Accounting for Fiduciary Faithfulness
Interrogating the Tensions within The Duty of Impartiality for the Superfiduciary Stewards of Society’s Social Superfunds
THE METAPHYSICS OF ACCOUNTING WITH PAOLO QUATTRONE
POSTED ON DECEMBER 1, 2021
by Money on the Left
https://moneyontheleft.org/2021/12/01/the-metaphysics-of-accounting-with-paolo-quattrone%EF%BF%BC/
I discovered the genius of Paolo Quattrone through the miracle of social media which lead to an email exchange in which Paolo directed me to this interview he did in 2021 for a podcast called Money on the Left. Below, I am presenting excerpts from his interview that I have taken the liberty of modifying to show how I see Paolo’s insights informing an important new conversation about the innovation of a new system of accounting for the fiduciary faithfulness of Fiduciary Money (which Paolo himself was not speaking about in this interview).
Paolo is a Professor of Accounting, Governance & Society at The University of Manchester, and a Philosopher of financial accounting as a way of showing ourselves who we are in the world.
From his podcast interview, we begin with this.
One thing that is interesting is also that in the first accounting treatises–let’s say early, modern times, late medieval times–to explain to those who are reading these treatises what accounting was about, an example that was used is the metaphor of the mirror. When it is asked: “Why do you use the accounts?” It is because you will see the state of your affairs, you will see yourself, you will reflect on your (
moralityfaithfulness as a fiduciary) as if you are looking at yourself in a mirror.
Without actually speaking about Fiduciary Money at all, Paolo shows us what this mirror of financial accounts shows us about fiduciary faithlessness today:
Mirroring in Latin is speculatus. ... The idea is you create a distance between you and yourself and you reflect on your behavior by looking at yourself in this mirror which, in accounting terms, is the financial reports that are produced at the end of the year, or when you close the books and you open them again. Interestingly, this speculation was a moment of reflection, a moment of reflecting on your (
moralityfiduciary faithfulness). In modern times, this has devolved into a degraded sense of speculation, however. “I don’t even care about who I am and why I’m here, I just want to make money.”
This is the argument against “woke” ESG that is very much in the headlines in the US today. It is a twisted and convoluted argument that says that the right way for Pensions to honor their duty of care is to just not care about anything other than making money, as much money as they can, as fast as they can. The “truth” at the core of this argument is that money is an absolute good, and making more money is always being more good.
Paolo teaches otherwise:
The truth needs to be in the middle, in that middle space between the two opposites. Accounting is about creating two opposites in order to speculate on the mystery of value, in order to speculate on what is in between these dichotomies, expenses and revenues, assets and liabilities (fiduciary and non-fiduciary). You create figuratively in order to deal with the mystery of (
valuefiduciary prudence), with uncertainty, with the unknown, so forth and so on.
The law of fiduciary duty does not define what is right. It establishes a process or procedure for arriving at what is prudent and loyal in the moment and at the time, in accordance with the facts of the case,
This is why I talk about .. procedural rationality … that … never define(s) what is right, but … define(s) procedures through which you understand, in every single circumstance, what is right and what is wrong. You do that by establishing a tension between two opposites in order to explore the ambiguity of them, which is symbolized by the space in the middle.
The tension in fiduciary faithfulness for the institutional fiduciary owners of intergenerational Fiduciary Money is established in the Duty of Impartiality (which is a fiduciary duty unique to the unique social structure of intergenerational fiduciary money: pensions and endowments). This is very clear in a pension plan, where the duty of the fiduciary is to the youngest new hire, whose concern is for a time far into the future when they become retired, and also to the oldest current retiree, whose future is rapidly collapsing into the present (and sometimes into the past, as for some, the future becomes a forward projection of romantic nostalgia for a past that never really was as we remember it being in our selective rememberings).
These two opposites, the future and the present, establish a tension within which fiduciary faithfulness must be exercised.
Fiduciary accounting must account for the choices to mediate that tension.
an account is also space. Physically, it is a space. Depending on how you design that space, depending on how we design that data visualization, you would have different kinds of social interactions. Depending on how you design the income statement, you will have different kinds of social interactions. So when I was a student, I was taught I think 6 or 7 different formats of income statements. Now, we teach students only one, which is the one that everyone knows that starts with revenues, cost of goods sold, gross profits, then operating expenses, operating profit, financial income or expenses, profit before tax, and tax and dividends. That is not, I would say, an income statement. That is a political statement. It tells us that the most important thing on earth is the shareholder, and the (
dividendsgrowth in share price [=”value”]) that need(s) to be (distributed tocreated for) them.
