Situating financial literacy

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Situating

ﬁnancial

literacy

Charlotta

Bay

a,

*

,

Bino

Catasu´s

b,c

,

Gustav

Johed

b

a_Department_of_Business_Studies,_Uppsala_University,_Box_513,_SE-751₂₀_Uppsala,_Sweden b_School_of_Business,_Stockholm_University,_SE-106₉₁_Stockholm,_Sweden

c_Norwegian_School_of_Economics,_Bergen,_Norway

1. Introduction

ArecentreportfromtheInternationalOrganizationofSecuritiesCommissions(IOSCO)concludesasfollows:

Nomatterwhatdisclosuresaremandated,theywillnothavetheintendedeffectiftheinvestoreitherdoesnotreadand/or understand the information provided. Regulators should therefore consider measures to help improve retail investor educationinordertoenhancetheirﬁnancialliteracyandabilitytoreadinvestmentdocumentationandmakeinformed investmentdecisions(IOSCO,2009,principle6).

ContrarytoIASBandFASB’s solutiontoimprovemarketefﬁciencybydemandingincreaseddisclosure,IOSCO(2009)

qualifiestheproblemofinformationefficiencyastheinabilityofinvestorstoaccuratelyunderstandfinancialinformation. Thisstateofaffairsisdescribedasanobstaclethatneedstobeovercome.ThisconclusionisnotlimitedtoIOSCO,however. Parallelwiththefinancialisationofsociety(Epstein,2005;Finlayson,2009;Froudetal.,2002;Martin,2002),actorsincluding

TheWorldBank(2009),theOECD(2005,2006,2008,2009)andtheEuropeanCommission(2007)haveallconcludedthat

CriticalPerspectivesonAccounting25(2014)36–45

ARTICLE INFO

Articlehistory:

Received30September2011

Receivedinrevisedform22August2012 Accepted1October2012

Availableonline20December2012

Motscle´s: Critique Enseignementdelacomptabilite´ Palabrasclave: Crı´tica Educacio´ncontable Keywords: Critical Accountingeducation Financialliteracy Financialisation Financialeducation Auditcommittees NewLiteracyStudies

ABSTRAC T

Thispapercommentsontheconceptualisationoffinancialliteracybyinvestigatinghowit is defined,problematised, andoperationalisedasa partofthe efforts toovercomeits perceivedimpediments.Thebackdropofthisstudyistheideathatthefinancialliteracy movementgoeshandinhand withthefinancialisationofsociety.Byreportingfroma studyoffinancialliteracypractices,theaimistodisentanglethenotionoffinancialliteracy fromtheassumptionthatitisasingularcapabilitythat,whengained,willautomatically affectpeople’sfinancialpractices.Thepaperdrawsonarecentdevelopmentinliteracy research, New Literacy Studies, and on its division intoautonomous and ideological definitions of literacy. The empirical illustrations originate from the efforts made to decrease financialilliteracyamongSwedishadolescentsand thedemand forfinancial literacy inauditcommittees.Contraryto earlierstudies, thispaperdemonstrates that financialliteracy doesnot merelyreferto a charactertrait thatresearchersmayfind lacking amongthe marginalisedactors insociety.Financial literacycannot merelybe viewedastheabilitytoreadandwriteinthelanguageoffinanceandaccounting.Instead, financialliteracyisaconceptthatneedstobesituatedandstudiedinpracticebecausethe characteristicsthatconstitutefinancialliteracy,orthosethatapplytoit,varywithtime andplace.

ß2012ElsevierLtd.Allrightsreserved.

*Correspondingauthor.Tel.:+46704829495.

E-mailaddresses:charlotta.bay@fek.uu.se(C.Bay),bino.catasus@fek.su.se(B.Catasu´s),gustav.johed@fek.su.se(G.Johed).

ContentslistsavailableatScienceDirect

Critical

Perspectives

on

Accounting

j our na l h ome p a ge : w ww . e l se v i e r . com / l oc a te / c pa

1045-2354/$–seefrontmatterß2012ElsevierLtd.Allrightsreserved. doi:10.1016/j.cpa.2012.11.011

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financial literacy programmesneed to be initiated. The reportsare univocal in their conclusion: the level of financial knowledgeneedstoberaisedsothatnon-professionalinvestorscanactinafinanciallyresponsiblemanner.

Increasedfinancialliteracyisbelievedtonotonlypreventnegativeimpactsonthefinancialmarkets(cf.IOSCO,2009)but to also contribute to improvingcorporate governance. Accordingto Williams (2007) ‘‘[l]iterate,skilled consumers are expected to search the market effectively, monitor firms attentively, switch providers efficiently, and exercise their consumerpowertodriveoutofthemarketfirmsthataredishonest,incompetent,orindifferenttoconsumers’needs’’(p. 233).Thus,financiallyliterateactorsdrivebothefficientmarketsandeffectivecorporations.

Theproblemoffinancialliteracy,however,doesnotresideonly amongthe non-professionalinvestors. Althoughthe higherlevelemployeesinorganisationsareimplicitlyexpectedtopossessthiscapability,therecentfinancialcrisesillustrate thattherisksofinvestinginandaccountingfornewfinancialproductswasunderstoodneitherbytheprofessionalinvestors norbythefirms.Asaresponsetothediminishingleveloftrust(Finansinspektionen,2009),financialliteracyhasalsobecome anissueforboardsofdirectors,withquestionsastowhethertheaccountingandauditing‘‘scandals’’wouldhaveoccurredif theboardsofdirectorshadbeensufficientlycompetent.Consequently,theissueoffinancialliteracyisofconcernbothinside andoutsideoftheorganisation.

