreover, they know that a ‘new’ final vocabulary is never ‘final’ and that it, too, will, in time, be replaced by yet another final vocabulary. For pragmatic ironists ‘nothing can serve as a criticism of a final vocabulary save another such vocabulary; there is no answer to a redescription save a re-re-redescription . . . there is nothing beyond vocabularies which serves as a criterion of choice between them.’17 Such a state of affairs is ironic in the sense that they must have doubts in their private spheres about the new final vocabularies they invent for the public sphere.18 Nevertheless, they hope that by changing the final vocabulary of important public sphere institutions they might, at the same time, recreate themselves in new and different ways. So, as with Nietzsche, they think that by changing one’s final vocabulary one can also recreate oneself. In the case of the accounting profession, adopting a heteroglossic approach to preparing financial statements would mean a new final vocabulary for the profession, one that squares more fully with poststructuralism than does the current double-entry-based monologic accounting. And if adopted, heteroglossic accounting might narrow the disquieting ‘expectations

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gap’ that keeps raising its head to remind the profession of the public’s doubt about its ability to meet its putative responsibility to both public and private sector stakeholders who ‘count’ on accounting. As well, it might lead professional accountants to reinvent their private consciousness regarding what it means to be a professional. The Prologue to this book identified accounting for intangibles as the major factor in the crisis of representation facing the profession at the outset of the new millennium, especially for new economy companies. This is the same general problem as the one that plagued oil and gas accounting. Intangibles (such as: R&D, proprietary knowledge, organizational culture, technical and professional expertise, brand names, and goodwill arising from acquisitions) today constitute the major revenue producing asset for companies of all kinds, not only new economy ones. When and how to expense intangibles in order to match them with revenues earned remains arbitrary and atheoretical.19 Remedies such as those described in the Prologue seem to be pretty much merely palliative attempts to patch up monologic accounting. But a heteroglossic accounting would bring a new final vocabulary into play. It would permit the various major voices to ‘speak.’ It is, to borrow a phrase from Foucault, time to stop with this anonymous text.20 Just as the End of History does not mean the end of history; nor does the Death of the Author mean the death of the writer. Similarly, the End of Accounting, as signalled in this treatise, does not mean the end of the giving of accounts nor the end of accountability. Rather, if there is a ‘big’ message, it is that contemporary poststructuralist ways of reading texts seem to be illuminating when applied to accounting texts. Nietzsche wrote, ‘“Truth” is therefore not something there, that might be found or discovered – but something that must be created and that gives a name to a process, or rather to a will to overcome that has in itself no end . . . It is a word for the “will to power”.’21 Could it be, then, that accounts which are deemed to be ‘true and fair’ or ‘presented fairly’ are also only words for the will to power?

Appendix A

Key events of the oil and gas accounting controversies The controversy began in the mid-1970s when the OPEC nations announced a total embargo of their oil to the USA along with a 5 per cent reduction in production for Western European countries until a peaceful solution was forthcoming for the Middle East situation. (The OPEC nations were incensed by President Nixon’s decision to give Israel over two billion dollars in military aid after the Ramadam/Yom Kippur war).1 The price of light crude rose from $1.35 a barrel in 1970 to nearly $14.00 by 1978 and rose to nearly $40.00 in 1980. An alarmed US Congress asked the Department of Energy (DOE) in 1973 to provide it with the size and the costs of domestic reserves. When the DOE replied that it did not have this information, Congress mandated the SEC (under The Energy Policy and Conservation Act, 1975 (EPCA)) with requiring filing companies to report both the quantity of oil and gas reserves and their costs. They also charged the SEC with developing uniform regulations for oil and gas accounting by December 23, 1977.2 The EPCA stated that the SEC had the authority to either prescribe such rules or to rely on the Financial Accounting Standards Board (FASB) for their development. It also stipulated that interested parties must have the opportunity to provide written comments (beyond 22 December 1977 if need be) with respect to the SEC’s relying on the FASB’s promulgated accounting standards. The SEC had already (ASR#150, January, 1974) stated that in meeting its statutory obligations over the years, it had looked to the accounting profession’s standard setting bodies for leadership. Since the FASB had already scheduled an oil and gas accounting project, the SEC announced early in 1975 that it would rely on the FASB for its charge under the EPCA. In May 1976 the SEC issued SAR #5706 requiring filing of details of reserves and production, and in January 1977 indicated officially (SAR #5801) that the FASB should take the lead in developing uniform accounting

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standards. The FASB held public hearings (which were not well attended and were later described as ‘sterile’) during March and April 1977. Anticipating a successful efforts decision, proponents of full costing (mostly small companies) launched a full-scale lobbying campaign in Washington while the FASB mounted a counter lobby. On 30 June 1977, the SEC released SAR #5837, soliciting comments regarding its responsibility under the EPCA and stating that it would try to coordinate the FASB’s reporting requirements. On 15 July the FASB voted (four to three) to issue what was to become the controversial SFAS-19 exposure draft, calling for the use of successful efforts only and the elimination of full cost. On 31 August the SEC adopted SFAS-19 (in SAR #5861) as a Commission regulation. The full cost lobby took their case to the DOE, the Federal Trade Commission, and the Department of Justice, among others, arguing that while the EPCA needed the reserve and production information for public sector decision making, this did not mean that the SEC should mandate one public accounting standard for the private sector. While requests to the FASB to hold public hearings on its Exposure Draft seemed to have little effect, the lobby was successful in getting Senators Haskell and Bartlett to introduce on 16 October 1977 an amendment to the pending 1977 Public Utilities Act which would make it illegal for the SEC to eliminate full costing under the authority granted the SEC by the EPCA. More pressure was exerted on the SEC when the Department of Justice wrote to SEC Acting Chairman Donald Kirk indicating that the SEC had a statutory obligation to hold hearings on SFAS-19. On 26 October 1977, the SEC issued SAR #5878 reconfirming SAR #5861. And, in a move that initially seemed removed from the full cost versus successful efforts controversy (SAR #5861), also required (effective after 28 December 1978) disclosure of the net present value of future net revenues from proven reserves. Thus, economics-based RRA (discovery value) came ‘in by the back door,’ so to speak. At this juncture the full cost lobby tried to extract an ‘understanding’ from the SEC that it would hold public hearings on SAR #5878 (and so in effect on SFAS-19). Such an eventuality would, importantly, be an unprecedented departure from the SEC’s long-standing practice of fully supporting the FASB’s GAAPs and thus keeping accounting standard setting in the domain of the private sector. In the meantime, the SEC officials became concerned that SFAS-19 was brought on in haste and that the entire issue needed reviewing with a broader scope and starting over from the very beginning. Consequently, on 7 November, the SEC’s chairman, Harold Williams, informed the Sub Committee managing the Public Utilities Act that the SEC intended to solicit public comment and hold public hearings regarding SFAS-19. On the same day, the SEC issued a release soliciting written comments on whether or not it should rely on the FASB’s determinations in general and whether or not the SFAS-19 successful efforts dictum was appropriate. The SEC also, as

Appendix A 137 permitted by the EPCA, extended the deadline for comments beyond 22 December 1977. The SEC held public hearings during March and April 1978, followed by private hearings in May, June, and July. Opposition to the FASB’s ‘successful efforts only’ position proved to be substantial. The Department of Justice Anti-Trust Division, for example, testified that SFAS-19 favoured big companies and would harm or even lead to the elimination of many small companies. On 19 December 1977, the SEC issued ASR #257 and ASR #258 which reaffirmed the conclusions in ASR #253 adopting the DOE definitions of proven reserves. It also outlined the form of full cost accounting by allowing a country-by-country cost centres approach as an acceptable alternative to successful efforts. These eventualities provided a space for the FASB to reconsider its position. In February 1979 the Board issued SFAS-25 which amended SFAS-19 by: changing its effective date to fiscal years ending after 25 December 1979; suspending indefinitely the effective date of adoption of successful efforts; adopting the SEC’s definition of reserves; and requiring companies switching away from successful efforts to justify the change (as required under ABP-20). The effect of suspending the effective date meant that companies previously using full cost could continue to use it. Then, in 1982, the FASB issued SFAS-69 (superseding SFAS-19 and SFAS-25), which established comprehensive financial statement disclosure for oil and gas accounting and which incorporated much of the SEC requirements. Under SFAS-69, companies had to disclose as supplementary information: proven oil and gas reserves (as per ASR-257); capitalized costs; costs incurred for property acquisition, exploration, and development; results of operations; and a standardized measure of discounted future net cash flows from reserves. This requirement was dropped in the 1980s when oil prices declined precipitously. Thus, nearly a decade after the OPEC initiative leading to the ‘energy crisis,’ Congress finally got the information and regulations it wanted from the DOE to maintain an up-to-date energy data base. Moreover, the FASB’s pronouncements coincided with the SEC’s regulations. It seemed, then, as if the setting of accounting standards and reporting practices would remain in the hands of the accounting profession and the private sector.

