Oliver Williamson

Sad to hear that Oliver Williamson has died. 

In 2002, the book based on my PhD was published. I had met a rep from a very small publisher at a conference and she had asked to see the manuscript.  Knowing nothing about academic publishing, I was thrilled when it was accepted - no changes needed but they did want camera-ready copy which in those far-off days was quite a hassle to produce. I think they printed 50 copies. Sales never reached the point of generating royalties, the company was absorbed into a much larger publisher, my contact moved on and the book sank without trace. But my mum was quite impressed and it looked good on my CV.

In 2003, when Google was still something of a novelty, in an idle moment late on a Friday afternoon, I googled my own name. Glancing down the results, I noticed one hit in which my name appeared together with that of Oliver Williamson. Odd, I thought. Isn't he a famous American economist? A click brought up a pdf which looked like a book chapter, with the title: " Organization Theory. Lessons for the Lens of Contract/Governance". 

Searching the text, I found this: 

"Laura Spira's ethnographical examination of role of audit committees in corporate governance is what I would refer to as a precious jewel. Rather than address the issues in a normative way, she examines the practice. Her main finding is that (2002, p. 165): 'an important and unacknowledged role of the audit committee is the provision of comfort, through a process of ceremonial performance.. The comfort thus generated supports claims to organizational legitimacy and facilitates resource access. The study offers a possible explanation for the popularity of audit committees despite their apparent lack of effectiveness in improving corporate governance standards.' 

The comfort benefit is that audit committees enable companies to present a concern over high standards of corporate governance, whereupon added legitimacy and better access to financial resources result (Spira, 2002, p. 169).

In the wake of Enron and other accounting scandals, the idea that the auditing committee is a legitimating façade, maybe even a scam, is hard to resist. Spira does not purport to settle these matters definitively, but her treatment suggests that the audit committee is more form than substance. That has lessons for corporate governance reformers: do not mindlessly proliferate new rules, the observance of which serves ceremonial purposes and deflects attention from serious underlying concerns."

Wow! No-one had reviewed my book and I didn't even think any copies had been sold. And now a Nobel Laureate economist had called my book "a precious jewel"! To be honest, the excitement of that moment has never died. 

Husband arrived home from work expecting dinner. No chance. I was far too busy composing an email to the great man asking how he had discovered my book. Husband, with an undergraduate degree in economics, had never heard of Professor Williamson and was not impressed. 

Some hours later a puzzled reply arrived. "I have no recollection of this piece, could you remind me?" Slightly deflated - was this a forgery? was the author a different and less illustrious Oliver Williamson? - I sent him the URL. 

"Ah" he replied, "I must have found your book on a shelf in the library at Berkeley." My book had found its way to a library in California - that was astonishing enough but to then be taken off the shelf by an eminent scholar in a random moment - what are the chances?  

He said that he had written the chapter for his students and had no current plans to publish it but I was welcome to quote his comment. Which I did. Often. Whenever an opportunity arose. In job applications, grant applications, annual appraisals...Of course, I had to explain who Oliver Williamson was to my mum ....and sometimes to other people... even, occasionally, to economists...

Some years later Professor Williamson came to the UK to give the annual Malthus lecture at the university of Hertfordshire. After his lecture - which, I confess, I barely understood -  he was surrounded by a crowd of people asking him what were no doubt penetrating questions about the arguments he had presented. I shouldered my way through to thank him for his kind words which had given a huge boost of confidence to someone in the early stages of an academic career. Of course, he had no idea what I was talking about but he smiled benignly.

The book wasn't that good. (I've written better stuff since.) It wasn't ethnographic, it was just based on a bunch of interviews. I think he was intrigued because it was an unusual approach to the subject at that time. But his comments made me believe that, in my fifties, I had become a proper academic and that my thoughts might be considered worthwhile.

Negative reviews have never bothered me since. And, paying it forward, I always frame the reviews I write as positively as I can. Although, sadly, I've never come across anything I would describe as a precious jewel.

Sir Donald Brydon's report on the quality and effectiveness of audit

This report is, in two respects, a model of its kind. It draws extensively on relevant academic research and it engages directly with those who responded to the Call for Views. Both of these features are unusual in this type of review: academic research is often cherry-picked simply to provide evidence for assertions of the authors and there is rarely any indication of how consultation responses have fed into the thinking behind the report.

I would have liked to have seen more general reflection on the role of audit in the structure of accountability. The report emphasises the role of audit in the supply of confidence (and I'm now wondering how confidence is related to what I termed comfort in my work on audit committees) but does not explore where audit sits in the investment intermediary chain, where confidence is crucial but accountability is blurred.

Another area which deserves exploration is the challenge of getting shareholders to engage: the owners/traders issue is relevant to the role of audit.

