What impact does systemaccounting have on corporate governance?


There is no distinction between the individual or the firm in systemaccounting.* The mechanism that protects the public from the costs incurred by private firms consuming market risk is also responsible for shielding equity holders from the internal risks consumed by a firm's agents. Whether the event under observation is at the level of the market or the firm, the solution in either case is the elimination of a lack of observability, and its fast accomplice, information asymmetry.

The formation of complex governing structures is an attempt to mitigate agency costs. Once owners are empowered by systemaccounting to directly scrutinize the performance of their equity, firms may dispense with all the middlers, meddlers, & squatters that tend to undermine or divert the focus of an executive away from his or her sole responsibility in an economy: more efficiently service demand. When demand is serviced well, both individual owners of equity and the economy propser. If there is a failure to service demand more efficiently, its measure will be known to all. To be hamstrung in the presence of opportunity, or benefit from collusion in times of failure, are both outcomes enabled by archaic mechanisms used to seek balance when the relationship between accountability and authority are unknown.

Now that the balance is set, a producer has only to look to the action of a consumer to earn the most substantive form of praise.

*Note: This subject is entertained according to current convention. While risk is currently perceived to be consumed at the levels of i) the individual, ii) the firm, and ii) the market, systemaccounting recognizes that liability rests solely with the author of a choice, or "consumer of risk". A "firm" is nothing more than a group of individuals. Therefore, there is no such thing as "corporate" since the opportunity for individuals to transfer the cost of risk to some other entity ("the firm" or "the public") after consuming it is eliminated.

Was this helpful?