Critical Perspectives on Accounting (1999) 10, 425]441

Article No. cpac.1998.0275

Available online at http://www.idealibrary.com on

DECONSTRUCTING THE PRINCIPAL-AGENT

MODEL: A VIEW FROM THE BOTTOM

MICHELE CHWASTIAK
University of Wollongong, Department of Accounting and Finance,
Wollongong, NSW, Australia

The principal-agent model has been a popular paradigm in mainstream

accounting research for nearly two decades. This paper argues that
contrary to principal-agent theorists’ claims to objectivity and neutrality,
the theory actually imposes a capitalistic subjectivity on the object of the
research, labor, and in so doing, rationalizes and legitimizes exploitation.
To pioneer a new age, the innate dignity of life must be restored to
human beings in systems of thought. An alternative conceptual frame
aimed at assisting with creating a culture in which human enrichment
replaces material riches as the object of economics is proposed.
Q 1999 Academic Press

Introduction

The degradation and exploitation of labor in a capitalist society is not

the result of a natural evolutionary process in the social organization of
work. This is evident from the fact that exploitative systems, such as
capitalism, must be sustained either by rule of bludgeon or by propa-
ganda, in which dominant ideologies inculcate beliefs that injustices in
society are either inevitable, or counterbalanced by greater benefits, or
not really injustices at all (Chomsky, 1987; Eagleton, 1991). The
principal-agent model, which has been a popular paradigm in main-
stream accounting research for almost two decades, serves all these
functions of a dominant ideology.
The principal-agent model’s ideological strength and resilience lies in
its ability to rationalize, normalize, and legitimize various means of
controlling the labor process in such a way that it appears as if labor
benefits from its own degradation and exploitation. Principal-agent theo-
rists accomplish this by promoting a very limited perception of what it
means to be human, (e.g. self-realization is equated with wealth accumu-

Address for Correspondence: Michele Chwastiak, University of Wollongong, NSW, Aus-

tralia
Received 27 July 1996; revised 18 September 1997; accepted 11 May 1998

425
1045-2354/ 99 / 040425+ 17 $30.00 / 0 Q 1999 Academic Press
426 M. Chwastiak

lation). If self-realization and wealth accumulation are equivalent, then

controls over the labor process are not represented for what they
are } degradation and exploitation} but as a benefit for all humanity in
that they assist with producing higher levels of wealth.
However, capitalism, which has no use for any values other than
material profit, has upset the overall balance of life by stimulating
excessive development of humankind’s economic potential, while degrad-
ing and devaluing social spheres which do not directly contribute to
wealth production (Galtung & Ikeda, 1995; Rich, 1996). As Irigaray notes:

‘‘Relationships between people constitute one of the main areas of

women’s work.... Unfortunately, our current culture responds by devalu-
ing this work socially, too.... Why is such work devalued to such an
extent? Is it because its female work or because it concerns relation-
ships between people, and not the production and selling of objects?...
Are we losing our humanity to manufactured objects, to which we are
becoming enslaved, or in favor of purely financial exchanges, to which
we are servants?’’ (1993, p. 130).

Thus, principal-agent theorists’ persistent habit of viewing human be-

ings solely in terms of economic potential diminishes the value of
humanity itself, which can only be enriched by non-material life af-
firming qualities as compassion, respect for difference and our shared
future. To pioneer a new age, we must restore wholeness to the human
being, which means our multifaceted abilities to engage in work to
utilize and develop our facilities, rather than to just produce material
goods, or to pursue excellence for excellence sake, rather than material
gain, must be embodied in systems of thought and valued by systems
of representation such as accounting (Galtung & Ikeda, 1995).
The purpose of this research is to explore potential ways to restore
wholeness to the principal and the agent and the approach is twofold.
First, the paper demonstrates how the unspoken premises which underlie
principal-agent theory mask a social order that is devoid of spiritual or
humane values and thus, is exploitative and repressive. Principal-agent
theorists do not represent human beings in their rich diversity. Rather,
they reduce human beings to social functions which sustain the status
quo, making the capital accumulation process appear to be the only
valid purpose for human existence. By discovering the partisan human
forces behind ideas we can discern whose interests are being served
and whose are not by a particular system of thought and this allows us
to question that system of thought on ethical grounds. Is the betterment
of all humanity or the exploitation of the many by the few the objective
of this knowledge production? Have principal-agent theorists aligned
themselves with the forces of destruction or the forces of construction?
Are human beings made better and more wise or more ignorant by this
theory?
Second, the paper proposes that the development of a conceptual
representation of the world which valued the inherent dignity of life
would assist with discrediting exploitative practices. Principal-agent theo-
 Deconstructing the principal-agent model 427

rists perceive ‘‘hard power’’ in the form of economic dominance as the

only possible moving force for history. In so doing, they equate progress
with growth of the social]structural conditions which expand the do-
mains of the economy (e.g. managerial accounting techniques that in-
crease surplus-value extraction). In such a conceptualization of progress,
improvement of the human being is of secondary importance to that of
developing the social]structural conditions which allow capitalism to
function more effectively.
However, the original purpose of the enlightenment project which
preceded the growth of capitalism was the full development of human
beings as ends in themselves. During the nineteenth century, this holis-
tic philosophy gave way to a regressive ideology which denatured and
dehumanized life and the environment, so that the economy and tech-
nology could flourish without being limited by any human interests and
values other than economy and technology (Mumford, 1970). Thus, as
Ikeda states:

‘‘Under the sway of the nineteenth-century cult of progress, in this

century we have feverishly devoted ourselves to enhancing the structure
of society and the state, laboring under the delusion that this alone is
the path to human happiness. But to the extent that we have skirted the
fundamental issue of how to reform and revitalize individual human
beings, our most conscientious efforts for peace and happiness have
produced just the opposite result. This, I feel, is the central lesson of
the twentieth century’’ (1995, p. 13).

While cultivating the external world, the human race has allowed ‘‘ the
barbarian within to rampage unchecked’’ (Ikeda, 1987, p. 248). External
controls, such as accounting, have been developed under the pressure
of capitalism to direct this barbarian to predetermined ends} wealth
production for the capitalist class. Thus, accounting is representative of
the degree to which the human race has abandoned the cultivation of
self and in its stead looked to technically competent, but spiritually
devoid, social structures to determine and guide reliable behavior.
However, in order to establish an age of ‘‘soft power’’, where factors
such as education, culture, and ideas and systems for organizing cooper-
atively, rather than competitively prevail, it is precisely the inner re-
sources and processes of the individual that must be strengthened
(Ikeda, 1991). For only when people affirm the inherent dignity of their
own life, not look for external validation, will they possess the inner
latitude and mercy required for cooperation. Thus, just as the Protestant
Reformation, which transcended the authority of the church by reliance
on inner spirituality, was necessary for the development of capitalism
(Held, 1980; Aronowitz, 1988), to usher in an age of ‘‘soft power’’ a
‘‘human revolution’’ in which secular authority is transcended and made
relative by reliance on inner moral law is required (Huyghe & Ikeda,
1991).
The paper is organized as follows. First, the paper critiques the princi-
pal-agent model, demonstrating how the research supports the perpetua-
428 M. Chwastiak

tion of a conceptual representation of the world that legitimizes and

rationalizes exploitation. Second, the paper begins to explore how an
alternative conceptual frame could assist with changing the current sys-
tem of values, creating a culture in which human enrichment took
precedence to material wealth. Third, the implications of this alternative
for accounting theory and practice are elaborated upon.

Objectivity

Principal-agent theorists claim to objectively model the underlying

economic conditions which give rise to the agency problem (Baiman,
1982, 1990). By evoking the rhetorical strategy of objectivity,
principal-agent theorists suppress the system which produces their
thinking} capitalism} and all the more effectively does system’s work by
incorporating the basic principles, (e.g. the separation of labor and
capital), into their framework for thinkable thought, equating them with
‘‘absolute truth’’ (Chomsky, 1987; Jameson, 1990). Depicting the capitalist
social order as ‘‘absolute truth’’ masks the extent to which the structural
conditions represent a repressed form of violence in that they keep the
‘‘haves’’ in power at the expense of the ‘‘have-nots’’ and render alterna-
tives infeasible, enslaving the future to the present.
The obfuscation of the fact that certain people derive more benefits
from capitalism than others is furthered by principal-agent theorists insis-
tence that accounting is a reflection of an objectively verifiable reality,
not a conceptual frame which upholds a system of values consistent
with sustaining the status quo distribution of wealth and power in
society (Tinker et al., 1982; Chioni Moore, 1991; Shearer & Arrington,
1993). Yet, the fact that corporations are not accountable for the ir-
reparable environmental damage their actions frequently create, as well
as the human and societal costs of alienated labor and poverty, reveals
that accounting is hardly objective and non-partisan. Thus, accounting
does not reflect reality, but constructs a reality which makes the vast
majority of the population as well as nature appear to have no identity
other than that imposed by the capital accumulation process. This in-
creases the efficacy of exploitation by masking the lives, communities,
natural habitats, etc. frequently shattered by corporate actions. However,
as Rich notes:

‘‘ White men, who more than any other group have dominated this
planet, have need for a history that does not lie to them about the
abuses of white male power, the terrible skewing of behavior and
psychic life in a society dominated by a single-sex, racist and profit
perspective’’ (1986, p. 144).