Notes

Prologue 1 See, for example, Stewart, 2001: 184. ‘The green eyeshade gang isn’t measuring what really matters to investors . . . a growing number of forward-thinking market watchdogs, academics, accountants and others [are convinced] that accounting gives rotten numbers about the value and performance of modern, knowledge-intensive companies.’ Such conclusions, however, need more research. One careful study by Francis and Schipper (1999) found that while the value of earnings and cash flow information had decreased over the period 1952–94, the usefulness of book value of assets and liabilities had not declined and these results were the same for both high and low technology stocks. 2 Ibid.: 184. 3 Capital refers to what accountants call owners’ equity, while income refers to net income. 4 Statement of Financial Accounting Concepts No. 1. 1978. Financial Accounting Standards Board, Norwalk, CT. 5 See Richardson (1988 and 1990) for a more general critique of the accounting profession. 6 Lev, 2001; Lev and Zarowin, 1999. 7 Lev, 2001: 88. 8 This is accomplished by estimating the earnings on physical and financial capital, deducting these amounts from total reported earnings with the difference being ‘knowledge capital earnings,’ and then dividing these earnings by the expected rate of return on knowledge assets to yield knowledge capital. Knowledge capital is then added to the assets on the balance sheet and owners’ equity incremented in the same amount. This proposal was put forward by Baruch Lev and reported in Stewart, 2001. 9 The cash earnings statement idea is attributed to Professor Robert Howell, an eminent US accounting professor (Stewart, 2001). 10 Lev, 2001. 11 See Lyotard’s (1979/1984) classic monograph on the postmodern condition of knowledge. 1 Introduction 1 2 3 4

See Bhimani, 1996; Scapens, 1985; and Hopwood and Bromwich, 1984. See Forrester, 1982–83; Nicklish, 1903; Schmalenbach, 1919. See Bhimani, 1996 for developments in European countries. See Beaver (1996) for a review of the future potential of the informational perspective and a call for some kind of radically new development.

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5 Harman, 1988: back cover notation. 6 See Hobsbawm (1997: 24–55) for an articulate and helpful exposition of these suppositions. 7 ‘Between historical statements based on evidence and subject to evidence and those which are not . . . Without the distinction between what is and what is not, there can be no history’ (ibid.: vii). 2 Structuralism and poststructuralism 1 2 3 4 5 6

7 8 9

10 11 12

13 14 15 16 17 18

Sturrock, 1986: vii. Ibid.: 64–5. Beaver, 1996. The self-interest theme stems from the influential writings of the likes of Hobbes (1588–1679), Smith (1723–90), and Spencer (1820–1903). Weedon, 1989: 23. This does not assume that languages never change. Rather, Saussure’s synchronic premise ‘is that the capacity of a language to alter unceasingly may be set aside for the sake of studying its more or less permanent constitution. The study of language itself, as the hypothetical template of all existing languages, is essentially a synchronic one because it is searching for the constants of language. The structures which Structuralists look for endure, which is not to say that they never change or last for ever. Structures too evolve’ (Sturrock, 1986: 5). From a radio interview, Canadian Broadcasting Company, 1977. The rules include a fixed hierarchy in which Kings rank higher than the Queens and face cards rank above the numbered cards which rank from the ten to the two. Whether or not and to what extent profit was deemed to be usury over the centuries was much debated by religious and secular scholars alike. See Tawney (1984) for the struggle over the meaning of usury since medieval times to this century. As Eagleton (1983: 131) puts it: ‘A great number of candidates for this role – God, The Idea, the World Spirit, The Self, substance, matter and so on – have thrust themselves forward from time to time.’ Derrida (1976: 158). He explains it this way: ‘There is nothing outside of the text [there is no outside text].’ Lacan (1977: 154). This is readily discerned if you start with any word in the dictionary and try to tie down its meaning. You quickly find that you are simply being referred to other words in the dictionary. Each signified becomes a signifier as soon as it is invoked. Sim (1998: 300). Eagleton (1983: 131). Mahon, 1992: 84. Nietzsche, 1973: 9. Nietzsche, 1967: 12. Ibid.: 7. For example, a genealogy of the moral value ‘virtue’ might begin with the modernistic liberal view that virtue is equated with rational altruism (a major good) and which is deemed to be the opposite of naturalistic egoism (a major vice). Going back in time, for early New Testament Christians, faith, hope, love, humility, and being poor materially were the characteristics of the virtuous person. While for Greeks like Aristotle, phronisis, or the trained mind, was the main virtue which made it possible for the gentleman to exercise the other virtues – friendship, magnanimity, munificence, wealth, and high social status. In contrast with the New Testament belief, riches for Aristotle were a virtue and

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humility a vice. While in Homerian times, virtue (aretai) meant excellence in physical strength and loyalty to the king without regard to the needs and feelings of other humans not in the kingdom. Before Homer, Western civilization reveals nothing, but Homerians probably inherited ideas from Egypt and other Middle Eastern civilizations. Ibid.: 59. Ibid.: 62. Nietzsche, 1968: 75. Ibid.: 68. Rorty, 1998.

3 Literary theory and accounting 1 The idea of investigating accounting from a linguistic perspective has been present in the accounting literature for some time (Belkaoui, 1978, 1980). Several research studies have been carried out along these lines. Thornton (1988), for example, showed how accounting relies on metaphors to produce meaning. Arrington and Francis (1989) used a deconstructionist approach to analyse Jensen’s (1983) influential agency theory article and later Arrington and Francis (1993) made the case for investigating accounting reports for their narrative qualities. Amernic (1997) also showed the power of deconstruction to illuminate the textual ploys and play in accounting research. Moore (1991, 1992) argued that literary theory should be useful in understanding accounting as a social practice. Cooper and Puxty (1994) presented a semiotic reading of an important UK accounting text following Barthes’s (1974) linguistic structuralist analysis. Cooper (1995) showed how language plays a central role in constructing accounting meaning. Cooper and Puxty (1996: 286) argued that accounting, like history, can only be understood as text and contended ‘that there is no access to anything except through language.’ Hopwood (1996: 55) called for more research investigating annual reports as narratives which ‘mobilize, in increasingly creative ways, text and visual images alongside the accounting data.’ Amernic (1996) demonstrated how literary theory can be usefully included in accounting teaching and concluded, ‘it is only when the concepts of rhetoric, metaphor and deconstruction are introduced . . . that a deeper insight may be gained into the complex social tapestry of accounting’ (59). Also Funnell (1998) demonstrated the importance of counternarratives as epistemologies for accounting research. These studies indicate that while a linguistic turn for accounting research ‘is quite exciting’ and holds promise, much more needs to be done (Arrington, 1997: 9). 2 Rorty, 1979; Giddens, 1984; Bertens, 1995; Potter, 1996. 3 Giddens, 1984: xvi. 4 Lavoie, 1987. 5 Felperin, 1985: 6. 6 See Tinker (1991) for a critique of Solomons’s (1991a, 1991b) telephone simile. 7 Eagleton, 1983. 8 ‘These standards shall be definite, meaningful, and widely applicable, and that urge the employment of such methods as an essential basis for judgement in constructing and appraising financial statements.’ Such standards would be stated ‘in such a way that they will be useful guides to procedures over a wide area of application . . . to afford a basis for conformity.’ Furthermore, accounting standards ‘like those of any other field of human endeavour, should be in accord with the accepted hallmarks of clear thinking. Thus accounting standards should be orderly, systematic, coherent; they should be in harmony with observable,

