.. women get it tougher.
I am deeply saddened by today's news that Sacha Romanovitch is being booted out of GT. She has been a wonderful role model for young women in accountancy and has done important things at GT. It seems that her public profile suited GT partners when things were going well but the Patisserie Valerie scandal has apparently tipped the balance. I'd like to know who the PV audit partner is and what action will be taken against him or her.
Have you ever heard of Bill Michael, David Sproul, Kevin Ellis or Steve Varley? They are the leaders of the Big Four accountancy firms. They manage to keep a pretty low profile, don't they, in spite of the audit problems which swirl around their firms on a regular basis. And if their fellow partners have briefed against them anonymously, the press haven't thought it worth reporting.
I have always admired GT. My very first experience of the accountancy profession, many years ago, was a summer job with a firm in Sheffield which was taken over by Thornton Baker. The staff were all so eccentric that I don't think taking on a girl seemed at all odd to them, which meant that I had no idea that I would encounter any gender prejudice in the future...
When I first started teaching, it was difficult for poly graduates, even with first class degrees, to get training contracts, because those in charge of recruitment used A level results as a filter: poly students typically had poorer A level results, often for reasons beyond their control and unrelated to their intellectual ability. The partners at the local GT office were keen to employ our graduates and went out of their way to meet them and advise them on their applications.
And the GT annual corporate governance reports have been a great boon to both academics and practitioners. As academic adviser to the Turnbull review group which looked at reporting of internal control, I was asked to investigate the research process GT used to produce their report: I was very impressed by its rigour (they hadn't heard of inter-coder reliability but they knew how to deal with it...)
Sacha's leadership of the firm only increased my admiration for them. It's disappointing to find that GT is really no different from its competitors.
Tuesday, 16 October 2018
Sunday, 26 August 2018
Bankers
I have just finished reading Philip Augar's excellent book "The Bank that Lived a Little: Barclays in the Age of the Very Free Market". I found myself completely gripped by it because, even though the outline of the events was familiar, his meticulous research and good writing made the story really come alive.
There is something fascinating about the rise of this literary genre which takes the lid off the world of finance, offering some insights into the thinking of the people involved in events that can blossom into full-blown scandals. I remember being very impressed by "Barbarians at the Gate" and "Liars' Poker" when they were published in 1989 and there has been a steady stream of such books since then, some turned into compelling films like "The Big Short" and "The Smartest Guys in the Room".
Augar's book seems to me to be a cut above the rest. The underpinning research is very impressive and he has made very good use of the extensive access he was afforded to people and papers. There is often a nuance to the books in this genre, as if the authors are saying not only "Here's the story and the facts I've discovered" but also inviting the reader to share their shock and concern about issues of accountability and the behaviour of the protagonists. Augar is very careful about positioning his analysis, which in my opinion makes this book as objective as good academic research aims to be. The reader can't help but conclude that there was a significant problem with Barclays' strategy and that the non-execs did a poor job of challenging those driving it but Augar manages to trace a path through his accumulation of factual information in such a way that the reader is led to this conclusion in small steps, rather than being presented with the full glare of the story viewed with hindsight.
The book clearly describes the dominance of a small elite group of middle-aged men over the banking industry. They are not driven by the size of their personal rewards: these serve to symbolise and reinforce their relative status. They are driven by competition. They know they are powerful but they seem to have little idea of how such power might be used to improve society. They view regulation as a constraint to be circumvented or even ignored. Although they have much in common, they are not friends and have little compunction about leaking damaging information, undermining each other in the boardroom or sacking each other. They consider themselves exclusive on the basis of their qualifications and experience: only they can fully understand the complexities of financial institutions and the challenges of the economic environment. They are not very likeable.
There are women in this story. If the diversity discourse has any real traction, you'd expect them to make a difference to board behaviour. They don't, although at least one - Alison Carnwath - tried.
The numbers are astonishing. They are juggled about with little concern for the impact on those at the bottom of the pile - the bank's retail customers. Alongside the boardroom story, Augar traces the experience of one such customer, whose business fails in large part due to the mis-selling of a complicated financial product, illustrating the way that the traditional aspects of retail banking have been undermined and also emphasising the distance and apparent disconnect between the board and the organisation's frontline activities.
