Keywords

1 Introduction

Is a company investment in employee training simply a cost driver for the business? How do you treat company expenses in financial reporting that aim at reducing the ecological footprint of your organization? And what about the costs for safeguarding human rights in the supply chain? In traditional value-added analysis (Arangies et al., 2008; Cox, 1979; Gilchrist, 1971; Machado et al., 2015; Morley, 1978a, b; Renshall et al., 1979; Riahi-Belkaoui, 1992, 1999; Rutherford, 1977; Suojanen, 1954), such transactions are accounted only as input costs of the production process. The result is that their value is not considered part of the calculated value added of a company, although these transactions obviously lead to an increase in value for the affected stakeholders. In other words, we currently measure business value creation without counting for all the incomes that have been produced in a firm’s value creation network. In this chapter, I will argue that the management of stakeholder relations not only creates costs for companies but at the same time also generates economic incomes for stakeholders. A large part of these incomes, however, is intangible (e.g., increased knowledge of employees or greater biodiversity at company locations), which is why to this day, many incomes that stakeholders actually appropriate remain hidden values to a company’s value-added analysis. This brings me to the following question: what does it take to gain a holistic view in corporate reporting about the tangible and intangible values a company creates for its stakeholders?

In fact, a lot of work has been done in the fields of intangibles accounting (Edvinsson & Malone, 1997; Lev, 2001, 2019; Lev & Gu, 2016; Sveiby, 1997; The Konrad Group, 1990) and sustainability management (Figge & Hahn, 2004; Figge et al., 2002; IIRC, 2013b; KPMG, 2014; PWC, 2013) to tackle this issue by developing elaborated instruments and frameworks that help companies to better manage their intangibles. However, regardless of this remarkable progress, my impression is that a successful and holistic reporting on tangible and intangible stakeholder incomes presupposes a concept of business value creation that puts the idea of generating values for stakeholders (Freeman, 1984; Freeman et al., 2010; Parmar et al., 2010) at the heart of our thinking about business conduct. The design and set-up of the reporting instruments used to communicate business value creation follow our understanding of the terms and categories we employ to describe the phenomena in the first place (Möhrer, 2021).

To develop my ideas, I will base my argumentation on the grounds of a relational theory of the firm (Wieland, 2018, 2020). In such a theoretical context, the firm is seen as a nexus of stakeholder relations, with the sole purpose of continuing its existence through satisfying stakeholder interests. From a relational point of view, stakeholders invest tangible (capital, payments, infrastructure, etc.) and intangible (know-how, legitimacy, character, integrity, etc.) resources into the cooperation team called firm and can therefore expect the allocation of economic incomes in return for this investment. The incomes that stakeholders appropriate as a result of their participation in the value creation network can either be tangible or intangible in nature. They include a tangible factor income (e.g., salaries, taxes, interests, dividends), as well as an intangible and/or tangible cooperation rent (e.g., knowledge, safe working conditions, family-friendly working environment, donations). Factor incomes are part of a legal contract between the firm and its stakeholders, whereas cooperation rents reflect additional income to stakeholders that goes beyond explicit contracting. Together, factor income and cooperation rent make up the total amount of income a stakeholder can gain from its specific relation to a company. For describing this overall economic income of a stakeholder, I will use the term stakeholder income (Möhrer, 2021). In this regard, the total performance of a company can then be understood as the sum of all stakeholder incomes created and distributed during a value creation period. In relational terms, this total performance can further be defined as shared value.Footnote 1 The shared value of a firm is the broadest performance figure for a cooperating team of stakeholders, from which all distributable stakeholder incomes must be paid. That is also the reason why we speak of shared value in this context.

In the following sections, we will learn more details about the relational approach to business value creation and develop ideas on how to gain a holistic view of the tangible and intangible values a company creates for its stakeholders. To that end, this chapter proceeds as follows: in Sect. 2, I briefly introduce the traditional concept of value creation as it is discussed in economic theory and business management. We will also have a look at the so-called value-added statement (VAS), which is the common reporting instrument used to measure and communicate business value creation. In Sect. 3, this traditional notion is then confronted with a relational view on value creation in which I try to develop arguments that allow us to theorize shared value as the company’s total performance for its stakeholders. In this regard, I will sketch the basic assumptions of an income-based theory of shared value, before Sect. 4 takes on these thoughts and further elaborates them in the broader context of an income-based theory of the firm. Sect. 5 then turns to an accounting perspective and introduces the shared value statement (SVS) as a reporting tool to measure the distribution of economic incomes among company stakeholders. Finally, Sect. 6 concludes with some ideas on the development of a relational accounting of the firm.

