On Tuesday evening I went to the Hardman lecture at ICAEW. I wangled an invitation to this prestigious event because I wanted to hear Jolyon Maugham (see my post on 30 September). I was not disappointed: he speaks as well as he writes and his talk was full of excellent metaphors (I do enjoy a good metaphor, as well as having a professional interest in them: see also here) Having followed his blog, I understood much of what he said, even the initialisms. And it was those that set me thinking.
Initialisms act as shibboleths in terms of identifying groups and deterring outsiders. On this occasion, I was definitely an outsider. It is unusual these days for me to be in a large gathering of people where I only know one or two. I once horrified a rather shy acquaintance by saying that my idea of heaven was a roomful of people I'd never met before - all those wonderfully interesting possibilities! I get less excited about the prospect these days as my hearing is not as good as it used to be and conversations are more difficult, especially in this splendid room where many ICAEW receptions take place and where the acoustics make it necessary to stand very close to ones interlocutors.
But I was intrigued by the tribe I had fallen among and talked to a lot of people. For all of them, tax figured largely in their lives, but in different ways. There were tax practitioners of various sorts - accountants, consultants, barristers - and there were civil servants and policy makers. And there were a few academics. In conversation with my neighbour at dinner we noted a lack of diversity of both race and gender, although I thought that there were more women present than at similar events I have attended.
And on the bus home I realised that I had observed another form of homogeneity, beyond the pale faces and suits and ties: almost everyone I had spoken to had studied at Oxford or Cambridge. I hadn't asked any specific questions about their educational background but I had asked how they had ended up in their tax related jobs, and their accounts of their careers had begun with graduation.
So the movers and shakers in the tax world are an elite group and a rather good example of an epistemic community, a notion I have been thinking about for some time in the context of internal auditors and risk management. I made a mental note to return to that thought and went back to the book I was reading.
Today I turned to Jolyon's blog - another very interesting piece, about the influence of the Big Four on tax policy - and there in the comments I found that Martin Hearson had beaten me to it, and articulated the epistemic community idea far better than I could have done. This is not the first occasion that I have had a thought and found that someone at LSE had beaten me to it but it's usually been Mike Power who I've been trailing after :)
The book I was reading was "The Circle" by Dave Eggers, a dystopian vision in which a company with similarities to Google is effectively taking over the world. The characters were rather wooden and the plot unsurprising but the scenario described was quite compelling and it was a good read for the bus journey from Oxford to London and back again. (But the pedant in me was roused on reaching the penultimate page, when the word "prone" was used to describe the position of someone in a coma in a hospital bed. I rather think such a person would be lying on their back...)
Eggers doesn't mention any tax issues but in the world he envisages, -where everyone is constantly under surveillance by everyone else, knowledge has to be shared and privacy is a crime - there could be no tax avoidance. A lot of people would be out of work..
Thursday, 13 November 2014
Wednesday, 8 October 2014
Tesco redux
In yesterday's FT, Hugh Willmott offered his view of the Tesco situation. He comments on the apparent dereliction of the NEDs but his analysis misses two points that I have written about before.
Firstly, the Tesco board structure. The company has a board made up of NEDs, the group CEO and the CFO. It also has an executive committee, which comprises all the senior executive directors plus the CEO and the CFO. The diagram showing the committee structure does not show the executive committee so we must infer that the Board and the Executive committee function together in some way but it is not at all clear how this happens. The 2014 report tells us:
"The Board itself has evolved substantially over the past two years
from its historical structure of broadly balanced Executive and
Non-executive representation to its current shape of the Chief
Executive and Chief Financial Officer being the only Executive
members of the Board. It is important to view these changes in the
context of management development generally and in particular
the development of a strong Executive Committee under Philip
Clarke, the individual members of which generally attend Board
discussions of matters reflecting their responsibilities. This allows
the Board to operate as a smaller group, supporting real, robust
and penetrating debate while ensuring continued contact with a
range of senior business executives."
Let's think about this in the historical context. Among the concerns that prompted Cadbury was the negative influence of dominant chief executives and many of the measures that have followed have been designed to deal with this apparent problem. (I say apparent because there may be some circumstances in which a dominant CEO may be just what is needed but let's ignore that.) But in Tesco's structure the link between the two committees rests in the hands of the CEO and the CFO who sit on both (the company secretary does, too, perhaps we shouldn't forget him.) Doesn't this potentially hand power back to the CEO?
