bycomputing, for each allocation, the potential gains and losses in the value of theirholdings, and then taking the allocation with the highest prospective utility.
because there is a higher chance of losing out on the stock market than there is when holding treasury bonds, despite there also being a larger chance of higher gains when holding stocks the investor demands a higher risk premium.
Prospect theory argues that when choosing between gambles, people compute the gainsand losses for each one and select the one with the highest prospective utility.
people are more averse to losses than gains and weight accordingly in decision making
First, when they receive new information,agents update their beliefs correctly, in the manner described by Bayes’ law.
Traditional markets. Look up Bayes' Law
methodological individualism
Consumers are rational
Fifth, the country in which the organization isreporting and the country of ultimate ownership seem to have a significanteffect, (see, for example, Andrews et al., 1989; Guthrie and Parker, 1990; Roberts,C.B., 1990; Teoh and Thong, 1984)
The country that the reports are made in has an affect on the faithful representation
Grafström and Windell (2011) found that the news media integrate the voices of NGOs, politicians,consultants, and corporations into their coverage of CSR. They argue that the news media construct and frameCSR and the notion of responsible companies by choosing and linking these voices in particular ways. Thus, themedia do not set the media agenda without any outside influences, but also give selected actors the space to voicetheir viewpoints
Counter argument to media agenda setting
For all their strengths and weaknesses(Cooper, Taylor, Smith, & Catchpowle, 2005; Everett,2004; Lehman, 2001; Owen, Gray, & Bebbington, 1997;Tinker, Lehman, & Neimark, 1991)
Look into
Further,within a voluntary reporting framework, companies mayfeel exposed if they disclose more than their competitors(Solomon & Lewis, 2002)
companies may wish to hide infomration in order to mainain a competitive advantage
Is TQM more difficult to implement than othertransformational strategies?Carlos J.F. Cândido & Sérgio P. Santos
The key points from the article are as follows:
TQM involves a comprehensive and systemic approach to quality management that requires a cultural shift within the organization. This cultural shift can be difficult to achieve and may require significant investment in training and education.
TQM requires the involvement and commitment of all members of the organization, from top management to front-line employees. This level of involvement can be difficult to achieve and may require significant communication and coordination efforts.
TQM requires the implementation of a complex set of tools and techniques, such as statistical process control, quality function deployment, and process mapping. These tools can be difficult to implement and may require significant investment in technology and infrastructure.
Other transformational strategies, such as Lean and Six Sigma, are more focused on specific tools and techniques and may be easier to implement in some cases.
However, the authors argue that TQM is a more comprehensive and sustainable approach to quality management than other transformational strategies. TQM can lead to significant improvements in quality, productivity, and customer satisfaction, but it requires a long-term and sustained effort.
Overall, the article provides a balanced assessment of the difficulties involved in implementing TQM and highlights the need for a comprehensive and sustained effort to achieve success with this approach to quality management.
The balance on the balanced scorecard—a critical analysis
The key points from the article are as follows:
The BSC assumes that financial measures are the most important indicators of an organization's success. However, this assumption neglects the importance of non-financial measures such as customer satisfaction and employee engagement, which can also impact financial performance.
The BSC assumes that the goals of an organization can be captured in a small number of measures. However, this assumption can lead to oversimplification and may not capture the complex and diverse goals of an organization.
The BSC assumes that there is a cause-and-effect relationship between the measures in each perspective of the framework. However, this assumption can be problematic because it may oversimplify the relationships between different aspects of an organization.
The BSC assumes that the framework can be used by any organization, regardless of its size or industry. However, this assumption neglects the fact that different organizations may have different goals and may require different measures to capture their success.
The BSC assumes that the framework is a comprehensive tool for strategic management. However, this assumption neglects the fact that the BSC is just one tool among many and should be used in conjunction with other tools for effective strategic management.
Overall, the article provides a critical analysis of some of the assumptions underlying the BSC framework, highlighting the need for a more nuanced and context-specific approach to strategic management.
found it difficult toidentify the relative importance of and the trade-offs between the balanced scorecard perspectives. Yet such identification iscrucial when resolving conflicts in setting targets for different measures of the perspectives.
hard to understand which element of the scorecard to implement
Economic benefits and performance improvemen
Mixed results on the usefulness of the balanced scorecard. This is because subjective measures are used
In contrast, using case studieswithin 15 Swedish multinational companies, Kraus and Lind (2010) found little impact of the balanced scorecard on corporatecontrol. However, they reported that the financially based balanced scorecard was most important to these multinationalcompanies
Potential critique of balanced scorecard
found that application of the balanced scorecard improved company results in the long term.
