تولید ارزش سهامداران: نقش حسابداری در تحول سازمانی

This paper explores the role of accounting calculations in constructing shareholder value within the context of organizational transformation in work organization. Using an intensive longitudinal case study (Conglom, a pseudonym), the paper relates innovation and experimentation in new forms of work organization to a drive for shareholder value creation. The priority given to shareholder value creation was articulated through a proliferation of accounting metrics and calculations that intermediated between the strategic preoccupation with securing financial profitability, as demonstrated by the share price, and the operational challenge of squeezing costs and improving margins to boost short-term performance through outsourcing, programme management and divestment. We interpret the discourse of shareholder value creation and the development of related accounting metrics as a hegemonic move which is central to the reassertion of capital – a development that, we contend, is symptomatic of a shift towards a more ‘despotic’ mode of capitalist reproduction [Burawoy, M., (1985). The politics of production. London: Verso], where the whip of the market, allied to notions of possessive individualism, free choice and self-determination, progressively replaces the velvet glove of the corporatist state.

Two ideas – ‘shareholder value’ and ‘restructuring’ – have been at the centre of interest in securing and examining corporate change during the past two decades. Prior to the dot.com bubble, accounting-related scandals1 and the crash of technology shares, there was limited questioning of the virtue of shareholder value creation. Following these events, the pursuit of shareholder value creation has become the subject of more sustained critical scrutiny – for example, by those who associate it with a broader strategy to ‘reorganize and remove unionized labor forces’ (Fligstein & Shin, 2005, p. 39). However, with a few exceptions (e.g. Gleadle & Cornelius, 2004), a critical examination of shareholder value creation is largely absent from the literatures on the (re)structuring of work and use of accounting measures. This neglect is particularly perplexing given that shareholder value creation is, at least in part, directed to and derived from extracting increased surplus from the rationalization of existing operations or acquisitions. New forms of work organization are characterized as flexible, lean, and innovation-mediated. In the lean manufacturing literature, for example, such features are identified as key to the ‘adding’ of ‘value’ (Womack, Jones, & Roos, 1990). Whether by default or by design (i.e. to avoid directly provoking labour), however, the adding of value is framed in terms of benefits to customers and also to employees who, it is anticipated, have more secure jobs in addition to becoming more empowered through teamwork. Similarly, Cooke and Morgan (1998) point to the emergence of processes of ‘semi-permanent experimentation’ to achieve closer and more durable integration of all aspects of manufacturing – supply chain, product design, new forms of corporate governance – but they do not consider the use and effects of the metrics that purport to create value for shareholders. Their analysis is restricted to how new employee relations in a ‘learning by doing’ environment foster knowledge sharing, problem solving, self-management and co-operation within and between networks of cross-functional work teams. In short, the imperative to restructure work organization is decoupled from the pursuit of shareholder value creation. The focus of mainstream accounting literature is confined to investigations of how specific accounting techniques, such as Economic Value Added and incentive schemes (e.g. share options), motivate managers to take decisions aimed at creating value for shareholders (Bromwich and Walker, 1998, O’Hanlon and Peasnell, 1998 and Stark and Thomas, 1998).2 How the pursuit of shareholder value is articulated through accounting measures and restructuring is rarely examined. The limited nature of the connections made between shareholder value creation, the use of accounting measures and restructuring efforts is apparent even in studies where, ostensibly, accounting is a focus of attention. Barsky, Hussein, and Jablonsky (1999) link the pursuit of shareholder value to downsizing but their focus is on analyzing published financial results rather than examining the articulation and use of accounting measures in the quest of shareholder value creation. In Miller and O’Leary, 1993, Miller and O’Leary, 1994 and Miller and O’Leary, 1998 study of Caterpillar, cursory attention 3 is paid to the significance of pressures from capital markets in contributing to management’s decision to transform the company in response to concerns about its cost disadvantage vis-à-vis Komatsu. Some earlier labour process studies have paid attention to work reorganization and shareholder value creation (e.g. Armstrong, 1987, Armstrong, 1991 and Hopper and Armstrong, 1991) but their focus is upon manager–worker relations, including contradictions within the capitalist agency relationship, with little attention given to the intersection of the wider ‘circuits of capital’ ( Kelly, 1985), let alone the study of accounting measures in enabling (and constraining) their intermediation. The most extensive study of corporate performance and shareholder value has attributed improvements in US and UK share prices in the 1990s exclusively to forces outside of the corporation: the ‘irrational exuberance’ of investors; declining rates of interest; and institutionalized patterns of middle class saving ( Froud, Johal, Leaver, & Williams, 2006). When examining giant firms in the aggregate, these may be highly significant influences but our study of Conglom suggests that ‘internal’ changes are also important, even when acknowledging the inclination of senior managers to give themselves credit for all share price improvements while attributing poor results to ‘adverse conditions’.