Similarly, capitalists have need for an accounting that does not lie to
them if we are to stop the rapacious behavior of corporations, for
 Deconstructing the principal-agent model 429

lasting prosperity cannot be built on the suffering of others (Ikeda,

1996a).
Further, by objectifying human beings, reducing them to their labor
power, principal-agent theorists alienate the prescriptions of their models
from the lives they impact. In principal-agent research, agents have no
intrinsic value, but only a contingent value as a means to an end for
principals (e.g., surplus-value production). This equation of a human
being’s worth with the amount of wealth they can produce for the
capitalist class contains the seeds for highly destructive social policies.
For instance, since the end of the Cold War the U.S. has been minus
an ‘‘evil empire’’ which can be blamed for all the country’s ills. In the
search to find a new ‘‘enemy’’ the U.S. has turned inward, locating the
blame in a so-called ‘‘brutish underclass’’ that has supposedly become
dependent on the ‘‘nanny state’’ (Anonymous, 1994). This ‘‘brutish un-
derclass’’ consists of many single mothers who are recipients of welfare.
In the arguments conservatives have promoted to eliminate this support
from the state, single mothers have been socially constructed as ‘‘not
working’’ (Ehrenreich, 1995). Since the reproduction and care of children
does not directly contribute to corporate profits, such work is being
devalorized, made to appear to be devoid of any social contribution.
Thus, the monolithic measure of human value which principal-agent
theorists help to promote is assisting to further the life destroying
properties of capitalism.

Rationality

In the principal-agent model, all human actions are guided by rationality.

Rationality, devoid of other means of knowing, (e.g. feelings and intu-
ition), lends itself to an abstract, cold, calculating and quantifying rea-
soning (Mies, 1990). Thus, by postulating rationality as the only method
for understanding, principal-agent theorists correctly register, but do not
problematize the extent to which the end-oriented actions of business
must be isolated from the constraining impact of (by definition) irratio-
nal norms such as mutual assistance and reciprocal respect, in order to
suspend moral inhibitions which would interfere with the efficacy of
corporate actions (Bauman, 1989). In a capitalist organization,
inner-organizational rules replace private moral conscience as the sole
source of propriety (Bauman, 1989). Principal-agent theorists’ distaste for
irrational norms is registered by Baiman (1990, p. 345) when he states,
‘‘Finally, the principal-agent model has often been criticized as too
narrow because it, apparently, leaves no room for trust and fairness,
which are also claimed to affect behaviour’’ (italics added).
Abstract, quantifying reasoning, as a means of knowing, was a result
of the bourgeois revolution which opened an age that would be domi-
nated by economy and technology. In order to adjust themselves to this
age, humankind excessively developed their facilities for practically repre-
senting positive reality, (e.g. they overdeveloped the intellect). As Huyghe
430 M. Chwastiak

notes, ‘‘The bourgeois individual became the practical man believing in

nothing but concrete, positive facts capable of immediate translation into
commercial values, hard cash and figures’’ (in Huyghe & Ikeda, 1991, p.
85). However, this required that everything arising from a profound
creative sensibility had to be eliminated as disturbing order and reason;
‘‘all trace of dream, imagination, myth and flight toward spirituality
became suspect as a divergence from reality’’ (Huyghe in Huyghe &
Ikeda, 1991, p. 85). In the process of shutting down our profound
creative sensibility, humankind unbalanced itself.
Thus, while scholars of the middle ages were producing questions that
were filled with awe and respect for the unknown, (e.g. ‘‘How is milk or
fish changed into nourishment‘‘? ‘‘ What causes rain, wind, and lofty
clouds‘‘? ‘‘ Why does the resounding echo repeat words‘‘?), the medieval
artisans were beginning to produce the dry, arid answers, (e.g. ‘‘This is
ivy, this is a hunting dog, this is a peasant mowing, this is a sly old
priest‘‘ ), that would lead to positivistic science and the belief that the
world could be reordered based on human reason alone (Mumford,
1970, p. 25). However, faith in the omnipotence of reason to reorder the
world according to manmade certainties led to a dangerous overinflation
of the human ego causing humankind to believe that there was nothing
beyond our power (Ikeda, 1993a).
This led to humankind conceptualizing themselves as the creator in-
stead of the created. The vision of human beings as simply a small
fragment of a vast universe and that of the earth as a nurturing
mother, which had governed human thought since pre-history, was re-
placed with images of human mastery and dominance (Merchant, 1980).
To assert their preeminence, the human race had to ceaselessly accentu-
ate the things that distance itself from the rest of the world. Abstract
conceptual definitions which radically separated subject and object in-
creasingly replaced more holistic approaches to thinking, and disinter-
ested rationality which sought only the logical and deductive relation-
ships between things increasingly replaced sensual knowledge (Huyghe &
Ikeda, 1991).
Because the human intellect alone is incapable of perceiving and
representing reality in its entirety, life had to be wrenched from the
organic whole, and translated into dissectible parts that were negotiable
in order for the human intellect to gain control. This violent reduction
of the whole into isolated parts could only be accomplished by ignoring
the deep interdependencies between all aspects of life. Thus, for modern
science to succeed, the research objects, (e.g. atoms and genes), had to
be separated by force from their symbiotic context and isolated in the
lab (Mies, 1990). In the natural world, humankind is still subject to the
vagaries of nature; in the lab, man can define the universe so as to be
master.
Similarly, principal-agent theorists by reducing the world to dissectible
parts, (e.g. principals and agents, partial equilibrium analysis, single
period models, etc.), can gain mastery through their intellect over capi-
talist control problems. However, just because a problem can be con-
 Deconstructing the principal-agent model 431