Lombard Street to Canary Wharf: my tentative theory that moving out of the old buildings of the City where office walls are often hung with portraits of past directors has had a negative impact on behaviour was somewhat undermined - Barclays took the portraits with them - but there are points in the story where the surroundings become symbolically important.
And the dinners. Deals are made and candidates are assessed over dinners. There's a book to be written about the role of dinners in corporate governance.
The relationship of the Barclays executives with their counterparts in the US is interesting. The goal of rivalling the Wall Street institutions underpins the development of the investment side of the bank but the implications of this for the organisation as a whole are not considered carefully by the board until it is too late. The clash of cultures between the US and the UK is also fundamental to the story. While wanting to harness the drive and abilities of US bankers, the board members from the UK fail to recognise problems of different communication styles. Traditional informal nods and winks of the City don't work as the regulators expect them to. The international network within which the senior bankers are enmeshed challenges the idea that culture can be effectively changed within individual companies. This group has its own culture, permeating all the banks between which they moved so easily. It would be interesting to consider the role of this type of epistemic community on organisational culture: the current emphasis in corporate governance thinking on managing culture does not appear to take such external influences into account.
The Barclays board ticked all the corporate governance boxes but made bad decisions. This is an excellent example to challenge the misguided belief that code compliance can prevent boards from making mistakes, and demonstrates the need to distinguish carefully between defective governance structures and processes and poor business decisions. The non execs were not shrinking violets: they were people of stature and competence in the worlds they came from. Why were they unable to exercise effectively the oversight function expected of them? This story supports my strong suspicion that the NED role is often impossible to fulfil in the way that our current corporate governance framework assumes.
The story is not over yet. Charges of fraud around the raising of the funds from Qatar that kept Barclays independent of government funding during the financial crisis have yet to be resolved. Criminal proceedings against four former senior employees will not start until next year. Augar's commentary on the unfolding story will be well-informed: I look forward to it.
There is something fascinating about the rise of this literary genre which takes the lid off the world of finance, offering some insights into the thinking of the people involved in events that can blossom into full-blown scandals. I remember being very impressed by "Barbarians at the Gate" and "Liars' Poker" when they were published in 1989 and there has been a steady stream of such books since then, some turned into compelling films like "The Big Short" and "The Smartest Guys in the Room".
Augar's book seems to me to be a cut above the rest. The underpinning research is very impressive and he has made very good use of the extensive access he was afforded to people and papers. There is often a nuance to the books in this genre, as if the authors are saying not only "Here's the story and the facts I've discovered" but also inviting the reader to share their shock and concern about issues of accountability and the behaviour of the protagonists. Augar is very careful about positioning his analysis, which in my opinion makes this book as objective as good academic research aims to be. The reader can't help but conclude that there was a significant problem with Barclays' strategy and that the non-execs did a poor job of challenging those driving it but Augar manages to trace a path through his accumulation of factual information in such a way that the reader is led to this conclusion in small steps, rather than being presented with the full glare of the story viewed with hindsight.
The book clearly describes the dominance of a small elite group of middle-aged men over the banking industry. They are not driven by the size of their personal rewards: these serve to symbolise and reinforce their relative status. They are driven by competition. They know they are powerful but they seem to have little idea of how such power might be used to improve society. They view regulation as a constraint to be circumvented or even ignored. Although they have much in common, they are not friends and have little compunction about leaking damaging information, undermining each other in the boardroom or sacking each other. They consider themselves exclusive on the basis of their qualifications and experience: only they can fully understand the complexities of financial institutions and the challenges of the economic environment. They are not very likeable.
There are women in this story. If the diversity discourse has any real traction, you'd expect them to make a difference to board behaviour. They don't, although at least one - Alison Carnwath - tried.
The numbers are astonishing. They are juggled about with little concern for the impact on those at the bottom of the pile - the bank's retail customers. Alongside the boardroom story, Augar traces the experience of one such customer, whose business fails in large part due to the mis-selling of a complicated financial product, illustrating the way that the traditional aspects of retail banking have been undermined and also emphasising the distance and apparent disconnect between the board and the organisation's frontline activities.
