The Vital Breath of Business Administration

Abstract

A strange fate befalls those involved in business administration and accounting in particular. It seems that, in the face of deep roots and great operational relevance, the disciplines and those who deal with them do not enjoy social appreciation. Films such as 1987's The Untouchables and 2016's The Accountant, for example, depict a self-referential profession serving criminal interests. Caravaggio, by contrast, shows us the “accountant” Matthew as he is called to the supreme divine mission – Rome, San Luigi dei Francesi, Contarelli Chapel. The present work then sets out to investigate the more intimate nature of the discipline and in particular its ethical dimension.

To do this, it is necessary to start from afar to ask whether, at the macro scale, there is a coincidence between people’s well-being and their wealth and whether an economy of more and more rather than an economy of enough is desirable. At the micro-scale, moreover, the hierarchy of needs to be met and interests to be prioritized, as well as efficiency in the use of resources, are relevant. Said issue can be investigated concerning the world of health care, where life, health, and suffering make every choice particularly significant. On the one hand, the criterion of choice about the allocation of scarce resources arises: is it legitimate to reason in terms of the life expectancy of the subjects benefiting from spending decisions? On the other hand, efficiency emerges as an ethical principle, even before it is an economic one if we only consider that its opposite, waste, means suffering is not avoided and lives are not saved.

The roots of today's business disciplines can be traced, conventionally, to the Liber Abbaci, by Leonardo Pisano – the Fibonacci, year 1202 – from which emerges the relevance of business calculus for the developments of modern arithmetic, algebra, etc. The book “Della mercatura et del mercante perfetto” by Benedetto Cotrugli, year 1458, proposes a direct correlation between business tools and the ethical and professional dimension of the economic operator. It is not irrelevant here to note that the main Italian treatises on accountancy from the 15th to 17th centuries are the work of religious men who found the rigor of monastery accounts consistent with their vocation – Luca Pacioli, Franciscan1494, Angelo Pietra, Benedictine 1586, Lodovico Flori, Jesuit1636. Also interesting is the thesis advanced by Jacob Soll in The Reckoning, the year 2014, which argues for a direct historical correlation between economic development and accounting culture.

In the narrow field of business administration, Pietro Onida’s “theory of simultaneous maxima”, year 1960, anticipates R. Edward Freeman's “stakeholder theory”, year 1984. The former can be summarized here in the expression “wealth is increased by spreading it, not by defending it”, the latter is, avowedly, as positive as it is normative. Given that empirical research has never been able to demonstrate the direct correlation between moral choices and corporate success, the normative dimension eventually prevails and forms the basis of subsequent corporate social responsibility and the very current focus on ESG issues.

So, business theories and business practice. In the latter dimension is the Internal Control System – ICS – which finds its operational dimension in the so-called CoSo I, year 1992 and later. That document proposes tools for companies of all kinds to counter maladministration and corruption. It is useful to dwell here on the version of the ICS rearticulated for public administrations by the International Organization of Supreme Audit Institutions – INTOSAI. It sets out, among other things, management objectives in terms of “carrying out operations in an orderly manner, by the principles of ethics, economy, efficiency, and effectiveness”. The ICS consists, further and first of all, of a controlled environment that must be characterized in terms of “shared ethical values” and the “example of leaders” – the “tone at the top” – professional competence, organizational adequacy, and staff incentive.

The above considerations seem sufficient to conclude that both business administration and its accounting dimension are founded on the centrality of human beings, their moral behavior, motivation, and professionalism, where numbers are merely tools to control and represent happenings, measure performance, and incentivize virtuous behavior.