trolled by the intellect, does not mean it can be controlled in reality.

Rational systems admit only partial truths because they are impervious
to evidence that is discrepant with its own principles. Therefore, the one
sided and illegitimate answers rational systems produce are frequently
transformed into devastating errors and aberrations when put into prac-
tice (Huyghe & Ikeda, 1991). Hence, the managerial control systems
which principal-agent theorists claim will align the interests of the agent
with that of the principal may actually do more to alienate the agent
from the principal’s goals by destroying any potential for autonomy or
self-fulfillment from work (Armstrong, 1991; Ogden, 1993).
Further, principal-agent theorists sorely underestimate the potentiality
of rational systems of thought and the technical efficiency they have
brought us; for in this century the cruelties have become far more
effectively administered than ever before. Thus, Bauman notes, in rela-
tion to the Jewish Holocaust:

‘‘Particular care was taken that at every stage of the road the victims
should be put in a situation of choice, to which criteria or rational
action apply, and in which the rational decision invariably agrees with
the managerial design. The Germans were notably successful if deport-
ing Jews by stages, because those that remained behind would reason
that it was necessary to sacrifice the few in order to serve the many’’
(1989, p. 23).

Self-interest

According to principal-agent theorists, all human behavior is rooted in

self-interest. By decontextualizing this behavioral assumption,
principal-agent theorists portray self-interest as an immutable biological
characteristic, rather than the product of a particular social system.
Biological determinism is frequently used by ideologues to rationalize
the practices of repressive]exploitative cultures by making such customs
appear to be the result of uncontrollable natural processes (Galtung &
Ikeda, 1995). In this respect, the self-interest assumption serves to per-
vert our understanding of economics by elevating capitalism, with its
individualistically and competitively driven market transactions, to the
only reasonable means of organizing economic life (Reardon, 1985).
However, capitalism, which subordinates the development of human
beings and social life to the imperatives of individual enrichment, is
steadily transforming the forces of production into the forces of destruc-
tion (Mandel, 1976). The forces of destruction are uniformly making the
planet uninhabitable for both principals and agents. Thus, as Huyghe
notes:

‘‘It is blind frivolity to allow the struggle among the classes to take
precedence over the struggle for human survival. When a captain at-
tempts to keep his ship from sinking, knowledge of the relative numbers
432 M. Chwastiak

of first and third-class passengers his action will benefit is a matter of

secondary importance. The important thing is to want to save the entire
ship. Is it so difficult to conceive of a global solidarity of humanity
united in a common front? Is it necessary to go on trying to find
polemics to deaden an awareness that grows more indispensable every
day’’? (in Huyghe & Ikeda, 1991, p. 20).

Thus, while self-interest may service the needs of capitalists by en-

couraging isolationism and competition among the masses so that peo-
ple come to believe that only the benefits which the elites can provide
are reasonable; such behavior is producing a society of individuals who
are isolated, fragmented, and increasingly alienated from their altruistic
self and hence, threatened with mutual collapse (Ikeda, 1992, 1993b).

Game Theory

The theoretical basis for the principal-agent model is derived from game
theory. Game theory was developed by Von Neuman and Morgenstern
in the 1940s and provided the intellectual rationale for why cooperative
behavior was infeasible in a capitalist economy. In the game entitled the
prisoner’s dilemma, both parties would be made better off if they
cooperated. However, cooperation requires trust and because one’s oppo-
nent has incentives to behave in a self-interested manner, trust becomes
an irrational norm. Thus, game theory mathematically proved that trust
and self-interest were antithetical.
Once trust was intellectually constructed as irrational, then the world
could be made to conform to these mathematical axioms. Thus, during
the 1950s, in the U.S. game theory was appropriated as the rational
justification for the Cold War. As Kaplan (1983, p. 66) notes, ‘‘ Game
theory was... the vehicle through which many intellectuals bought onto
[the Cold War’s] assumptions’’. The prisoner’s dilemma illustrated that
both the U.S. and the U.S.S.R. would be better off if they ended the
arms race and talked. However, this leap required trust and because the
‘‘enemy’’ might cheat } build more weapons and go onto win }
continuing to compete was the only rational solution (Kaplan, 1983).
However, as Cohn (1989) points out, game theory, as applied to the
technostrategic analysis of nuclear war, does not provide meaningful and
internally consistent justifications for U.S. nuclear policy. Nor does the
analysis provide the actual criteria upon which nuclear decisions are
made. Cohn (1989, p. 158) states, ‘‘Instead, [game theory] functions as a
gloss over a set of much more primitive, ambiguous, contradictory
axioms that constitute the core dogma of the nuclear world’’. These
primitive axioms rest on the infinitely expandable concept of deterrence,
(e.g. anything that deters an enemy from being able to exercise a threat
of coercion is good). Implicit in this concept is a need to demonstrate
resolve, a will to stay the course no matter what. Thus, nuclear policies
do not have their justification in rational behavior, but in brute force.
 Deconstructing the principal-agent model 433