Lombard Street to Canary Wharf: my tentative theory that moving out of the old buildings of the City where office walls are often hung with portraits of past directors has had a negative impact on behaviour was somewhat undermined - Barclays took the portraits with them - but there are points in the story where the surroundings become symbolically important.
And the dinners. Deals are made and candidates are assessed over dinners. There's a book to be written about the role of dinners in corporate governance.
The relationship of the Barclays executives with their counterparts in the US is interesting. The goal of rivalling the Wall Street institutions underpins the development of the investment side of the bank but the implications of this for the organisation as a whole are not considered carefully by the board until it is too late. The clash of cultures between the US and the UK is also fundamental to the story. While wanting to harness the drive and abilities of US bankers, the board members from the UK fail to recognise problems of different communication styles. Traditional informal nods and winks of the City don't work as the regulators expect them to. The international network within which the senior bankers are enmeshed challenges the idea that culture can be effectively changed within individual companies. This group has its own culture, permeating all the banks between which they moved so easily. It would be interesting to consider the role of this type of epistemic community on organisational culture: the current emphasis in corporate governance thinking on managing culture does not appear to take such external influences into account.
The Barclays board ticked all the corporate governance boxes but made bad decisions. This is an excellent example to challenge the misguided belief that code compliance can prevent boards from making mistakes, and demonstrates the need to distinguish carefully between defective governance structures and processes and poor business decisions. The non execs were not shrinking violets: they were people of stature and competence in the worlds they came from. Why were they unable to exercise effectively the oversight function expected of them? This story supports my strong suspicion that the NED role is often impossible to fulfil in the way that our current corporate governance framework assumes.
The story is not over yet. Charges of fraud around the raising of the funds from Qatar that kept Barclays independent of government funding during the financial crisis have yet to be resolved. Criminal proceedings against four former senior employees will not start until next year. Augar's commentary on the unfolding story will be well-informed: I look forward to it.
Tuesday, 31 July 2018
Holiday reading
Even retired professors get holidays but while cruising along the Rhine my choice of reading was on the lighter side and, since I came home, the recent very hot weather has made it difficult to concentrate on anything that deserves significant intellectual effort, like Philip Augar's "The Bank that Lived a Little" or Jesse Norman's "Adam Smith: What he Thought and Why it Matters", both of which are waiting on my desk.
But I had reserved Richard Brooks' "Bean Counters: The Triumph of the Accountants and How they Broke Capitalism" from the local library so when it arrived I thought I should at least open it. Not that I imagine there will be such a queue of other eager readers that I won't be able to renew it but you never know in Oxford.
I confess that having read an extract somewhere I was expecting this book to irritate me, so the act of reserving it and paying £1.20 to do so was possibly masochistic. I began by looking at the index: how could a book about accountants not include any reference to my hero Sir David Tweedie? And then I looked at the acknowledgements and sighed a little that the names listed were all from the critical wing of both academia and the profession, such as it is. Puffs on the back cover from Margaret Hodge, Frank Field and John McDonnell and the fact that Brooks writes for Private Eye all made it pretty clear what I could expect in its pages.
But I was surprised to discover that the book is somewhat better than I expected. The first section on the history of the profession is reasonably well researched, although there is more about the history of the US profession than the UK but I suppose that's necessary to set the picture for the ascendancy of the global firms.
The opportunity to take a slightly more balanced view of the probity of the profession is occasionally missed: with reference to Robert Maxwell's scathing description by the Board of Trade inspectors as "a person who cannot be relied upon to exercise proper stewardship of a publicly quoted company" Brooks does not inform the reader that one of those inspectors was Sir Ronald Leach, senior partner of Peat Marwick Mitchell and that the firm refused to have anything to do with Maxwell thereafter.
Neither is there any discussion of the establishment of UK accounting standards and the sincere attempts by the profession to address the measurement and valuation issues inherent in the reports being audited (which is where Sir David would come in.)