Therearethreeresearchtraditionsconcernedwithfinancialliteracy(AlmenbergandWidmark,2011).Thefirsttradition seekstomeasuretheleveloffinancialliteracyindifferentdemographicareas(AlmenbergandWidmark,2011;Huston, 2010; Jappelli, 2010; Lusardi and Mitchell, 2007). The secondtradition investigates the effectsof financial literacy on financialdecisions(AlmenbergandWidmark,2011;Carter,1973;JohnsonandSherraden,2007;LusardiandMitchell,2007; VanRooijetal.,2007).Thethirdtraditionstudiestheeffectsoffinancialeducation.Acentraldebateinthelatterthemeis whetherfinancialilliteracycanbeovercome(Foxetal.,2005;Lyonsetal.,2006;OehlerandWerner,2008;TheWorldBank, 2009;Willis,2009).Takentogether,theresearchaddressingfinancialliteracysuggeststhat(1)thereisadelineatedand stablenotionoffinancialliteracy;(2)thefinancialskillsunderlyingthenotionofliteracypredicthowtheindividualwill makefinancialdecisions;and(3)bybeingtaughthowtoacquireandfostertheseskills,afinanciallyincapablepersoncan becomeacapableinvestor(Langley,2008).

Thispaperquestionsthislineofargument.Theaimistodisentanglethenotionoffinancialliteracyfromtheassumption ofasingularcapabilitythat,whengained,automaticallyaffectspeople’s financialpractices. Byexamining howfinancial literacyis configured intheprivate aswell asthecorporate sphere, thispaperdemonstratesthat financialliteracy is not primarilyaboutpossessingtheskillstointerpretaccountingandfinancialinformation.Rather,whatconstitutesfinancial literacychangeswhendifferentsocialsettingsareconsidered.

To emphasise the context-bound meaningof financial literacy, thispaper draws on two cases of financial literacy discourseinSweden.Thesecasesbothsharethegoalofraisingtheliteracylevel,althoughindifferentareasofsociety.The firstcaseexaminesfinancialeducationforhigh-schoolstudents.Thiscaseoffersanopportunitytowitnesshowfinancial literacyisconfiguredinasettinginwhichthefinanciallyilliteratearepredominantlyconsumersanddescribesasituationin whichyoungpeoplelackthe abilitytomanagetheirpersonalfinances.Thesecondcaseexaminesboardwork inpublic companiesandthecompanies’effortstoincludeafinanciallyliteratepersonintheirauditcommittees(hereafter,ACs).The committeemembers’leveloffinancialliteracycameintoincreasedpublicfocusafterthescandalsinthebeginningofthe century(BenstonandHartgraves,2002).AlthoughtherelationshipbetweenanAC’seffectivenessandthefinancialliteracyof theAChasbeenquestioned(GendronandBe´dard,2006;TurleyandZaman,2007),financialliteracybecamearegulatory concernintheEUwiththe8thDirective(EuropeanCommission,2006).Thispapertakesonthesetwocasestoanalysea conceptthathasbecomeabenchmarkforprogressinthefinancialisationofsociety.

ThispaperprovidesanaccountofastrandofliteraturelabelledNewLiteracyStudies(NLS).NLSrepresentsabroadened viewofhowtounderstandliteracy,which,intermsofthispaper,offerstheoreticalargumentsforanalysingourdata.This paper continues by describing how the data were collected and coded, followedby an analysis of the two cases. The conclusionsabouttheresultsarepresentedinthefinalsectionofthepaper,accompaniedbyadiscussionofhowthisstudy contributes to definingareas that are appropriate for further research into how financial literacy interplays with the consumptionofaccountinginformation.

2. Financialliteracyfromanew(literacy)perspective

Beginningwiththebasics,theCollinsDictionarystatesthatliteracyrefersto Theabilitytoreadandwrite;theabilitytouselanguageeffectively.1

Thisdeﬁnitionencapsulatesthedominant(andcommon-sense)ideaaboutliteracy,whichalsosuggeststhatliteracyis somethingdesirable.AccordingtoGee(2008),thisattitudetowardsliteracyisrelatedtothebeliefthatliteratepeoplemake upamodernandcivilisedsociety.Beingmodernandcivilisedthenprovidesanempoweringability(FreireandMacedo, 1987) that allowsindividualsto thinkrationally and totakecritical stances (Gee, 2008). These positiveattributes are assumed tobecomponents ofhighersocialequity(ibid.)becausehigh literacyratesareassociatedwith democratised societies.Inthistradition,literacyisapracticethatcanbemasteredthroughtheacquisitionoftherightskillsandthat,toa

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limiteddegree,isaffectedbyideology(Gee,2008;Gough,1995).Thus,theargumentsfollowalinear‘‘literacy-comes-ﬁrst’’ logic(Rogers,2001,p.206)wheretheexpectedoutcomeisprogress.

Inthe1980s,however,theauthorsthatpromotedthe conceptsthatwouldeventuallybelabelledthe‘‘NewLiteracy Studies’’(BartonandHamilton,2000;Gee,1990;Street,1984)begantorejectthistraditional‘‘readandwrite’’deﬁnitionthat wasbasedonaproxyforcompetence.Theirargumentwasthatthepreviousunderstandingofliteracydownplayedthesocial settinginwhichliteracyisobserved(Gee,2008).Theircritiquedidnotignoreliteracypracticesbutarguedthatliteracyis situatedwithinaparticulartimeofhistoryandinrelationtospeciﬁcsocialpractices(Gee,2008,2000).Street(1997)labelled thisdominantformofliteracystudies(Clarke,2002)asautonomousbecauseitbuildsontheassumptionthatliteracyinitself –autonomously–willhaveeffectsonothersocialpractices.Street’s(1997,2003)critiqueoftheautonomousperspectiveis twofold:itoverlooksthatneitherilliteracynorliteracyappearsoutsideofthesocialcontextandthattodisregardsucha contextistoignorethatliteracyismorethanasetofindividualcognitiveachievements(seealsoGee,2000,2008).