That many shopfloor workers were dismissive of management’s claims that new manufacturing methods and the focus on shareholder value in Conglom would be beneficial to both labour and management is perhaps not surprising, given previous experiences of workers in Western capitalist countries that such promises never deliver (e.g. Oakes & Covaleski, 1994). Arnold (1999) cites many quotes from shopfloor workers and shop stewards in Decatur that almost exactly parallel many of the quotes we provided above. Quite simply, as Arnold has noted, shopfloor workers tend to read management agendas as meaning something entirely different: ‘”continuous improvement” means “continuous speed-up”; “flexibility” means “eliminating job classifications”; “outside contracting” means “job loss”; “design for manufacture” means “design for deskilling”; “worker empowerment” means “more power for management”; and competitiveness” means “worker against worker”’ ( Arnold, 1999, p. 413). Some measure of awareness of workers’ suspicion of, if not antagonism towards, management agendas was seemingly reflected in managers’ disinclination to draw, or broadcast, too direct or recurrent a relationship between plant performance metrics and the buoyancy of the share price: Shareholder value and Conglom’s position on Wall Street isn’t something we communicate to employees, not directly. We’re aware that this is important at corporate level, our managers are aware that it is but not the shopfloor. So it is not something we communicate to employees on any kind of a regular basis… It is something that comes up at briefings and it is also something that comes through in performance appraisals. (HR Manager) In sum, in significant respects, our findings lend support to Fligstein and Shin’s (2005, p. 39) assessment that: Maximizing shareholder value and minimizing the importance of employees is a not so veiled way to try and increase profits by reducing the powers of workers…The data suggests that workers were certainly being treated less like stakeholders and more like factors of production. (Fligstein & Shin, 2005, p. 39; see also Froud, Haslam, Johal, & Williams, 2000) However, our theoretical orientation leads us to regard the situation at Conglom as less self-evident and more complex than Fligstein and Shin suggest, and points to limitations of analysis that relies upon simple categorization and sweeping generalization that is largely silent on the dynamics and complexities of change. Discussion and conclusions We have provided a critical assessment of the literature on shareholder value creation as a theoretical backdrop for the analysis of the transformation of Conglom. We have noted how mainstream analysis broadly assumes the desirability and legitimacy of capitalist economic organization on the grounds that it offers the most rational and efficient means of harnessing production factors – capital, raw materials and labour. For advocates of shareholder value creation, the primary targets are executives who stand accused of ‘feather-bedding’ and ‘empire-building’ by presiding over the (mis)appropriation of the value that is properly due to shareholders, thereby failing society, by making inadequate use of corporate resources, and shareholders, by promoting the self-interested development of flabby corporate capitalism. The shareholder value conception of the firm urges and promotes a revival and reinvigoration of capitalist enterprise through a process of financial discipline in which the redistribution of wealth to the most privileged sections of society is justified on the grounds of the necessity of ensuring, through incentives and other controls (e.g. threat of takeover) the effectiveness of their contribution to the general good. We have located shareholder value creation in a broader neo-liberal discourse, including agency theory, which promoted and legitimized change during the 1980s and 1990s. The idea was articulated and pursued most energetically by finance specialists, including academics – financial analysts, stock brokers, institutional investors, and investment bankers – but also by senior executives who either subscribed to, or cynically embraced, the view that firms ‘had to voluntarily reorganize to raise profits and share prices or else face getting bought out’ (Fligstein & Shin, 2005, p. 14). Collectively, they have been pressing ‘for higher returns on corporate securities that have in turn created growing systematic pressures for financial liquidity on US corporations’ (O’Sullivan, 2000, p. 161). Financial analysts became more vociferous in their support of managers who meet the expectations of the stock market and in lambasting those who failed to deliver (Iverson & Varian, 1998): In 1990, fully one third of the companies in the Fortune 500 were targeted for hostile takeovers. The rest lived in fear of the knock at the door…Thus CEOs faced a clear choice: pledge allegiance to shareholder value and become fabulously wealthy, or be fired (Kelly, 2001, p. 55). In effect, shareholder value creation has mobilized and sustained a social movement that ‘came to dominate the rhetoric about firms and the strategic behaviour of managers’ (Kelly, 2001, p. 16). It has served to reassert, rally and reorganize the interests of capital around the notion of shareholder value primacy. More specifically, it has reaffirmed and focused the role of managers as responsive, above all, to investors as their performance is assessed in terms of share price movement. A distinctive focus of our study has been upon the behaviour of managers and the accounting measures devised and applied in response to pressures to create shareholder value as a key indicator of corporate performance. Critical commentaries have suggested that mainstream representations of shareholder value creation are ‘ideological’ – in the sense that they assume the legitimacy of the status quo, and they disregard the divisive consequences, as well as the short-termism, of placing such emphasis upon shareholder value creation (e.g. Aglietta & Rebérioux, 2005). Critics of shareholder value maximization have questioned