RESPONSE
by
David Solomons
Ernst & Young Professor Emeritus
The Wharton School, University of Pennsylvania
1992 Accounting Hall of Fame Inductee
As those who have preceded me into the Accounting Hall of Fame in recent years will know, one’s first intimation of the conferment of this high honor comes in the form of a telephone call from Tom Burns. As I have told him, I rank that call with only two others in my professional career. The first was a telephone call from Bob Anthony early in 1963, inviting me to spend the year 1963-64 in Switzerland with my family, teaching at IMEDE. It turned out to be a fabulous year. The other was a call from Charlie Zlatkovich in 1976, saying that I had been nominated as president-elect of the American Accounting Association. Other nice things have happened over the years by mail, or by cable (as in the case of the invitation in 1959 to join the Wharton faculty). But by telephone, these are the three occasions I shall remember.
First, let me acknowledge some debts. It is true, as Chuck Horngren recognized two years ago on a similar occasion, that in naming specific individuals one runs the risk of omitting some deserving names. But 1 am going to accept that risk.
My greatest debt, of course, is to my wife, Miriam. She has been by my side now for almost 50 years, and no other influ-ence can compare with hers.
However, there have been other influences. One was a cer-tain teacher of English in my London secondary school, so many years ago, who almost brutally instilled some rules that have helped me to write better English than I might otherwise have done. He had a number of “forbidden words,” the use of which automatically earned you a zero for an essay. His forbidden words included “very,” “extremely,” “former” and “latter”; and there were others. During the intervening 65 years, I have often broken his rules, but always to the detriment of my writing.
Another debt of the same kind that I acknowledge is to Reed Storey, whose editing of my drafts when we were working together on the FASB’s Concepts Statement No. 2 on Qualitative Characteristics greatly improved that document and my writing generally. I am much more sensitive to dangling participles, the common misuse of “this” when one means “that,” the misuse of “which” instead of “that,” and other linguistic blunders than I was previously.
My main debt, of an academic nature, is undoubtedly to the faculty of the London School of Economics, both in the classroom when I was a student, and later as colleagues when I went back to teach there for almost a decade after World War II. To have rubbed shoulders with men like Arnold Plant and Ronnie Edwards (both later knighted), Lionel Robbins (later Lord Robbins), my immediate colleagues William Baxter and Harold Edey, Basil Yamey (that fine accounting historian for whom I accepted the Hourglass award here on Sunday evening), and no fewer than four Nobel prize winners in economics (John Hicks, James Meade, Friedrick Hayek, and Ronald Coase), was a rare privilege. This must sound like name-dropping; but these men really have exerted a lasting influence on me. Life at LSE during my years there was life in an intellectual powerhouse.
Most American academics start their careers by writing a dissertation for their Ph.D., mining one or two papers out of it, and then going on from there. My start was different, and I was reminded of it recently when my wife and I were in London, riding down Oxford Street in a bus, past D. H. Evans, a department store. D. H. Evans, in 1947 or thereabouts, gave me the idea for my first serious paper. I was having lunch there one day and I noticed that the dining room was divided into two sections by moveable screens. On one side of the screens, the space was devoted to a self-service cafeteria, while the other side was devoted to waitress service. This led me to think how I would position the screens if I were the restaurant manager. Cost allocation was clearly not the answer. Cost allocation would have to follow the space allocation decision, not precede it. The result was a paper entitled “Cost Accounting and the Use of Space and Equipment,” which gave me my start. Of course, I had not heard of linear programming in those days.
Perhaps it was the heady atmosphere of LSE that gave me a somewhat lofty view of the nature of accounting, but also kept my estimate of its importance within reasonable bounds. During my year as president of the American Accounting Association, a committee of the Association produced a report that was published, entitled Accounting Education and the Third World. I was asked to write a forward to that report, and I should like to quote from it here, because it expresses my assessment of ac-counting as well as I know how, and it is as relevant now as it was in 1978.
In any ranking of the needs of the developing countries of the world to help them improve the quality of life of their peoples, there are undoubtedly some that would rank ahead of improved accounting and accounting education. The eradication of disease, the elimination of hunger . . ., improved standards of literacy, the spread of political freedom and the rule of law—these are the foremost advances that must be made before the distinction between “developing” and “developed” nations can be discarded.
The report that I am introducing does not deal with these great themes. Accounting itself cannot feed the hungry or cure the sick or bring enlightenment to the illiterate. Yet, it has a part to play in all these advances. Wherever scarce resources need to be economized, there is work for the accountant to do; and the scarcer the resources are, the more important it is that they should not be misdirected or misappropriated.
Accountants can take a good deal of satisfaction in the role that they play in making our free enterprise system work. But we have no reason to be complacent. As I look back over more than 50 years in the profession and compare the progress we have made with the progress made in fields like medicine, electronics, physics and chemistry, transportation, and even economics, our showing is not impressive. Bob Elliott, of KPMG Peat Marwick, had something of interest to say on this subject in a paper recently. He first quotes the complaint of a CEO of a successful software company, who told him that:
trying to run my organization with the output of our accounting department is like trying to fly an airplane that has only one dial—a dial that shows the sum of airspeed and altitude. If it’s low, I’m in trouble, but I don’t even know why.
Then turning later to financial reporting, Elliott says:
One of the few things that financial statement preparers agree upon is that the scoring rules should not be changed in the middle of the game. Thus, there is a powerful constituency in favor of the status quo. Add the attesters—who are dissuaded from change by unknown, but probably unbearable, legal liabilities— and you have an implacably conservative environment. The same managements that complain that they can’t run the business with today’s accounting information are the ones who make pilgrimages to Norwalk to lobby against changes.
I do not find Elliott’s “implacably conservative environ-ment” at all congenial. It is not peculiar to the United States. One finds it throughout the English-speaking world and beyond. I wish that I could have been more persuasive in my own writing and more successful in helping to change that environment. It is a task that my generation must leave to our successors.