2 Business Value Creation and the Value-Added Statement

From a historical standpoint, value creation as an economic concept has its roots in macroeconomic theory (Cox, 1979; Haller, 1997; Haller et al., 2018; Morley, 1978a; van Staden, 2000). Here, value creation is reflected in the gross domestic product (GDP) and the national income of an economy. The GDP measures economic value creation from a production point of view, whereas the national income represents the distribution side of the value creation process (Meyer-Merz, 1985). Transferred to a business context, a company’s value added can then be understood as its monetary contribution to the creation of the national product (Arangies et al., 2008; Haller et al., 2018; Lehmann, 1954; Rutherford, 1977). In the traditional sense of the word, it stands for the value a company adds to the value of bought-in products and services by applying its production factors, i.e., labor and capital (Haller et al., 2018; Renshall et al., 1979). Especially in the early days of the business management discussion, the close connection between the economic and the business concept of value creation was of great importance (Gilchrist, 1971; Haller, 1997; Lehmann, 1954; Nicklisch, 1932; Suojanen, 1954). In fact, it is possible to historically trace the development of the macroeconomic notion of value creation from its early beginnings in the physiocratic school of economic thought until its current application in business management and accounting (Möhrer, 2021). When it comes to the question of measurement, there are two ways to calculate value added. The first is called the indirect (subtractive) method, whereas the second is known as the direct (additive) method of value creation (Haller & van Staden, 2014):

  1. (i)

    VA = TP – IP (subtractive method)

  2. (ii)

    VA = RE + RG + RCP + NAWC (additive method).

Following the additive method of value-added analysis, value added (VA) is calculated as the sum of the remunerations generated in a company’s value creation process and distributed to employees (RE), the government (RG), and capital providers (RCP). Also part of the value added is the amount that stays within the company, for example, as retained earnings, which can be used by management for future investments (ASSC, 1975; Rutherford, 1977). This part of value added is often called “not appropriated wealth creation” (NAWC) (Haller et al., 2018). Applying the subtractive method, bought-in products and services, i.e., the inputs (IP) of the value creation process, are deducted from the company’s total performance (TP) in order to calculate value added. In the traditional idea of economic value creation, the inputs invested in the value creation process are not considered part of a company’s value added, although these inputs lead to remuneration for suppliers (RS). Figure 1 shows the basic concept of value creation as it is usually discussed in economic theory and business management.

Fig. 1
figure 1

Basic concept of value creationFootnote

Own figure. Translated from Möhrer (2021) and based on Haller & van Staden (2014).

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In an accounting context, the measurement of business value creation is typically conducted by using a value-added statement (Haller, 1997; Haller & van Staden, 2014; Riahi-Belkaoui, 1992, 1999; van Staden, 2000). Like the income statement, the VAS is a financial reporting instrument by which companies can calculate their annual performance in a structured and systematic way (Günther et al., 2016). However, while the income statement measures the net profit of a company, value added reflects a broader performance figure that not only includes economic incomes for shareholders but also for other stakeholder groups such as banks, employees, and the state, as well as values that are not appropriated by one of these groups but stay within the company (Haller, 1997; Morley, 1978a; Schäfer, 1951; Weber, 1976). Also, in times of increased awareness of sustainability issues in business management, company investments in society and environmental protection are gaining momentum (Haller & van Staden, 2014; Perera-Aldama & Zicari, 2012; Zicari & Perera-Aldama, 2020). Based on the differentiation between the subtractive and additive method for calculating value added, the VAS can be divided into two separate but complementary statements—the statement of sources of value added and the statement of value-added appropriation (Haller & van Staden, 2014). Figure 2 shows the VAS in its generic form.

Fig. 2
figure 2

The value-added statementFootnote

Own figure. Translated from Möhrer (2021).

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There are two aspects with this way of understanding and measuring business value creation that I would like to point out because it brings us back to the argument that many stakeholder incomes generated in a company’s value creation network are actually not recorded by a VAS. When we take a closer look at the instrument as it is outlined in Fig. 2, we can see that there are different stakeholder groups participating in a company’s value creation process and that they, as a result of this participation, appropriate certain amounts of the generated value added. From the perspective of a relational theory of the firm (Wieland, 2020), it seems that this traditional approach to value creation measurement does not necessarily draw a complete picture of the total economic incomes created and distributed in a company’s value creation network. In fact, my impression is that certain stakeholder incomes are not yet counted as such in value-added analysis, either because (i) individual stakeholders are not recognized as legitimate recipients of economic income, and/or because (ii) intangible income allocations have been largely ignored:

Ad (i): Take customers for example. In regular market transactions, customers receive a product or service in exchange for the price they are willing to pay for these goods. One might question, however, if the purchased product or service is really the only thing of value they receive as a result of their relation to the selling company. What about the discounts and allowances that customers get to initiate the purchase in the first place? Or how can we interpret company expenses for after-sales training to improve customer knowledge in terms of product application? It seems fair to say that these benefits represent some sort of tangible (discounts) or intangible (product knowledge) income that customers can appropriate as a result of their specific relation to a company. I think the crucial point here is that certain stakeholder groups that stakeholder theory usually sees as valuable elements of a company’s stakeholder system (Clarkson, 1995; Donaldson & Preston, 1995; Freeman, 1984) are not recorded yet as legitimate recipients of economic income in value-added analysis, although these stakeholders obviously invest valuable resources into a company’s value creation process (Möhrer, 2021; Wieland, 2020).

Ad (ii): For those stakeholders that are actually recorded (mainly employees, government, capital providers), the methodological focus of the VAS lies on the documentation of tangible factor incomes, i.e., mainly salaries, taxes, interests, and dividends, without counting the intangible benefits that stakeholders can gain from their relation to the business. One example for the allocation of intangible income to stakeholders would be an increase in employee health as a result of a company’s investments in work safety at its production sites. Another example is company-driven improvements in natural capital as a result of its engagement in climate protection or biodiversity.Footnote 4 These and other intangible incomes are not yet part of our accounting approach to measure business value creation, mostly because today’s understanding of the term is still determined by a market-based notion of value creation which has its roots in macroeconomic theory, and in which intangible values are usually seen as external effects to the economic system (Möhrer, 2021).

What do these considerations mean for the measurement of business value creation? In fact, I see the fundamental problem in value-added analysis being not primarily in the measurement instrument itself, i.e., the VAS, but rather in the way we understand and conceptualize the idea of business value creation. We should start working on the terms and categories used in value-added analysis before we can draw conclusions for the design and set-up of its reporting instruments. By doing so, we might be able to develop a more holistic view of the different tangible and intangible values a company creates for its stakeholders. To that end, the following section sketches some ideas on an income-based theory of shared value.

3 Income-Based Theory of Shared Value

The income-based theory of shared value is a theory of value creation not based on macroeconomics but takes the private business and the specific relations to its diverse stakeholders as a theoretical starting point to explain economic value creation. As such, the normative core of this theory lies in the idea of creating values for stakeholders (Freeman, 2017; Freeman et al., 2010; Parmar et al., 2010; Zollo et al., 2018). As I mentioned early, these values can be tangible or intangible in nature, and they are reframed by an income-based theory of shared value as tangible and intangible incomes that together make up the total economic income a stakeholder can appropriate as a result of its business relation. I introduced the term stakeholder income to describe these appropriable incomes. The shared value of a firm can then be defined as the sum of all stakeholder incomes generated in a company’s value creation network and distributed to its stakeholders as compensation for their resource investments into the cooperation team. In a very formal notation, which is inspired by the works of Freeman (2017) and Freeman et al. (2020), a firm’s shared value can be described as a function consisting of tangible and intangible stakeholder incomes:

$$ SV_{FI} = f\left( {\underbrace {\frac{{SI_{SU} }}{{SV_{FI} }}}_{x_{SU} },\underbrace {\frac{{SI_{EM} }}{{SV_{FI} }}}_{x_{EM} },\underbrace {\frac{{SI_{CO} }}{{SV_{FI} }}}_{x_{CO} },\underbrace {\frac{{SI_{CP} }}{{SV_{FI} }}}_{x_{CP} },\underbrace {\frac{{SI_{CU} }}{{SV_{FI} }},}_{x_{CU} }\underbrace {\frac{{SI_{OR} }}{{SV_{FI} }}}_{x_{OR} }} \right) $$
$$ \begin{aligned} SV=Shared \, Value; \, FI=Firm; \, SI=Stakeholder \, Income; & \\ SU=Suppliers; \, EM=Employees; \, CO=Community/State; & \\ CP=Capital \, Providers; CU=Customers; \, OR=Organisation \end{aligned} $$