It would also have been useful to see some discussion of audit evidence: the work of Peter Wolnizer on auditing as independent authentication has been unjustly neglected.

The idea of an audit profession which recognises audit beyond the financial is interesting: this could usefully clarify the boundaries of financial audit. I remember engaging in heated discussions about the meaning of the word audit with the senior management at my university when the term "quality audit" crept into their discourse, before the publication of Michael Power's "The Audit Society". Multidisciplinary training for this new breed of auditors would indeed be essential.

The comments on the audit committee were also interesting. It is a long time since I interviewed AC members but it is clear that the demanding role placed on members has increased greatly. I remain baffled as to how anyone can chair, or even be a member of, more than one large and complex plc AC. The proposal that membership should be broadened away from those with a purely financial background is important but more needs to be understood about AC dynamics before further requirements about membership are introduced. The suggestion that NEDs don't fully understand the role of external audit is worrying.

I found this interesting:

"10.2.2 A simple mechanism to enable the workforce to raise issues around risks and assurance should be developed in each company, so that the designated director (or other mechanism) be the recipient of those inputs. The company should then have an obligation to respond to the workforce as to the way in which it has reacted to their requests."

I remember interviewing internal auditors in the 1990s about the processes underpinning risk reporting: at least one FTSE 100 company at that time had such a system and based its determination of its risk universe on feedback from employees. 

Two parts of the report made me cheer.

"18.0.3 In essence, it can be argued that there are no correct values as these all depend on informed estimates about the future of one kind or another." If only this was more widely recognised!

Numbers carry a misleading aura of certainty: Ted Porter analysed this effect in "Trust in Numbers" but it is rarely explicitly discussed in the context of financial reporting.

And this:

"26.1.5 It is too seductive for people to retreat behind a best practice defence of their actions. What matters is that the right practice has been followed and that may well be different in different companies and at different times. What matters is what is right for a particular company, with its particular problems and its particular management at this particular moment given its particular circumstances. Best practice concepts drive out innovation as it is always safer to go with the herd and claim that an action is best practice rather than take a bolder and individual step. Best practice defences are based on backward looking analysis. Of course, good practice must be faithful to an enduring set of principles. "

I have long believed that the words "best practice" are very misleading. Who decides what best practice actually is? 

We need to acknowledge the contextual nature of financial reporting and thus of audit. Standardisation implies homogeneity but companies are all different. Why shouldn't audit approaches differ too, depending on the context? 

And where does the role of judgement fit in? I have only looked at a few of the consultation responses so far but I was very struck by the one from Andrew Likierman in which he provides a very useful framework for the analysis of professional judgement.

It will be very interesting to see how this important report is taken forward. The demands placed on the future ARGA are very significant: ideally the design and constitution of ARGA will take these recommendations into account.

Professors of accounting

On Friday I attended the annual Conference of Professors of Accounting and Finance where there were two speakers who have recently written books which may be of interest.

Linda Evans is Professor of Education at the University of Manchester and her book is “Professors as Academic Leaders: Expectations, Enacted Professionalism and Evolving Roles”.   This is based on four extensive studies that she has undertaken, exploring the role of professors across all disciplines. Her conclusion is that the definition of “academic leadership” which underpins the role is poorly defined and thus problematic, leading to professors being stretched too thinly over a range of scholarly and administrative roles. She suggests that the professoriate in a university should be treated as a team with specialisms allowing all requirements across the university to be fulfilled but with professors able to contribute according to their strengths, in a manner similar to the canons at Westminster Abbey. This could then preserve space for research and scholarly activity which, she suggested, was under grave threat.

Michael Shattock has for many years been the guru of university governance and his new book is “Governance of British Higher Education: The Impact of Governmental, Financial and Market Pressures”. He presented an interesting historical analysis of university governance, arguing that boards of governors comprised of lay people cannot fulfil governance accountability requirements and that academics have been progressively side-lined from any influence on university strategy and need to take back control. The audience was a bit sceptical about this, having already spent the day listening to speakers who had painted a gloomy picture of the overstretched professoriate: Michael’s somewhat unsatisfactory response to this scepticism was to point to the enduring success of Oxbridge where senior academics take an active part in strategy development and manage to do everything very effectively.  No Oxbridge academics were present to comment on this.

I was particularly interested in the parallels with corporate governance in the private sector: the adoption in public sector institutions of mechanisms developed in the private sector has not been very successful in improving accountability – indeed, such mechanisms have largely failed in the private sector, too, where non-executive boards have been unable to deal effectively with issues such as CEO pay. The Shattock solution of including more academics on boards of governors is remarkably similar to Labour policy proposals to put employees on corporate boards.

Robert Caro

Until a few days ago I had never heard of Robert Caro but the title of his recently published book - "Working: Researching, Interviewing, Writing" - intrigued me. I've spent much of my working life doing those three things and I'm always interested to know how other people do them.

