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The development of modern accounting and the changing position of shareholders 1864 - 2000

By Marianne V. Pitts


This dissertation consists of a set of four sole-authored, reviewed and published papers\ud which develop the theme that company accounting policies, particularly those relating\ud to asset valuation, depreciation and dividend policy, developed in response to a change\ud in the general perception of the nature of the property rights of the original owners.\ud The original owners of commercial and industrial concerns in the early nineteenth\ud century were the partners. After incorporation they and others became the\ud shareholders of the company.\ud The origin of commercial and industrial companies as partnerships influenced the\ud British government and legal thinking for nearly a century from 1856 to 1945, the date\ud of the Cohen Committee. It was the age of laissez-faire and has been much discussed:\ud Parliament was less keen to intervene in connection with the generality of companies,\ud where the view expressed in 1856 by Robert Lowe, then President of the Board of\ud Trade, that `having given [companies] a pattern the State leaves then to manage their\ud own affairs ...\ud (quoted in Hein, 1978, p. 149) provided a rationalization of the\ud widespread belief that it was no business of the state to interfere in what were seen as\ud private contracts between shareholders (Sugarman and-Rubin, 1984, p. 12). Moreover,\ud a laissez-faire approach on the part of the courts, where `formalist' views were at their\ud height (Atiyah, 1979, pp. 388-97), seems also to have affected the attitude to accounts\ud on the part of the courts. This may be observed in the series of `dividend' cases in the\ud nineteenth century (French, 1977) where judges on the whole were loath to go beyond the companies' Articles of Association and the latter of the Companies' Acts (unless\ud they could adduce fraudulent or improper behaviour on the part of directors) in\ud assessing matters of valuation, income measurement and profit determination.\ud (Napier and Noke, 1992, p. 38, emphasis added).\ud These issues `matters of valuation, income measurement and profit determination'\ud form the basis for much of this dissertation. There is one further paper extending the\ud work of Jefferys (1938) and Cottrell (1980) on the format of share issues from 1914\ud (Pitts 2000)

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