the effects of its logic – in terms of accountability, opportunity and wealth distribution. The neo-Marxist standpoint, articulated by Burawoy and engaged with here to examine changes at Conglom, shares the view of critics that advocates and apologists for shareholder value creation: (i) naturalize capitalism as a form of social and economic organization and (ii) embrace a narrow, instrumental understanding of what is ‘rational’ without regard for what is equitable or sustainable. But, in addition, our focus has been upon how interests are organized (rather than given); and we have shown how the discourse of shareholder value, translated into specific accounting and control measures within organizations, is important for organizing the interests of capital. We have argued that the discourse of shareholder value creation and the development of related accounting metrics exemplify what Burawoy, 1983 and Burawoy, 1985 calls ‘hegemonic despotism’. Accounting metrics were shown to enable a process of translation and control with regard to the realization of share price targets. It was hegemonic insofar as controls were exercised “rationally” rather than idiosyncratically, and all employees enjoyed comparatively favourable terms and conditions of employment. But it was increasingly ‘despotic’ as pressures to increase shareholder value were translated, through accounting metrics, to generate “real productivity growth” by cutting staff numbers and threatening plant closures. A chain of causality was constructed, descending from shareholder value creation through the twin policy of cost cutting and growth to create a stronger alignment with a new strategic vision and to promote a climate of change. Cost cutting was achieved through the application of financial metrics (e.g. integrated cost, cost of quality, risk calculations) that sought to eliminate waste (in particular labour identified as non-value adding) and new, innovative manufacturing methods, such as single piece flow and Six Sigma Growth was pursued through increased sales of existing business, divestment and acquisitions that would benefit from Conglom’s financial discipline, centralization and cutting-edge technology. We have interpreted the incessant and intensive reliance on accounting calculations as a translation of senior management’s will to create shareholder value rather than ‘just’ as an effort to render accounting responsive to some manufacturing ideal. Conglom’s strategy sought to raise productivity, but we have argued that productivity and even growth were subsidiary objectives. Raising and supporting the share price, we contend, became the foremost and overriding preoccupation of senior managers at Conglom – not least because, as significant holders of share options, they had a strong incentive to focus upon improving the share price. Other targets, such as securing ‘customer satisfaction’ were means to this end. The ‘search for continuous improvement’ was principally a search for ways of impressing and/or placating Wall Street. 10 What failed to impress, or did not impress sufficiently quickly, was simply abandoned by Conglom’s most senior executives. The share price as valued in the stock market became the ultimate ‘acid test’ of the performance of Conglom and its CEO. To pass this test, Conglom’s manufacturing strategy went through a process of continuous development; and we have identified a number of connections between this aim and experimentation with new forms of manufacturing and ‘financially-driven’ corporate initiatives. ‘Bottom-line’ profitability was improved by squeezing out costs through divestment, delayering, outsourcing, and rationalization. Share option schemes sought to incentivize Conglom’s employees to implement policies and mechanisms that would drive up the share price. 11 We have shown how performance measures were embraced, though sometimes reluctantly, by Conglom managers. We have also noted how, in contrast, many shopfloor workers viewed the emphasis on shareholder value creation as symptomatic of ‘corporate greed’, and as being typical of an obsession with profit at the expense of employee reward, recognition and job-security. The importance of shareholder value creation inherent in Conglom’s strategic vision served only to reinforce a widely held view amongst shopfloor workers that, in the eyes of corporate management, they were no more than a resource, like any other resources (material or financial), that was there to be exploited or disposed of. Rejections of the selfish discourse of shareholder value creation serve as a reminder of the precariousness of manufactured ‘consent’ ( Burawoy, 1979) by labour in the face of the priorities of capital, as signalled by the capital markets and relayed by senior executives who were incentivized (and terrorised) by share price values. Translating the aspiration to maximize shareholder value into practices – of manufacturing or acquisition – to bring about its realization has been shown to be problematical as, ultimately, it relied upon the full cooperation of managers as well as workers. In each case, we have seen how this cooperation is qualified by negative appraisals of the legitimacy and/or consequences of a slavish devotion to the goal of shareholder value creation. In concentrating upon shareholder value-driven forms of calculation and accountability in a number of areas, including investment/divestment decisions, operations management, and supply chain relations, our study complements the recent work of Fligstein and Shin (2005) who connect work reorganization with what they term a ‘shareholder value conception of the firm’. Their study examines this connection using secondary data (e.g. counts of number of times the term ‘downsizing’ was used in the New York Times and Wall Street Journal) without addressing how shareholder value is practically enacted. In contrast, our study explores how the general logic examined by Fligstein and Shin was articulated in the particular case of Conglom. We have shown how changes in manufacturing, work organization and structural configuration were motivated