Caro is a highly respected journalist who, now in his eighties, is still working on the fifth volume of his biography of Lyndon Johnson and previously wrote a biography of Robert Moses. This book is a collection of pieces in which he describes the background to his writing - his motivation and the way he works.

Caro began by wanting to explore the nature of political power: he didn't set out to write biographies but saw this as the most interesting way to investigate this topic, focusing on the role of a single man who exercised great power, and considering its source. Not (yet) having read either biography, I can't assess how far he achieved this ambition but the diligence he exercised in his research is hugely impressive.

His account of working with documentary sources is amazing. His description of the Lyndon Johnson library and the colossal number of files held there is very vivid. The prospect of investigating them would be daunting for anyone less committed than Caro but with the help of his wife Ina he tackled the task. His research was meticulous. These days, when so many archives are available online, one might think it would be easier to do such work but Caro's description of working with documents illustrates the importance to a researcher of the feel and look of the originals. I noticed this myself when working on the Cadbury archive: looking at digitised documents is undoubtedly convenient but it is very different from holding the paper in your hands, seeing hand-written annotations, and this prompts different ways of thinking about the context in which the documents were produced and their meaning for those who produced them and read them.

His interviewing was equally diligent. Just tracking down the people who could provide him with the most useful insights took immense effort and great determination: researchers who complain about difficulties in accessing interviewees could learn a lot from Caro. And he is a very persistent interviewer, braving the irritation this caused to some of his influential interviewees.

Caro had no funding to do this work. He realised quite early on that working as a journalist and writing in his spare time was not an effective way to undertake such big projects. His first publisher made him a small advance but eventually his wife sold their house to support his work. It took a while before they were in position to feel more financially secure. This didn't prevent them from moving from New York to Texas to understand Johnson's background and to get closer to the people who could tell him about Johnson. This is an astonishing commitment to the project.

I found this book quite fascinating. Caro is a great storyteller and a fine researcher. Anyone interested in researching, interviewing and writing should read it.

Risk, regulation and blame

I've read two interesting articles this week. One by Gillian Tett in the FT: "A thicket of laws strangling the land of the free?" and one by Alex Edmans in economia, on Kodak.

Alex argues that Kodak's demise is an example of poor corporate governance because good corporate governance should not only focus on preventing egregious behaviour with regard to management rewards but also on the promotion of proactive innovation, which is where Kodak failed.

This reminded me that I had once written about the tension between enterprise and accountability. I find it a slightly worrying experience to reread things I wrote a long time ago. It's not a very good paper although it's interesting to see how much of it prefigures thinking that I developed in later publications. And I was surprised that it had gathered some quite recent citations, given that the corporate governance literature has expanded so much in the twenty years since I wrote it. But the point that I think I made and that Alex makes more cogently is the importance of balance in corporate governance and the need to think carefully about the impact of regulatory policy on long term value creation objectives.

Gillian Tett's article explores the increasing development of rules and bureaucracy and by implication its impact on innovation. She comments that "..the surplus of modern rules and bureaucracy has not emerged by accident: on the contrary, it reflects a mixture of powerful vested interests and (sometimes) well-meaning efforts to protect consumers and workers from exploitation." This prompted me to reflect on the management of risk and its use as a means of placing blame, which her article does not mention as a motive for regulation and which Mike Page and I discussed in our paper "Risk management: the reinvention of internal control and the changing role of internal audit" - another paper written about twenty years ago which stands up rather better to the test of time judging by its citation history.

Gillian Tett mentions the work of anthropologist David Graeber; we drew on the work of another anthropologist, Mary Douglas. There is much to be said for interdisciplinary approaches which can enable different perspectives on corporate governance and can raise broader issues for policy consideration beyond a focus on regulatory compliance.

Invisible Women

I have been trying to read "Invisible Women: exposing data bias in a world designed for men" by Caroline Criado Perez but I have given up. Which is disappointing because I have much sympathy with the author's argument, I just don't like her style. Her passion comes across to me as hectoring and, although she provides a great deal of evidence, I find an endnote in every other sentence very distracting.  I'm a reader who follows them all up but in this case not only is the quantity overwhelming but I also found the quality worrying. I prefer to see research evidence from the horse's mouth rather than filtered through media reports. It doesn't claim to be an academic book but for this reader rigour is important. Anecdotes are good hooks to capture reader interest but they are not data.

A couple of examples of things that bugged me in the first 100 pages.

1. On page 97 Criado Perez asserts that women receive less credit for jointly authored academic papers than men do. This article from the New York times is the reference to back up this assertion. A respectable author but I still dug around, followed the link to the working paper, checked to see if it had been published in a peer-reviewed journal (it has), thought briefly about comparing the working paper with the published version but decided life is too short. But I'm not convinced that there would be similar evidence in Europe and found myself irritated by generalisations based on a narrow US context.

