The Ethical Implications of Human Resource Accounting

This paper has two objectives. Our first aim is to critically analyze the ethical implications of current accounting principles relating to human resources. Our second purpose is to propose three alternatives to the current accounting treatment of human resource costs as an expense of doing business. We utilize institutional economic analysis in our investigation of the ethical implications of current human resource accounting. Through the use of institutional economics, we conclude that the language that accountants use to describe human resource costs as expenses must change before the accounting system can change. We conclude that the current accounting treatment of human resources lessens the dignity and even the inherent humanness of a company's labor force, and clearly does not match common rhetoric from management that refers to employees as an “important” asset or resource. In addition, we contend that current accounting for human resources serves as an institutional impediment to pursuing a multiple stakeholder corporate governance model. This paper contributes to the human resource accounting literature by proposing three alternatives to current practice, each of which is superior to current practice from an ethical perspective. Our third alternative represents a significant change to current accounting practice since it employs a multiple stakeholder perspective and treats a firm's labor force as a source of “intellectual capital.”