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objective, conditions; they should be impersonal and impartial’ (Paton and Littleton, 1940: 5–6). Accounting Research Bulletin No. 7: 58. May, 1957: 1. Thomas, 1969, 1974. Eagleton, 1983: 95. In this, structuralism followed the epistemological and ontological assumptions of the physical sciences. As Docker (1994: 105) sums it up: ‘The strategy of the narrative we can call structuralist, the search beneath supposed surfaces for an ultimate structure, for essences that, once discovered . . . explain a phenomenon conceived as a whole, a unity.’ Culler, 1982: 21. Sturrock, 1986: 95. Northrup Frye’s structuralist theory included: narrative categories, literary modes, mythoi, and mimetic (high, low, and other) patterns of symbolism. Eagleton, 1983: 91–2. Ahearn, 1989. Ibid.: 31. Economic theory observes the seemingly confused web of outward appearances of economic units (individuals, partnerships, corporations, etc.) as they compete for gains (‘goods’) and struggle to avoid losses (‘noxients’) and reveals how they behave according to the laws of economics (supply and demand, equilibrium, and survival of the fittest, etc.) regulated by the ‘invisible hand’ of the market. Mueller, 1971: 29. Tinker, 1980: 158. Cooper, 1980. Hopper and Armstrong, 1991, and Macintosh, 1994. Culler, 1982: 20. In semiotic terms, the structuralist had to repress (suspend or bracket off) the referent (the surface meaning or what was said) in order to isolate and privilege the below-the-surface organizing formation. At the time, Barthes was a ‘high structuralist’ (Eagleton, 1983: 135) and enjoyed a reputation as an intellectual star and a maitres a penser. Barthes, 1977a: 155. He saw this as more in the nature of an epistemological slide than as a real break or an overturning. Barthes, 1988: 115. Ibid.: 58–61, ‘Wine and Milk.’ The myth, Barthes explains, holds that red wine is the lifeblood, a cultural possession of the French people, just as milk is for the Dutch and tea for the English. It is not consumed in order to get tipsy or drunk as in other (presumably inferior) cultures. Rather, it enables the Frenchman to control the material world with ease. It gives him the strength to work. It warms his body in winter and cools it in summer. It brings the intellectual scholar down to earth. It enhances French haute cuisine. And it is a perfect French table decoration. (Milk is the opposite – creamy, soothing, lucid, cosmetic, the drink of innocence of infants – something foreign.) Wine represents all that is good about France. The wine myth, then, is a crucial social bonding agent. ‘Knowing how to drink (wine) is a national technique which serves to qualify the Frenchman, to demonstrate at once his performance, his control, his sociability’ (59). Wine gives thus a foundation for a collective morality within which everything is ‘redeemed,’ and it is true that ‘excesses, misfortunes and crimes are possible with wine, but never viciousness, treachery, or baseness’ (59). A Frenchman who does not believe

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in wine is treated as an outcast or seen as depraved, disabled, or sick. Wine acts as a vital social glue that holds the French masses together. It signifies fraternité, égalite, et liberté – the motto of the French Revolution. Barthes demystifies the Frenchness myth this way. In the vineyards of France local and foreign workers alike toil for the private vintners for subsistence wages. While the French settlers in Algeria ‘impose on the Muslims, on the very land from which they have been disposed, a crop of which they have no need, while they lack even bread’ (61). Below the surface layer of the wine myth lies the ideology of exploitive French capitalism. This lifeblood of a Frenchman, with all its redeeming features, is also the product of exploitation and expropriation and so alienates the French bourgeoisie from their fellow man. Myths are never innocent; they are always ideologically loaded. This idea is similar to Martin Hiedegger’s (1889–1976) practice of crossing out a word as soon as it is written, thus indicating that its meaning will change as soon as more words come along in the passage. It also resembles Derrida’s (1976: 18–19) notion of putting a word sous rature as soon as it is written by crossing it out and then printing both the word and the deletion. Since the word is inadequate to bring meaning into the present it is crossed out, but since it is also necessary it remains legible. Barthes developed and refined these ideas further in Elements de Semiology (1964) and he allowed in the Preface to the 1988 reissue of Mythologies that literary theory, semiology, and ideological critique had become much more precise, complicated, and differentiated since 1953 and that if he were to rewrite Mythologies, it would be quite different. ‘The hermeneutic circle is designed in part to replace the linear model of inductive understanding, because the latter is inapplicable to the human sciences’ (Weinsheimer, 1985: 23). See Holland (1975) as an example. His position, however, contained a major contradiction. His loyalty to the discipline of criticism forced him, as Ray (1984: 62) points out, ‘to argue the feasibility of translating such radically private experience into shared knowledge . . . truly subjective reactions are by definition those which fall outside the conventional, shared categories into which understanding must translate its public objects.’ Holland seems to want it both ways. One is reminded here of the institutional linguistic fettering of the informational perspective that came to dominate accounting research and theory in recent decades, especially in the USA. Barthes, 1953. Barthes, 1977b: 142–3. Ibid.: 148. Pears, 1971: 112–13. Later Barthes (1973) would argue that interpretation can be an exotic experience during which the reader can be provoked by, and delighted with, the ceaseless slippage of signifiers and signs and can luxuriate in the provocative, but ephemeral glimpses of meaning. Barthes even contended that reading could be compared to a private, anarchic erotic experience like the bliss of orgasm – a sort of jouissance. One is hard-pressed to imagine anyone having such an experience while reading an accounting report, or an academic article for that matter. Barthes wrote this book in the style of Nietzsche’s The Will to Power, using small short passages which are not connected and do not flow from their predecessor passage. Iser, 1978. Barthes, 1974: 11–12. Ibid.: 5.

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45 This idea parallels Derrida’s notion of not importing anything into the text during a deconstructive reading, but operating only on the text’s own linguistic material where the contradictions and cunning supplementary moves are enclosed. 46 Barthes, 1974: 5. 47 Sassarine is Honoré de Balzac’s short novel that was much admired by cognoscenti such as Georges Baitille. It is included at the end of S/Z ‘as the tutor text.’ In the novel, the anonymous narrator is persuaded by a beautiful young woman he is pursuing at a party of decadent Parisians to tell her about a small, mysterious, old, ugly, ill-dressed repulsive wraith of a man who appears briefly during the evening. The narrator relates that Sarrasine was a very talented, but wild sculptor who went to Rome and fell madly in love with La Zaminella, a beautiful singer who warns him not to pursue her. Undeterred, he ignores her warnings, but later discovers that she is a castrato. Shortly thereafter, Sarrasine is murdered by Cardinal Cicognara’s henchmen. (The Cardinal is La Zambinella’s owner/patron/lover.) At this point in the story, the young woman cuts off the storyteller and tells him that he has given her a disgust for life, especially the decadence of Paris, and that she will never have anything to do with him, even though she begged him to tell her about Sassarine. 48 Barthes, 1974: 13. 49 Barthes also describes these as: (1) the Voice of Empirics (the proairetisms); (2) the Voice of the Person (the semes); (3) the Voice of Science (the cultural codes); (4) the Voice of Truth (the hermeneutisms); and (5) the Voice of Symbol. The notion of lexias and the five codes was picked up by Cooper and Puxty (1994) and used to interpret an important accounting article in Accountancy by an eminent and conservative member of the British accounting profession. 50 In proposing this, I am aware of the irony that I am open to the criticism that, in a way, I am ‘systematizing’ Barthes ideas, an operation Barthes wants us to eschew at all costs. My defence is to claim that I am only producing a historical genealogy of his ideas. 51 This claim has close parallels with his notion in Mythologies that signs are empty of content, but get filled up by sign observers with myths, which in turn get filled up with the discourses of de-mystifiers of myths. 52 Here, Barthes shows traces of his early penchant for phenomenology. This idea also parallels Derrida’s mandate that deconstruction must be carried out inside the host text working only with the linguistic material already in the text and never importing any new ideas into it. 53 Empire of Signs was Barthes’s favourite piece of his own writing. He later called it his only successful book (Barthes, 1977). 54 These include: chopsticks, meals, bowing, riots, pachinko, Bunraku theatre, rooms, haikus, and even Tokyo itself. 55 Paradoxically, Mu is ‘full of emptiness.’ The Japanese ideogram for Mu is reproduced at the beginning of his book and takes up a whole page indicating the importance of emptiness for Barthes’s interpretations. It should be recognized that the English word ‘emptiness’ is inadequate in capturing the sense of Mu. It is also referred to as ‘suchness’ and ‘nothingness,’ which are also inadequate. 56 Derrida and others refer to this fetish as logocentrism, the desire to bring into one’s presence some indisputable transcendental signifier, some sort of Word of Words. 57 A haiku consists of 17 syllables. It does not try to explain the insight, the meaning of which vanishes as soon as it is inscribed. For example, the following haiku attributed to a famous monk does not convey to the reader the insight he had at the time:

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58 In Zen training the novice monk is given a Koan (a contradictory word puzzle) to contemplate by the Master or chief monk. From time to time the novice presents himself to the latter with his response. The well-known Koan: ‘In the clapping of two hands a sound is heard; what is the sound made by one hand.’ The sound of one hand is nothing or emptiness, which is the aim of Zen training. While this Koan sounds easy because it has been popularized, try the following. ‘Empty handed yet holding a hoe; walking but riding the water buffalo.’ 59 Letting go of ego, concepts, and theories is by no means easy. It is like catching a monkey where a piece of bait is put inside a cage so that the monkey can reach it from outside. The bait is much bigger than the mesh and the monkey cannot pull it out, but will not let go and so is easily caught. It is the same with people; they are trapped until they let go of all those things that clutter up the mind. 60 This code is a finely turned hierarchy of status attached to job, rank, family position, education, gender, etc. 61 In the following chapter the idea of empty signs is radicalized further by Baudrillard, who posits that today many important signs no longer refer to any real referents. They start out empty, but fill up with images (signs) of themselves. 62 See, for example, the FASB’s SFAS 1, 2, 4, and 6. As Solomons (1991a, 1991b) argues, accounting reports are like a telephone, they only carry the information to the user/reader. 63 It can be argued that the creativity takes place in ‘staging’ the situation before having to comply to the GAAPs. This idea is developed in Chapter 6 which draws on Lyotard’s notion of releasing ‘desire’ during the income smoothing and budget manipulation process. 64 A bricoleur is someone who constructs or creates something from a given set of diverse available things. The term also refers to someone who earns a living doing chores that are usually uninteresting and imposed by a profession or guild. See Levi-Strauss (1966: 16–22) for the difference between the bricoleur and the scientist, engineer, or artist. The bricoleur makes do with whatever means are at hand, ‘a set of tools and material that is always finite and is always heterogeneous’ (17). These are not collected or retained ‘on the principle that they may always come in handy’ (18). Rather, the bricoleur, at work on his current project, retrospectively draws on this set ‘to engage in a sort of a dialogue with it and, before choosing between them, to index the possible answers which the whole set can offer his problem’ (18). Similarly, the professional accountant draws on the existing set of GAAPs and thinks about how they may be applied to the particular accounting problem at hand. He or she is as much a bricoleur as a scientist or artist. 65 The web that holds the accounts together is merely the age-old double-entry bookkeeping method which does not provide any overarching meta-level meaning to the report in its entirety. 66 The intrinsic value is thought to be the price of the security that would prevail given that everyone else possessed the same endowments, preferences, and beliefs about the security’s true value. It is also defined descriptively as the value which is justified by the facts, and normatively as the value a security should have when all parties have the same insight and knowledge as the investment analyst. Thus, the efficient markets hypothesis assumes that all individuals have the same subjectivity, if not the same attitude to risk.

Notes 67 68 69 70 71 72 73 74 75 76

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APB Statement No. 4 (AICPA, 1970.) Ibid. See Rorty, 1998: 1–15. Czarniawska, 1997, see especially ch. 2. Ibid.: 34. There are also ‘off-Broadway’ presentations of quarterly earnings scripts for the ‘in’ audiences and the cognoscenti of the investment community; and there are even private shows for ‘insiders.’ Derrida, 1967, 1976, 1981. Eagleton, 1983: 148. Derrida, 1967: 21. A metanarrative is ‘any thought system which depends on a ground or a first principle,’ while logocentrism is the ‘disposition, the longing, for a “transcendental signifier” which would directly relate, correspond, to a secure stable “transcendental signified” ’(i.e., a logos). Examples of such signs include: Idea, Matter, the World Spirit, God, etc. Each of these concepts acts as the foundation of a system of thought and forms an axis around which all other signs circulate. Derrida argues that any such transcendental meaning is a fiction (Sarup, 1993: 37). Any such logos would be ‘the meaning of meanings, the linchpin or fulcrum of the whole thought-system, the sign around which all others would obediently reflect’ (Eagleton, 1983: 131). It would ‘refer to no other signifier, would exceed the chain of signs, and would no longer function as a signifier’ (Derrida, 1981: 19–20). Trigg, 1985. Derrida’s deconstructions parallel to some extent Nietzsche’s and Foucault’s genealogical research. While Nietzsche conducted historical analysis of various reigning values to show how they are the result of man’s will to power, and Foucault wrote histories of the appearance in the eighteenth century of various discursive formations (regimes of truth) regarding ‘normality,’ Derrida as philosopher analysed the history of sundry highly influential texts of Western civilization. Nietzsche dismantled values, Foucault de-doxified reigning discourses, and Derrida provoked, disturbed, disrupted, and unsettled the central achieved meaning of various canonical philosophical texts, including those of Plato, Rousseau, Husserl, and Lévi-Strauss (Mahon, 1992). ‘To deconstruct the opposition is, above all, at a particular moment, to reverse the hierarchy’ (Derrida, 1981: 41). Derrida, 1981: 41. As Culler (1982: 92) explains, ‘In oppositions . . . the superior term belongs to logos and is a higher presence; the inferior term marks a fall. Logocentrism thus assumes the priority of the first term and conceives the second in relation to it, as a complication, a negation, a manifestation, or a disruption of the first.’ While Derrida (1977: 66) sees logocentrism as the key to metaphysics, ‘the enterprise of returning “strategically,” in idealization, to an origin or to a “priority” seen as simple, intact, normal, pure, standard, self-identical, in order then to conceive of (pour pensor ensuite) derivation, complication, deterioration, accident, etc. All metaphysicians have proceeded thus, from Plato to Rousseau, from Descartes to Husserl: good before evil, the positive before the negative, the pure before the impure, the simple before the complex, the essential before the accidental, the imitated before the imitation, etc. This is not just one metaphysical gesture among others; it is the metaphysical exigency, the most constant, profound, and potent procedure.’ ‘The Tyranny of the Yale Critics,’ New York Times Magazine 9 February, 1986. This was chosen to illustrate deconstruction since the biblical text is well-known to most Western readers and highlights, in the popular press, how deconstruction

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can problematize taken-for-granted, commonsensical beliefs and how it can reveal the politics of the text. 83 See Macintosh, 1988; Arrington and Francis, 1989; Tinker and Neimark, 1990. 84 Tinker and Niemark, 1990. 85 Amernic, 1996: 59–60. 86 (105,000 + 20,000 + 25,000 + 50,000) / 10,000 = £20. 87 (105,000 + 25,000) / 10,000 = £13. 88 As Skinner (1987: 449) explains: ‘Thus, the crucial questions for oil and gas producers relate to their treatment of costs of exploration, finding, and development of reserves before production begins. The problem is to determine which costs should be written off as they are incurred and which costs may be deferred on the grounds they are applicable to reserves that have been or will be discovered and therefore should be matched with revenue from production.’ 89 While the SEC’s ASR #253 (3 August 1978) adopted successful efforts, it also announced that neither successful efforts nor full cost could provide useful information for either government policy making or for private sector investment decisions. 90 Gorton, 1991: 39. 91 Ironically, in the year 2000, oil prices reached $40 a barrel and were predicted to soar to $50. 92 Country-by-country full cost is akin to successful efforts as it uses countries as the appropriate cost centre rather than basin-by-basin or well-by-well cost centres; so it could also be called successful efforts using countries as cost centres. 93 Reported in Gorton, 1991: 39. 94 Ibid.: 39. 95 Ibid. 96 Accounting and Reporting Problems of the Accounting Profession (Arthur Anderson & Co. 3rd edition, 1969): 117. 97 Bell, 1983. 98 Skinner, 1987: 466–7. 99 Ibid.: 448. 100 Best and Kellner, 1991: 111. 4 Simulacra and hyperreality 1 Some of the materialism this chapter, including Figures 4.1 and 4.2 are reprinted from N. Macintosh, T. Shearer, D. Thornton and M. Welker, Accounting, Organizations and Society, Vol. 25, No. 1, 2000, ‘Accounting as simulacra and hyperreality: perspectives on income and capital’. 2 Sarup, 1993: 144. 3 Kellner, 1989: 83. 4 Baudrillard, 1994: 152. 5 Baudrillard, 1983: 64. 6 Van Gogh’s famous series of yellow sunflower paintings, which he dashed off in the hopes that when Gauguin saw them the latter would be convinced to stay in the South of France to live and paint with Van Gogh, would not likely be valued as they are today without his signature on them. 7 Baudrillard, 1994: 118. 8 Baudrillard uses the terms sign, image, model, simulacrum synonymously. 9 Marx and Engels, 1967: 80. 10 Ibid.: 80. 11 Baudrillard, 1983: 84. 12 Tawney, 1984.

