Making imaginary worlds real: The case of expensing employee stock options
West [West, B. (2003). Professionalism and accounting rules. London: Routledge] and Chambers [Chambers, R. J. (1966). Accounting evaluation and economic behavior. Houston: Scholars Book Company] have provocatively argued that financial reporting has reached a state of near-total incoherence. In this paper, we argue that a source of this incoherence is the transformation of the US accounting academy into a sub-discipline of financial economics, a transformation in which accounting became a servant of the imaginary world of neoclassical economics. After noting the unusually prominent role of rules within the accounting profession, we describe the displacement of accounting's centuries-old root metaphor of accountability by the metaphor of information usefulness, and situate that displacement within neoliberalism, a broader political movement that arose after World War II. Finally, we use SFAS 123R, the recently issued stock option standard, as a case study of the incoherence that West and Chambers assert. Through various issues - such as reflexivity, theory paradox, and unexplained questions of responsibility - we demonstrate the logical inconsistencies involved in SFAS 123F. The incoherence of stock option reporting rules raises serious questions about the information metaphor as a foundation for either individual rules or the standard setting process. The Financial Accounting Standards Board's (FASB) attempts to make the imaginary world of neoclassical economics real have resulted in rules which are not defensible.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hayek, F. A., 2007. "The Road to Serfdom," University of Chicago Press Economics Books, University of Chicago Press, edition 0, number 9780226320540 edited by Caldwell, Bruce.
- Whitley, Richard, 1986. "The transformation of business finance into financial economics: The roles of academic expansion and changes in U.S. capital markets," Accounting, Organizations and Society, Elsevier, vol. 11(2), pages 171-192, March.
- Williams, Paul F., 1989. "The logic of positive accounting research," Accounting, Organizations and Society, Elsevier, vol. 14(5-6), pages 455-468, October.
- Sue Ravenscroft & Paul Williams, 2005. "Rules, rogues, and risk assessors: Academic responses to Enron and other accounting scandals," European Accounting Review, Taylor & Francis Journals, vol. 14(2), pages 363-372.
- Brown, Lawrence D., 1996. "Influential accounting articles, individuals, Ph.D. granting institutions and faculties: A citational analysis," Accounting, Organizations and Society, Elsevier, vol. 21(7-8), pages 723-754.
- Ijiri, Yuji, 2005. "US accounting standards and their environment: A dualistic study of their 75-years of transition," Journal of Accounting and Public Policy, Elsevier, vol. 24(4), pages 255-279.
- Black, Fischer & Scholes, Myron S, 1973. "The Pricing of Options and Corporate Liabilities," Journal of Political Economy, University of Chicago Press, vol. 81(3), pages 637-54, May-June.
- Sue Llewellyn & Markus J. Milne, 2007. "Accounting as codified discourse," Accounting, Auditing & Accountability Journal, Emerald Group Publishing, vol. 20(6), pages 805-824, October.
- Macintosh, Norman B. & Shearer, Teri & Thornton, Daniel B. & Welker, Michael, 2000. "Accounting as simulacrum and hyperreality: perspectives on income and capital," Accounting, Organizations and Society, Elsevier, vol. 25(1), pages 13-50, January.
- Baker, George P & Jensen, Michael C & Murphy, Kevin J, 1988.
" Compensation and Incentives: Practice vs. Theory,"
Journal of Finance,
American Finance Association, vol. 43(3), pages 593-616, July.
- Bonner, Sarah E. & Hesford, James W. & Van der Stede, Wim A. & Young, S. Mark, 2006. "The most influential journals in academic accounting," Accounting, Organizations and Society, Elsevier, vol. 31(7), pages 663-685, October.
- Fama, Eugene F & Laffer, Arthur B, 1971. "Information and Capital Markets," The Journal of Business, University of Chicago Press, vol. 44(3), pages 289-98, July.
- Gintis, Herbert, 2000. "Beyond Homo economicus: evidence from experimental economics," Ecological Economics, Elsevier, vol. 35(3), pages 311-322, December.
- Young, Joni J., 2006. "Making up users," Accounting, Organizations and Society, Elsevier, vol. 31(6), pages 579-600, August.
- Michael C. Jensen & William H. Meckling, 1994. "The Nature Of Man," Journal of Applied Corporate Finance, Morgan Stanley, vol. 7(2), pages 4-19.
- Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
- Tinker, Anthony M. & Merino, Barbara D. & Neimark, Marilyn Dale, 1982. "The normative origins of positive theories: Ideology and accounting thought," Accounting, Organizations and Society, Elsevier, vol. 7(2), pages 167-200, April.
- Chick, Victoria & Dow, Sheila C, 2001. "Formalism, Logic and Reality: A Keynesian Analysis," Cambridge Journal of Economics, Oxford University Press, vol. 25(6), pages 705-21, November.
When requesting a correction, please mention this item's handle: RePEc:eee:aosoci:v:34:y:2009:i:6-7:p:770-786. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Shamier, Wendy)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.