The Entity Concept as Ideology: Corporations, Personhood, and Legitimation in a Global Society

Abstract

Ideology can be defined as unquestioned assumptions used to understand, create and recreate the world around us. The insufficiently examined entity concept has been the source of numerous problems in accounting standard setting, yet the FASB and ISAB are persistent in claiming that the lines between economic entities can be readily distinguished. This paper argues that recurring standard setting themes, evidence of moral hazards associated with the corporate form, and recent court cases on corporate personhood all point to inherent difficulties in drawing entity boundaries in a global society. This paper conjectures that lack of focus on the entity question by American and European dominated accounting standard setting bodies may arise from a cultural mindset that emphasizes individual contributions while downplaying social interdependence. The hypothesis is consistent with observations that Oriental and Islamic cultures that place more emphasis on interdependence also have a lesser prevalence of the corporate form. The paper concludes that an ideology which ignores the ambiguities and problematic nature of accounting entities forecloses meaningful discussions of the underlying problem of accountability in a global society and suggests that modern standard setting processes may be more about legitimation than decision making.