The technostrategic analysis of game theory simply serves as a rational

mask for the true human motivations underlying U.S. nuclear policy}
greed, anger and stupidity.
Similarly, principal-agent theorists must frequently rely on extra-theoret-
ical justifications to explain their results. Hence, the fact that the con-
tracts derived from principal-agent models are frequently complex,
whereas most real world contracts are quite simple needs to look
outside the theory for an explanation. Thus, Baiman supplies the fol-
lowing rationalization:

‘‘The observed contracts against which we compare the optimal princi-

pal-agent contracts are usually only the explicit or formula-based parts of
actual employment relationships. At all levels of the firm there is often a
great deal of discretion involved in determining the actual compensation
received, especially when one considers job promotion, job assignment,
and the allocation of bonuses and perquisites. The differences in com-
plexity and sensitivity between principal-agent contracts and observed
contracts may be much less when one factors in the discretionary
aspects of actual contracts’’ (1990, p. 345).

However, he goes on to state that principal-agent research has also

been criticized for devoting ‘‘little study to the possible role of discre-
tion in rewarding agents’’ (Baiman, 1990, p. 345). Hence, because princi-
pal-agent theorists do not study the discretionary components of com-
pensation, discretion cannot logically be the reason for the complexity of
the contracts derived from principal-agent models. In sum, principal-agent
research fails to provide a rational explanation for compensation.
As Irigaray (1993, p. 121) states, ‘‘There are numerous examples of
irrationality to be found in the way pay is awarded for work and they
are on the increase. The fact that such irrationality continues to be
implemented suggests that a disguised form of violence is being used
in what passes for social order’’. Thus, principal-agent research is simply
an attempt to gain the status of ‘‘rationality’’ for an economic system in
which those who own the means to produce can, for the most part,
dictate the conditions under which they will produce and these terms
require that workers are paid as little as possible.

The Metaphysics of Death

It is by reifying abstract concepts and making absolute values out of

them, that structural violence in the form of exploitation, discrimination,
oppression, etc. is legitimized (Galtung & Ikeda, 1995). Principal-agent
theorists add to our stock of rationalizations of structural violence by
making the capital accumulation process appear to be more essential
than life itself. In all forms of neoclassical economics, capitalism is
personified, endowed with an existence by and for itself. Neoclassicists
accomplish this by reifying the capital accumulation process and harden-
ing the structural features of a capitalist economy, (e.g. markets and
434 M. Chwastiak

their imperfections), into fetishes, investing them with a life of their

own. Under this presumption, enlivened markets, not people, create
regulatory institutions such as accounting to resolve accumulation and
distribution problems. Thus, in principal-agent research, the clashing of
utility functions draw forth their own solution to problems with no
explanation of how this occurs (Armstrong, 1991). Such a presentation,
however, produces a metaphysics of death in that we are led to believe
that life itself is inessential to the functioning of capitalism. As Griffen
notes:

‘‘Proceeding both from an alienation from nature and an estrangement

from the natural self, our civilization replaces reality with an idea of
reality. Through maintaining the supremacy of the idea, one creates a
delusion of supernatural power over nature. In the development of this
alienation as a state of mind, the delusion of well being and safety
eventually becomes more important than the realistic considerations
which will actually effect well being and safety’’ (1989, p. 82).

Thus, principal-agent theorists mastery is not of the real world, but of

an artificial sphere in which markets have replaced living, breathing
human communities as the object of concern. By elevating this synthetic
world to a position of absolute, principal-agent theorists deny the role
people play in the creation and reproduction of social processes and
institutions, portraying capitalism as a social system beyond human
control or responsibility, and hence, enforcing ignorance which, in turn,
produces indifference and apathy. However, if we are to reaffirm our
independence, then we must claim responsibility for the artificial envi-
ronment we have created as a human race and seek ways to change it
(Huyghe & Ikeda, 1991).