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13 It should be noted that Baudrillard’s depiction of the changes in the social order in each of his eras is very similar to that of Marx and Engels’s. 14 This usage of the term ‘code’ resembles the logic (rules) governing the game of chess, which includes a social hierarchy running from king, queen, castle, bishop, knight, and pawn. Baudrillard also implies that the social body contains a code for its regulation somewhat like the idea that DNA contains the codes for the biological development and maintenance of a living organism. 15 Berle and Means, 1932: 45–6. 16 These principles were to be committed to writing in some detail by Paton and Littleton, 1940. 17 Baudrillard, 1994: 118. 18 In making these ontological assumptions, Baudrillard is following the ‘literary or linguistic turn’ and the ‘crisis of representation’ taken for some time now in many of the humanities and social sciences (Bertens, 1995, Giddens, 1984). 19 Baudrillard, 1983: 88. 20 Baudrillard, 1988: 211. 21 A television advertisement for Nike shoes, for example, featured a flying image of Michael Jordan performing incredible basketball feats that are magically replicated by a small boy wearing Air Jordan sneakers. Far from being outraged by this lie, and not for a minute believing that they, too, need only buy the shoes to become as skilled as Jordan, the masses reacted simply by absorbing such images and demanding more of these senseless signs. Baudrillard offers, for better or for worse, the metaphor of a black hole to capture the idea of the masses absorbing such images. 22 Baudrillard, 1983: 149. 23 See, for instance, Blocher, Chen, and Lin, 1999; Hansen and Mowen, 2000; Lee, 1999; and Hilton, 1999. 24 Levitt, 1996. 25 See Lukka (1990) for a critique of this realist ontology. 26 Black and Scholes, 1972. 27 The informational perspective treats accounting information as a commodity, analyses it using methodologies of economics and statistical decision theory, and incorporates problems of measurement including issues of valuation, recognition, and disclosure, and studies the effects of accounting signals on security returns (Beaver, 1996). 28 Levitt, 1996. 29 Ibid., 1998. 30 General Electric Company (GE); Managing Profits, 1994. 31 Kahn (2001) compares GE’s accounting practices with Lewis Carroll’s Alice in Wonderland. ‘Certain investments suddenly appear, disappear, and then reappear in GE’s filings with the SEC. Meanwhile, the value of some investments float, mischievously disembodied from reality’ (136). 32 Baudrillard, 1983: 167. 33 See McGoun, 1997 for a postmodern description of this hyperreal financial economy. 34 For example, a call option (a type of derivative) is a ‘bet’ on whether the price of a stock will go up or down during the option period. The option pricing model uses the Black and Scholes theoretical formula which makes the bet virtually risk free for a very short time period. A hypothetical stock’s present market price is $100 and the exercise price one year hence is also $100. The expected risk-free interest rate is 12 per cent and the instantaneous variance rate of the stock’s return is 10 per cent, meaning that the stock price is assumed to vary between $110 and $90 during the year. This variation is captured by a stochastic process known as the Wiener process.

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So the call price is the current stock price multiplied by the cumulative value of the Wiener process at time zero, minus the exercise price multiplied by the discount factor for continuous time with an interest rate of 12 per cent multiplied by the cumulative probability value of the Wiener process at the end of the year. In this example, the call price is $10.071. So the bet is worth $10.071 and since call options are usually bought on margin, say 10 per cent, then the bettor could ‘control’ a stock worth $100 for $1.071. If the price at the exercise date is $110, then the bettor earns about a $10 profit on a virtually risk free bet. Traders in derivatives only hold the bet for a very short time. McGoun, 1997. Briloff, 1973, 1981, 1990, 1993, 1994, 1997. Briloff, 1993, 1981, 1990, 1994, 1997. Briloff, 1994: 20–2.

5 Surveillance, discipline, and punishment 1 Sturrock, 1999: 63. 2 Foucault (208), in Dreyfus and Rubinow, 1983. 3 ‘Vouloir-savoir: the phrase in French means both the will to knowledge and knowledge as revenge.’ Editor’s note to the translation of Foucault’s essay ‘Nietzsche, Genealogy, and History,’ 1977: 163. Vouloir is a verb meaning wanting, wishing, or willing something; pouvoir is a noun meaning power; and savoir is a noun referring to a more or less systematic ensemble of understanding and knowing. So pouvoir/savoir is the wanting to know the human condition in order to mould individuals so that they are like ourselves. 4 Foucault, 1979: 220–1. 5 Ibid.: 3. 6 This was Pacioli’s famous ‘users’ manual’ Particulars of Accounting and Recording, Treatise XI, including 37 chapters on DEB as part of his classic book, Suma de Arithmetica, Geometric, Proportioni et Proportionalita, 1494. 7 P. Crivelli, 1924. UK: Harper & Brothers. 8 Ibid.: 4. 9 Ibid.: 5 and 26. 10 Aho, 1985: 21–43. 11 See, for instance, Van Cleve, 1986, and Tawney, 1984. 12 Foucault 1979: 217. 13 This section draws on Hopper and Macintosh, 1993. 14 Foucault, 1979: 151. 15 Ibid.: 150. 16 One is reminded today of ‘worker-of-the-month awards.’ 17 Walsh and Stewart, 1993. 18 Tawney, 1984. 19 This section draws on Macintosh, 1994: 11–15. 20 Foucault, 1979: 221. 21 Roethlisberger, Dickson, and Wright, 1939. 22 Ibid.: 24. 23 Ibid.: 25. 24 Ibid.: 53. 25 Ibid.: 37. 26 Ibid.: 72. 27 The girls were even given physical medical examinations during the experiment. 28 Ibid.: 14. 29 See, for instance, Argyle, 1953; Landsberger, 1958; Sykes, 1965; and Carey, 1967.

