Open-book accounting is an extension of the principles of
Open-book management
Open-book management (OBM) is a management phrase coined by John Case of Inc. magazine, who began using the term in 1993. The concept's most visible success has been achieved by Jack Stack and his team at SRC Holdings.
The basis of open-book mana ...
to include in an organisation's accounts all those with an interest in the organisation, not merely its employees and its shareholders (including those whose shareholding is managed indirectly, for example through a
mutual fund
A mutual fund is a professionally managed investment fund that pools money from many investors to purchase securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV i ...
). This effectively means all members of the public.
Since almost all
accounting records
Accounting records are key sources of information and evidence used to prepare, verify and/or audit the financial statements. They also include documentation to prove asset ownership for creation of liabilities and proof of monetary and non monetar ...
are now kept in electronic form, and since the computers on which they are held are universally connected, it should be possible for accounting records to be world-readable.
This is an aspiration: at present, organisations run their accounts on systems secured behind firewalls and release of financial information by publicly quoted companies is carefully choreographed to ensure that it reaches all participants in the market equally.
Advocates of open-book accounting argue that full transparency in accounting will lead to greater accountability and will help rebuild the trust in
financial capitalism
Finance capitalism or financial capitalism is the subordination of processes of production to the accumulation of money profits in a financial system.
Financial capitalism is thus a form of capitalism where the intermediation of saving to invest ...
that has been so badly damaged by recent events such as the collapse of
Lehman Brothers
Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before Bankruptcy of Lehman Brothers, filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Gol ...
, the federal rescues of
AIG
American International Group, Inc. (AIG) is an American multinational finance and insurance corporation with operations in more than 80 countries and jurisdictions. , AIG companies employed 49,600 people.https://www.aig.com/content/dam/aig/amer ...
,
Fannie Mae
The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a United States government-sponsored enterprise (GSE) and, since 1968, a publicly traded company. Founded in 1938 during the Great Depression as part of the N ...
and
Freddie Mac
The Federal Home Loan Mortgage Corporation (FHLMC), commonly known as Freddie Mac, is a publicly traded, government-sponsored enterprise (GSE), headquartered in Tysons Corner, Virginia.[Merrill Lynch
Merrill (officially Merrill Lynch, Pierce, Fenner & Smith Incorporated), previously branded Merrill Lynch, is an American investment management and wealth management division of Bank of America. Along with BofA Securities, the investment bank ...]
to
Bank of America
The Bank of America Corporation (often abbreviated BofA or BoA) is an American multinational investment bank and financial services holding company headquartered at the Bank of America Corporate Center in Charlotte, North Carolina. The bank w ...
, not to mention earlier scandals such as the collapse of
Enron
Enron Corporation was an American energy, commodities, and services company based in Houston, Texas. It was founded by Kenneth Lay in 1985 as a merger between Lay's Houston Natural Gas and InterNorth, both relatively small regional companies. ...
and
Worldcom
MCI, Inc. (subsequently Worldcom and MCI WorldCom) was a telecommunications company. For a time, it was the second largest long-distance telephone company in the United States, after AT&T. Worldcom grew largely by acquiring other telecommunic ...
.
References
* Romano, Pietro; Formentini, Marco (2012-05-01). "Designing and implementing open book accounting in buyer–supplier dyads: A framework for supplier selection and motivation". International Journal of Production Economics. 137 (1): 68–83. doi:10.1016/j.ijpe.2012.01.013
Accounting systems
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