Tesco is not alone in adopting this "evolved" board structure. When the Cadbury Committee sought to strengthen the role of NEDs, particularly through establishing audit committees, critics argued that this undermined the principle of the unitary board. But the trend to smaller boards with an emphasis on the role of independent NEDs seems to have led to a de facto two tier structure. I've never understood why this shouldn't work just as well but it's worth noting that the countries where this is the norm have different legislative and regulatory arrangements to the UK.
Secondly, Professor Willmott's criticism of Tesco's NEDs is rather unfair. With the best will in the world and even with relevant industrial and commercial experience, a bunch of part time directors is unlikely to be able to offer the rigorous oversight and constructive challenge which is now demanded of them. I'm surprised that anyone wants to take on the role these days.
Prescribing board composition to raise the level of board independence has had unintended consequences and there is little evidence that it has been effective in any regard. I very much doubt whether similar prescriptions to increase diversity will work, either. As the Tesco report also says:
"Board structure is not set in stone. At any point in time it must
reflect the requirements and state of development of the business
in order to be effective. The Tesco Board will continue to evolve to
best match the needs of the business."
Let's move away from prescription and return to the intention of the Cadbury Committee which was to enable the important conversation between boards and investors within the flexibility of the comply or explain framework. And let's also remember that boards, however independent and diverse, will still make mistakes. Not every "scandal" has its roots in corporate governance: some are just bad business decisions.
Firstly, the Tesco board structure. The company has a board made up of NEDs, the group CEO and the CFO. It also has an executive committee, which comprises all the senior executive directors plus the CEO and the CFO. The diagram showing the committee structure does not show the executive committee so we must infer that the Board and the Executive committee function together in some way but it is not at all clear how this happens. The 2014 report tells us:
"The Board itself has evolved substantially over the past two years
from its historical structure of broadly balanced Executive and
Non-executive representation to its current shape of the Chief
Executive and Chief Financial Officer being the only Executive
members of the Board. It is important to view these changes in the
context of management development generally and in particular
the development of a strong Executive Committee under Philip
Clarke, the individual members of which generally attend Board
discussions of matters reflecting their responsibilities. This allows
the Board to operate as a smaller group, supporting real, robust
and penetrating debate while ensuring continued contact with a
range of senior business executives."
Let's think about this in the historical context. Among the concerns that prompted Cadbury was the negative influence of dominant chief executives and many of the measures that have followed have been designed to deal with this apparent problem. (I say apparent because there may be some circumstances in which a dominant CEO may be just what is needed but let's ignore that.) But in Tesco's structure the link between the two committees rests in the hands of the CEO and the CFO who sit on both (the company secretary does, too, perhaps we shouldn't forget him.) Doesn't this potentially hand power back to the CEO?
Tesco is not alone in adopting this "evolved" board structure. When the Cadbury Committee sought to strengthen the role of NEDs, particularly through establishing audit committees, critics argued that this undermined the principle of the unitary board. But the trend to smaller boards with an emphasis on the role of independent NEDs seems to have led to a de facto two tier structure. I've never understood why this shouldn't work just as well but it's worth noting that the countries where this is the norm have different legislative and regulatory arrangements to the UK.
Secondly, Professor Willmott's criticism of Tesco's NEDs is rather unfair. With the best will in the world and even with relevant industrial and commercial experience, a bunch of part time directors is unlikely to be able to offer the rigorous oversight and constructive challenge which is now demanded of them. I'm surprised that anyone wants to take on the role these days.
Prescribing board composition to raise the level of board independence has had unintended consequences and there is little evidence that it has been effective in any regard. I very much doubt whether similar prescriptions to increase diversity will work, either. As the Tesco report also says:
"Board structure is not set in stone. At any point in time it must
reflect the requirements and state of development of the business
in order to be effective. The Tesco Board will continue to evolve to
best match the needs of the business."
Let's move away from prescription and return to the intention of the Cadbury Committee which was to enable the important conversation between boards and investors within the flexibility of the comply or explain framework. And let's also remember that boards, however independent and diverse, will still make mistakes. Not every "scandal" has its roots in corporate governance: some are just bad business decisions.
Wednesday, 1 October 2014
If women are the answer, what is the problem?
