Financial management and phenomenology: The role of dialogue, accountability and context in investment decisions

Abstract

In this article, it will be argued that subjective assumptions play a prominent part in the way valuations are conducted and investment decisions are made by financial managers (FMs) from the perspective of agency theory. The problem is that there is a general absence of rules of compliance for financial management. Quantitative calculations are based on theories, models and accepted practices that guide FMs in their decision-making process. The selection criteria that inform these theories, models and practices rely on qualitative assumptions, which are informed by the presuppositions of the FM. The problem is that this understanding framework has traditionally not been assessed because of the assumption that the theories, models and practices are value neutral. Value neutrality generally implies that calculations, processes and projections are based on factual information and rational procedures that are objective. The scrutiny of the assumptions involved in financial management assumes that the individual has philosophical sensitivity. However, this is not traditionally part of the expected competencies of finance professionals. Philosophical competency means that the FM is capable of evaluating decision-making processes in order not to fall into the trap of circular logic or solipsism as highlighted by Gadamer. Maurice Merleau-Ponty identified that the limitations of such an understanding of reality result in a failure of responsibility and accountability. From the philosophy of Merleau-Ponty, there are three principles for philosophical analysis, namely, dialogue, accountability and context. These principles are applied to the purchase of Gourmet Burger Kitchen by Famous Brands in 2016.