2. In the early section on transport, the author clearly believes that if more women were involved in transport planning, transport policy would be more female friendly. This is very much like the belief that more women on boards would make them more effective and I've ranted on about that quite enough. The section on toilets must surely demonstrate that this assumption is flawed: I am sure that there are female architects involved in designing public buildings but there is always a queue for the ladies.

The accounts of the toilet problems of women in less developed countries were horrifying but Criado Perez is too young to know that the UK situation used to be much worse than now. Women used to have to pay a penny to use a public loo: men paid nothing. A wonderful Labour MP named Barbara Castle did more for women than many other female MPs ever had when she got that charge abolished.

I realised that I am not the target audience for this book. I'm not entirely sure who is but it may open up some useful conversations. Criado Perez' argument is important but we also need to recognise that there is some danger in expecting significant and fast change from increasing female representation.

Then I opened the June issue of economia. I always start with the disciplinary listings since someone observed that true equality in the profession would not be achieved until there were as many women being hauled up for disciplinary offences as there were men. On that basis we still have some way to go.

But look at this. Page 14. Strapline at the top of the page. "From the Institute this month: A woman steps up as ICAEW president..." Can you imagine reading "A man steps up as ICAEW president"? Maybe this just proves Criado Perez' point.

Advice for young accounting academics

The BAFA conference was a great way to catch up with people I hadn't seen for a while but I was concerned to learn that so many of my younger academic friends are struggling with increasing workloads and poor management support. I think I was very lucky that my academic career spanned the last two decades of the 20th century when UK higher education was better resourced and creeping commercialism was only just starting to bring in the heavy-handed management that they are now suffering. But I soon learned that I had to be proactive in managing my work situation. Reflecting on this, I wondered what advice I would give to young academics starting careers in business schools now.

Build and maintain your personal network. Your network will be really important for your career: as well as providing friendship and personal support, it will be a source of  information about project and job opportunities, as well as referees for grant and promotion applications.  Doctoral study gives you the chance to start building an academic network: if you've attended any research training courses or doctoral colloquia you will have met others in the same career stage as you, as well as leading academics in your area. It's worth keeping in touch with these people.

The resources to support conference attendance have diminished in many universities but it is the best way to establish contacts with colleagues in other institutions. Make the effort to meet new people: I know it's not always easy for those who are not naturally extrovert but it pays dividends.  Emphasise the value of conference attendance to your line manager by showing what useful general information you have brought back, beyond the benefits to you personally. Get involved in the main learned society in your discipline: committees are always looking for volunteers.

Don't forget your local network: take every opportunity to meet people in other parts of your university - getting yourself known can lead to interesting cross-disciplinary activities.

If you are a qualified accountant, you will also have a professional network through firms you have worked for and your professional body. This will help you to keep up with developments in the profession and with research access. It will also enable you to offer appropriate careers advice to your students.

Record what you do. Much of the work that academics do is invisible. I started writing this blog because a senior manager who was not a researcher had, in an informal conversation, questioned how I spent my time, implying that professors had an easy life compared to managers. You need to make all your activity visible - to yourself to start with, so that you can be realistic about your work-life balance - and then to managers. This may not at first seem relevant in an academic job - after all, you have a teaching timetable.  But what about all the admin you have to do to support that teaching? And the research that you often have to fit in during evenings and weekends and annual leave?

There may be allowances to support admin and research (although they are never large enough!) but there is also other activity which supports your role as a good "organisational citizen" which is not formally recognised. There are many examples, including ad hoc jobs that have not been anticipated in your workload planning, such as membership of validation panels, both internal and external; committee membership within your university or in academic or professional bodies; reviewing papers for academic journals and conferences; membership of editorial panels; external examining. These are all career-enhancing opportunities, worth pursuing, and often not obvious to your manager.

You will find it very helpful to have detailed information to hand when appraisal time comes round. Proactively, where there are areas of your work which you want to develop, you can show how your current activity may constrain this and ask for help. Reactively, if you are asked to take on extra work, being able to say "This is what I am doing at the moment. What would you like me to drop to make space for this new task?" focuses attention on *all* your activity, beyond the work reflected in whatever allocation system is used in your university.

Study the politics of your institution. Where does the power and influence lie? Understanding the pressures on your head of department and dean will help you to manage upwards. It will also help you to see what your career development opportunities might be.

Back in 1985 I quickly realised that the head porter was more important to my daily life than my head of department: he had the power to make my daily life much more comfortable in an old and poorly maintained building. My tiny office was always too cold or too hot: he could find me a heater or a fan. Equally important were the AV technician who could replace the bulb in the overhead projector and the library assistant who could find the current journal issue missing from the shelf. New buildings, new teaching technology and online library access have made these particular issues less important but making friends with admin and support staff is always worthwhile.