Againsttheautonomousperspective,Street(1997)advocatesanideologicalmodelofliteracy.Inanutshell,theideological modelmeansthatwhatcountsasliteratediffers‘‘fromculturetocultureandfromperiodtoperiod’’(Jackson,1993,p.2);in other words,the understandings of literacy resultfrom analysis ratherthanfrom autonomous deﬁnitions. This model suggeststhataliteratepersonissomeonewhoreadsaparticulartypeoftextataparticulartimeand,moreover,doesitina particularway(Geeetal.,1996).

Literacyisnotjustasetof‘technicalskills’tobeimportedtothoselackingthem(...)butratherthattherearemultiple literaciesincommunitiesandthatliteracypracticesaresociallyembedded.(Street,2001,p.2)

Thisacknowledgementsuggeststhatanactor’sliteracyinteractswiththesocialsetting.Asacorollary,differentformsof literacyco-existandcompeteinsociety(Geeetal.,1996),andtheconceptofliteracyshouldincluderepresentationalforms beyond the written word.However,the ideological modeldoesnot questionthe existence of illiteracy,but ratherthe deﬁnitions,methodsandeffectsoftheliteracyefforts:

Socialconsequencesareassumedtofollowfrom literacy,suchas‘modernisation’,‘progress’andeconomicrationalityto nameafew.Recentresearch,howeverhaschallengedthis‘autonomous’view’.(Street,1996,p.2)

Althoughthedistinctionbetweenanautonomousandanideologicalmodelofliteracyisrelevanttotheﬁnancialliteracy discourse,theconceptofideologymightleadustobelievethattheautonomousmodellacksideology.Thispaperargues, however,thatamodelthatsuggeststhatatechnologyisneutralandcanbeunaffectedbyapplicationintimeandspaceis ideologicalperse.ThatargumentiscertainlyconsistentwiththethrustofNLS,whicharguesthattheautonomousmodel disguisesideologicalassumptions(Street,1996).Inthefollowing,theideologicalmodelisre-labelledasasituatedmodelof literacy(see,e.g.,AhrensandChapman,2007;Bay,2011a,2011b).

Appliedtofinancialliteracy,thedistinctionbetweentheautonomousandthesituatedmodelsisthattheformermakesit possibletodelineatefinancialliteracywithouttakingintoeffecthow,whenandtowardwhomtheliteracyeventisdirected. This type of modeloffers measures to divideactors into financial literates and illiterates. Understood in thisway, an autonomousmodelcanidentifyandactuponilliteracy.Inarecentreview,Remund(2010)summarisedvariousdefinitionsof financialliteracyandclassifiedthemintofivecategories:

(1) Knowledgeofﬁnancialconcepts

(2) Abilitytocommunicateaboutﬁnancialconcepts (3) Aptitudeinmanagingpersonalﬁnances

(4) Skillinmakingappropriateﬁnancialdecisions

(5) Conﬁdenceinplanningeffectivelyforfutureﬁnancialneeds

Remund’sclassificationsummarisesthethrustofthefinancialliteracymovement,inwhich‘‘literacycomesfirst’’(Rogers, 2001).Thatis,intheautonomousmodelitispossibleto(1)diagnosefinancialilliteracyand(2)performfinancialliteracy eventssothat(3)the financiallyilliterate becomefinancially literate.Thisviewhas beencontestedbyseveral reviews, however.Forexample,Atkinson(2008)concludesthat‘‘thereislittleinthewayofrobustevidencetoshowtheoveralleffect offinancialtraining’’(p.5).However,Atkinsonconcludesthatthislackofevidencemightbeaneffectofevaluationmethods suchasthesmallsizeofthestudies,poorindicatorsoffinancialliteracy,anddataandestimationissues.Inanotherreview,de Mezaandcolleagues(2008),rootedinthebehaviouraleconomicsstreamofresearch,statethatthenormsaffectingfinancial behaviourimpedethesuccessoffinancialeducation.Rather,itisthesituatedfinancialliteracyactivities(suchaspersonal interventionbyacounsellororindividualisedadvice)thatcanmakeachange.Theconclusionisthateventhoughasituated modeloffinancialliteracycannotofferthesametypeofmeasurableresultsforthelevelofliteracy,themodeloffersus narrativesofhowfinancialliteracyisconstitutedinpractice.

Tosumup,theNewLiteracyStudieshavetakenasocialturnawayfromafocusontheinherenttotheaffected,fromskills topractices,fromcognitivedispositionstoculturalconditions.Thisviewofliteracyisbasedontheideathatreadingand writingpracticesonlymakesensewhentheyarestudiedwithintheircontext—acontextofwhichtheyarebutapart.‘‘Inits simplest sense’’,asBartonand Hamilton(2000)put it,‘‘literacypracticesarewhatpeopledowithliteracy’’(p.7). This conceptentailstherecognitionofmultipletypesofliteracy.Assuch,literacyeventsarehistoricallyandcontextuallysituated andalwaysembeddedinbroadergoalsthatserveoverarchingpurposes.

C.Bayetal./CriticalPerspectivesonAccounting25(2014)36–45 38

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3. Designofstudy

Materialaddressinghowfinancialilliteracyisattendedtoinhighschoolswascollectedfrommultiplesources.Archival material wasgathered from reports produced by the OECD,the EU,and IOSCO, as well as by the Swedish regulatory authoritiessuchastheFinancialMarketsAdvisoryCommittee(FMAC)andtheFinancialSupervisoryAuthority(FSA).The firstauthoralsoconductedteninterviewswithcivilservantsandpoliticaladvisorsattheFMAC,theFAS,theEnforcement Authority(EA),theConsumerAgency(CA)andtheMinistryofFinance.TheinterviewingstartedinFebruary2008andended in March2009.Thelength ofthe interviewsvaried betweenoneand twohours.The interviewswere semi-structured, includingasetofopen-endedquestionsfortheintervieweestoelaborateon.Sevenoftheteninterviewswererecorded.The high-schooltour,conductedduringSeptember–November2008,comprisedtwenty-fourstopsincitiesinSweden.Thefirst authorparticipated onfour occasions,observing the activitiesinclass. Mostof the activitiesperformedillustratedthe argumentsinafilmproducedtoformapointofdepartureforthestudentdiscussioninclass.Thefilm,togetherwiththe teacher instructionmanual that was produced to supportinteraction with students, constituted additionalsources of informationfortheanalysis.