Dr Barnali Choudhury has kindly sent me a copy of her paper "New Rationales for Women on Boards", recently published in the Oxford Journal of Legal Studies. The paper is one of a very small number questioning the "business case" for women on boards and suggests not only an extended rationale but also possible ways forward to increase the number of women appointed. Dr Choudhury usefully draws on strategic management literature to consider the contribution of women to board decision-making effectiveness, demonstrating that this depends on task performance and cohesiveness.
With regard to the latter, she acknowledges the potential problem of groupthink but I think this deserves much deeper analysis. The level of constructive challenge that is most useful for a board is likely to change with changing circumstances both internally and external to the company and the contribution of board diversity to constructive challenge is far from clear. Further, discussions of board effectiveness rarely address the criteria for assessing effectiveness in the context of board objectives.
Dr Choudhury proposes legislation along the lines of the US football Rooney Rule, which would ensure that women were interviewed for every board position. She addresses the issue of enforcement with the proposal of an annual "audit" for companies with few women on the board, with financial sanctions. This could prompt a new strand in the board consultancy business, but it would, in my view, be better than quotas, as women appointed in this way would have the opportunity to compete equally without the fear that they have been favoured because of their gender, reflected in the "golden skirts" phenomenon. However, she also highlights the supply issue in business leadership, particularly the existing "job success model":
"Positions of leadership in business tend to be achieved through a model in which unfailing availability and total geographical mobility at all times is required in addition to a linear
career path with no breaks."
This is an interesting paper and a thoughtful and important contribution to the debate about board gender diversity, the type of approach I called for in my blog post a year ago. But I am still not convinced about the fundamental nature of the issue. Is there really a problem with corporate board composition that can be solved by appointing more women?
In setting out the "equality rationale", Dr Choudhury asserts that
"... even if a correlation cannot be found between women on boards and shareholder maximization, an equality rationale still justifies measures to promote women on boards. In this light, an equality rationale can be seen as emphasizing women’s rights—as opposed to business reform—as the focus of the government’s measures. In short, increased female representation on boards is valued in its own right."
While agreeing that the factors in our social and institutional environment which inhibit female participation in leadership of all types need to be addressed, I'm still not convinced that getting more women onto corporate boards is a good way of doing this. There is much discussion of the "pipeline", through which female senior managers can achieve board level posts, but I have yet to see much evidence of a trickle down effect resulting in better opportunities for women after such appointments are made. Governmental action would be more usefully directed towards measures to offer all women (and other diverse groups) opportunities for achievement within our social system, rather than focusing on the relatively small group who aspire to board appointments.
There is little evidence that prescribing board composition has positive effects. The process by which directors are appointed to boards depends on shareholders and nomination committees: let them get on with it as they see fit.
With regard to the latter, she acknowledges the potential problem of groupthink but I think this deserves much deeper analysis. The level of constructive challenge that is most useful for a board is likely to change with changing circumstances both internally and external to the company and the contribution of board diversity to constructive challenge is far from clear. Further, discussions of board effectiveness rarely address the criteria for assessing effectiveness in the context of board objectives.
Dr Choudhury proposes legislation along the lines of the US football Rooney Rule, which would ensure that women were interviewed for every board position. She addresses the issue of enforcement with the proposal of an annual "audit" for companies with few women on the board, with financial sanctions. This could prompt a new strand in the board consultancy business, but it would, in my view, be better than quotas, as women appointed in this way would have the opportunity to compete equally without the fear that they have been favoured because of their gender, reflected in the "golden skirts" phenomenon. However, she also highlights the supply issue in business leadership, particularly the existing "job success model":
"Positions of leadership in business tend to be achieved through a model in which unfailing availability and total geographical mobility at all times is required in addition to a linear
career path with no breaks."
This is an interesting paper and a thoughtful and important contribution to the debate about board gender diversity, the type of approach I called for in my blog post a year ago. But I am still not convinced about the fundamental nature of the issue. Is there really a problem with corporate board composition that can be solved by appointing more women?
In setting out the "equality rationale", Dr Choudhury asserts that
"... even if a correlation cannot be found between women on boards and shareholder maximization, an equality rationale still justifies measures to promote women on boards. In this light, an equality rationale can be seen as emphasizing women’s rights—as opposed to business reform—as the focus of the government’s measures. In short, increased female representation on boards is valued in its own right."