Spechbacher
Using contingency theory of organisations
The contingency theory of organization suggests that the most effective organizational structure and practices depend on the external and internal environment of the organization.
s also not unique to the balanced scorecard. McNair et al. (1990) introduced aperformance pyramid in which the vision of the “balance” was incorporated into the financial and non-financial measures ofperformance. Grady (1991)
Look at the performance pyramid
criticised suchmeasures for encouraging managers to focus on short-term financial results while sacrificing long-term prospects.
Johnson 1988
Organisations are moving from managing vertically tomanaging horizontally.
refers to a shift in management philosophy from a hierarchical or top-down approach to a more collaborative, team-based approach.
Organisations are moving from managing vertically tomanaging horizontally. It is a move from a functionorientation to a process orientation. Total quality man-agement (TQM), just-in-time (JIT), benchmarking andbusiness process reengineering (BPR) are all examples ofhorizontal management improvement initiatives.
How business have changed over the years. From companies performing a certain process to that process becoming fluid and constantly improving.
Findings indicate that expectations of fairness-based price conces-sions do not
Looking at whether fairness has a part in the transfer pricing between divisions.
Looks at whether increased competition has an effect on the 'fairness' of pricing
The growingemphasis upon customer relations, employeerelations, supplier relations and indeed investorrelations, is an indication of the way managers aregrappling with the need to satisfy the interests of morecomplex constituencies than shareholder theorywould suggest.
shareholder theory is too narrow minded for the actual world. Especially the modern world
t was this critical distinction which let the HampelCommittee on Corporate Governance in the U.K. offthe hook of more formally recognising stakeholderinterests among the duties of company directors
Look into the UK law. Does it promote shareholder or stakeholder theory.
Of course it does: it cannot hope to suc-ceed unless it takes all these interests properly intoa c c o u n t . . . Shareholders may come at the end of thequeue for dividends (and for distribution if the com-pany ceases to trade), but they are the anchormen. Ifthe board's accountability to them is lessened it bealtogether weakened: the distinction between 'takinginto account' and 'being responsible to' must bemaintained". 34
if other stakeholders are introduced then the influence of shareholders and the accountability they give may weaken
Only ownershave the motive to inform themselves and to enforcestandards that arguably are a proxy for the publicinterest". 1
Really interesting does the general public have that much of a motive for ESG
as not only entitled but even obliged toconsider in its decisions whatever is regarded as ofsocial interest, or to support good causes andgenerally to act for the public benefit, it gains anuncontrollable p o w e r - - a power which would notbe left in the hands of private managers but wouldinevitably be made the subject of increasing publiccontrol". 17
Why is it bad for companies to be in thrall to the public? read the reference 17 article
Berle and Means were the first to explore the struc-tural and strategic implications of the separation ofownership and control.
Seminal text
Though ascendant in financial circles the share-holder view of the firm has only occasionally enjoyeda strong voluntary commitment from industrial man-agers who have to wrestle with the more practicalconcerns of running a business. A more broadly basedstakeholder conception of the objectives of com-panies has a long intellectual lineage beginning withthe pioneering work of Berle and Means.
Shareholder view seems to be too narrow minded in todays world. Competing views
Abstr
Critique - Small sample size Online questionnaire CEO may not have realised Just have one question. Said both countries would be compared but did not compare them.
Good
Conclusi
QUite a weak conclusion. Small sample size bit of regression nothing else.