ThematerialfortheACcaseisgatheredfromtwosources. First,avarietyoftextswereexaminedsuchascorporate governancecodesandgovernanceregulations.Theinvestigationwasdirectedtowardsrecountinghowﬁnancialliteracyis recognisedinthesetexts.Second,thecaseuses41interviewswithboardmembersofpubliccompanies.Interviewingstarted in2010andendedinJune2011;onaveragetheinterviewslasted90min,andallbutsixwererecorded.Theissueofﬁnancial literacy was raised when the respondents described the relationship between the board, the AC and the auditor. The interviewswithboardmembersprovideduswithanopportunitytoanalysehownotionsofliteracyareconnectedtoACsand boardpractices.

Theentiredatasetwasorganisedbycreatingascrapbookofquotationsrelatedtoelaborationsoffinancialliteracy.The codingwasinformedbyamethodologicalkeyconceptofNLSstudiesdenotedliteracyevents(BartonandHamilton,2000; Street,2001).Literacyeventsrefertoepisodeswhereobservableelementsrelatedtofinancialliteracycanbeidentifiedand described,suchasinteractingparticipants,textsandactivitiesperformedbyparticipants(Hamilton,2000).Appliedtoour cases, thisdefinitionmeansdescribing eventswherethe activitiesthat arederivedfrom an understandingof financial literacyareoperationalisedbythedifferentactors.Literacyeventsarisefromliteracypractices(BartonandHamilton,2000; Street,2001),whichisthesecondmethodologicalprinciple.Literacypracticessensitiseliteracyeventsbyconnectingthem toasocialcontext(Street,2001).

4. Situatingﬁnancialliteracy–twocases

4.1. Financialliteracyfromaﬁnancialeducationperspective

Inapressrelease,theSwedishMinisterforFinancialMarketsMatsOdellstatesthat(2007)

It’shightimeforustoidentifytheknowledgegapsanddoourbesttosupportandstrengthenthehouseholds’abilityto managetheirpersonalfinances.OnlythenwillwegetthesavvyconsumerstheSwedishfinancialsectordeservesandneeds tofacetoughercompetition.That,Ibelieve,isachallengethatultimatelywillbenefitusall.

Thispressreleasemarkedthestartofthe Swedishfinancialeducationprogramme,2_which_aims_to_instruct_Swedish citizens how to becomefinancially capable. The programme grew to incorporatea network of public authorities and organisationsundertheumbrellanameoftheNationalAssemblyforIncreasedFinancialSelf-Confidence.Theprogramme launchcameafteradecade-longinternationaldebateaboutalleviatingfinanciallydistressedconsumers(OECD,2005,pp. 62–64). According to the report, financial distress at the private level resulted from changing economic and political conditions,andthealteredpensionsystemsandtheincreasedcomplexityoffinancialproductsdemandanenhancedlevelof financialawarenessfromtheindividual.TheOECDconcludesthatwithoutappropriatemeasurestorectifyfinancialliteracy, asubstantialnumberofcitizenswillendupinfinancialisolation(OECD,2005).Financialliteracyeventsare,thus,definedby theambitionofincludingpeopleinasocialsettingoffinancialnorms.

TheSwedish programmewas initiatedby surveying1000 households ontwooccasions, 20073(Finansinspektionen, 2007)and20094₍_{Finansinspektionen,}₂₀₀₉_)._The_criteria_used_in_the_surveys_correspond_to_Remund’s₍₂₀₁₀₎_definition_of financial literacy as competence in managing money. The survey measured thiscompetence implicitly, indicating an autonomousfinancialliteracynormagainstwhichallpeoplemightbeobjectivelycomparedandevaluated.Becausethe questionnaires were developed to measure people’s attitudes towards their own financial affairs, it allowed for the identificationofarchetypes,suchas‘‘thespender’’or‘‘thetypicalless-informedperson’’(Finansinspektionen,2007,pp.8–

2_Several_national_ﬁnancial_education_programmes_have_been_launched_{internationally.}_For_detailed_country_information,_see_the_OECD_website_http://

www.ﬁnancial-education.org(8August2012).

3_The_survey_was_conducted_by_the_Financial_Supervisory_Authority.

4_The_survey_was_commissioned_by_the_Financial_Supervisory_Authority_and_executed_by_the_private_contractor_Svenskt_{Kvalitetsindex}_and_EDB_Business Partner.

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37).Theconstructionofthesecategoriesindirectlyhelpedtofurtherclarifythemeaningof‘‘ﬁnanciallyliterate’’,althoughby delineatingwhatitnotratherthanwhatitis.

In2010,5_a_third_survey_was_carried_out_to_measure_the_{population’s}_mastery_of_numbers_and_financial_concepts._The surveyexecutorsacknowledgedthatnumeracyandfinancialliteracyaredifficulttodifferentiate.Evenso,itwasconcluded that financial literacy, understood as a knowledge-based resource involving ‘‘familiarity with financial concepts and products’’,isdeterminedandsupportedbytheindividual’slevelofnumeracy,referringtoaskill-basedcognitiveability‘‘to processnumericalinformationandperformsimplecalculations’’(AlmenbergandWidmark,2011,p.2,7).Accordingly,it was suggested that financial illiteracy couldbe indirectly alleviated by raising the levelof numeracy (Almenbergand Widmark,2011).Moreover,whenmarketparticipationwasevaluatedbasedonthesetwomeasures,thefindingsresultedin theidentificationofyetanotherautonomousrelationship.Theauthorsfoundthatincreasednumericalcapabilityleadsto increasedfinancialliteracy,whichinturnleadstoincreasedactivityinthestockmarkets(ibid.)–allresonatingwiththe ‘‘literacy-comes-firstargument’’(Rogers,2001).

