On March 28th 2019 I wrote an article “Introducing Valueism and Social Contract Accounting” for The London School of Economic Business Review. The subtitle read, “The purpose of business should be to provide a good and prosperous life to this and future generations”.
The two concepts, Valueism and Social Contract Accounting, are closely related.
Social contract theory holds that organisations, including businesses, operate under an unwritten contract with the society as a whole, in which the society allows the company to do business under the condition that its actions benefit society. The benefit to society represents the value it creates for society. Valueism argues it is high time the implicit contract is made explicit, each business or organisation defining how it sees its obligations to society. Then, with a new accounting standard to supplement the financial accounts, real accountability to society is possible, and performance measurable.
CEO performance against the social contract can also be assessed by the board. Additionally, CEO pay, and other incentives, can be linked to performance in relation to it.
Previous attempts to align the interests of the corporation with those of society have so far failed. Public trust in business is evidence of that. Making firms accountable for their explicitly defined social contract obligations is a first step to restoring trust. But it will not happen whilst those obligations remain implicit.
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