This open letter to the Senior Partners of the Big 4 was posted by The Accountant on 26th October 2017.
“The necessary and sufficient conditions for legitimate capitalism.”
Dear Senior Partners (of Deloitte, EY, PwC & KPMG)
I write as the Chair of the Maturity Institute having noted that you have not responded, at the request of the Editor of The Accountant, to his recent analysis and review of our Preliminary Report on your partnership behaviours and practices. I set out here why we believe our report puts your organizations at the very centre of the debate on the future of capitalism.
Profitability and shareholder returns are just two among the many necessary conditions for a capitalist system to work; yet neither afford any intrinsic legitimacy. Capitalism is now under unprecedented pressure to reassert its legitimacy for the simple reason that the world is only just beginning to wake up to the obvious fact that we all inhabit the same planet; we are all part of a whole system, by default, not design. It is time that we designed a better version of capitalism.
We have witnessed how profitability and shareholder pressure, in the hands of those with narrow or vested interests, can corrupt the entire system. It makes sense, therefore, that the only sufficient condition for a legitimate, coherent and socially cohesive form of global capitalism is to measure how much it benefits everyone.
The Maturity Institute was born in 2012 with this single purpose – maximising the value of people to maximise the value for society. We have developed a single measure that combines the best of profitability, shareholder returns, company valuation and societal benefits: we call it Total Stakeholder Value (TSV). Our Report identifies that your organizations score too low on this scale to perform the very important, professional duties and responsibilities that are needed for legitimate capitalism.
Despite its multitude of good works and benefits for many, capitalism has always had to patch up its worst inclinations with other, bureaucratic systems of legal rules and regulations, accurate accounting and auditing for assurance. All of these systems have to work in concert and harmony and they can only operate effectively if they continue to reflect society’s changing values, principles and ethical codes. This is why the demand for integrated reports has arisen. This is where, we believe, the accounting and auditing professions are failing.
Our Report is based on significant evidence of audit failures going back to the era of Enron and the collapse of Arthur Andersen. This not only indicates your own failings and heightened risks but, on occasions, you have strayed into illegal territory. This totally undermines trust in the entire system and begs the question whose interests come first? Your own professional bodies also appear reluctant to admit that such practices breach their ethical codes. Thereby losing sight of their connection with, and obligations to, society at large.
If you sincerely believe that your behaviour constitutes legitimate capitalism, and that you can square your own circle of profitability with TSV, then we would ask you to publicly present your case and respond accordingly to The Accountant. Alternatively, we invite you to sign up to the Maturity Institute’s professional standard of Total Stakeholder Value, today.
Yours faithfully,
Paul Kearns
Chair
Maturity Institute
paul.kearns@maturityinstitute.com
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