The second section gallops through more recent scandals, pointing out the high rewards and lack of accountability that have privileged accountants over those who have lost money and jobs. Oddly, there is almost no mention of the boards of the client companies discussed: all responsibility is placed at the doors of their auditors with no reference to corporate governance failings.
The final part in which Brooks interviews Big Four partners in an attempt to hold them to account could have been really interesting if approached more objectively - perhaps with the help of disinterested academic support enabling more nuanced probing, giving some deeper insights into the thinking of leading accountants about their role. And the conclusions about what might be done are far from startling.
For me, the real kernel of the questions Brooks should have been asking lies in footnote 12 of chapter 2: "for whom does a company account?" Our reporting framework, in which audit is so central, is based on a set of assumptions about this question which were developed in another era and are inappropriate for current circumstances. If the profession really wants to retain its audit role, it should be leading thinking about this question, in order to shape the place of audit in the future.
But I had reserved Richard Brooks' "Bean Counters: The Triumph of the Accountants and How they Broke Capitalism" from the local library so when it arrived I thought I should at least open it. Not that I imagine there will be such a queue of other eager readers that I won't be able to renew it but you never know in Oxford.
I confess that having read an extract somewhere I was expecting this book to irritate me, so the act of reserving it and paying £1.20 to do so was possibly masochistic. I began by looking at the index: how could a book about accountants not include any reference to my hero Sir David Tweedie? And then I looked at the acknowledgements and sighed a little that the names listed were all from the critical wing of both academia and the profession, such as it is. Puffs on the back cover from Margaret Hodge, Frank Field and John McDonnell and the fact that Brooks writes for Private Eye all made it pretty clear what I could expect in its pages.
But I was surprised to discover that the book is somewhat better than I expected. The first section on the history of the profession is reasonably well researched, although there is more about the history of the US profession than the UK but I suppose that's necessary to set the picture for the ascendancy of the global firms.
The opportunity to take a slightly more balanced view of the probity of the profession is occasionally missed: with reference to Robert Maxwell's scathing description by the Board of Trade inspectors as "a person who cannot be relied upon to exercise proper stewardship of a publicly quoted company" Brooks does not inform the reader that one of those inspectors was Sir Ronald Leach, senior partner of Peat Marwick Mitchell and that the firm refused to have anything to do with Maxwell thereafter.
Neither is there any discussion of the establishment of UK accounting standards and the sincere attempts by the profession to address the measurement and valuation issues inherent in the reports being audited (which is where Sir David would come in.)
The second section gallops through more recent scandals, pointing out the high rewards and lack of accountability that have privileged accountants over those who have lost money and jobs. Oddly, there is almost no mention of the boards of the client companies discussed: all responsibility is placed at the doors of their auditors with no reference to corporate governance failings.
The final part in which Brooks interviews Big Four partners in an attempt to hold them to account could have been really interesting if approached more objectively - perhaps with the help of disinterested academic support enabling more nuanced probing, giving some deeper insights into the thinking of leading accountants about their role. And the conclusions about what might be done are far from startling.
For me, the real kernel of the questions Brooks should have been asking lies in footnote 12 of chapter 2: "for whom does a company account?" Our reporting framework, in which audit is so central, is based on a set of assumptions about this question which were developed in another era and are inappropriate for current circumstances. If the profession really wants to retain its audit role, it should be leading thinking about this question, in order to shape the place of audit in the future.
Thursday, 7 June 2018
Reviewing the FRC
The invitation to contribute to the Kingman review of the
FRC published today mentions in passing that the FRC was established after Ron
Dearing’s 1988 report “The Making of Accounting Standards”. I can’t find my
copy but I remember the cover – glossy red with an overall design based on the
word “red” in fancy lettering. I was told by an ICAEW employee at the time that
this design was requested by Dearing as it was not only the colour of the cover
but also his initials.
Not long after, ICAEW published a further report with a red
cover. This was written by Professor David Solomons. I still have my copy. It
is a much more sober publication printed in a very small font and it contains a
detailed and scholarly analysis of the conceptual and theoretical aspects of
accounting standards.
