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Those relatively few companies which undertake actions benefiting society are necessarily incurring costs for such activity, and are now beginning to recognize that it is unfair for them to be "penalized" on their profit and loss statements for such wholesome activity. Costs of hiring and training hard core unemployables, making executives available to assist ghetto entrepreneurs, and incurring extra costs in neutralizing poisonous waste before being dumped into streams presently serve to reflect negatively on progressive management because they are charged as expenses against its operations.

On the other hand, for a management that refuses to assume any responsibility for the problems of society and carelessly continues to pollute the environment, its operations look better under today's system of reporting because it is not being charged with these extra costs. This state of affairs cannot continue. A means must be found for properly reflecting all facets of a management's efforts.

Measurement of social programs is being demanded. Some academicians may argue that before we seek to implement social program reporting, we first should define what we mean by social action or non-action. Sometimes social programs are difficult to define. That does not mean we should not deal with them. For as Justice Potter Steward said of obscenity, "I can't define obscenity but I know it when I see it." In the same way, we need not necessarily wait until we clearly define a social action or non-action, for I believe we know it when we see it. The accountant (who is the measurement expert), the business executive, and the social scientist together should immediately initiate action to develop and adopt a usable measuring and reporting device for social programs in business, which is, after all the most productive segment of our society. Meanwhile, even now many socially helpful pro

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grams can be made quantifiable for measurement and for visibility. Much is being said of the need for the measurement of social pro

grams, but the observations run all over the horizon. The biggest mistake we can make at this juncture is to try to design techniques which will fully satisfy all dimensions.

It may be years before we can invent and use social measurement with the confidence and relative precisions with which we use economic and fiscal measurements in business and government.

But we do have

enough standards available in social areas so that we can begin now. I should add, however, that considering the softness of much of the economic and fiscal data used today, as well as how this data is often misused, I venture to say that the results of social measurements with all their present limitations can be just as effective as economic

measurements.

What we can do at once is to borrow from economics and apply the "system" of economic and fiscal measurement to social areas. This I call Socio-Economic Measurement.

Dollars involving social costs incurred by business are clearly determinable. The fact that a statement prepared of these costs may not be complete is not sufficient reason for us to delay further the preparation and use of such exhibits. Traditional financial statements never have been able to fully reflect significant facets of business affairs e.g., value of trained manpower, extent of provision for executive succession, potential profitability of new inventions and product development, contingent liabilities which include potential adverse legal actions for faulty products, etc.

Here I present a suggested beginning. It is in the form of what

I call a Socio-Economic Operating Statement (SEOS).

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The SEOS exhibit should be prepared periodically along with a business organization's profit and loss statement and balance sheet.

It is a tabulation of those expenditures made voluntarily by a business aimed at improving the welfare of the employees, and/or public safety of the product, and/or conditions of the environment. Such expenditures required by law or union contract would not be includible, inasmuch as these are mandatory and thereby necessary costs of doing business.

Offset against these "pro bono publico" expenditures would be the costs of those items which have been brought to the attention of management, of a nature which would improve the welfare of people, safety of the product, and/or conditions of the environment and which a reasonably prudent socially aware management would be expected to undertake, but this management chooses to ignore.

below:

Several rules to help identify socio-economic items are listed

1. If a socially beneficial action is required by enforceable law and regulations, it is not includible on a SEOS statement.

2.

The same

If a socially beneficial action is required by law, but is ignored, the cost of such item is a "Detriment" for the year. treatment is given an item if postponed, even with government approval. 3. A pro-rata portion of salaries and related expenses of personnel who spend time in socially beneficial actions or with social organizations is included.

4. Cash and product contributions to social institutions are in

cludible.

-

is includi

5. Cost of setting up facilities for the general good of employees or the public without union or government requirement ble.

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6.

Expenditures made voluntarily for the installation of safety devices on the premises or in the products not required by law or contract, are included.

7.

Neglecting to install safety devices which are available at a

reasonable cost is a "Detriment".

8.

The cost of voluntarily building a playground or nursery school for employees and/or neighbors is a plus on the exhibit. Operating costs of the facility in each succeeding year are also includible.

9. Costs of re-landscaping strip mining site, or other environmental eyesores, if not otherwise required by law, are listed on the SEOS

exhibit.

10.

Extra costs in designing and building unusually attractive business facilities for beauty, health, and safety are includible. Some might question whether it is realistic to expect a business enterprise to identify and report social non-actions that is things

it has avoided doing for the good of society.

I have two observations to make in response:

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1. For decades business has been accounting for and giving visibility to adverse conditions in the fiscal area when it reports on contingent liabilities.

2. Many consumer groups and organizations such as Ralph Nader's organization, The United Church of Christ, Dreyfuss Third Century Fund, and the Council of Economic Priorities are already publicly identifying and giving visibility to anti-social actions or non-actions of specific business enterprises.

The SEOS statements themselves would be prepared by a small interdisciplinary team, headed by an accountant. Other members of the team could include a seasoned business executive, sociologist, public health

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administrator, economist, and/or members of other disciplines whose specific expertise might apply to a particular industry or circumstance. Although SEOS statements would be prepared internally by an interdisciplinary group, they should be audited by an outside independent interdisciplinary team, headed by a CPA.

The concept of what is included in the SEOS is what a business has given to or held back from society. We must make distinctions between costs of social programs required by law and/or contract e.g. with the union or with zoning authorities, etc. (These are arms-length negotiated business deals and therefore a necessary business cost.) and costs of such programs voluntarily undertaken.

An item is determined to be a "detriment" or negative charge for SEOS statement purposes where a responsible authority brings the need for social action to the attention of management, but management does not voluntarily take steps to satisfy such a need, even though it is of such a nature that a reasonably prudent socially aware business management would have responded favorably. The fact that this determination is a subjective one, should not discourage its implementation. In traditional business accounting, research and development items, work in process inventories, allowances for bad debts, depreciation charges, price-earnings ratios are also largely subjective determinations.

The results of an SEOS statement produce an amount of "Total Socio-Economic Contribution or Deficit for the Year." It can be effectively used by comparing such statements for various companies in the same industry. Also, analyzing SEOS statements for a particular company over several years helps establish the general directions of social actions of a company's management.