SVFI stands for the shared value of the firm. It reflects the total monetary performance of a company and results from the tangible and intangible resources invested by stakeholders and processed by the organization. As stated above, a firm’s shared value consists of all economic incomes created during a value creation period and distributed to the company’s different stakeholder groups. The appropriable income of a stakeholder can either be tangible or intangible in nature and comprises a tangible factor income on the one hand and an intangible and/or tangible cooperation rent on the other. Let’s consider the following examples: from the perspective of an income-based theory of shared value, the appropriable income of employees can include annual wages/salaries (factor incomes) as well as an additional income that might take the form of specific knowledge (cooperation rent) that the employee is able to gain as a result of its participation in vocational training. Looking at communities, their total income consists of taxes paid by the company (factor incomes) plus extra income that might result from corporate volunteering activities in local schools (cooperation rent). There are more examples like that, but I think the crucial point here is to understand that such resource allocations by the firm lead to economic incomes from the perspective of their stakeholders. Ultimately, all stakeholder incomes must be paid from the collectively generated shared value of the cooperation team.

SI stands for the stakeholder income distributed by the firm. In the context of an income-based value creation approach, stakeholders are systematically entitled to a share in the company’s shared value due to their specific investment of resources. The shared value function outlined above includes the following stakeholder groupsFootnote 5: suppliers (SU), employees (EM), community/state (CO), capital providers (CP), customers (CU), and the organization itself (OR). An income-based theory of shared value considers all stakeholders not only as investors of resources but also as recipients of tangible and intangible incomes. This is an important point and distinguishes the income-based understanding of shared value creation from the macroeconomic notion of value added. Take suppliers for example: while in traditional value-added analysis, suppliers are excluded by definition from the calculation of value added because they are seen as providers of inputs only, they are an integral part of a company’s income distribution process from the perspective of an income-based theory of shared value (Möhrer, 2021). In this regard, the operating costs of the focal firm can be interpreted as factor incomes paid in the form of revenues which suppliers appropriate for providing inputs to the production process (GRI, 2018).Footnote 6 Also, special attention must be given to the question of why an income-based theory of shared value identifies the organization as a separate stakeholder in the stakeholder system of the firm. With organization, I refer to the idea that the organization of companies can be understood as an abstract going concern (Commons, 1934, 1990), existing as an entity in its own and independently from the interests of a firm’s other stakeholder groups (Wieland, 2020). We will get to this point in more detail in the following section because it stands in direct relation to the attributes we use to identify individual and collective actors as stakeholders of a company.

X represents a variable by which it is possible to weigh the stakeholder incomes allocated during a company’s income distribution process. It is reported specifically for every stakeholder group and indicates how the collectively generated shared value is paid out by the firm to the stakeholders invested in the cooperation team.Footnote 7 By analyzing this variable, accountants and managers can identify current priorities in terms of a company’s distribution policy and also recognize future potentials for income allocations based on the firm’s strategic objectives. An important aspect regarding the income-based understanding of business value creation is that ultimately, the amount of income (tangible and intangible) distributed to stakeholders must equal the collectively generated shared value of the company. Marvin Lieberman and colleagues chose a similar wording to describe this idea of value creation and distribution by the firm:

Any rigorous analysis of value creation and appropriation must account for the fact that, by definition, the value created through a firm’s activities, and the value distributed to the firm’s stakeholders, must be equal. (Lieberman et al., 2017, p. 1194)

I discussed the various aspects of an income-based theory of shared value in more detail in a different setting (Möhrer, 2021). For the purpose of this chapter, I therefore use the following assumptions to summarize its basic ideas:

  • A firm’s shared value is calculated as the sum of all tangible and intangible incomes generated in a company’s value creation network and distributed to its stakeholders. It represents the total monetary performance of a firm that results from the tangible and intangible resources invested by stakeholders and processed by the organization.

  • Based on its specific resource investments, each stakeholder can claim to appropriate a certain amount of income which is paid from the collectively generated shared value and accrued in the company. The allocation of stakeholder incomes is determined by the stakeholder’s contribution to the firm’s value creation capacity and safeguarded by the governance structures of the organization.

  • An income-based shared value theory is concerned with the stakeholder incomes generated and distributed in a firms’ value creation network. Stakeholder incomes include tangible factor incomes as well as intangible and/or tangible cooperation rents which in turn make up the total income a stakeholder can appropriate as a result of its specific relation to the business.

  • From an epistemological point of view, an income-based theory of shared value is interested in a descriptive analysis of a firm’s income distribution process. It is not about a normative justification for prioritizing stakeholders in terms of their income claims they might have toward a company. Rather, it is about the economic measurement of the generated shared value and its distribution to the stakeholders invested in the firm.

  • Analytically, an income-based theory of shared value examines the specific shares of income stakeholders appropriate in relation to the overall performance (shared value) of the firm. Hence, it compares stakeholder groups in terms of the economic incomes they gain from their participation in a cooperation team and thereby identifies current priorities and future allocation potentials for management control.

