Accounting and Labour Control at Boulton and Watt, c. 1775-1810

The paper offers a new perspective on the management and accounting practices at this pioneering firm of the British industrial revolution. Using a historical materialist approach, it offers an alternative to the economic rationalist, Foucauldian and Marxist explanations in the prior literature. Based on preliminary archival research, it shows how the business practices of Boulton and Watt reflected the norms of the eighteenth century and before rather than overtly capitalist methods and used accounting to solve the problems of pricing their product and the supervision and control of labour.

Oldham capitalism and the rise of the Lancashire textile industry

The joint stock company, centred on Oldham, is a central narrative in Douglas Farnie’s seminal book, the English Cotton Industry and the World Market. Farnie was the first to highlight the idiosyncratic nature of these limited companies, including their highly democratic system of governance. Documenting the collapse of this system is a useful post-script to Farnie’s analysis. The chapter will extend Farnie’s contribution by examining new evidence in the pre-1896 period. It will then go on to document subsequent developments after 1896 and show that changes in governance had serious consequences for the industry. Cliques of mill owners, and the speculative stock market capitalism they engendered, promoted over-expansion of the industry and financial instability. The over-expansion of the 1907 boom was repeated with disastrous consequences in the re-capitalisation boom of 1919. It will be shown that the activities of networks local directors, which had been established pre 1914, not financial syndicates, banks, trade unions or government, were responsible for the collapse that precipitated the industry’s long decline.

Asymmetric Response: Explaining Corporate Social Disclosure by Multi-National Firms in Environmentally Sensitive Industries

The paper examines the determinants of corporate social disclosure (CSD) using a sample drawn from environmentally sensitive industries. It extends the traditional literature in two respects. First, it is international in scope, examining the accounting disclosure responses of multi-national companies to the pressures implied by the nature and scope of their operations. Second, variables measuring political risk and social development are developed so that these pressures can be measured, thereby introducing new dimensions to the literature. In common with previous studies, financial risk, size and other control variables are included. The relationships are tested econometrically utilising regression techniques not previously applied in the CSD literature but nonetheless more generally appropriate when using count dependent variables. Our results suggest that managers feel an unequal sense of responsibility to different constituencies and their disclosure priorities are determined by stock market accountability, lobbying power of their domestic audience and the political risk of their activities rather than the impact of their activities in countries of operation.

Calculating Profit: A Historical Perspective on the Development of Capitalism

The paper introduces the notion of different methods of calculating and analysing profitability as signatures of capitalism at different stages of development. Interactions between the development of the productive forces and the socialisation of capital ownership jointly impact on these signatures, such that profit calculations are historically contingent. These interactions take the identification of capitalism beyond simple associations with the presence or absence of double-entry bookkeeping (DEB), the capital account or return on capital calculations. Profit calculations are implicated in the process of transition from feudalism to capitalism by enabling the private enforcement of profit levels in excess of legally regulated interest rates or through fairly remunerated labour. The modern usage of ROCE is linked to the development of the productive forces and the socialisation of capital ownership.

The resource-based view of the firm and the labour theory of value

The paper argues that the principal components of the Resource- based view (R-BV) of the firm are not a sufficient basis for a complete and consistent theory of firm behaviour. Two important missing elements are governance arrangements and value theory. Whilst these missing elements have been acknowledged separately in the literature, their complementary interaction with the commonly accepted components of the R-BV has yet to be fully explored. This paper argues that there are significant opportunities to develop a more integrated approach, thereby uniting substantial strands of the strategy and economics literatures to produce a unified view of strategy and move towards a resource based theory of the firm. Specifically the paper argues for the inclusion of labour process theory, asymmetric information and the analysis of risk and the classical labour theory of value. The combination of these elements shows that a resource-based theory must unite the process and content elements of strategy, through the simultaneous interaction of labour management processes, the determinants of sustained competitive advantage (SCA), and relations with capital markets. The argument presented shows how value originates in the productive process and is transmitted as rents to organizational and capital market constituents. The detailed assumptions are sufficient to suggest an integrated resource-based theory of corporate strategy. The principal assertion in the paper is not that the labour theory of value is true per se, only that it is at least as good as competing theories, but that only if it is assumed to be true can we progress to construct a consistent resource-based theory of the firm. Without these links to the labour theory of value and labour process theory, and mechanisms of corporate governance, the R-BV remains merely a view and not a theory, because it lacks a consistent basis for asset valuation. The theory also explains that the roots of SCA lie in the labour process, but with the corollary that maximizing the associated investment in tacit knowledge and associated difficult to replicate assets is fundamentally inconsistent with the objective of maximizing shareholder value.resource-based view; labour process theory; theory of value; governance; information asymmetry