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30 Schwartzmann, 1993. 31 Perrow, 1972: 10. 32 Empire Glass is a disguised name for a large packaging company that specialized in cans. See Anthony, Dearden, and Vancil, 1965: 419–31. 33 See Sampson, 1974. ITT’s first president and one of its founders, Sosthenes Behns, ‘gradually wove a web of corruption and compromise which left the idealism in ruins, and his company with deep kinks in its character’ (22–3). 34 Behns successfully wooed (and presumably bribed) Spain’s then dictator Primo de Rivera and installed the Duke of Alba as chairman. 35 Sampson (ibid.: 26–46) describes the details of ITT’s treacherous and unsavoury collaboration with both sides. Some experts speculated that some of ITT’s executives acted as counterintelligence agents for both sides. 36 Geneen had been highly instrumental in the rapid growth and profitability of companies like Bell & Howell and Jones & Laughlin, but especially with the giant electronics company, Raytheon. But because of his lack of family ties with the major shareholders and its president, it was clear to him that he would never become president at Raytheon, a position he dearly wanted. ITT was the chance he had prepared and hoped for over the years. 37 Ibid.: 70–1. 38 These documents took up over 30 feet of shelf space at headquarters each year. 39 Geneen, 1984a: 89–90. 40 Sampson, 1974: 123. 41 Ibid.: 96. 42 Ibid.: 96. 43 These included: intercompany accounting, budgets, cost accounting, capital expenditures, payables, debt management, foreign exchange, the controller’s monthly operating and financial review, and his relationship with his general manager. Each unit controller answered nearly 1600 self-evaluation items. 44 Hopper and Macintosh, 1993: 205. ITT used the term ‘comptrollers’ which is the same as ‘controllers.’ 45 From 1959 to 1980, ITT grew in sales from under $1 billion to $22 billion, profits from $29 million to $301 million, peaking in 1971 at $406 million. And at its zenith in 1977, had 250 separate business units operating in a wide variety of mainly unrelated activities and employed nearly 400,000 employees (Merchant, 1998: 652). 46 Sampson, 1974: 72–3. 47 The source material for this section came from Anthony and Govindarajan, 1995, and Simons, 2000. 48 Products ranged from Band-Aids and disposable diapers to highly sophisticated laboratory and surgical equipment, as well as hospital management systems. In the late 1980s J&J employed nearly 75,000 people in 75 countries around the world with sales of around $80 billion. 49 For example, Johnson & Johnson Dental Products Company ‘serves dental practitioners throughout the world with an extensive line of orthodontic, preventative and restorative products. The company also provides dental laboratories with a broad line of crown and bridge materials, including the high-strength ceramic CERESTORE system’ (ibid.: 426). 50 As Simons (2000: 417) describes it: ‘Thus, in 1983, a budget and a second-year forecast was developed for 1984 and 1985 and a strategic plan was developed for the years 1990 and 1995. In each of the years 1984 through 1987, the five- and ten-year plan was redrawn in respect of only years 1990 through 1995. Only in year 1988 would the strategic planning horizon shift five years forward to cover 1995 and 2000. These two years will then remain the focus of subsequent fiveand ten-year plans for the succeeding four years, and so on.’

150 51 52 53 54 55 56 57 58 59 60 61 62 63

Accounting, Accountants and Accountability Ibid.: 418. Ibid.: 419. Anthony and Govindaranjan, 1995: 421. Ibid.: 421. Ibid.: 421–2. Simons, 2000: 423. The fact that the health care industry had experienced rapid growth over the same time frame is, of course, another and perhaps even more important factor in the company’s ‘success.’ Foucault, 1979: 294. Mettray was a prison for young boys that opened on 22 January 1840. Anthony and Govindaranjan, 1995: 10. Ibid.: 9–10. Anthony, Dearden, and Bedford, 1989: 7. Hopwood, 1987: 223. Foucault, 1979: 304.

6 Accounting and truth 1 Logocentrism refers to the widely held disposition to bring some essence or truth into one’s presence, a truth that would be the foundation of all our beliefs. In semiotic terms, this would be some final, untouchable transcendental signifier that would point directly and unambiguously to some transcendental signified such as: Justice, Authority, Freedom, Order, World Spirit, God, etc. ‘Each of these concepts acts as the foundation of a system of thought and forms the axis around which all other signs circulate’ (Sarup, 1993: 37). Logocentrism is the longing for some final Word. Derrida calls this an impossible dream. 2 See, for instance, Hebdidge, 1988; Bauman, 1992; Docker, 1994; Bertens, 1995; and Eagleton, 1996 for supporters of this view. 3 Norris, 1982: 19. 4 Nietzsche, 1968: 302–3. 5 Prado, 1992: 173. 6 See Prado, 1992: 98–101 for a helpful discussion of this point. 7 Solomon, 1994. 8 Trigg, 1985: 211. 9 See Arthur (2001) for a detailed discussion of the correspondence/coherence debate in an auditing context. 10 See paragraphs 297, 339, 349, and 350 of FASB #133, 1998. 11 See Archer and McLeay, 1990 for research along these lines. 12 Regimes of truth are referred to alternatively as ‘discursive formations.’ 13 Discourse refers to the words, statements, utterances, etc., and ways of speaking and writing and communicating that carry meaning for a particular community of speakers and which they rely on and use in social interactions and intercourse. Discourse, importantly, is not limited to linguistic statements and utterances and includes non-linguistic kinds of communication such as a wink or a nod, a parade, a military salute, or even a flag. The Rebel flag of the Confederacy, for example, was flown on top of many state capital buildings in the southern states of the USA. The flag was taken as a discursive formation in different ways. Some read it as a sign of white supremacy and suppression of blacks; while others took it to signify the remembrance of those who died in the Civil War of the 1860s. Thus, the flag became the turf for discourse wars. While a discourse is situated within the discursive field of some specific social community, it is not grounded in any universal, permanent metaphysical truth world.

Notes

14 15 16 17 18 19 20 21 22 23

24 25 26

151

Rather, it is a historical and material object in its own right and can be investigated as such. Prado, 1995: 124. Popper, 1978: 106. It is a matter of différance. The massive collapse of the stock market price of such companies in the first quarter of 2001 supports, albeit only indirectly, this claim. Aho, 1985. Nietzsche, 1966: 116 (202). Nietzsche, 1968: 536 (1041). Nietzsche also contrasts Dionysius with the Crucified: 542 (1052). Drury, 1994: 82–3. Lyotard, 1993. Lyotard devoted a great deal of effort over the years to the issue of justice. In the final analysis he concluded that justice was not a universal unchanging thing. Rather, justice was something that had to be locally determined in the particular historical circumstances of the actions at stake. See Macintosh et al., 2000: 41–2. Eagleton, 1996: 132. See Richardson (1988, 1990) for a critique of accounting professionalism by privileged chartered institutions

7 Heteroglossic accounting 1 Holquist, 1981: xv. Bakhtin was a Russian literary theorist whose life work was a struggle against the Soviet government’s programme in the 1920s and 1930s to homogenize (i.e., ‘Leninize’) all Soviet culture and art, including novels and literary institutions. The government required all authors to join the Soviet Union of Writers. It also, in an all-out drive to ensure a single stylistic and institutional perspective, declared ‘socialist realism’ as the only ‘necessary aesthetic unity.’ 2 Sturrock, 1986: 136. Sturrock also commented that ‘without knowing it, and well ahead of time, Bakhtin and Medvedev here inaugurated the age of poststructuralism . . . in their prescient and formidable critique of the Russian Formalists’ (ibid.: 136). 3 Lodge, 1990: 57. 4 While the English equivalent of slovo is word, ‘the Russian word slovo covers more territory than its English equivalent, signifying both an individual word and a method of using words (cf. the Greek logos) that presumes a type of authority’ (Holquist, 1981: 427). 5 Volosinov, 1929, quoted in Morris, 1994: 35 and 73. 6 Lodge, 1990: 21. 7 Docker, 1994: 171. 8 Volosinov, 1929, quoted in Morris, 1994: 36. 9 Clearly, such a position would prove to be a slippery slope in the accounting profession. Exploring this, however, is beyond the scope of this chapter. 10 Important early spokespersons for pragmatism were Charles Pierce, William James, John Dewey, Chauncy Wright, Nicholas St John Green, and Oliver Wendell Holmes. 11 James, 1907. 12 Beck, 1979: 124. 13 Rorty, 1989: xv. See Haber (1994: 43–71) for a critique of Rorty’s liberal ironist position. 14 Ibid.: 73.

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15 16 17 18

Ibid.: 105. Ibid.: 73. Ibid.: 80 As Rorty (1989: 108) puts it: ‘An ironist is caught in a dilemma between saying he has actualized the last possibility left open and saying that he has created not just a new actuality but new possibilities. The demands of theory require him to say the former, the demands of self-creation require him to say the latter.’ 19 Thomas, 1969, 1974. 20 Foucault, 1979: 307. 21 Nietzsche, 1968: 298. Appendix A 1 Al-Farsy, 1990. 2 See Gorton (1991) for a detailed description of these events.

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Weinsheimer, J. 1985. Gadamer’s Hermeneutics: A Reading of Truth and Method. New Haven, CT: Yale University Press. Williamson, O. 1976. The Economics of Internal Organization: Exit and Voice in Relation to Markets and Hierarchies. American Economic Review, pp. 369–77.