There is no doubt that the income-based theory of shared value, as it is presented here, is still in its infancy, and much more work has to be done in this field to reach a point in theory building where we are really able “to reexamine the very nature of how we determine firm performance” (Freeman, 2017, p. 7). Thus, the previous consideration can only be understood as one out of many steps toward a more holistic and multidimensional understanding of business value creation—an understanding that allows us to identify and evaluate the values a firm creates for its stakeholders, both in their tangible and intangible configuration. I am aware of the fact that the special treatment of the organization as a separate stakeholder group of the firm can cause serious irritations. For this reason, I will use the following section to build a rationale that enables us to theoretically integrate the organization as an entity in its own (Wieland, 2020) into a company’s stakeholder system. To that end, it will be necessary to transfer the main ideas of an income-based theory of shared value into the broader setting of an income-based theory of the firm.

4 Notes on an Income-Based Theory of the Firm

Although we are concerned in this chapter with gaining new perspectives on measuring business value creation, it nevertheless seems worthwhile to reflect the accounting part in the wider context of a discussion about the theory of the firm. It was, in fact, Ronald Coase who once stated that “a theory of the accounting system is part of the theory of the firm” (Coase, 1990, p. 12). And indeed, I share the view that both an income-based theory of shared value as well as a shared value statement, which I consider its corresponding reporting instrument, presuppose an understanding of the firm that puts the idea of creating values for stakeholders at the heart of our thinking about business conduct (Freeman, 2017; Freeman et al., 2010; Parmar et al., 2010). I follow Josef Wieland at this point when he concludes that finally, it is the concrete relation between a company and its stakeholders as well as the relations that exist between these exact same stakeholders that build the basis for the creation and distribution of economic incomes by the firm (Wieland, 2018, 2020). That being said, an income-based theory of the firm, at the end of the day, is a relational theory of the firm in the sense as Wieland developed it over the past several years. In fact, it uses its assumptions and applies them to the idea that the total performance of a company (i.e., its shared value) is the result of the many tangible and intangible incomes it distributes to the various stakeholders invested in the cooperation team called firm. In addition to that, an income-based theory of the firm argues that a company’s organization can be interpreted as a separate stakeholder group in the stakeholder system of the firm. In the following, I will give a brief overview of the main aspects behind this thought.Footnote 8 But first, Fig. 3 is supposed to show a vision of the firm as a relation of stakeholder resources and stakeholder incomes.

Fig. 3
figure 3

The firm as a relation of stakeholder resources and stakeholder incomesFootnote

Own figure. Translated from Möhrer (2021) and based on Wieland (2020). The six stakeholder groups we already know from the shared value function introduced earlier are extended here by two more groups, namely the stakeholders Joint Venture and Non-Governmental Organization (NGO). We do this, because it shows quite well how broad and complex a company’s stakeholder system can be designed. However, for the later development of the SVS, we will work again with a reduced number of stakeholders that also matches the selection we referred to in an income-based theory of shared value.

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In an income-based approach to value creation, the purpose of the firm can be defined as the generation of economic incomes for stakeholders. These incomes can either be tangible or intangible in nature. They are appropriated by stakeholders as a result of their specific relation to a company in which they invest resources that also can have a tangible (capital, infrastructure, payments, etc.) or intangible (know-how, legitimacy, skills, etc.) configuration. A very crucial aspect in an income-based theory of the firm is to build a rationale that allows theorizing the organization as a separate stakeholder in the value creation network of a company. The starting point for this is to agree to a theoretical differentiation between the business in general and its organization, which is part of a business’ stakeholder system, and which can be identified as an abstract entity in its own, existing independently from the interests of the other stakeholders in the system (Wieland, 2020). This idea that the organization of the firm can somehow be designed as a stakeholder in its own, equally existing with other stakeholder groups, is not very common in traditional stakeholder theory (Freeman, 1984, 2010; Freeman et al., 2007, 2011). Here, we usually read about customers, suppliers, financiers, employees, and the broader community who potentially can appropriate incomes as a result of their participation in the company’s value creation network. From the perspective of stakeholder theory, this approach is totally sound as long as we consider the organization as the focal point of the stakeholder system (Freeman & Reed, 1983).Footnote 10 Taking the organization as a theoretical reference point, economic relationships with stakeholders are established with the goal of creating value for stakeholders.