nterrelationship between MCS and StrategyManagement control systems and strategy: acritical reviewLangfield-Smith,K.Accounting, Or-ganizations andSociety1997Using management control systems toachieve alignment between strategic invest-ment decisions and strategySlagmulder, R. Management Ac-counting Research1997An empirical investigation of the relation be-tween the use of strategic human capital andthe design of the management control sys-temWidener, S. Accounting, Or-ganizations andSociety2004The effects of the interactive use of man-agement control systems on product innova-tionBisbe, J. andOtley, D.Accounting, Or-ganizations andSociety2004Management control systems and strategy: Aresource-based perspectiveHenri, J. Accounting, Or-ganizations andSociety2006The interrelationship between managementcontrol mechanisms and strategyKober, R. Et al. Management Ac-counting Research2007Organizational antecedents of second-ordercompetencesDanneels, E. Strategic Manage-ment Journal2008Management Control SystemsA conceptual framework for the design oforganizational control mechanismsOuchi, W. Management Sci-ence1979Control: Organizational and economic ap-proachesEisenhardt, K. Management Sci-ence1985Control theory in strategic human resourcemanagement: the mediating effect of admin-istrative informationSnell, S. Academy of Man-agement Journal1992Research in Management Control: An Over-view of its DevelopmentOtley, D. et al. British Journal ofManagement1995Management control systems in researchand development organizations: the role ofaccounting, behaviour and personnel con-trolsAbernethy, M.and Brownell, P.Accounting, Or-ganizations andSociety1997Management control systems design withinits organizational context: findings from con-Chenhall, R. Accounting, Or-ganizations and2003
look up best books
Further analysis with more advanced statistical tools and alarger data set combined
Further analysis needed questions raised but does not really ask key questions
resulted in poor per-formance in the 1970s, an outcome that was exacerbated by an unstablemacroeconomic environment and by the rise of new international competition,especially from Japan (Lazonick and O’Sullivan 1997; O’Sullivan 2000: ch. 4).
Another macro economic influence
Maximizing shareholder value: a new ideology forcorporate governan
The paper "Maximizing Shareholder Value: A New Ideology for Corporate Governance" by William Lazonick & Mary O'Sullivan critiques the ideology of maximizing shareholder value as the primary objective of corporate governance. The authors argue that this focus on short-term profit has led to a reduction in investment in research and development, decreased employee training, and the exploitation of workers. They argue for a new approach to corporate governance that prioritizes long-term value creation and considers the interests of all stakeholders, including workers, customers, and communities. The authors propose that corporations should focus on building capabilities and promoting innovation, rather than solely maximizing shareholder value.
Institutiona
Institutional investors play a significant role in corporate governance by using their voting rights to influence company decision-making.
The author argues that the voting process is a crucial tool for institutional investors to hold companies accountable and ensure they act in the best interests of their stakeholders.
The author stresses the importance of effective voting practices, such as active engagement with companies and informed voting, to ensure that institutional investors are effectively using their voting rights to drive positive change.
The author also highlights the challenges facing institutional investors in exercising their voting rights, including the difficulties of obtaining information about the companies they invest in and the complexity of the voting process itself.
Overall, the author concludes that institutional investors have a critical role to play in corporate governance and that the effective use of their voting rights is essential to driving positive change in companies.
Institutional shareholders own over 55% of US equity whilst in the UK, the latestavailable figures published by the Office of National Statistics in January 2010,show that at the end of 2008, insurance companies, pension funds, unit trusts,investment trusts, banks and other financial institutions own some 43% of UKequity.
Look up updated stats from the NAO
Therefore, Hopwood (1974) identified, accounting systems operate in human organizations, servehuman purposes and ultimately have behavioral objective, and their behavioral and social aspectsshould be considered as important as their technical aspects.
Look into the behavioural impact of management accounting
The findings of the present study also lead tosome potential policy recommendations. First, policy-makers could launch environmental education pro-grams to increase environmental awareness of companymanagement—stakeholders’ as well as the general publi
Found that the country with a public which was more concerned about ESG caused more CER reporting
the origin of managementaccounting from two different perspectives
Financial and non financial
those relating to the market, and those resulting from agencyrelationships.
Two motivations market and agents
inancial Crisis And EarningsManagement: The European Evidence
Looks at earnings management when the macro economic climate changes
Beidleman (1973) observes the positive effects of income smoothing on expectations,seccurities valuation and some element of risk reduction for analysts.
Income smoothing can be good for managing investor expectations
Another bias that sometimes arises is called 'big bath' accounting, wherea company making a bad loss seeks to maximise the reported loss in that year so thatfuture years will appear better
This will impact the usefullness of the statement in the year
(a recent comprehensive review of the US literature is provided by Healy andWahlen, 1999)
could be useful
On the other hand, Healy and Wahlen (1999)cite studies that find that creative accounting prior to equity issues does affect shareprices, suggesting that investors do not necessarily see through creative accounting
Evidence of the effects of creative accounting.
From a marketefficiency perspective such failures in understanding may not matter.
Creative accounting does not matter if there is an efficient market
enry Ford was born in 1863 and raised on a farm in what is now Dearborn,Michigan. He became an engine
this
According to a study by the consultancy Booz Allen Hamilton, of all the value destroyed by the largest US companies between 1999 and 2003 (including Enron, Tyco and friends), just 13 per cent was the result of failures of regulatory compliance or board oversight. Eighty-seven per cent was caused by strategic or operational error.