The Dearing report addressed the structure of accounting
standard setting: Solomons addressed the content of the standards themselves.
Both are fundamental to the issue of trust in corporate reporting and I think
they need to be addressed at the same time. How can we judge whether the FRC is
fit for purpose in its role as guardian of
corporate reporting and corporate governance, without considering
whether both corporate reporting and corporate governance are fit for purpose?
Tuesday, 22 May 2018
Is there a better way to fail?
In some instances of corporate scandal or failure, it seems clear who is to blame. Greed and incompetence are simple to attribute and, when punishment does not follow, outrage does. The outrage is usually addressed by promises of systemic change.
The pendulum signifying deficient behaviour swings between three poles. If the board of directors is at fault, we are told that we need improved corporate governance - more independent and diverse boards. If the auditors are at fault, we are told that we need to break up the big 4 to make the audit market more competitive. If the shareholders are at fault, it seems that we need to make them take more active interest in their investee companies and behave as owners rather than traders.
None of this makes a great deal of difference. Part of the problem is due to the process of corporate accountability. The reporting framework was devised in the nineteenth century and has not adapted sufficiently to changes in business activity, business structure, information requirements and communication channels.
There is also a problem of expectation. The literature on audit long ago identified the expectation gap between what people think auditors should do and what they are actually required to do. (I remember being taught that the auditor is "a watchdog, not a bloodhound" which may seem like a useful metaphor.. but don't they both bark?)
But there is also a very wide expectation gap between what the general public believe that companies should do and what they actually do. No corporate accountability system can work without some clear idea of what companies are for and what can be expected of them. This discussion is happening in various places: for example, The Future of the Corporation, The Purpose of the Corporation, Tomorrow's Company Whether the insights from these different groups can be brought together and synthesised in any useful way remains to be seen but such thinking is needed to underpin policy and regulatory decisions which, at present, work on an ad hoc basis, selecting what appear to be the most pressing issues and tinkering with the system to try to address them.
Companies fail for all sorts of reasons. Risk is inherent in business and can't be managed out of existence. Honest and competent boards and management may make bad business decisions. Covering up may lead to incompetent and dishonest behaviour but no system can prevent that. The new focus on corporate culture assumes that a "good" culture will inhibit such behaviour but evidence of this seems very sparse.
We need to accept that companies will fail, even those that tick all the boxes. More boxes to tick won't change this. As well as identifying causes, perhaps we should be looking more closely at how the failure process is managed and how those caught in the fallout can be better protected.
The pendulum signifying deficient behaviour swings between three poles. If the board of directors is at fault, we are told that we need improved corporate governance - more independent and diverse boards. If the auditors are at fault, we are told that we need to break up the big 4 to make the audit market more competitive. If the shareholders are at fault, it seems that we need to make them take more active interest in their investee companies and behave as owners rather than traders.
None of this makes a great deal of difference. Part of the problem is due to the process of corporate accountability. The reporting framework was devised in the nineteenth century and has not adapted sufficiently to changes in business activity, business structure, information requirements and communication channels.
There is also a problem of expectation. The literature on audit long ago identified the expectation gap between what people think auditors should do and what they are actually required to do. (I remember being taught that the auditor is "a watchdog, not a bloodhound" which may seem like a useful metaphor.. but don't they both bark?)
But there is also a very wide expectation gap between what the general public believe that companies should do and what they actually do. No corporate accountability system can work without some clear idea of what companies are for and what can be expected of them. This discussion is happening in various places: for example, The Future of the Corporation, The Purpose of the Corporation, Tomorrow's Company Whether the insights from these different groups can be brought together and synthesised in any useful way remains to be seen but such thinking is needed to underpin policy and regulatory decisions which, at present, work on an ad hoc basis, selecting what appear to be the most pressing issues and tinkering with the system to try to address them.
Companies fail for all sorts of reasons. Risk is inherent in business and can't be managed out of existence. Honest and competent boards and management may make bad business decisions. Covering up may lead to incompetent and dishonest behaviour but no system can prevent that. The new focus on corporate culture assumes that a "good" culture will inhibit such behaviour but evidence of this seems very sparse.