The Human Revolution

Under capitalist ideology, economic laws are made to appear to be as

natural and as unassailable as the law of gravity (Soper, 1990). How-
ever, capitalism is an artificial institution that goes against the laws of
nature far more than it conforms with them. For industry is based on
the premise of limitless growth, whereas the natural environment in
which it takes place is strictly limited (Schumacher, 1973; Mies, 1990).
Further, as Schumacher (1973, p. 122) notes, ‘‘... man-as-producer cannot
afford ‘ the luxury of not acting economically’, and therefore cannot
produce the very necessary ‘luxuries’}like health, beauty, and perma-
nence} which man-as-consumer desires more than anything else‘‘. Thus,
economic man is also an artificial creature who has defined ultimate
happiness as the fulfilment of material desires, even if these desires
must be met at the estrangement of all that is beautiful, healthy and
good.
However, far from bringing lasting happiness, consumption as the
ultimate purpose of life creates emptiness and angst. This is due to the
 Deconstructing the principal-agent model 435

fact that the fulfilment of desire is non-cumulative and therefore, is

immediately succeeded by a sense of emptiness. This sense of empti-
ness stimulates a craving for more consumption leading to a vicious
cycle of desire which can never be satiated (Huyghe & Ikeda, 1990).
Further, every increase in our material needs tends to increase our
dependence on forces currently beyond individual human control and
therefore, increases our existential fear (Schumacher, 1973). For in order
to create a social structure that would provide an overabundance of
material riches and convenience, the human race had to shift from a
micro-society in which each individual and group’s contribution to the
whole was visible, to a macro-society in which each unit has simply
become ‘‘an abstraction imprisoned in the autonomy of concepts’’
(Huyghe in Huyghe & Ikeda, 1991, p. 174).
In the process, human beings deprived themselves of the spiritual
fulfilment and stability derivable from a profound sense of oneness with
society and having become passive beneficiaries, have lost the ability to
act deliberately and spontaneously in society’s management (Huyghe &
Ikeda, 1991). Because the management of society has been surrendered
to autonomous institutions such as corporations and the state, humans
have assimilated the externally authorized standards of behavior which
allow these autonomous institutions to function. By having precedents
set from without, human beings have foregone the painful processes of
contemplation, soul-searching, and self-questioning, atrophying the hu-
man consciousness (Ikeda, 1991).
The atrophy of the human consciousness has created gross im-
balances between our knowledge and our wisdom, and between our
material development and our moral evolution. In other words, our
material prosperity has been gained at the cost of our spiritual impover-
ishment. Thus, as former U.S. President Truman noted in his diary after
returning from a tour of the rubble of Berlin, ‘‘machines are ahead of
morals by some centuries’’ (quoted in Lifton & Mitchell, 1995, p. 148).
Or as the late U.S. General Omar Bradley once stated, ‘‘ Ours is a world
of nuclear giants and ethical infants. We know more about war than we
do about peace. We know more about killing than we do about living’’
(quoted in Caldicott, 1986, p. 31).
In order to close the gap between machines and morals, a human
revolution of equivalent magnitude to the proceeding industrial and
technological revolutions is required (Peccei & Ikeda, 1984; Huyghe &
Ikeda, 1991; Galtung & Ikeda, 1995). The process of human revolution
will involve an exploration and cultivation of each human being’s innate
capacities for compassion, courage, wisdom, etc. such that people can
independently determine the correct way to live, rather than a search
for more effective ways to externally impose behaviors needed to sus-
tain the current social structure. As Peccei notes:

‘‘... each human being has within himself or herself large reserves of
comprehension, imagination and creativity, as well as a wealth of unex-
ploited, even neglected, moral resources. These reserves represent an
436 M. Chwastiak

untapped potential that can and must be systematically developed to

repair the damage we have done to ourselves and our environment and
to restore the lost equilibria between us’’ (Peccei & Ikeda, 1984, p. 24).