A relational and income-based theory of the firm in fact shares the idea that the relationships of a company to its stakeholders play a decisive role in creating and distributing stakeholder values (Freeman et al., 2020). However, in contrast to traditional stakeholder theory, relational economics (Wieland, 2020) does not identify the organization as the focal point of analysis, but the relational transaction (see also Fig. 3). It is important to recognize that relational transactions are not the same as economic transactions in the market-based and purely financial sense of the word. Rather, a relational transaction, with reference to Commons (1934/1990), must be understood as a multidimensional construct to which different tangible and intangible value interests of stakeholders can connect to and thereby influence a company’s value creation process (Wieland, 2020).Footnote 11 It is only in relation to a specific economic, and in our case multidimensional, transaction as the focal point of stakeholder analysis that the organization is even imaginable as a separate stakeholder group in the stakeholder system of the firm (Möhrer, 2021).

If both are accepted—the idea that the organization is an entity in its own and that stakeholders relate to a relational transaction as the focal point of stakeholder analysis—then it is inevitable for our discussion to proceed with the following question: what makes an individual or collective actor a company stakeholder? An income-based theory of the firm identifies two attributes necessary to qualify an economic actor as a company stakeholder: (i) the resources a stakeholder invests into the firm (stakeholder resources) and (ii) the economic incomes appropriated by the stakeholder as a result of this investment (stakeholder incomes). My argument is that both attributes can also be applied to the organization, which in turn would make it a separate stakeholder group in the stakeholder system of the firm:

Ad (i): The resources invested by an organization into the cooperation team is its own governance. With governance, I refer to the formal and informal structures (e.g., policies, procedures, organizational culture, etc.) a company uses to organize its value creation network. In principle, the organization and its governance can exist independently from other stakeholders in the network. We can think of employees who choose to leave the business to work somewhere else, or suppliers who are suddenly substituted because a new market player offers a better fit. Instead, the organizational structure of a firm, i.e., its governance, is something that usually continues to exist, although other stakeholder investments may change over time. In fact, management uses a firm’s governance structures to continuously (re-)organize old and new stakeholder resources in a way that is not only beneficial to the invested stakeholders but also to the business as a whole. We know of similar thoughts, for example, from the dynamic capabilities approach, in which it is argued that a company’s governance can be seen as an economic resource in its own because it increases the productivity of the other resources in the system (Amit & Schoemaker, 1993; Makadok, 2001; Teece et al., 1997).Footnote 12 From these arguments, an income-based theory of the firm would conclude that, at the end of the day, it is not exclusively the invested resources in the traditional sense (e.g., capital, payments, legitimacy, know-how, etc.) that flow into the value creation network of the firm, but it is also the governance structures provided by its organization that would have a relevant contribution to the process of business value creation (Möhrer, 2021).

Ad (ii): For this contribution, the organization can claim a certain share of a company’s total performance (i.e., its shared value) for which I suggest the term organizational income. With organizational income, I refer to stakeholder incomes that the organization as an entity in its own receives from the value creation network in return for its invested resources. As already mentioned earlier, in accounting terms, these incomes are often not considered “real” incomes, but they are called “not appropriated wealth creation” because they include values that are not distributed to stakeholder groups usually referred to in value-added analysis, such as employees, capital providers, or the state. Examples of such income allocations are depreciation and amortization or retained earnings. These incomes are part of the collectively generated shared value of a firm and belong to the organization where they can be used for future investment and development. They exist independently from other stakeholder resources in the system, and their purpose is to safeguard the infinity of the firm as an economic going concern.

In the context of an income-based theory of the firm, both the investment of resources and the appropriation of economic incomes are constitutive for qualifying an individual or collective actor as a company stakeholder. It is interesting that in fact, both attributes have always been part of the original definition of a stakeholder given by Freeman (1984). Here, a stakeholder is characterized as “any group or individual who can affect or is affected by the achievement of the organization’s objectives” (Freeman, 1984, p. 46). Against the background of an income-based theory of the firm, in the first case (“can affect”), we are dealing with the aspect of providing resources by stakeholders, whereas in the second case (“is affected”), we are talking about the allocation of stakeholder incomes organized by applying organizational governance. Of course, many questions remain open at this point, and much more work will be necessary in the future to develop the income-based approach further to a resilient theory of the firm. However, for the purpose of this chapter, we gained enough insights so far to draw some first conclusions for the design and set-up of a modified value-added statement for which I suggest the term shared value statement.