The labour theory of value, risk and the rate of profit

The paper extends Marx’s law of value to include the effects of risk. It shows how risk has its origins in the labour process and is transferred between labour and capital on an unequal basis and between capitals on a zero sum basis. An empirical test is then presented, which shows that the employment of labour increases risk from the point of view of the investing capitalist. The conclusion is that the employment of labour is a curate’s egg from capital’s point of view. On the one hand it is essential for the production of sustainable surplus value and therefore for competitive advantage and capital accumulation. On the other hand employment of labour renders such accumulation inherently risky and therefore commensurately more costly to the rational capitalist investor.

Strangers and Brothers’: The Secret History of Profit, Value and Risk. An inaugural lecture

[First Paragraphs] As political history is signposted by decisive battles and the rise and fall of great leaders, so the history of finance is marked by speculative booms and busts. From the failure of the futures market in Dutch tulips in the seventeenth century, to the South Sea Bubble of 1720, and more recently the Wall Street crash and, more recently still, the various ‘Black Mondays’, ‘Black Wednesdays’ and so on. These bubbles are characterised by upward speculation that leads prices to depart from some notion of underlying value, followed by a sharp readjustment, marking the re-imposition of the rule of value. The pattern is well illustrated by the ‘dot-com’ boom of 2000. In spite of the misleading signals about value given by financial markets, we are witnessing an increasing dominance of such markets as the sole arbiter of valuation. Not only is this a tautology, but its application has some important and potentially dangerous consequences. Some economists, following the development of the Black-Scholes option pricing model, have gone as far as arguing that volatility itself is a source of value.2 As Bernstein notes, ‘the product in derivative transactions is uncertainty itself’.3 According to this model, inter alia, the greater the risk, the higher the price of the asset. Such attitudes afforded scant protection to the Black Scholes inspired hedge fund,Long Term Capital Management when its losses of $3.75bn shook the world financial system in 1998.

Asymmetric Response:Explaining Corporate Social Disclosure by Multi-National Firms in Environmentally Sensitive Industries

The paper examines the determinants of corporate social disclosure (CSD) using a sample drawn from environmentally sensitive industries. It extends the traditional literature in two respects. First, it is international in scope, examining the accounting disclosure responses of multi-national companies to the pressures implied by the nature and scope of their operations. Second, variables measuring political risk and social development are developed so that these pressures can be measured, thereby introducing new dimensions to the literature. In common with previous studies, financial risk, size and other control variables are included. The relationships are tested econometrically utilising regression techniques not previously applied in the CSD literature but nonetheless more generally appropriate when using count dependent variables. Our results suggest that managers feel an unequal sense of responsibility to different constituencies and their disclosure priorities are determined by stock market accountability, lobbying power of their domestic audience and the political risk of their activities rather than the impact of their activities in countries of operation

Risk and value in labour and capital markets: The UK corporate economy, 1980-2005

The paper sets out a theoretical model linking stock market financial risk to labour market conditions, including labour intensity and the risk arising from the specification of labour contracts. A value added analysis is conducted combining national and firm level accounts data to examine the relationship between the share of value and the share of risk, contrasting manufacturing and service industries. In conjunction with a firm level analysis, empirical support for the model is established showing rational trade-offs between the risk and value appropriations of investors and employees and a less rational accumulation of structured debt finance as the UK economy has shifted from manufacturing to services in the last 30 years. The shift to services, flexibility and deregulation has tended to promote labour intensity, inflexibility of cost structures, and, as a consequence greater financial risk.

Does Community and Environmental Responsibility Affect Firm Risk? Evidence from UK Panel Data 1994-2006

The question of how an individual firm’s environmental performance impacts its firm risk has not been examined in any empirical UK research. Does a company that strives to attain good environmental performance decreases its market risk or is environmental performance just a disadvantageous cost that increases such risk levels for these firms? Answers to this question have important implications for the management of companies and the investment decisions of individuals and institutions. The purpose of this paper is to examine the relationship between corporate environmental performance and firm risk in the British context. Using the largest dataset so far assembled, with Community and Environmental Responsibility (CER) rankings for all rated UK companies between 1994 and 2006, we show that a company’s environmental performance is inversely related to its systematic financial risk. However, an increase of 1.0 in the CER score is associated with only a 0.02 reduction in firm’s risk and cost of capital.