Index

accounting: common sense view 26; historical cost 8, 50, 52; marginal cost 50–1; oil and gas accounting 24, 29, 45–52, 118, 121, 122, 125–6, 131–2, 134, 135–7, 146n88; political economy (PEA) 31; product costing 45; standards, postulates, principles 28–29, 52; structuralist theory of 9–10; supplementary information 51; traditional perspective 25–6 accumulated other comprehensive income (AOCI) 72–3 activity-based costing (ABC) 68 Adkerson, Richard 51 agency theory 9–10; adverse selection 10; information asymmetry 10; moral hazard 12; transaction costs 10 Ahearn, E. 30 Alexander the Great 19–20 Althusser, Louis 2, 3, 12 Amazon Inc. xii, 122 amende honorable 80 American Institute of Accountants 28 antiquarian history 20 arm’s length transaction 50 Arrington, E. 44 Arthur Andersen & Co. 51 auditor(s) 23, 25–6, 49 Austen, Jane 30 author, the 34–5; death of 35 Bakhtin, Mikhail 2, 4, 52, 129–31 balance sheet xii, 61, 63, 64, 68, 72 Barthes, Roland 4, 3–4, 6, 7, 12, 32–41, 50, 52 Baudrillard, Jean 2, 3, 4, 6, 17, 53, 54, 56, 57, 71, 75, 77; Baudrillardian perspective 68, 74

Behns, Sosthenes 102; family 101 Belsey, Catherine 23 Benthem, Jeremy 89 Bertens, Hans 114 biopower 78 Black and Scholes model 69, 72, 122, 147n34 book value xi–xii, 123, 138n1 bricoleur 38, 144n64 Briloff, Abraham 75, 76–7 capital xi, 38, 54, 56, 58, 60–4 passim, 67, 73, 75, 77, 116, 118, 126, 138n3, 138n8, 149n43; depersonalized 63–4; entity view 64; proprietary view 64 capitalism 31, 80, 90, 141–2n31; globalized capitalism 39 carceral society 67, 79, 82–113 Cartesian epistemology 48 cash earnings statement xii, 138n9 cash flows 49–50, 63, 71, 72, 122 cellular principle see enclosure principle centrifugal forces 130 centripetal forces 115, 130 charge and discharge accounting 57–50 Chomskey, Noam 7, 12 Cisco Systems Inc. xii coherence theory of truth 116–17, 119, 122, 126, 132 comprehensive income see accumulated other comprehensive income (AOCI) conservatism 64 Copy, the 35 correct comportment principle 86, 94, 97, 110, 112 correspondence theory of truth 115, 116–17, 118, 119, 123, 126, 132 cost of capital xii, 46

162

Index

crisis of representation xiii, 114–15, 122–3, 126, 134, 147n18 Damien 80, 82 deconstruction 24, 41–7, 52, 115, 122, 140n1, 143n52, 145n78, 145n82 derivative securities 66, 69, 72–4, 118; see also sophisticated financial instruments Derrida, Jacques 2, 3, 4, 6, 15, 17, 41, 43, 143n32, 143n45, 143n52, 143n56, 145n76, 145n78, 145n81, 150n1 dialectic historical materialism 3, 67, 82; see also Marxism Dionysis 78, 123–4 disciplinary formation/regime 79–82, 99, 106, 115 Discipline and Punish: The Birth of the Prison 79–80, 85 disciplined mind principle 83, 97; see also correct comportment principle discursive formations 15, 78, 145n78, 150n12–13; see also regimes of truth Dostoevsky, Fyodor 129–30 double entry bookkeeping/accounting xiv, 6, 58–1, 67, 76, 79–82, 90, 123, 124, 133, 144n65 dressage 84–6, 94, 101, 104, 111, 115 Durkheim, Emile 7 Eagleton, Terry 7, 139n10 earnings forecasts 71 earnings management see managed earnings East India Company 60 eBay Inc. 123 economic theory 1, 8–9, 31, 46, 127, 141n20 efficient body principle 83–4, 86, 94, 96, 101, 110, 111 efficient market hypothesis 39, 70, 144n66 Empire Glass Co. 79, 99–101, 124, 149n32 Empire of Signs 37, 143n53 enclosure principle 83–4, 86, 96, 101, 103, 109–10, 113 Engels, Friedrich 30, 57 Enlightenment 16, 59, 82, 115, 126, 127 entity view 64 Ericsson xiii EVA (economic value added) 9

Events of May 2–4 ex ante accounting model 71 examination (the) 86, 88–89 existentialism 3 expectations gap 49, 118 expressive realism 24–6, 32, 42, 47, 48, 49, 52 extralinguistic 15, 21, 48, 49, 50, 116, 117 FASB see Financial Accounting Standards Board final vocabulary 133––4 Financial Accounting Standards Board 29, 49–50, 68–70, 72, 118, 122, 125, 130, 132, 135–7 first-order semiological system 33, 38 Ford Motor Company xii Foucault, Michel 2, 3, 4, 6, 12, 17, 67, 78, 79, 82, 97, 104, 109, 112, 113, 134, 145n78 Francis, J. E. 44, 138n1, 140n1 Freud, Sigmund 7–8; theory of the psyche 8, 32 Frye, Northrop 30, 141n16 GAAPs see generally accepted accounting principles genealogy 4, 6, 16, 22, 41, 54, 75–7, 79, 82, 112, 119, 120, 121, 125, 127, 139n18, 143n50; Nietzschean 4, 16–20 Geneen, Harold 101–6 General Electric Company 71 generally accepted accounting principles xvii, 29, 38, 39, 50, 72, 121, 122, 124–6, 144n64 goal incongruence 124 going concern concept 58, 60–3, 64 goodwill xi, xiii, 134 Gramsci, Antonio 3, 67 grand narrative 35 Habermas, Jürgen 2, 67 haiku 37, 143n57 Hawthorne Works of Western Electric Company 79, 95, 106, 124 Hegel, Georg 3 hegemonic control 67 hermeneutics 35, 36, 142n34 heteroglossic 115, 128, 129–32, 133–4 hierarchical surveillance 86–7, 89, 92, 94, 97, 101, 111

Index history; antiquarian 19–20; critical 20–2; monumental 19–20; traditional 4–6, 16 homo economicus 65 homo semioticus 65 human relations school 95–99 Husserl, Edmund 3 hyperreality 54, 55, 67, 68, 74, 76 hyperrealization 56 hyperspace/time 67 I Ching 119 implosion 54, 66, 67, 73, 74 income xi, xiii, xiv, 31, 47, 49, 51, 54, 56, 58, 60–1, 62–5, 67–73 passim, 75–6, 77, 115–16, 118, 122, 126, 130, 133, 138n3 income smoothing 76, 124–5, 144n63; see also managed earnings industrial engineering see scientific management Industrial era 55, 56, 61, 65, 90 Information Age xi, 67 information economics 9–10, 31 information revolution 67 informational perspective 1–2, 23, 31, 70, 142n36, 147n27 infotainment 67 intangibles xi–xii, 39, 45–6, 68, 134 International Accounting Standards Committee xiii intralinguistic 48, 117 intrinsic value 39, 69, 70, 74, 144n66 invisible hand (of the market) 8, 67, 141n20 ironic liberal ironists 133, 152n18 Italian method of accounting 58 ITT 79, 101–6, 124, 149n33, 149n35–6. 149n44–5 Jakobson, Roman 12, 30 Johnson & Johnson Inc. ( J&J) 79, 106–10, 124, 149n48–9 joint stock companies 60–1 Jung, Carl 7 knowledge assets xi–xii, 68, 138n8 knowledge capital xii, 138n8 knowledge companies xii, 138n1 knowledge societies xiii Koan, 144n58 Kojeve, Alexandre 3