TheSwedishsurveyswerebasedonmeasuresfromsimilarinternationalsurveys(cf.BanksandOldfield,2007;Lusardi and Mitchell,2007,2006)indicatingthat financialliteracyis seenas anon-situated issue.TheSwedish surveysfound, consistent with their international counterparts, that many adults struggle with basic calculations and lack an understanding of elementary financial concepts. It is noteworthythat it was considered normal and consistent with expectations tofindthat older peopleperformed below average. This conclusion impliesthat notonly can weexpect financialliteracytochangeoveralifespanbutalsothatthischangeisacceptable.Thefinancialilliteracyamongyoung people is spelled out as particularly worrying, however. Furthermore, the illiteracy found in this group also held consequencesforhowtodirecttheliteracyinitiative:

Theresultsshould beusedforpreventiveeffortsaimedtoimprove ﬁnancialabilitywhereithasbeen shownweak.By replicatingthesurveyonaregularbasis,e.g.,annually,theeffectoftheseeffortscanbemeasured.(Finansinspektionen, 2007,p.2).

Asaresultofthelinkbetweennumeracyandfinancialliteracyoutlinedabove,financialilliteracybecameaproblemthat couldbeidentified,directlyactedupon,andsolved.Consequently,theconductedsurveyswereconcernedwithidentifyingthe deviantareaswherefinancialcapabilitieswereabsentandwithcharacterisingtheseabsencesassymptomsofafinancial illiteracyproblemthatneedstobesolved.Becausethefinancialilliteracyproblemwasoutlinedasoriginatingfromdeficient individualabilities,developingtheseskillsfollowsnaturallyasasolution.Intheautonomousmodeloutlinedinthethirdsurvey (AlmenbergandWidmark,2011),anincreasedlevelofnumeracywouldthelevelofinterestthatpeopletakeinfinancialissues. Fromthesurveys,itwasestablishedthatfinancialilliteracyamongtheyoungergenerationwasespeciallyworrying,so threepublicauthorities6_decided_to_go_on_a_high-school_tour_in_2008._The_tour’s_goal_was_to_get_young_people_to_reflect_upon theirfinancialchoicesasawaytoempowerthesestudentstomakewisedecisionsinthefuture(Finansinspektionenetal., 2008).Attheschools,thetourrepresentativesintroducedateachingpackagethatdescribedtheissuestothinkaboutwhen startingupalifeforoneself.Thereasonsforthepoorsurveyperformanceoftheseyoungpeoplewerediscussedduringan interviewwithoneofthetourorganisers:

Ithinkit’snotjustamatterofeconomy.Youhavetoseethebiggerpicturehere.(...)It’snotjustamatterofmoney. Apartfromthemoney,thereareloadsofothermechanismscontributingtoahigherconsumptionpressurewhichin turnhaseffectsonthebudget,whichinturnmightputyouinapositionofover-consumption.

Accordingtotheorganisers,financialeducationdirectedtowardsstudentscannot,initially,beaboutfinancialproductsor settingup budgets.Theorganisersconcludedthat ratherthanintroducinghigh-schoolstudentstostocksandbondsor showingthemhowtoworkoutinterestrates,thefinancialeducationofyoungpeopleshouldprimarilybeconcernedwith theirattitudestowardsmoney.Hence,agenericskill-basedcompetencywascontestedandbecame,instead,re-definedinto aconcernfortheirevery-daypractice.ThisdecisioncorrespondstotheNLSargumentthat,incontrastwiththeautonomous modeloffinancialliteracywherethedefinitiondictatesthetermsforthereader,thesituatedmodelconsidersthesocial setting to determine how that same definition should be practised (Street, 2001). As a corollary, financial literacy is dependentontheparticularsetting,and,inthefollowing,twoexamplesillustratehowliteracypracticesweretranslatedinto theclassroom.

Acentralexerciseattheschoolsaskedthestudentstoparticipatein‘‘valueexercises’’.Valueexercisesarescenarios wherethestudentsareconfrontedwithethicaldilemmasthatarepotentiallyrelatedtotheirownlives.Inonesuchscenario, thestudentsencounteredahypotheticalsituationwherethereisafestivalthattheywanttoattendthattheycannotafford. Studentsarethenaskedtochooseoneofthreeoptions:

(a) stayathome,

(b) borrowmoneyfromtheirparentsortakeasmallcreditloan,or (c)workatthefestivalforfree.

5_The_survey_was_commissioned_by_the_Financial_Supervisory_Authority_and_executed_by_the_private_contractor_Svenskt_{Kvalitetsindex.} 6_The_FSA,_the_EA_and_the_CA.

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Accordingtotheorganisers,thepurposeofthisexercisewasnottotellstudentshowtomakethe‘‘right’’decisionbutto forcethemtoreflectonhowtheyindividuallyreachfinancialdecisions,givingthemanopportunitytoexaminetheprosand consthatthesedecisionsentail.Thepointmadeisthatturningstudentsintofinanciallyliteratecitizensalwaysbeginswith anawarenessofhowtheychoosetorelatetothemselvesandtheircurrentfinancialsituation.Moreover,intheteachingkit handedouttotheteachers,apublicationcalled‘‘If...Ihadonlyknown’’wasincluded.Thisinformationfolderisco-produced bytheSwedishTaxAuthorityandformspartofacampaignthattriestoaffecttheproblemofpaymentdefaultsamongyoung people.Theinformationinthisfolderincludesaseriesofquestionsformulatedasidiomsormetaphorsthathavemany possibleanswers:

Whathappenswhenyou’reindebtuptoyourearsbutwithnomoneytopay? Doesadvertisingcreateindebtedpeople?