Internal rules and strategies which are set by management are more important than regulation
The recent waves of insider scandal and abuse—with Enron justthe most spectacular—are a perfect illustration of how pay tied to per-formance completely fails to address the problem of power derived fromcontrol, a power that can manipulate all the supposed objective structuresand information sources on which financial measurement and perfor-mance depend.
pay tied performance is not enough to deal with the principal agent problem
Rethinking the Separation of Ownership fromManagement in American History
examines the historical relationship between ownership and management in American businesses. The article argues that the traditional separation of ownership and management in American businesses, in which shareholders own a company but do not actively manage it, is a relatively recent development in American history and is not a universal concept. The article suggests that this separation has led to a number of problems, such as a lack of accountability and poor performance, and suggests that a rethinking of the relationship between ownership and management may be necessary to address these issues.
ARD A STEWARDSHIP THEORYOF MANAGEMEN
proposes that managers should act as stewards for their organizations, with a focus on creating long-term value for all stakeholders rather than just maximizing profits for shareholders. The article argues that this approach can lead to better decision-making and improved performance for the organization as a whole.
). In particular, assumptions made in agency theory about individu-alistic utility motivations resulting in principal-agent interest divergencemay not hold for all managers
Reductionist
ts detractors call it trivial, dehu-manizing, and even "dangerous" (Perrow, 1986,p. 235)
Critic of agency theory
Of course information technology change is also bringing with itelectronic commerce, virtual organisations, expanded scope information transfer assurance services,and the movement of business information systems professionals into advisory and decisionmakingroles (ICAEW, 1997; ICAA, 1998; ICANZ, 1998; Simister et al, 1998;Russell et al, 2000)
The impact of technology on changing what an accountant does
rganisational success is increasinglymeasured in financial and non-financial terms electronically available to increasingly informationsophisticated managers and clients (ICAA, 1998; Simister et al, 1998)
Look into. What is this non financial terms? Environment?
In related research, Cuccia et al. (1995) use experimentsd methods to examine re-porting aggressiveness in the tzix area.
The authors conclude that when practitioners have incentives to report aggressively, modifications to standards to make them more strin- gent and quEintitative may prove ineffective in reducing the aggressiveness of the re- porting.
Tbe primeiry responsibility for financial reports lies witb management.
Arguably, the managers are even more important than having better standards
However, the tensions between and among the companies, their auditors,investors, and regulators are not specific to the nature of the standards as concepts-based or rules-based. Standards, iii whatever form, cannot solve these conflicts. Webelieve that issues of incentives and monitoring should be addressed separately andshould not determine the nature of accounting standards
Changing the standards to offer more guidance than rules might be a good start but there are other factors at play which influence how finances are reported
I have argued that U.S. financial reporting standards are ingeneral based on principles, derived from the FASB's Conceptusd Frsimework, but theyalso contain elements—such as scope and treatment exceptions and detailed imple-mentation guid£ince—that make them also appear to be rules-based.
US system GAAP is both principled and rules based. Changing to a more principled system could sacrifice the comparability of financial statements which; a comparability which is trying to be acheived.
n doing so, they will also of course changeaccounting policies, which in turn leads to over-time inconsistencies in reporting (thehistorical financial reports of a firm are not comparable with its current financial re-ports whenever accounting policies change). If these inconsistencies impair relevance,reliability and/or comparability, the quality of financial reporting will be temporarilydiminished, by some unknown amount, during the transition period.
Transition problems if standards are changed
The FASB's standard-setting activities are guided by its Conceptual Framework, aslaid out in its Concepts Statements.
GAAP is guided by a conceptual framework
Excessively detailed reporting guidance caninvite transaction structuring and incentive-consistent standard interpretation to achieve preferredaccounting treatments FASB 2002; Bockus et al. 2003; Nelson 2003.
Argument against rule based. Excessive rules can lead to managers trying to find loop holes with a 'show me where it says i can't attitude"
The ongoing debate over whether and when to movetoward more principles-based accounting standards reflects the uncertainty of both the anticipateddesirable and undesirable effects of such a paradigm shift. Although these are empirical questionsthat can be addressed experimentally to inform policy makers prior to making a move toprinciples-based standards, the academic literature is limited with respect to research regardingthese uncertainties Maines et al. 2003.