We need to accept that companies will fail, even those that tick all the boxes. More boxes to tick won't change this. As well as identifying causes, perhaps we should be looking more closely at how the failure process is managed and how those caught in the fallout can be better protected.
Thursday, 10 May 2018
Transparency?
This recent publication by Larcker and Tayan caught my eye: "Netflix Approach to Governance: Genuine Transparency with the Board". It's a short descriptive account of the "highly unique practices" (can "unique be qualified?) of the Netflix board.
I'm a fan of Netflix (love "The Crown") but I'm not convinced that what is described represents "genuine transparency", whatever that means. We are told:
"The Netflix approach incorporates two highly unique practices: (1) board members periodically attend (in an observing capacity only) monthly and quarterly senior management meetings, and (2) board communications are structured as approximately 30-page online memos in narrative form that not only include links to supporting analysis but also allow open access to all data and information on the company’s internal shared systems, including the ability to ask clarifying questions of the subject authors. This quarterly memo is written by and shared with the top 90 executives as well as the board."
I do think that distance from management is a problem for boards, now that executive directors and NEDs don't sit around the boardroom table together. But attending management meetings? Reed Hastings, the CEO, says:
“I don’t want the management meeting to be any different because they’re there.”
Really? Has he heard of the Hawthorn effect? I can't believe that management won't behave differently if observed by the board. I also find it difficult to believe that board members could keep their mouths shut if they think that mistakes are being made. Transparency? The cynic in me whispers that meetings can be stage managed to avoid difficult issues and important discussions can take place outside management meetings. Just like board meetings, in fact...
The board memo could be a good idea. Maybe this is transparency. The ability to drill down and ask direct questions could be very valuable. But how much time would this take out of a director's day? Would they bother? We are not told how long the Netflix board has been operating in this way, although it implies that the practices were in place at the time of the Qwikster debacle which was in 2011. So the directors interviewed could have been asked about the actual use they make of this facility and how much of their time they devote to it.
"Hastings cautions that directors granted this level of access to management discussion and documentation need to exercise self restraint about influencing decisions outside the boardroom." You bet!
At a broader level, these practices raise an issue about the boundaries of corporate governance. The challenge is to provide board members with information that enables them to fulfil their oversight duties but not so much that they are tempted to become de facto management. Or at least that is the received wisdom: the discussions I have had with NHS NEDs suggest that the boundary could be permeable under some circumstances.
We need to know much more about information flows around the board. It's quite possible that other companies use similar - or even more innovative - methods. Some rigorous research into this would be very valuable.
I'm a fan of Netflix (love "The Crown") but I'm not convinced that what is described represents "genuine transparency", whatever that means. We are told:
"The Netflix approach incorporates two highly unique practices: (1) board members periodically attend (in an observing capacity only) monthly and quarterly senior management meetings, and (2) board communications are structured as approximately 30-page online memos in narrative form that not only include links to supporting analysis but also allow open access to all data and information on the company’s internal shared systems, including the ability to ask clarifying questions of the subject authors. This quarterly memo is written by and shared with the top 90 executives as well as the board."
I do think that distance from management is a problem for boards, now that executive directors and NEDs don't sit around the boardroom table together. But attending management meetings? Reed Hastings, the CEO, says:
“I don’t want the management meeting to be any different because they’re there.”
Really? Has he heard of the Hawthorn effect? I can't believe that management won't behave differently if observed by the board. I also find it difficult to believe that board members could keep their mouths shut if they think that mistakes are being made. Transparency? The cynic in me whispers that meetings can be stage managed to avoid difficult issues and important discussions can take place outside management meetings. Just like board meetings, in fact...
The board memo could be a good idea. Maybe this is transparency. The ability to drill down and ask direct questions could be very valuable. But how much time would this take out of a director's day? Would they bother? We are not told how long the Netflix board has been operating in this way, although it implies that the practices were in place at the time of the Qwikster debacle which was in 2011. So the directors interviewed could have been asked about the actual use they make of this facility and how much of their time they devote to it.