While agreeing that the factors in our social and institutional environment which inhibit female participation in leadership of all types need to be addressed, I'm still not convinced that getting more women onto corporate boards is a good way of doing this. There is much discussion of the "pipeline", through which female senior managers can achieve board level posts, but I have yet to see much evidence of a trickle down effect resulting in better opportunities for women after such appointments are made. Governmental action would be more usefully directed towards measures to offer all women (and other diverse groups) opportunities for achievement within our social system, rather than focusing on the relatively small group who aspire to board appointments.
There is little evidence that prescribing board composition has positive effects. The process by which directors are appointed to boards depends on shareholders and nomination committees: let them get on with it as they see fit.
Tuesday, 30 September 2014
Tax and Twitter
I have some issues with tax. I'm happy to pay it, up to a point. The biggest cheque I have ever written was to settle the inheritance tax bill after my mother died and I really resented having to do it. The capital amassed by my father (and preserved by Mum) was formed mostly from his taxed earned income and it was being taxed again, which didn't seem fair.
When I sat my final chartered accountancy exams, if you failed one paper you had to retake the whole lot. I always struggled with tax. It made no sense to me at all, there was no underpinning logic to the calculations. I failed the tax paper (in spite of expert revision tuition from an aristocratic future ICAEW president), got married, moved out of London and could not get a job with the biggest accountancy firm in the area, not because I hadn't passed my finals but because... they would only employ women in one department: tax. I went to work in the NHS, finally realised that all numbers are socially constructed fiction, resat my finals when heavily pregnant, got the precious letters after my name, dashed Husband's hopes that I'd do his business books for free and ended up, quite by chance, as an academic.
Obviously, I have never taught tax. I have kept well away from the topic (even when I discovered that tax guru Robert Maas was Bob who lived opposite when I was little, whose sister was my best friend). But a couple of years ago at the annual BAFA conference I went along to a session in the tax stream to support a colleague who was presenting and found something sufficiently interesting to stop me checking email on my phone. It seems that there is qualitative research in tax: who'd have thought it?
Back in April this year I blogged about cutting down on my reading and on Twitter. Well, it's partly worked. I cancelled the alerts and I no longer feel compelled to follow every link. But I haven't been able to break the Twitter habit completely, partly because I've found some even more fascinating people there. Following tweets from a few of my favourite accountants (@Truen Fairview, @nairobiny, @Bombarde16) led me to the fearsome critiques of @fcablog, many of which are directed at @richardmurphy. Now I've been reading Richard Murphy's blog on and off for a while, to find out why he seems to be the go-to commentator on all sorts of things. He is cut from similar cloth to my inestimable pal Prem Sikka: if such people didn't exist, we'd probably need to invent them. But the arguments that they provoke can be a bit wearing, often because of the tone. And I'm an academic: I want properly constructed and supported argument, couched if possible in elegant prose without jargon. Or numbers, because I'm never happy with numbers.
And in among the fretful sniping I found the charming @JolyonMaugham and his blog. Beautifully written. I am astonished to find myself reading for pleasure the words of a tax barrister. I can actually understand some of it. Or I think I can: I once attended a lecture by Stephen Hawking and came out believing I had understood everything he said because he made it seem to simple and obvious. Of course I didn't but the feeling persisted for several hours until I tried to explain it to someone else. (That's the real test of what you know. I was horrified to discover I knew so little about accounting when I started teaching it. If I'd been forced to teach tax I might have understood it eventually but I had enough trouble dealing with double entry: in my first ever class a first year student posed the great unsolved mystery of life: just why is debit on the left?)
Anyway, I now know what an APN is and all sorts of other things which will never feature in questions on Pointless or Only Connect but may lodge in the bit of my brain that stores stuff in case I should ever be a contestant. Today Jolyon has bravely offered a platform for others on his blog. To be honest, I'd rather read what he writes because he writes so well. And he is now wrestling with the problem of comments and whether and how they should be edited. A very time consuming and somewhat depressing, task, I imagine (I don't have that problem here, the passing traffic remains silent, as do my three faithful readers).
But why should I bother reading about tax at this point in my life? Well, at some point someone will no doubt make a connection between corporate governance and taxation and I might feel a need to pontificate. <Checks Google Scholar> Yes, they already have and it looks quite interesting...