Thefolderaimstoinitiateaself-dialoguethatrecognisesthefinancialissuesatstake.Asasideproducttothefolder,a rap-song wasalsoproduced.7Consistentwith theNLS arguments(e.g., Street,1997),financial literacyextendsbeyond the writtendomainandthereforeeffortsaimedataffectingfinancialliteracyincludevariousmediatingtoolsandpractices.This financialeducationmodelisorganisedaroundpracticesthatenablefinanciallyilliterateyouthtoreflectonthefinancial issuesthatarefoundintheirowndomain.Thisdetourconnectspopularculturewiththefinancialissuesthatoccurinthe contextofayoungperson’slife.Thesituatedmodeloffinancialliteracy,i.e.,themodelthatwasusedinpracticeinthe high-schooltour,isnotcharacterisedbydevelopingnumericalskillsorbyteachingfinancialvocabulary(initsnarrowsense). Rather,thisfinancialliteracyendeavouraskstheparticipantstoreflectontheirroleinsocietyandtoconsiderthenecessity ofapracticeinwhichfinancialcompetenceisagiven.

Ontheonehand,theautonomousmodelisusedtoidentifyfinancialilliteracybecauseanormofliteracyenablesthe deviationstobespotted.Deviationsfromthisnormcanthenbeusedbytheregulatoryagenciestopinpointthefinancially illiterategroupsinsocietyandtojustifyeffortstoremedythefinancialshortcomingsamongthosegroups.Ontheother hand,wheneffortsaremadetoovercomefinancialilliteracyforacertainstrataofsociety,theseeffortsareadjustedtoa highlyspecificnotionoffinancialliteracy;hence,theyrepresentatypeofsituatedmodeloffinancialliteracy.

4.2. Financialliteracyfromanauditcommitteeperspective

Theprominenceoftheauditcommitteehaschangedovertheyears.TheearlydemandsoftheACwerelimited,anditwas notuntilthemid-1980sthattheACbegantobegivenresponsibilitiesthatextendedbeyondtheirrelationshipwiththe auditor(Verschoor,2008).ThedemandsontheAChavebeengeneratedbyamixoflaws,bankingcrisesandinitiativesfrom otherstakeholders(ibid.).InacommentregardingthelackofcompetenceatWorldcom,Micklethwait(2006)ﬁndsthat‘‘of itsfourmembers,onlytwohadformalﬁnancialtraining’’(p.71),implyingthatwithtraining,theAC’sdecisionswouldhave beenbetteralignedwiththepublicinterest.

FinancialliteracybecamearegulatoryconcernwiththeBlueRibbonCommitteereport(BlueRibbonCommittee,1999) thatrecommendedthateverypubliccompanyshouldhaveanACcomprisingatleastthreefinanciallyliteratemembers.8 Thecommitteedefinedfinancialliteracyas‘‘theabilitytoreadandunderstandfundamentalfinancialstatements,including a company’s balance sheet, income statement, and cash flow statement’’ (ibid., chapter 3). Interestingly, the report distinguishedbetweenbeing‘‘financiallyliterate’’andbeingan‘‘expert’’.Inthereport(ibid.)theysuggestthatanACshould be‘‘comprisedofaminimumofthreedirectors,eachofwhomisfinanciallyliterate...andfurther...atleastonememberof theauditcommittee[should]haveaccountingorrelatedfinancialmanagementexpertise.’’Thus,financialliteracyvariesnot onlywithintheboard(ACvs.therestoftheboard),butitalsovarieswithintheAC(expertvs.financiallyliterate).

UnliketheBlueRibbonreport,theEU’s8thDirectivedidnotdemandthreefinanciallyliteratemembersoftheACbutonly one. Inresponsetothe proposedlaw,theconsultation bodiesraisedseveralproblematicaspects. Mostspecifically,the demandthatoneACmemberhavecompetenceinaccountingandauditingspurredthequestion‘Howcanwerecognisethis competence?’IncontrasttotheBlueRibbonreport,theDirectivedidnotqualifythetermfinancialliteracy.InSweden,the critiquefromtheSwedishBoardofCorporateGovernanceforcedthegovernmenttoclarifythetermfinancialliteracy:

...the...requirementmustbedeterminedinlightofthecircumstancesoftheindividualcompany....Therearenodemands forformaleducationinaccountingorauditing.Instead,theunderstandingofsuchissuescancomewiththeexperienceof seniormanagement.Thismustbedecidedonacase-by-casebasis.Ifaperson,forexample,hasheldapositionasCEO,with responsibilitiesforaccountingandﬁnancialmanagementassociatedwiththismission,thisshouldbeadequateexperienceto meettherequirementofthenecessaryaccountingskills(Govt.2008/09:135,p.155).

Ineffect,tobefinanciallyliterateinanACsetting,thepersoncouldhavepractisedfinancialcompetenceinothercontexts. ThisdefinitionimpliesthatthiscompetencecanonlybegainedoutsideoftheAC.Thatis,amemberoftheACwhoisnot consideredtobefinanciallyliteratecannotbecomeliteratebyservingontheAC.Here,theautonomousmodeloffinancial

7_The_rap-song_is_available_at_{http://www.youtube.com/user/iffe23#p/a/u/2/5jAcRBxNAeY}₍₁₅_July_2011). 8_The_report_had_an_impact,_and_in_1999,_the_NYSE_added_ﬁnancial_literacy_to_its_listing_{requirements.}

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literacyimpliesthatliteracyisequatedwithoutsideexperience.Thepracticalimplicationisthattoactuponthelevelof literacy,theboardcanonlybecomemoreliteratebyrecruitingnewboardmembers.

