Social Responsibility Accounting

We have considered the several groups having vested interests in business organizations, with a view to determining the scope of the accounting problem, defined as the provision of information for making economic decisions having welfare implications. The review of the role of theory in accounting, provided justification for approaching the definition of users' information needs by means of a normative specific approach to constructing theories about such users' needs. Accordingly, we were able to discuss the provision of information for shareholders, investors and employees by attempting to stipulate the information which such groups ought to be using in making economic decisions. In effect, we suggested that the needs of investors emphasized cash-flow expectations in line with the hypothesis that investors were primarily concerned with maximizing their own welfare. Equally, we examined the information needs of employees in the same context, and came to the conclusion that such information as they should require related to matters affecting their welfare as a specific group of individuals.

The concept of social responsibility accounting raises initial problems of defining not only the users of such information, but their objectives in receiving such information. In effect, the concept of corporate social responsibility, which underlies the debate about social responsibility accounting, assumes that there exists a theory about the social role of business firms in modern society. Clearly, such a theory not only explains the public interest in the role of business in society, but would seek to monitor and influence the behaviour of forms in accordance with the value judgements on which such a theory might be considered to be founded.

In a very precise sense, the law exists as an institution having the objective of embodying and expressing those value judgements by which behaviour is to be regulated. In accordance with many Acts of Parliament and legal precedents, the accountability of business firms for matters affecting the social good is strictly laid down and enforced. For example, firms are liable at law for various offences in relation to harmful acts, such as allowing the escape of dangerous substances, failing to provide adequate safety precautions for employees etc. Equally, the law provides very clear rules for the manner in which the accountability of business firms to investors and employees is to be met.

The concept of corporate social responsibility extends beyond notions embodied in current law. Essentially, it represents an emerging debate having its source in political and social theory. In its present state of evolution, there is very real controversy in the following critical areas:

(a) the nature of corporate social responsibility

(b) the scope of corporate social responsibility;

(c) the objectives to which accounting information might be directed;

(d) the manner in which information is to be reported.

In this webpage, we examine the problems stipulated above and review the development of social responsibility accounting. As we shall see, whilst there appears to be a great deal of uncertainty about the problems which we have indicated, business firms and governments have already committed them-selves to this enlarged concept of business accountability.


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Read on: Reporting to Employees Summary

The purpose of this webpage has been to address the problem of reporting to employees as users of financial reports. Traditionally, the interests of investors have been recognized as paramount both in terms of Company Law and in terms of accounting theory. Changes in the social environment and in political attitudes have begun to emphasize the importance of employees. This process may be seen in the context of the movement towards participation in decision making which has featured largely in the literature of management science, and in the discussion of the concept of industrial democracy which has... see: Reporting to Employees Summary