When I sat my final chartered accountancy exams, if you failed one paper you had to retake the whole lot. I always struggled with tax. It made no sense to me at all, there was no underpinning logic to the calculations. I failed the tax paper (in spite of expert revision tuition from an aristocratic future ICAEW president), got married, moved out of London and could not get a job with the biggest accountancy firm in the area, not because I hadn't passed my finals but because... they would only employ women in one department: tax. I went to work in the NHS, finally realised that all numbers are socially constructed fiction, resat my finals when heavily pregnant, got the precious letters after my name, dashed Husband's hopes that I'd do his business books for free and ended up, quite by chance, as an academic.
Obviously, I have never taught tax. I have kept well away from the topic (even when I discovered that tax guru Robert Maas was Bob who lived opposite when I was little, whose sister was my best friend). But a couple of years ago at the annual BAFA conference I went along to a session in the tax stream to support a colleague who was presenting and found something sufficiently interesting to stop me checking email on my phone. It seems that there is qualitative research in tax: who'd have thought it?
Back in April this year I blogged about cutting down on my reading and on Twitter. Well, it's partly worked. I cancelled the alerts and I no longer feel compelled to follow every link. But I haven't been able to break the Twitter habit completely, partly because I've found some even more fascinating people there. Following tweets from a few of my favourite accountants (@Truen Fairview, @nairobiny, @Bombarde16) led me to the fearsome critiques of @fcablog, many of which are directed at @richardmurphy. Now I've been reading Richard Murphy's blog on and off for a while, to find out why he seems to be the go-to commentator on all sorts of things. He is cut from similar cloth to my inestimable pal Prem Sikka: if such people didn't exist, we'd probably need to invent them. But the arguments that they provoke can be a bit wearing, often because of the tone. And I'm an academic: I want properly constructed and supported argument, couched if possible in elegant prose without jargon. Or numbers, because I'm never happy with numbers.
And in among the fretful sniping I found the charming @JolyonMaugham and his blog. Beautifully written. I am astonished to find myself reading for pleasure the words of a tax barrister. I can actually understand some of it. Or I think I can: I once attended a lecture by Stephen Hawking and came out believing I had understood everything he said because he made it seem to simple and obvious. Of course I didn't but the feeling persisted for several hours until I tried to explain it to someone else. (That's the real test of what you know. I was horrified to discover I knew so little about accounting when I started teaching it. If I'd been forced to teach tax I might have understood it eventually but I had enough trouble dealing with double entry: in my first ever class a first year student posed the great unsolved mystery of life: just why is debit on the left?)
Anyway, I now know what an APN is and all sorts of other things which will never feature in questions on Pointless or Only Connect but may lodge in the bit of my brain that stores stuff in case I should ever be a contestant. Today Jolyon has bravely offered a platform for others on his blog. To be honest, I'd rather read what he writes because he writes so well. And he is now wrestling with the problem of comments and whether and how they should be edited. A very time consuming and somewhat depressing, task, I imagine (I don't have that problem here, the passing traffic remains silent, as do my three faithful readers).
But why should I bother reading about tax at this point in my life? Well, at some point someone will no doubt make a connection between corporate governance and taxation and I might feel a need to pontificate. <Checks Google Scholar> Yes, they already have and it looks quite interesting...
Wednesday, 24 September 2014
Every little helps...
The Tesco tale is so interesting that I almost wish I were
still teaching - such a gift of a case study, we haven't had a meaty UK scandal
for a long time. But what exactly is scandalous about it?
One important aspect is the highlighting of the very strange relationship that supermarkets have with their suppliers. When the perils of the demand for cheap food are discussed in the media, the focus is often on dishonesty by suppliers - the horsemeat scandal, for example, or poor animal rearing conditions. The trading practices of supermarkets are rarely discussed. I remember my shock years ago when interviewing an internal auditor who told me that milk suppliers operated without the protection of contracts and supermarkets could switch at a day's notice. Some of the media reports suggest that the revenue Tesco had booked did not materialise because the suppliers were refusing to accept the demands placed on them. In a previous post I was dismissive of the idea of supply chain governance but there are clearly ethical issues to be explored here and opening these up to media scrutiny is not a bad thing.