"Hastings cautions that directors granted this level of access to management discussion and documentation need to exercise self restraint about influencing decisions outside the boardroom." You bet!
At a broader level, these practices raise an issue about the boundaries of corporate governance. The challenge is to provide board members with information that enables them to fulfil their oversight duties but not so much that they are tempted to become de facto management. Or at least that is the received wisdom: the discussions I have had with NHS NEDs suggest that the boundary could be permeable under some circumstances.
We need to know much more about information flows around the board. It's quite possible that other companies use similar - or even more innovative - methods. Some rigorous research into this would be very valuable.
Thursday, 12 April 2018
It's conference time again...
Back from two interesting days at the annual conference of the British Accounting and Finance Association. This year those of us who had received awards from BAFA in past years were invited back specifically to provide feedback to early career researchers. One of the privileges of an academic career is the opportunity to help those who are just starting out so I was delighted to be asked although my heart did sink slightly when I read the papers in the session which I had been assigned to chair with Mike Page. They were all about audit but all quantitative and only one author had any practical experience of auditing and that wasn't really apparent in his work.
The presentations were excellent - all kept to time and were very accomplished, especially when considering that English was not the first language of those presenting. Mike was able to give them some feedback on their stats and we both agreed that they needed to tell more of a story to give their work greater context. If you've spent several years immersed in the fine detail of doctoral work it's quite a shift to step back and look at the big picture. But I did think that some of the research questions addressed, particularly those considering relationships between people, were not best tackled by the use of archival data.
In a very lively and thought provoking plenary address, last year's Distinguished Academic, Professor Jeffrey Unerman discussed the implications of the Brexit and Trump campaigns for accounting and finance academics. In the course of his presentation, he urged the audience to consider carefully the choice of research tools to investigate their research questions. I was certainly struck by the dominance of quantitative approaches in the papers at the conference but it is not difficult to see why this is happening as the opportunities for getting qualitative studies published in top ranking journals is limited and it is much easier and less time-consuming to find archival data to crunch than to gain access to appropriate interviewees or documentary sources.
At the other extreme, a paper, which attempted to stretch the understanding of what accounting is, considered war cemeteries as a means of accounting for the cost of war. Bizarrely, I found myself among a group of non-British academics who, while explaining how moving they found these places, also seemed to be developing a critique of the British government's management of the aftermath of World War 1. As a Brit whose great-uncle's wartime death is commemorated on the Chatby memorial I felt that I should have some comment to make but couldn't quite frame it appropriately.
Many of the papers scattered throughout the conference programme included corporate governance in their titles. This led me to joke that such attention probably signifies that corporate governance is dead. It appears that I am not the only one thinking this: Bob Garratt has written an interesting piece with this title for the RSA website. I agree with Bob that the focus of accountability should spread beyond boards but I don't think his remedy goes far enough to address the mismatch between the legal and regulatory structure which frames corporate reporting and the wider demands for accountability now being placed on business. When integrated reporting was first mooted, I thought this might be a big step towards solving this problem but it has been slow to make an impact. But several people attending the conference told me that they were looking at IR in their work so maybe academics can progress this in some way.
A paper by Niamh Brennan and Phil Shrives developed their continuing study of compliance with the UK Corporate Governance Code, looking at serious serial non-compliers. I think this is a very useful documentation of the impact of the Code but it is again important to step back and look at the big picture, in this case the way that approaches to the Code have evolved from its inception. But I would say that, wouldn't I? And I did suggest that they should read my book...
The paper that worried me most attempted to link the presence of female executive directors on boards with levels of executive remuneration in the UK. I found the fundamental assumption, that female directors could influence the level of accounting conservatism and thus the earnings on which executive compensation is based, quite unconvincing. Having focused only on female executives. they seemed to have ignored two important facts: a) the increased number of female directors since the Davies report are predominantly non-executives and b) it's NEDs who form remcos and make decisions about executive remuneration. But the really worrying aspect lay in their list of future research possibilities where they suggested exploring the impact on executive pay of other aspects of board diversity such as ethnicity, disability and sexual orientation. In one of those daft after-dinner conversations one has at conferences I had suggested that every company board should include a dog: this paper seemed to be moving perilously close to that idea...
