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Social and Economic Implications of Increasing Income Inequality: Accountability Concerns

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Accounting for the Public Interest

Part of the book series: Advances in Business Ethics Research ((ABER,volume 4))

Abstract

Any discussion of CSR extends beyond the concept of accounting for productive capacity and operations to the broader notion of accountability. That notion includes looking at how social resources are allocated. Accountants should assume greater responsibility to help the public understand the implications of corporate behavior, especially in relation to a major social pattern, income inequality, which has created significant social problems. We look at how income distribution patterns have changed since the Great Depression and the reasons for those changes, one of which is a shift in government policies towards neoliberalism. We then suggest information that we believe should be required in corporate reports in order to help the public understand whether and how corporate behavior contributes to increased income inequality.

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Notes

  1. 1.

    We do not mean to reify corporations or assign them agency, but find that speaking of corporations as if they are agents is widely accepted in academic discourse and is a trope without obvious alternatives. When we speak of corporations as agents, we are referring to decision-makers (usually executives) within corporations.

  2. 2.

    Neoliberalism is an ideology that advocates greater privatization and deregulation, and a greater reliance on markets.

  3. 3.

    Despite widespread insistence that shareholder value maximization is a legal mandate for corporate officers, large corporations (e.g. British Petroleum, Exxon, General Electric, and Archer Daniels Midland) promulgate commercials in both print and electronic format that focus almost exclusively on their social welfare activities and general concern for the planet.

  4. 4.

    This was also the era known by some economists as The Great Compression (i.e., of incomes) (Phillips 2002, 76). Reich (2011) calls this period The Great Prosperity.

  5. 5.

    Margaret Thatcher’s rise to power in the UK gave rise to neoliberal policies there at the same time.

  6. 6.

    Although our focus is on income inequality, the closely-related problem of wealth inequality is even more severe and worsening. In 2010, households in the bottom half of the net worth distribution owned only 1.1 % of the nation’s household wealth (Levine 2012).

  7. 7.

    The inflation factor since then is 9.33, which would yield an income of $5,843,379 in 2011 dollars. By comparison, the CEO of McKesson Medical earned over $145,000,000 in 2010.

  8. 8.

    Axelrod’s famous computerized Prisoner’s Dilemma experiment showed this effect quite dramatically when Anatol Rappoport won with a generous strategy called Tit for Tat (1984).

  9. 9.

    These lists are not exhaustive.

  10. 10.

    The information we propose gathering may be easier to obtain for companies that are registered as benefit corporations or B-Corporations, which are required to provide expanded disclosure about their social impact. As this is a relatively new and small category of companies, however, we do not discuss these types of companies or the disclosures they provide separately from more traditional companies.

  11. 11.

    Galbraith makes a similar argument in The Predator State (2008).

  12. 12.

    In Iowa, for example, the state actually gives refundable tax incentives, so some of the largest corporations receive refunds that exceed their tax liability.

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Authors and Affiliations

  1. Department of Accounting, Iowa State University, Ames, IA, USA

    Sue Ravenscroft & Christine A. Denison

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  1. Sue Ravenscroft
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  2. Christine A. Denison
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Correspondence to Sue Ravenscroft .

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  1. Acounting & Law, California Polytechnic State University,, San Luis Obispo, California, USA

    Steven Mintz

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Ravenscroft, S., Denison, C.A. (2014). Social and Economic Implications of Increasing Income Inequality: Accountability Concerns. In: Mintz, S. (eds) Accounting for the Public Interest. Advances in Business Ethics Research, vol 4. Springer, Dordrecht. https://doi.org/10.1007/978-94-007-7082-9_5

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