In terms of accounting practice, what, if anything, has gone wrong? Revenue recognition is, despite accounting standards, a very subjective area. Early reports have noted that Tesco's auditors commented on the potential difficulties in this area but suggest that the audit committee responded that there was no problem and adequate controls were in place. The audit committee members have impressive backgrounds but none of them appear to have retail experience. How far have they and the rest of the board relied on advice from members of the executive committee? With all the recent changes among senior management, it would not be surprising if that advice was at the very least confused. Does this support my view of the unintended consequences of the purely NED board? And what about the role of internal audit?
If, as has been reported, the issue was revealed by a whistleblower, I wonder how the Tesco system works. This could be seen as a positive feature in that the company listens to whistleblowers but what protection will be in place for that brave individual?
Watching all this unfold will make for riveting reading but we should not forget the consequences for individuals. Actions taken to retrieve the company's situation may mean job losses in stores and distribution, as well as in suppliers' businesses.
Friday, 22 August 2014
Corporate governance and management - a blurred boundary?
A Twitter conversation reminded me that I have never got round to writing a coherent summary of the invited presentation (podcast here) that I gave at last year's MARG conference at LSE. I think I mentioned in passing that preparing it was a bit of a struggle because I found it difficult to make a clear connection between management accounting and corporate governance, the topic of the conference.
What I *really* wanted to say was that management accountants seem these days to be in search of a raison d'être and it looked as if they were now clutching at the notion of corporate governance. This was the conclusion I had come to when reading the CIMA/IFAC invention of enterprise governance, which classifies corporate governance as conformance and "business governance", whatever that is, as performance. (The model is derived without acknowledgement from the model developed by Bob Tricker, twenty years earlier: I probably should have made that point more strongly but Bob is in my slides.) But that might have been a bit rude, given the audience, so I watered it down a bit and discussed the relationship between governance and management, rather than management accounting.
And I probably talked a bit too much about the history of NEDs but the book was not long completed and I was in the middle of interviewing NEDs so they were at the forefront of my mind. But I do think that the restructure of corporate boards has had two consequences which have not so far been discussed by academics, regulators or practitioners.
Firstly, as boards have become smaller and predominantly non-executive, most executives have been squeezed out on to an executive board. The structure that has evolved is effectively two tier which is interesting, because objectors to the creation of audit committees at the time of the Cadbury Committee report argued that they would undermine the unitary board structure, which they viewed as a Very Bad Thing. (Difficult to know why this was seen as so important for UK companies, other than the fact that two tier boards were common in continental Europe...) And the main link between the main board and the executive board is... the CEO. Now, wasn't the whole thrust of corporate governance focused originally on constraining the power of the CEO? Hm.
Secondly, these disenfranchised executives seem to be claiming links to corporate governance by coupling their functional areas with governance, in meaningless combinations - marketing governance, sales governance, IT governance, HR governance, even financial governance. On examination, all of these misuse the word governance: they are concerned with management.
Does this blurring of meaning matter? I still haven't made up my mind. What do you think?
What I *really* wanted to say was that management accountants seem these days to be in search of a raison d'être and it looked as if they were now clutching at the notion of corporate governance. This was the conclusion I had come to when reading the CIMA/IFAC invention of enterprise governance, which classifies corporate governance as conformance and "business governance", whatever that is, as performance. (The model is derived without acknowledgement from the model developed by Bob Tricker, twenty years earlier: I probably should have made that point more strongly but Bob is in my slides.) But that might have been a bit rude, given the audience, so I watered it down a bit and discussed the relationship between governance and management, rather than management accounting.
And I probably talked a bit too much about the history of NEDs but the book was not long completed and I was in the middle of interviewing NEDs so they were at the forefront of my mind. But I do think that the restructure of corporate boards has had two consequences which have not so far been discussed by academics, regulators or practitioners.
Firstly, as boards have become smaller and predominantly non-executive, most executives have been squeezed out on to an executive board. The structure that has evolved is effectively two tier which is interesting, because objectors to the creation of audit committees at the time of the Cadbury Committee report argued that they would undermine the unitary board structure, which they viewed as a Very Bad Thing. (Difficult to know why this was seen as so important for UK companies, other than the fact that two tier boards were common in continental Europe...) And the main link between the main board and the executive board is... the CEO. Now, wasn't the whole thrust of corporate governance focused originally on constraining the power of the CEO? Hm.