For me, the most stimulating paper of the conference was presented by Lisa Jack who, working with Julia Mundy, is looking at the relationship between investment analysts and companies from a perspective of fairness and relational justice, using the theories of John Rawls. Unpicking such relationships is no easy task, with all the challenges of access to those involved, but this seems to me a very important attempt to throw light on the opaque workings of the investment intermediary chain. I shall watch the unfolding of this work with considerable interest.
The presentations were excellent - all kept to time and were very accomplished, especially when considering that English was not the first language of those presenting. Mike was able to give them some feedback on their stats and we both agreed that they needed to tell more of a story to give their work greater context. If you've spent several years immersed in the fine detail of doctoral work it's quite a shift to step back and look at the big picture. But I did think that some of the research questions addressed, particularly those considering relationships between people, were not best tackled by the use of archival data.
In a very lively and thought provoking plenary address, last year's Distinguished Academic, Professor Jeffrey Unerman discussed the implications of the Brexit and Trump campaigns for accounting and finance academics. In the course of his presentation, he urged the audience to consider carefully the choice of research tools to investigate their research questions. I was certainly struck by the dominance of quantitative approaches in the papers at the conference but it is not difficult to see why this is happening as the opportunities for getting qualitative studies published in top ranking journals is limited and it is much easier and less time-consuming to find archival data to crunch than to gain access to appropriate interviewees or documentary sources.
At the other extreme, a paper, which attempted to stretch the understanding of what accounting is, considered war cemeteries as a means of accounting for the cost of war. Bizarrely, I found myself among a group of non-British academics who, while explaining how moving they found these places, also seemed to be developing a critique of the British government's management of the aftermath of World War 1. As a Brit whose great-uncle's wartime death is commemorated on the Chatby memorial I felt that I should have some comment to make but couldn't quite frame it appropriately.
Many of the papers scattered throughout the conference programme included corporate governance in their titles. This led me to joke that such attention probably signifies that corporate governance is dead. It appears that I am not the only one thinking this: Bob Garratt has written an interesting piece with this title for the RSA website. I agree with Bob that the focus of accountability should spread beyond boards but I don't think his remedy goes far enough to address the mismatch between the legal and regulatory structure which frames corporate reporting and the wider demands for accountability now being placed on business. When integrated reporting was first mooted, I thought this might be a big step towards solving this problem but it has been slow to make an impact. But several people attending the conference told me that they were looking at IR in their work so maybe academics can progress this in some way.
A paper by Niamh Brennan and Phil Shrives developed their continuing study of compliance with the UK Corporate Governance Code, looking at serious serial non-compliers. I think this is a very useful documentation of the impact of the Code but it is again important to step back and look at the big picture, in this case the way that approaches to the Code have evolved from its inception. But I would say that, wouldn't I? And I did suggest that they should read my book...
The paper that worried me most attempted to link the presence of female executive directors on boards with levels of executive remuneration in the UK. I found the fundamental assumption, that female directors could influence the level of accounting conservatism and thus the earnings on which executive compensation is based, quite unconvincing. Having focused only on female executives. they seemed to have ignored two important facts: a) the increased number of female directors since the Davies report are predominantly non-executives and b) it's NEDs who form remcos and make decisions about executive remuneration. But the really worrying aspect lay in their list of future research possibilities where they suggested exploring the impact on executive pay of other aspects of board diversity such as ethnicity, disability and sexual orientation. In one of those daft after-dinner conversations one has at conferences I had suggested that every company board should include a dog: this paper seemed to be moving perilously close to that idea...
For me, the most stimulating paper of the conference was presented by Lisa Jack who, working with Julia Mundy, is looking at the relationship between investment analysts and companies from a perspective of fairness and relational justice, using the theories of John Rawls. Unpicking such relationships is no easy task, with all the challenges of access to those involved, but this seems to me a very important attempt to throw light on the opaque workings of the investment intermediary chain. I shall watch the unfolding of this work with considerable interest.
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