Ourinterviewsrevealedthatonedesiredcompetenceofanon-executivedirectorwaspriorexperienceasaCEO.The boardmembersarguethatwithoutsuchexperience,onecannot‘‘seethroughtheaccounts’’:

SinceIhavebeenaCEOforsuchalongtime...IknowhowtheCEOmaypresenttheperformancesothatthereportsshow whatisexpected.SometimesaCEOmightbetemptedtoavoidinghighlightingproblems.

Hence,theimplicationisthatfinancialliteracyintheACistheabilitytoreadwhatisnotthere,i.e.,toreadbetweenthe lines.Afinanciallyliteratepersonisapersonwhohasthecapabilitytocontextualisethefinancialreport.Thus,oneneedsto beabletounderstandtheauthorofthereports,which,inturn,meansthatthereaderofthefinancialreportexpectsthe authortohavetheabilitytowhitewashthesefinancialtexts.Lurkingbehindsuchastatementisanideologyofself-interest inwhichtheCEOwill,ifneededandifpossible,usetheAC’sfinancialilliteracytoobtainbenefits.Atthesametime,ifthe readersthinkliketheauthor,theACmighttooeasilyacceptthedominantfinancialdiscourse.Oneintervieweewithout financialexpertise(but withan academicdegree in socialscience)framed hislack ofspecific financialexpertiseasan advantage:

WhenIamaskedaboutmyacademicdegrees...Ialwayssaythatithasgivenmeconﬁdencetoaskstupidquestions.And,as weallknow,theseareoftentheonesthatleadusforwards.

Thisquoteillustratesthatitispossibletobetooliterate,accordingtoanautonomousdefinition,andthatignorancemay indeedbewarranted.Anotherofourrespondents,resonatingwitharespondentin GendronandBe´dard’s(2006) study, questionedthedirectrelationshipbetweenfinancialliteracyandqualifieddecisions:

MycompetitiveadvantageisthatIcanposethestupidquestionsthatareneededtoseethroughthetechnologicaljargonthat sometimescharacterisesboardwork.

Even though a recentreview ofAC effectiveness indicates that the measuresof financial expertise havea positive associationwithACeffectiveness(Be´dardandGendron,2010),thisassociationhasnotbeenestablishedforfinancialliteracy, arguablybecauseithasnotbeenwidelyusedasaproxyforACeffectiveness.Rather,andasindicatedbythetwoquotes above,theassumptionthatahighleveloffinancialliteracyequalseffectivegovernanceshouldnotbetakenforgranted.As discussedinthepriorliteratureonACs,astructuralcharacteristicofanACsuchashavinganon-executivedirectorwhois financiallyliterateisnotnecessarilyrelatedtoimprovedcontrolortotheAC’seffectiveness(see,e.g.,GendronandBe´dard, 2006;TurleyandZaman,2007).

TheanalysisthemeaningofliteracyinanACintroducesachallengefortheautonomousview.First,becausethedefinition offinancialliteracyisinflux,itisdifficulttodiscoverwhoisliterate.Second,becauseexperienceisatthecoreofasthe definitionoffinancialliteracyintheACandbecauseexperiencecannotbetaught,thefinanciallyilliterateremainilliterate. Third,thereisanacknowledgedriskthattheACmaybecometoofinanciallyliterate(sic!)andthatthisstatemightimpede bothcontrolandcreativity.Aplausibleexplanationtotheadventofthesechallengesisthat whilefinancialliteracyisa rhetoricalstrategyinourfirstcase,functioningasameanstoinitiateaprogramme,itneedstobepracticablyoperationalised inthecontextofacommittee.

5. Concludingdiscussion

Thedistinctwaysinwhichfinancialisation(Epstein,2005)issaidtobemanifestedinsocietyhasemergedintheprior literatureasaneffectofthesocietallevelfromwhichitisstudied.Onthegloballevel,forexample,financialisationrelatesto issuessuchasfinancialinnovationsonthecapitalmarket(McSweeney,2009).Inasimilarvein,thenationalleveliscentralto

Belfrage’s(2008)analysisofhowstatesmanagenewpensionsystems.Furthermore,financialisationhasbeenstudiedand connectedtointernalcorporatestrategiesandmanagementorientation(Anderssonetal.,2010;GleadleandHaslam,2010; LazonickandO’Sullivan,2000).Inaddition,theindividuallevelhasbeencentralinstudiesofhowindividualsmanageand are affectedby theirprivate investments, pensions, mortgages,and credit card expenditures, etc.(e.g., Greenfield and Williams,2007;Langley,2007,2008;Martin,2002).However,thispaperarguesthatthepriorstudieshaveoverlookedthe relationshipbetweenfinancialliteracyandfinancialisation,i.e.,howtheframingoffinancialliteracy,irrespectiveofthe societallevel,bearsonhowfinancialisationisunderstoodandpractised.Thebenefitofanalysingfinancialliteracyisthatitis requiredatmultiplelevelsofsocietyandassuchoffersanempiricalopportunitytodetailthedifferentwaysinwhichit enablestheinfluenceofthecapitalmarkettoshapelocalpractices.Inthefollowing,threefindingsarehighlightedregarding howfinancialliteracyunfoldsandisconfigured.

First,byillustratingtwoseparateapproachestofinancialliteracy,i.e.,thefinancialeducationcaseandtheregulationof theauditcommittee,thispaperdemonstratesthatfinancialliteracyisbynomeansastableconceptthatisdrawnuponin oneparticularsettingforoneparticularpurpose.Thefindingthatfinancial(il)literacyismobilisedindifferentsituations impliesthattheconceptisbothstable,transportableandelastic,harbouringseveralunderstandingsandareasofapplication. Morespecifically,thispaperhasdemonstratedthatfinancialliteracyisseeneitheras(1)anindividualcapabilitythatcanbe acteduponinrelationtoexperience,vocabularyandskills(theautonomousmodel),or(2)asociallysituatedissuewhere financialliteracyinitselfmustalwaysbedebated(thesituatedmodel).