Secondly, these disenfranchised executives seem to be claiming links to corporate governance by coupling their functional areas with governance, in meaningless combinations - marketing governance, sales governance, IT governance, HR governance, even financial governance. On examination, all of these misuse the word governance: they are concerned with management.
Does this blurring of meaning matter? I still haven't made up my mind. What do you think?
Sunday, 17 August 2014
Stopping reading, starting analysing...
My plan to cut back on my reading has been quite successful but logging in to Google Scholar yesterday I found that it had a couple of suggestions for me to look at. Big mistake. I found myself reading an article which made me sigh.
The authors have developed a typology for analysing the quality of "comply or explain" reporting. All well and good: everyone these days wants to develop a typology. It's rather like years ago when we all wanted our own two-by-two matrix: I remember being very excited when I managed this when studying internal auditors' views of risk management. But...there is already a very good paper on the same topic which develops a taxonomy.
What is the difference between a taxonomy and a typology in the context of social science? I have always understood a taxonomy to reflect hierarchical arrangements whereas a typology just groups things together on the basis of characteristics rather than relationships.
Anyway, the authors do recognise the other paper and make some attempt to explain why their approach is different but if I'd been reviewing the paper I would have asked for a more detailed explanation.
But the source of my irritation is more fundamental. The authors note that there is a very limited literature on comply or explain, thus justifying their contribution. But does this matter? The intention of the Cadbury Committee in recommending comply or explain in the Code of Best Practice was to initiate conversations between investors and companies. Nowhere in the paper is the view of investors mentioned: the whole focus is on regulation and enforcement. Regulators have to justify their existence: that they call for improved disclosure quality is inevitable. But investors seeking information about corporate governance don't rely solely on published reports: they have other information sources. If they are unhappy about the quality of disclosures, let them pursue this directly with companies, exercising voice or exit.
Rather than sitting at their desks, churning out sterile analyses of explanations of non-compliance, academics could make a greater contribution by finding out what investors think and what difference such explanations make in practice. Much more of a challenge to get suitable data, of course, but surely much more valuable in assessing the practical effects of the comply or explain requirement.
That was a brief diversion and my reading is now focused on storytelling which is considerably more interesting. I have returned to interview data collected a decade ago, using a new perspective which I think may generate a third paper from the data. I have been planning to do this for some time but have been waiting for a Mac version of MAXQDA, software that I have used in the past. Finally this has appeared and I have downloaded a free demo version. I wonder if I can get all the coding done before the 30 days run out!
The authors have developed a typology for analysing the quality of "comply or explain" reporting. All well and good: everyone these days wants to develop a typology. It's rather like years ago when we all wanted our own two-by-two matrix: I remember being very excited when I managed this when studying internal auditors' views of risk management. But...there is already a very good paper on the same topic which develops a taxonomy.
What is the difference between a taxonomy and a typology in the context of social science? I have always understood a taxonomy to reflect hierarchical arrangements whereas a typology just groups things together on the basis of characteristics rather than relationships.
Anyway, the authors do recognise the other paper and make some attempt to explain why their approach is different but if I'd been reviewing the paper I would have asked for a more detailed explanation.
But the source of my irritation is more fundamental. The authors note that there is a very limited literature on comply or explain, thus justifying their contribution. But does this matter? The intention of the Cadbury Committee in recommending comply or explain in the Code of Best Practice was to initiate conversations between investors and companies. Nowhere in the paper is the view of investors mentioned: the whole focus is on regulation and enforcement. Regulators have to justify their existence: that they call for improved disclosure quality is inevitable. But investors seeking information about corporate governance don't rely solely on published reports: they have other information sources. If they are unhappy about the quality of disclosures, let them pursue this directly with companies, exercising voice or exit.
Rather than sitting at their desks, churning out sterile analyses of explanations of non-compliance, academics could make a greater contribution by finding out what investors think and what difference such explanations make in practice. Much more of a challenge to get suitable data, of course, but surely much more valuable in assessing the practical effects of the comply or explain requirement.
That was a brief diversion and my reading is now focused on storytelling which is considerably more interesting. I have returned to interview data collected a decade ago, using a new perspective which I think may generate a third paper from the data. I have been planning to do this for some time but have been waiting for a Mac version of MAXQDA, software that I have used in the past. Finally this has appeared and I have downloaded a free demo version. I wonder if I can get all the coding done before the 30 days run out!
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