5 The Shared Value Statement

We started this chapter with the observation that the current accounting approach to measuring business value creation seems somehow incomplete because it does not count for all the incomes that have been produced in a company’s value creation network. The SVS is meant to tackle this issue by giving a more holistic view of the tangible and intangible incomes a firm creates for its stakeholders. The specific contribution of the SVS is to increase transparency about how a firm distributes the collectively generated shared value to its various stakeholders. It measures in financial terms the income distribution for every single stakeholder group and processes this information for internal and external reporting. Hence, the purpose of a shared value statement is a structured presentation of the tangible and intangible incomes as well as their specific allocation to the company stakeholders. Keeping this purpose in mind is important because it marks a major difference to the macroeconomic-based value-added statement, in which the methodological focus is not on reporting stakeholder incomes, but on measuring a company’s contribution to the national product of society. Of course, from a macroeconomic point of view, it still matters to avoid double counting in the process of calculating the GDP (Arangies et al., 2008; Machado et al., 2015; Meek & Gray, 1999), and here is where the VAS stays a relevant reporting instrument for companies. However, in contrast to that, the major interest of an income-based theory of shared value lies in measuring the amount of tangible and intangible incomes generated in the cooperation team, and finally also in the question of how these incomes are actually distributed to stakeholders, either as factor income or in the form of a cooperation rent. In the following, I can only give a brief overview about the major contents of a shared value statement, for which I suggest a division into three main parts, namely (i) a performance statement, (ii) a cost statement, and (iii) a stakeholder income statement (Möhrer, 2021). We will have a closer look at the performance statement first, but before we do that, Fig. 4 gives an impression of how the SVS could be structured in a sample set-up.

Fig. 4
figure 4

The shared value statement in a sample set-upFootnote

Own figure. Translated from Möhrer (2021). Although the SVS offers a new perspective on business value creation, many contents presented by the instrument can also be found for the VAS, however in a different set-up and theoretical context. See for example Haller & van Staden (2014).

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Ad (i): The basic structure of the SVS comprises three separate parts: a performance statement, a cost statement, and a stakeholder income statement. The performance statement calculates the total performance of a firm in monetary terms and thereby determines its shared value. The shared value of a cooperation team is the most comprehensive measure of a company’s success, from which all distributable incomes to the invested stakeholders must be paid. Besides a company’s sales, the performance statement includes additional revenues, such as other operating revenues, revenues from investments or intangible assets, and extraordinary revenues. All these revenues are potential sources of economic income that can benefit the company’s stakeholders either in a tangible or intangible way.Footnote 14 Employee salaries, payments to suppliers, dividends to shareholders, and also company expenses for vocational training, corporate nutrition programs, or investments in environmental protection are examples of specific income distributions to stakeholders that, at the end of the day, must be paid from the collectively generated shared value of the firm. However, whereas salaries, supplier payments, and dividends reflect tangible factor incomes for stakeholders, the rest can be considered intangible stakeholder income because, in our example, company activities behind these allocations either increase the knowledge of employees (through vocational training), improve employee health (through nutrition programs), or contribute to the preservation of biodiversity (through environmental protection measures). In relational terms, these intangible incomes are defined as cooperation rents since they reflect additional incomes for stakeholders which result from the specific cooperation between them and the company they are invested in (Möhrer, 2021; Wieland, 2020).

Ad (ii): The cost statement of the SVS calculates the total costs of a company’s shared value creation and makes them available for corporate decision-making. In an income-based value creation approach, the organizational costs of a firm include factor costs on the one hand and relational costs on the other. Factor costs accrue because companies use production factors invested by stakeholders, i.e., labor and capital, to create economic value. Factor costs of companies lead to factor incomes for stakeholders. Take again the salaries of employees as an example reflecting a tangible compensation for the workforce they provide to the company. The same is also true for revenues that suppliers earn by delivering inputs to the production process. Both income allocations represent genuine expenses for companies which finally can be measured by applying proper cost accounting. Besides factor costs, a firm’s shared value creation also generates so-called relational costs. In relational economics, relational costs can be defined as those costs of a company that accrue for allocating intangible values to stakeholders (Wieland, 2020). Giving employees the chance to gain extra knowledge by participating in vocational training, improving work safety in the supply chain, or simply supporting the local community with corporate volunteering activities are examples of company measures that create intangible incomes for stakeholders, but at the same time also generate genuine costs in the organization. These costs, however, are relational in nature because they emerge from the specific relationship between a company and its stakeholders. To put it differently, relational costs are investments of a firm into the long-term cooperation with their stakeholders. They are meant to increase the total amount of income stakeholders can appropriate as a result of their investment into a cooperation team, with the goal of keeping or making them part of a company’s stakeholder system (Clarkson, 1995). That is also the reason why a shared value statement measures relational costs in terms of the periodic expenses companies have for performing their company stakeholder responsibility (CSR) (Freeman & Velamuri, 2006). At the end of the day, relational costs exist because companies take on the responsibility toward their stakeholders which in fact goes beyond the payments they are obliged to make as a result of legal contracting (Möhrer, 2021). We should be aware, though, that besides such a cost-based approach, there are also various other approaches to measure the intangible values of a company, and all of them have their pros and cons (Working Group “Accounting & Reporting of Intangible Assets”, 2013). However, at the same time, I also agree with Laurie Hunter and colleagues who pointed out that in order to develop a proper accounting for intangibles, it might be a good start to gain a better understanding first of the actual costs that companies have for allocating intangible values to their stakeholders (Hunter et al., 2005, 2012).