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Second,thepapershowsthat the definitionoffinancialliteracyunfoldsin afundamentallydifferent mannerinthe empiricalcases.Inthesurveys,thedefinitionoffinancialliteracyispresentedasanon-controversialprobleminwhichthe solutionsaresetandagreedupon.Asaresult,theautonomousmodeldrivestheactorstoidentifydeviationsfroma skill-basedliteracynorm,i.e.,pointingoutareaswherefinancialliteracyisabsent.IntheACcase,theprocessofunfoldingfinancial literacyis thereverse.Herefinancialliteracyisreferred toas asomethingthat isindeedpresentbutismoreporousin character.ThefinancialliteracyofanACmemberisnotconfiguredbyidentifyingwhatislackingordeviatingfromanorm.In otherwords,whereasthesurveysframedtheproblemasaquestionofspottingfinancialilliteracy,theregulationoftheaudit committeesapproacheditasbeingamatterofdifferentiatinglevelsofliteracy.Thispaperargues,andperhapsincontrast withNewLiteracyStudies,thattheautonomousmodelisofparamountsignificanceasawaytointroducetheproblemsof financialliteracy.Tomobiliseresourcestosolveaproblem,oneinitiallyneedstostartoutfromanautonomousdefinitionof theproblemthatreflectsanoverarchingproblematisation.

Third, whether a phenomenon is framed either as something that is there (albeit not explicitly specified) or as somethingthatisnotthereentailsdifferentconsequencesintermsofsolutions.Thefindingsshowthatthemeasuresinthe auditcommitteecase,ontheonehand,aredirectedtowardsspecifyingcriteriasothatfinancialliteracycanbeidentified. Thisclearidentification,inturn,wouldmakeitpossibletoexcludesomeactorsbydisqualifyingthemfromservingasAC members. Althoughsomeof ourrespondentswerenot altogetherconvincedof thefruitfulnessofthis exclusion,the regulationssuggestthatthedemandsforfinancialliteracyinthiscontextmightnotbeinthepublicinterest.Inthe high-schooltour,however,theambitionistoincludeyoungpeopleinsociety.Theproblemofexclusionisstabilisedthroughthe autonomousmodeloffinancialliteracy,whichdefinesitasasocietalproblem.However,theeffortstoremedythisproblem areframedasaninvitationinwhichthehigh-schoolstudentsareaskedtoreflectonissuesrelatedtofinancialliteracyand nottothedefinitionssuggestedbytheautonomousmodelthatappearsinthesurveys.Theexplicitargumentforfinancial educationingeneralandthehigh-schooltourinparticularistopromoteandfosterliteracywhereveritisabsent,witha goalofincludingtheilliteratesinsocietyandhelpingthemtobecomethefull-fledgedcitizensthatsocietyneeds.Hence, whereastheACcaseisconcernedwithhowfinancialliteracyisrecognised,thelatterispreoccupiedwithhowitshouldbe constructed.

InTable1,thepaper’sﬁndingsaresummarisedaccordingtothelineofargumentoutlinedabove.

This paper is an attempt to problematise the previous research on financial literacy and offers an alternative viewpoint to understand its definition(s) and practices. In contrast to the dominant approach of viewing financial literacy as a phenomenon thatcan be acted uponand solved bymeans of technical skills, this paper draws on the insightsof theNewLiteracyStudiestoemphasisethesituatedconditionsofhowtounderstandfinancialliteracyand the various waysin which it unfolds. Studies onfinancialisation acknowledgethat accounting and finance are ever presentandaretobefoundinplacesoutsideoftheconventionalideaoftheorganisation(NeuandGraham,2006).This paper contributes to this (limited) research by investigating how financial literacy is formulated in differentsocial settings.

Althoughthisstudyisframedinthefinancialliteracy/financialisationdiscourse,italsosetsthestageforfurtherresearch intohowfinancialliteracyinterplayswiththeconsumptionofaccountinginformation.Theeffectsofaccountingisation,for exampleonnon-accountants(seee.g.,Kurunma¨ki,2004),havebeenproblematised.However,accountinginformationis typicallyviewedeitherasbeingappropriatedordismissedratherthanasbeingselectivelymadesenseof.Bothempirical casesshowthatfinancialliteracyisacapacitythatcanalwaysbecontestedanddoesnotalways‘‘comefirst’’(Rogers,2001). Moretothepoint,ratherthanpresupposingthatactorshaveareasonableknowledgeofbusinessandeconomicactivities, thattheyreviewandanalyseinformationwithdiligence(IASB,2010)andthattheycanbeconfiguredasrationaleconomic decisionmakers(Young,2006),accountingresearchmightbenefitfrominvestigationsintotheinterplaybetweenskillsand contextandhowaccountingliteracyisconstructedandrecognisedtoincludeandexcludeactorsfromspeakingandreading ‘Accountish’. This study shows that for most consumers of financial information, accounting is, if anything, a second language.Thisperspective,weargue,opensupapossiblevenueofresearchthatextendsbeyondthestudiesofhowaccounts areproducedtostudythewaysinwhichaccountsare(not)consumed.

Acknowledgements

First,weowetheeditorsandthetwoanonymousreviewersawordofgratitudeastheirsuggestionshaveimprovedthe papersigniﬁcantly;inaddition,wearegratefulforthecriticalcommentsthatwehavereceivedalongthewayfromour colleaguesattheStockholm/UppsalaMusicaResearchGroup.Wealsowishtoacknowledgetheﬁnancialsupportgrantedby SvenskaHandelsbankenthatmadethisresearchconceptachievable.

Table1

Summaryofﬁndings.

Whentheproblemisdeﬁnedas ...effortsentail ...whichischaracterisedby ...andisillustratedinthecaseof Absentliteracy Literacyconstruction Inclusionofactors Survey/high-schooltour Presentliteracy Literacyrecognition Exclusionofactors Auditcommittees

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