The capitalist ethic requires that we view life as a constant struggle

for separation and self-assertion, rather than a journey towards greater
empathy and integration with the living world (Morrison, 1995). How-
ever, the cosmos, with its ability to create life, represents a life form of
unfathomable compassion and in this respect, ‘‘... the purpose of human-
ity’s advent on earth is to be active participants in the compassionate
workings of the universe, enriching and enhancing its creative dy-
namism... ’’ (Ikeda, 1996b, p. 12). From this perspective, social processes
such as production and distribution should be viewed as a means for
improving humanity and nature, not as a formula for domination and
exploitation. Further, the Buddhist theory of ‘‘dependent origination’’
explains how all beings and phenomena exist and occur in relation to
other beings and phenomena, how nothing can arise or endure solely
by itself (Ikeda, 1991, 1995). This notion urges us to respect all life as if
it were our own because our lives are intrinsically dependent upon
others for survival. Hence, if humanity’s purpose on earth is to enhance
the compassionate workings of the universe and if all life is innately
co-dependent, then only by entering into a peaceful and harmonious
alliance with nature and others can humans develop their true potential.
For the highest order of human creativity and sensitivity arises when
people engage in a partnership with nature and others, because in so
doing they are forced to confront the dialectical complexity of life,
enriching their consciousness through an attempt to create harmony
among disparate aspects of reality (Huyghe & Ikeda, 1991; Shiva, 1997).
To exert a cultural change in which improvement of the human being
takes precedence to the external realm, a paradigm shift away from
lifeless positivism is necessary (Schumacher, 1973; Devall, 1988; Shiva,
1997). Central to this paradigm shift would be the principle of
subject]subject reciprocity, which presumes that the research object is
regarded as living and bequeathed with its own dignity, soul and
subjectivity (Mies, 1990). In order for science to enhance, rather than
impair life, it must view its research objects as living beings who have
a right to self-realization, rather than as dead controllable matter which
should be manipulated to conform to externally prescribed aims. Thus,
rather than a science and economics which imposes subjectivity from
without, these activities could be accomplished, albeit with different
ends, with feelings of kinship and connectivity to the research object, as
a form of delightful play giving joy to all participants alike (Easlea, 1983;
Fox Keller, 1992).
To further facilitate subject]subject reciprocity, detached, neutral theo-
retical frames which hamper our ability to identify with the other’s
dignity by placing a conceptual wedge between their existence and our
own will need to give way to images that demonstrate the interdepen-
dence of the subject and object’s lives. Thus, rather than researchers
 Deconstructing the principal-agent model 437

grouping objects into binary, hierarchical opposites, such as principal

and agent, which presupposes that one participant is superior to the
other and elevates that participant’s interests to universal, the equality of
all life plus the validity of different aims must be recognized.
However, a conceptual shift alone will be inadequate for changing the
human condition. As Ikeda (1996c, p. 15) states, ‘‘Unless we discipline
our spirits through our day-to-day experience... a conceptual shift alone
will not give us the strength we need to set a new course for our
times’’. This is clearly evident, for example, in the fate of research into
genetic transposition. The founder of this research, Barbara McClintock,
based her search for this phenomena on a science which sought kinship
with the organism. Her research results viewed genetic transposition as
a wedge of resistance on the part of the organism against external
control. However, even though her scientific research was based on a
conceptual shift, the conceptual shift alone did not prevent the ultimate
appropriation of her results by genetic engineers who sought to employ
them as an instrument to regulate organic life (Fox Keller, 1992).
Disciplining our spirits will require us to reject the competitive ethic
embedded in capitalism, which teaches that our own individual advance-
ment can only be gained at the expense of others (Prescott, 1975). In
its place, an ethic which realizes that each individual life has a unique
contribution to make to the world and therefore, their gains are our
gains as well should emerge. Rejecting the competitive ethic requires
that we break the hard shell of the lesser self which is concerned with
only personal fame, profit, notoriety, etc. and thus, remove the
self-centered ego from human pursuits (Ikeda, 1993b, 1994). By pursuing
education for the sake of education, creativity for the sake of creativity,
etc. we can discipline our spirits to transcend the conceptual definitions
and distinctions which delude us into valuing, for instance, money and
position more than life. Further, once we smash the hard shell of the
lesser self a new vista of opportunities for happiness and self-fulfilment
will unfold, for our own self-interest will be broadened and deepened to
include the extent to which the fundamental needs of others are satis-
fied (Devall, 1988).

Accounting

Accounting, as currently practiced, helps to maintain a culture of ex-

ploitation by depicting benefit as being created through negation and by
subordinating human and natural diversity to the monolithic objective of
profit maximization. Such a measure of value denies the inherent worth
in objects by submitting them to a capitalistic subjectivity and, as
previously mentioned, this in turn increases the efficacy of exploitation.
However, if humans are to enrich their lives by living peacefully and
harmoniously with all beings, severe limits must be placed on the
degree to which exploitation is socially sanctioned by the dominant
culture. As Snyder notes:
438 M. Chwastiak

‘‘Since it doesn’t seem practical or even desirable to think that direct

bloody force will achieve much, it would be best to consider this
change a continuing ‘revolution of consciousness’, which will be won
not by guns but by seizing the key images, myths, archetypes, escha-
tologies, and ecstasies so that life won’t seem worth living unless one’s
on the side of the transforming energy’’ (1995, p. 43).