primarily by a drive to increase shareholder value; and we have focused upon the changing role of accounting practices as media and outcome of this drive. Other analyses have noted the extensive, negative impacts of work reorganization upon many groups of workers who are progressively reduced to factors of production (e.g. Ezzamel et al., 2004, Baumol et al., 2003, Gordon, 1996 and Harrison and Bluestone, 1988). At Conglom, the picture was broadly confirmed but also more complicated. On the one hand, and with the possible exception of employees in receipt of share options, our study shows that workers were not treated like ‘stakeholders’ (see also Fligstein & Shin, 2005), although it may be questioned whether, during the previous era, they were treated as stakeholders rather than as unplanned beneficiaries of a satisfying and complacent managerial regime. On the other hand, Conglom employees were not treated in every respect as readily substitutable ‘factors of production’ (contra Fligstein & Shin, 2005). In order to attract and retain well qualified, productive employees, Conglom was reported to have offered all its employees exceptionally generous benefits packages with respect to salary, training, health care and pensions. At the very least, it can be said that Conglom employees were treated as valued commodities, albeit readily expendable ones, as illustrated by the application of the ‘pizza principle’. Of no less importance, an abiding appeal of working for Conglom was a sense of being (employed by) the best, as reflected in the company’s ranking amongst the top employers in the USA and worldwide. In this respect, its highly ranked status, which turned heavily upon it reputation for creating shareholder value, was presented to and valued by managers as basis for their future employment prospects, whether within the company or when they became expended by it, except for the shopfloor who could perceive little scope for re-employment. In return, the company expected an equivalent, superior level of performance and did not hesitate to fire individuals or downsize companies if this was calculated to be necessary to support or improve the share price. In this respect, it is relevant to note how the transformation of Conglom parallels that of other major conglomerates, such as GE. But is also differs from GE in two key respects. First, Conglom lacked the equivalent of GE Capital that has provided a strong engine for GE growth (see Froud et al., 2006). Second, and relatedly, Conglom never achieved the brand status of GE despite being less diversified than GE. 12 What the history of Conglom shares with GE, nonetheless, is an unswerving commitment to forms of restructuring – both internally and through divestment and acquisitions – that seek to deliver shareholder value by squeezing costs and leveraging assets. Lacking an equivalent of GE Capital, and at times struggling to identify sufficiently attractive acquisition targets, shareholder value creation at Conglom relied more heavily upon cost cutting through the restructuring of existing businesses using a variety of techniques, such as Six Sigma. As our study has been based upon a single corporation, it is necessary to exercise caution in generalizing our observations. In particular, it is worth recalling that Conglom is a high-tech, US based corporation. As Froud et al. (2006) point out, when contrasting the US and the UK, ‘the USA and the UK offer two national stories with different variables and dynamics. The USA is the world’s only superpower with a high-tech capability to match, and this economic base contrasts with the UK (and numerous other advanced capitalist economies), which represents a subaltern capitalism on the edge of Europe where the expansion of services provides partial compensation for the halving of manufacturing employment over the past twenty-five years”. ( Froud et al., 2006, p. 74). Nonetheless, in contrast to other studies where secondary data on many companies has been used or where pressures from capital markets have been connected with the reorganizing and disciplining of productive activity in only the most schematic form, our study has sought to illuminate the intermediation of accounting measures in the realization of shareholder value. In this respect, this study adds to, and advances upon other research that, in the case of labour process studies, have made abstract connections between capital markets and work organization through the notion of a ‘circuit of capital’ (e.g. Kelly, 1985 and Thompson, 2003) but have not examined how accounting operates to intermediate this relationship. In the case of accounting studies, either metrics are examined without reference to shareholder value creation; or critical analyses have been undertaken that do not explore in detail how these metrics intermediate between capital markets and efforts to change work organization (e.g. Arnold, 1999, Miller and O’Leary, 1993 and Miller and O’Leary, 1994). To conclude, the nature of our access to Conglom – which began with the study of shopfloor practices in a UK plant and extended to interviews with senior managers in the USA and UK – has enabled us to shed light upon the intermediating role of accounting in translating the pursuit of shareholder value creation into (hegemonically despotic) forms of work organization; and it has permitted us to explore a range of employee’s assessments of the role and effects of Conglom’s emphasis upon shareholder value creation. Our study has endeavoured to connect key elements within the circuit of capital and to examine of the role of accounting measures in their intermediation. The bottom-up nature of our access did not allow us to interview the key architects of Conglom’s strategy about its central thrust or about how the shareholder value emphasis worked its way through the corporation. Future research in other large and/or leading corporations such as Conglom might valuably combine analysis of the introduction and use of accounting measures with investigation of top managers’ attentiveness to, and pursuit of, shareholder value creation.