Ad (iii): The stakeholder income statement takes the total company costs measured by the cost statement and allocates them to a firm’s different stakeholder groups. For every stakeholder, the stakeholder income statement differentiates the total income appropriable by a stakeholder into its factor income as well as a cooperation rent. Factor incomes result from a legal contract that exists between a company and its stakeholder about the specific exchange of resources. Cooperation rents, however, reflect additional benefits for stakeholders which are usually not covered by explicit contracting. Rather, they accrue because companies invest in developing their stakeholder system. In relational terms, the paying of cooperation rents can be understood as an economic incentive for stakeholders to invest their resources into a specific cooperation team (Möhrer, 2021). In this regard, they become necessary income allocations that are supposed to safeguard the continuity of the organization as an economic going concern (Commons, 1934/1990; Wieland, 2020). A special feature of the SVS is to provide a detailed view on the various incomes stakeholders can possibly appropriate from their engagement with a cooperation team, and how these incomes are actually distributed in the company’s stakeholder system. Take again the factor incomes of customers for example, for which an income-based theory of shared value refers to customer discounts, allowances, or credit notes. In an income-based approach, these measures can be interpreted as stakeholder incomes because they reflect genuine price reductions that either result in a lower market price for the product or service in question or in a refunded payment to the customer. I already mentioned that an income-based theory of shared value identifies the organization as a stakeholder in its own. In the SVS, the organization is therefore listed as a separate stakeholder group that appropriates its own specific income share of the collectively generated shared value. Factor incomes include depreciation and amortization as well as retained earnings required by law or company constitution, whereas cooperation rents cover additional income allocations that are voluntary but nevertheless contribute significantly to the future existence of the organization.

These are only a few examples that show how a shared value statement can increase transparency in the process of measuring a company’s income distribution process. Without going too much into detail, the following points are meant to note the most relevant advantages I see when using the SVS in corporate reporting: (1) identification of steering and control potentials for the management with regard to the distribution of stakeholder incomes, (2) transparent presentation of a company’s income distribution process over time (historical analysis), and (3) supplementing non-financial sustainability reporting by using a structured monetary reporting framework to communicate the created and distributed values for stakeholders.

6 Concluding Remarks

We are in need of accounting instruments that really account for the specific relations between a company and its stakeholders. Such relations can include tangible and intangible value interests of stakeholders, which makes the firm by definition a multidimensional endeavor of economic value creation. To this day, however, this multidimensionality is only barely recognized in our current accounting systems, therefore leaving room for further development. I see the purpose of a relational accounting of the firm being mainly in systematically providing information about the various tangible and intangible values a company creates and manages for its stakeholders. In this regard, the SVS discussed in this chapter can only be one of many instruments that help to gain a better understanding of the actual value creation capacity of a team of cooperating stakeholders. For example, we will also have to think about how we (re-)structure a company’s balance sheet so that it tells us about the number of different capitals a firm manages for its stakeholders as well as the development of these capitals over time. In relational terms, such stakeholder capitals can and must include tangible and intangible value categories (e.g., economic capital, natural capital, social capital, etc.) as it has also been suggested years ago by the International Integrated Reporting Council (IIRC, 2013a). In fact, to develop the traditional balance sheet into a relational balance sheet, we probably have to change categories from assets and liabilities to stakeholder capitals and stakeholder resources. A corporate balance sheet would then list a company’s different stakeholder groups and account for both, that is, their invested resources as well as their multidimensional stock of capital. Of course, all of this will not be possible without having a standardized approach that allows companies to report on their stakeholder capitals in a comparable and transparent way. To that end, I imagine the development of International Stakeholder Reporting Standards (ISRS) which in the long run would have to reach the same level of sophistication as we currently know it from the field of financial reporting, but which take the stakeholder relation as their focal point of analysis. No doubt, relational accounting is a work in progress, and future research will show where it is heading.