Accounting limits the concept of gain and loss to the financial wealth
created or depleted by corporate actions. In so doing, it assists with
perpetuating the myth that human happiness lies in acquiring material
possessions. For accounting to play a transforming role, its energy must
be converted from a force that ensnares the human mind set to the
status quo to one that engages and expands the human being’s infinite
possibilities. Hence, rather than positing the accumulation of wealth as
the only rational reason for engaging in economic action, accounting
could play a reformative role by representing value as being created by
economic activities that respect and enhance the innate merit in others
and nature.
For instance, a forest should be appreciated for its role in replenishing
the soil, water and air essential for the reproduction of life, not because
it provides the raw material needed to sustain our current materialistic
culture (Tokar, 1997). Animals should be valued because they share this
planet with us and because they could teach us a great deal about
love, compassion, courage, and the wonders of creation, not because
they are the raw material for food, clothing and luxury items (Peccei &
Ikeda, 1984). In other words, all living beings and things not only have
their own unique contribution to make to the perpetuation of life, but
also, the richness of existence. Hence, if accounts reflected the inherent
worth of objects and if gain or loss was measured by the extent to
which an economic action respected or disdained the object’s own
subjectivity, accounting would assist with enacting a cultural shift in
which it would be considered intolerable to deny the innate dignity of
life in order to exploit it. Further, such a system of accounts and
conceptual representation of gain and loss would demonstrate how hap-
piness could be enhanced by cultivating difference and diversity, creating
the conditions for non-material affluence to grow in importance to mate-
rial fortune. As Snyder further notes:

‘‘The longing for growth is not wrong. The nub of the problem now is
how to flip over, as in jujitsu, the magnificent growth energy of modern
civilization into a non-acquisitive search for deeper knowledge of self
and nature. Self-nature. Mother Nature. If people come to realize that
there are many non-material, non-destructive paths of growth} of the
highest and most fascinating order} it would help dampen the common
fear that a steady state economy would mean deadly stagnation’’ (1995,
p. 53).

Accounting as currently practiced produces a delusion that the

economic consequences of an action are all that matter. However, if
accounting is to assist with creating a culture of human revolution,
 Deconstructing the principal-agent model 439

ethical, ecological and social values must be driven to the forefront of

the decision making process. This could be accomplished by developing
a system of accounts that demonstrated the effects economic decisions
have on the totality of life (e.g. existing humans and their relationships,
as well as future generations, natural habitats, animals, etc.). For if
accounting were to focus attention on the myriad human and non-hu-
man relationships affected by an economic decision, with costs defined
as the ecological and social disruptions and benefits as the ecological
and social needs satisfied, the full impact of judgments would become
visible bringing ethical, ecological and social values to bear.
Thus, a shift from a culture of material prosperity to human enrich-
ment will require a radical change in the underlying relationship between
the economy and society. The economy needs to take its rightful place
as a means to provide sustenance for human life, not as the all
pervasive mechanism and logic that tries to mold everything to the
agenda of wealth, luxury and power for an elite few. This means, in
part, that a fuller more humane notion of work must arise. As Schu-
macher notes:

The Buddhist point of view takes the function of work to be at least

threefold: to give a man a chance to utilize and develop his faculties; to
enable him to overcome his ego-centeredness by joining with other
people in a common task; and to bring forth the goods and services
needed for a becoming existence’’ (1973, p. 58).

In other words, while the provision of goods and services is essential,

the means by which these goods and services are provided is even
more crucial. Work cannot contribute to the process of human revolution
if its sole purpose is to convert dead matter to sellable objects for
individual consumption. In order for work to enhance the capacities of
human beings, it needs to be organized in such a manner that people
can pool their resources and explore their ingenuity, seeking ways for
their efforts to contribute to the greater good. Thus, rather than assess-
ing the value of labor in terms of the wealth it creates, accounting
could be employed to measure the extent to which a job contributes to
the psychological, social and ecological well being of the individual,
community and environment.
Of course, in order for the economy to be accountable to the people
and Mother Nature, economic decisions must be made through a process
of dialogue and consensus involving everyone who is affected by them,
not by distant, unaccountable corporations or state bureaucracies (Tokar,
1997). Thus, a decentralized, democratic and community controlled
economy would be an essential component of a culture dedicated to
human revolution. In order to enact a democratic economy, people must
be fully informed about all the surrounding issues and potential conse-
quences of alternative courses of action. In such a society, accounting
would be relied upon to expose the issues, options, possible repercus-
440 M. Chwastiak

sions, etc., so that dialogue could take place regarding the appropriate-
ness of various actions and the best way to proceed.
In conclusion, in order for the twenty-first century to be a century of
hope and peace, we must direct our energy towards exploring and
cultivating the vast resources of the human being, rather than the
external realm. The creation of a new world order devoted to spiritual,
rather than material, enrichment will depend upon how many of us are
willing to forego the path of least resistance and stand up to meet this
challenge (Ikeda, 1994).

Acknowledgements
This paper was presented at the 1996 Critical Perspectives on Accounting Confer-
ence, New York, New York. I would like to thank Jim Haslam, Tony Tinker,
David Cooper and an anonymous reviewer for helpful comments.

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