163

Lacan, Jacques 7, 12, 32 language games 6, 55 language object 33–4 langue 10–13 ledgers; Renaissance 81 Lévi-Strauss, Claude 7, 12–13, 67, 144n64; structuralist theory 12–13 lexia 36–7, 39–40, 50, 143n49 liberal ironist 133 LIFO 117 linguistic theory see semiotics linguistic turn 4, 23, 55, 140n1, 147n18 literary critic 23, 25–6, 41 literary turn see linguistic turn Littleton, A. C. 28–29, 56 logocentrism 37, 42, 45, 114, 143n56, 145n76, 145n79, 150n1 London School of Economics 1 Lyotard, Jean-François xi, 2–4, 17, 124, 144n63, 151n23 man–object–machine see manoeuvre managed earnings 70–1, 125; see also income smoothing management by exception 92 manoeuvre 84–6, 94, 96, 110 Marconi PLC xiii mark to market rule 72 Marx, Karl 2, 3, 7, 30, 52, 56–7, 67, 146n13 Marxism 3, 31–2, 52, 57–8, 82; see also dialectic historical materialism Marxist-based accounting see political economy accounting May, George O. 28 Merchant of Venice, The 81 Merrill Lynch xiii metanarrative 3, 16, 20–1, 36, 42–4 passim, 50, 122, 127, 145n76 metaphysical hierarchy 42–4, 50, 52 metaphysics 17, 44, 67, 115, 127, 145n79 Miller, J. Hillis 43 mimesis 24 monologic novel/accounting 129–31, 133–4 monumental history 19–20 Mu 37, 143 Mussolini, Benito 19 Mythologies 32–3, 36, 37, 142n33, 143n49 myths 30, 33–5, 37, 39, 142n29, 143n49

164

Index

nature 17–18, 43, 65 Neimark, M. 44 neo-classical economics 1, 9, 30–1, 50, 52, 75, 127 net income 14–15, 29, 38, 40, 46–7, 49–50, 72–3, 106, 122 new criticism 24, 26–29, 30, 32–3, 34, 42, 48, 49, 52 new economy 123, 134 new economy companies xi, xii, 24, 134 Nietzsche, Friedrich xiii, 1, 4, 6, 15–20, 41, 76, 78, 79, 115, 123, 124, 133, 134, 145n78; genealogy of, 16–20; overman 18 no arbitrage position 72, 74 Nokia xiii nominal accounts 60–1, 64 non-referential signs 71 normalizing sanctions 86, 87–88, 89–90, 94, 97, 99, 101, 104, 105, 110, 112, 113 Nortel Ltd. xiii Oedipus complex 8 oil and gas accounting see accounting On the Genealogy of Morals 4 ontology 7, 65, 68, 127, 147n25 OPEC 47, 125, 135, 137 orders of simulation 56–7, 65–69, 71, 75 other comprehensive income (OCI) 73 overhead account 87 Owen, Robert 88 owners’ equity xii, 72–3, 138n3, 138n8 Pacioli, Lucas 59, 80–1, 106, 112, 123 panopticon, panopticism 67, 78, 83, 86, 89–90, 95, 98, 99, 101, 103–5 passim, 110, 112 Paradise Lost 43 Pareto optimal position 10 parole 10–11 Paton, W. A. 28–29, 56 phases of the image 55–6, 115 phenomenology 3, 143n52 Piaget, Jean 12 picture-theory of meaning 48 plastic power 19 political economy accounting 31, 52 political economy logic 62 Popper, C. 121 postmodern xiii, 54, 65, 66, 67, 90, 138n11, 147n33

post-Saussurean theory of language 129 poststructuralism i, xiii, xiv, 1–2, 4, 6–8 passim, 10, 12, 13–16, 32, 52, 77, 83, 95, 114–15, 118–2, 123, 125, 126–7, 129, 133–4, 151n2 power/knowledge 79, 80, 89, 90, 99, 148n3 pragmatism 132, 133, 151n10 presents fairly 47, 75, 114, 126, 131 prices and pricing 59; canon law 62, 60; cost-based 59; exchange value 62; just and fair 59; labour value 62, 127; sign value 70, 75, 127; value-inuse 60, 62 price-to-earnings ratio xi, 63, 71, 105, 123 Pride and Prejudice 30 product costing 45 professional accountant’s role 38 profit: as balance sheet approach 61; as liquidation proceeds 61 profit manipulation see managed earnings reader response theory 33 reality principle 54 realization principle 64, 68 reason 4, 16 recognition accounting 49 red wine myth (Barthes) 33, 39, 141n31 referent 11–12, 13, 15, 33, 38, 47, 54, 57, 59, 60, 62, 63–4, 67, 68–72, 74, 75, 115, 126, 141n26, 144n61 regimes of truth 78–79, 111, 115, 119–122, 145n78, 150n12; see also discursive formations relativism 42–3, 119 retained earnings 69 Rorty, Richard 21, 133 rule of functional sites 83 Russian formalists 30, 151n2 Said, Edward 12 Sampson, Clarence 51 sanctions 84, 86–90, 94, 97, 99, 113 Sarrasine 36–7, 143n47 Sartre, Jean Paul 3 Sarup, Madan 7 satori 37 Saussure, Ferdinand de 7, 8, 10–13, 33, 129, 139n6 scientific management 95, 99, 111

Index scriptable text see writerly text scriptors 35, 40 Security and Exchange Commission (SEC) 49–1, 68, 70, 77, 114, 125, 126, 132, 135, 136, 137, 146n89 self-normalization 88, 95, 105 self-referential accounting models 28, 67, 72 semiology see semiotics semiotics 4, 8, 10–12, 13, 23, 33, 35–6, 38–9, 54–5, 59–60, 65, 76, 141n26, 150n1 Shakespeare, William 81 sign(s) 4, 7, 11, 12, 32, 33, 38, 55, 56, 57, 58, 66, 67, 68, 70, 71, 72, 73, 74, 75, 77, 127, 142n41, 143n51, 144n61, 145n76, 146n8, 147n21, 150n1, 150n13; defined 11; empty signs 35–7, 40; referential signs 71; sliding sign 33 signification 15, 33, 36, 39 sign–objects 62, 65, 69 sign-of-signs 14; see also transcendental signifier sign-to-referent relationship 61–2, 75, 77 sign value 55, 70, 75, 127 signified 9, 12–15, 33–4, 38, 54, 139n12, 150n1 signifier xiv, 11–13, 15, 33, 38, 45, 54, 122, 139n12, 142n41, 143n56, 145n76, 150n1 simulacrum 54–5, 59, 65, 72, 76, 77, 146n8 simulation 54–7 passim, 65–69, 71, 74, 75; era 54–5, 72, 75, 115; principle 54 Smith, Adam 8, 67, 90 Snow White 71 sophisticated financial instruments 69, 72, 118, 122 speech utterances 130 standard setters (accounting) 50, 67–8, 72, 77, 114 stewardship accounting 57–58 stock options 69–70, 121, 126 Stoics 17–18 strike price 69 structural linguistics see semiotic theory structuralism 2, 4, 7–10, 13, 22, 24, 28, 29–32, 42, 141n13; literary theory of, 29–30

165

structuralist/model 49, 50, 52, 140, 141; card carrying 7 Sumerian accounting 56–7, 68, 72, 76 supplementation 42, 49, 51, 52, 82–3, 126, 129–30; supplementary moves 44, 143n45 S/Z 37–9, 143n47 tableau vivant 84 Taylor, Frederick 95 Three Deaths 129 timetable 84, 86, 111 Tinker, T. 44 TLM Ericsson see Ericsson Tolstoy, Leon 129 transaction cost economics 9–10 transcendental signifieds 145n76, 150n1 transcendental signifier 14, 17, 45, 143n56, 145n76, 150n1 transparency 68, 75, 77, 114, 118–19 true and fair view 47, 49, 75, 114, 121, 131, 134 truth 4, 17, 45, 48, 54, 75, 106, 114–26, 132, 134, 145n78, 150n1, 148n12–3 tutor text 35–6, 50, 143n47 useless information 65–6 usury 80, 90, 123, 139n9; account 14 value(s) 16–22, 41, 58, 63, 66, 69, 145n78; intrinsic value 39, 69–70, 74, 144n66 Wal-Mart xii Weber, Max 2, 7, 67 Wedgwood, Josiah 79, 90–5, 106, 123 Wesley, John 91, 94, 123 Williams, Harold 49, 51, 136 Williamson, Oliver 44 will-to-knowledge 79 will-to-power 17–18, 20–2, 78, 134, 145n78 Wittgenstein, Ludwig xiii, 7, 48 writerly text 35–6, 39, 50 Yahoo! Inc. xii–xiii, 123 Zarathustra 18