An accounting for Fiduciary Money that tells us the most important thing is the shareholder is an accounting for faithlessness to the Pubic Good of the Pension Promise, which is by law the only important thing in the world of Fiduciary Money.
The structure of the data visualization, the structure of the income statement is not a neutral, banal technique. It embeds certain forms of seeing societies, certain forms of seeing the world, certain forms of seeing the economy, and who counts in that economy and what counts in that economy.
We need to innovate data visualizations, structures of income statements that sees the Public Good of the Pension Promise (or its Endowment equivalent) as what counts in the economy of Fiduciary Money.
you use numbers, the means, to interrogate the ends. It’s when means and ends become the same thing that it’s the end of (
the worldfiduciary faithfulness). In a sense, it is when the means becomes an end in itself, when speculation becomes speculation. “I want to make money,” that is my end. So means and ends become isomorphic, and that is the end of (the worldfiduciary faithfulness).
For the institution of Fiduciary Money to retain its power, it must be always be about the Promise, to the fulfillment of which money is only the means.
This is why, for instance, (
universitiespensions) are losing their power, because it’s all about money. So it’s not about (educationthe dignity of future income security). It’s not about the role of (the universitypensions) in (keeping democracies together, or in keeping the nation-state togetherfinancing enterprise to shape an economy of sufficiency for keeping a good society ongoing into a dignified future. For all. Forever.) It’s all about making money. The moment in which money is no longer a means to pursue a bigger and greater end, then institutions collapse.
The measure of fiduciary faithfulness is not private gain, but the Public Good.
The core principle of (
that code, of the Camaldoli code, wasthe Pension Promise is) the idea of “common good.” So in everything that you do, if you’re an accountant, if you’re a lawyer, if you’re a politician, if you’re an administrator, you have to pursue the common good. But (theythe pension construct) define(s) the common good in a very interesting way. Because it (wasis) defined in this very ambiguous way where the common good (wasis) the series of conditions that allow individuals to pursue their personal interests. So in pursuit of the common good, inevitably, you have to compromise and you have to mediate with others. You have to allow the others to pursue their individual interests, which means that you have to constrain yours, but the others had to constrain there’s for you to pursue yours.
As we innovate a new ecosystem for Fiduciary Finance, we also have to innovate a new income statement that puts faithfulness to the Public Good of the Pension Promise (and Endowment equivalent) at the bottom line.
Because an income statement where you have profits and dividends at the bottom line, it’s indeed a political statement that tells you that the most important institution in the economy and society is the corporation and the shareholder.
The most important thing in a Fiduciary Economy is not the corporation, or the shareholder, but the Duty of Impartiality, that holds the tension between present and future, and mediates the Pension Promise.
It’s much better to be misaligned and have an instrument of mediation. The key instrument of mediation in contemporary times, or in financial times as the newspaper would say, is indeed accounting.
If, as Paolo teaches, accounting shows us who we are in the world, right now, fiduciary accounting is showing us fiduciaries who are being faithful to making money, and faithless to their fiduciary purpose.
A new form of fiduciary accounting will help us return fiduciaries to their purpose, which is to hold the tension between present and future in their Duty of Impartiality.
Today, the Palestinian resistance movement launched a large-scale military offensive against Israel, reportedly taking control of several towns, capturing Israeli soldiers and seizing military vehicles.
The attack is a backlash after decades of Jewish aggression against Palestinians, which has resulted in hundreds of thousands of deaths and the constant expansion of Israel’s borders.
Self-defense is an inalienable right. The Nordic Resistance Movement stands wholeheartedly behind the Palestinian offensive and for the Palestinian people’s right to a sovereign nation in accordance with the borders that existed before the victors of World War II founded Israel on occupied land in 1948.
Just as we are fighting here at home, under the prevailing conditions and circumstances, for a new and free Nordic Nation, we wish the Palestinian people all the best in their struggle for a new and free Palestine.
Long live the Nordic Nation! Long live Palestine! Crush Zionism!
https://nordicresistancemovement.org/the-nordic-resistance-movement-supports-the-offensive-in-israel/