Empirically not sure which way is better: rule based or principle based.
Concern has been rising within the financial/investing community that U.S. accounting stan-dards have become too “rules-based.”
Too rule based
Alexander (1999), further developed by Nobes (2000) and Alexander (2001), dis-tinguishes three different levels of regulation, which are summarized in Table 1.Type A and Type B ideas are both generally regarded as principles, but there isclearly a distinction between them
Type A and B are principles but type C is classified as rules
Arguments against standards
Arguments against standards- consensus seeking and overload of information
Arguments in support of standards
Arguments in favour of standards- credibility, discipline and comparability
rue that stockholders have
maybe have another go?
Chandler's ex-planation of the M-form appears to be only apartial account. Political, ecological/life-cycleapproaches, transaction costs, and administra-tive coordination may all well play a role in ex-plaining the dominance of the M-form today(Palmer, Fiedland, Jennings, & Power, 1987)
Good counter arguments to Chandler. But do not understand the theory of coordination.
Perrow (1981, 1985) argued convinc-ingly that a history of industrialization in terms ofefficiencies and not concerned with the laborforce, labor organizations, profits, the effects ofbusiness upon the political and social structures,financial markets, and cost externalities is seri-ously flawed
Alternative to management and coordination being what defined and enabled the US economy to thrive. Countless other possibilities for what it could have been.
handler's historical account is only one of anumber of competing explanations for the cre-ation and adoption of the M-form, and it hasbeen contested. Williamson (1976) focused ontransaction costs theory in his markets-and-hierarchy approach, whereas Chandler claimscoordination to be the more critical factor ofefficiency.
Look into transaction cost theory. Alternative to Mform
This in turn leads to change in strategic emphasis: professional managers, says Chandler, are more likely to emphasise long-term growth and stability rather than short-term profits.
Not true it is the other way around short term is currently the way
(Resolution Foundation, 2021).
Use modern day issues and statistics to back up theoretical points.
hile the OECD’s Principles of Corporate Governance sayscorporations should be run in the interest of shareholders, we would argue that theirreport from 1999 is outdated and does not reflect the current economic climatefollowing the 2008 recession (OECD, 1999)
This is synthesising theory and the practical element of the answer really well.
That’s what happened to Northamptonshire in 2018 when they faced a £10 million shortfall and debts of around £1 billion.
Another case of mismanagement but for an area that is twice the size as Croyden...population size double as well?
The Medium-Term Financial Strategy for Croydon 2018 – 2022 established an Asset Acquisition Fund of £100 million to investin property to generate an ongoing income stream for the Council.
Council take on government debt with low servicing rates and planned to invest it in real estate.
The world economy now combines a number of separate crises,
Pandemic increased debt burdens and less economic output in which to pay off the debt and the interest on that debt.
High inflation linked to the pandemic because of supply chain issues but also because of the war in Ukraine. Oil prices have doubled and the cost of food has soared. Reversed the convergence where the rest of the world is catching up with the west.
“When you have a cost of living crisis it causes not just economic but social unrest”, says Gita Gopinath, first deputy managing director of the IMF. “We saw this last time we had a food crisis in 2008,” when food prices were one of the triggers for the Arab spring.
This has happened before - historical context
The way I look at Sri Lanka is the extent to which it is a canary in the coal mine,” says Tina Fordham, a geopolitical strategist and adviser at consultancy Fordham Global Foresight.
This economic collapse could be the beginning of many other crsises around the world
Bond yields have spiralled in a number of countries — ranging from Pakistan to Ghana and Egypt — in a sign of mounting economic stress.
AS yields go up prices go down signifying a lack of demand for the government bonds as they are deemed to risky by the market.
In contrast to Theory X, or the conventional approach to management, McGregor (1957) proposed an alter-native approach based on “more adequate assumptions about human nature“, which he called Theory
alternative to x
that people were averse to working,lacked ambition and a desire for responsibility, were selfish, resistant to change, and gullibl
Theory X people dislike work and the best way to motivate employees is through close watch.
eory X (in order to avoid the complications as-sociated with creating a label, 1957), was that it was the duty of management to organise, direct, control, andmodify the behaviour of employees as otherwise they might become passive or even resistant to work.
Theory X is about controlling employee behaviour and regulating time. We did have time sheets at the end of the week. My experience followed more of a theory Y. Certain month end tasks which had to be done so that was a sort of self governing system. In other departments managers did seem to follow a theory X approach.
First, it will help us understand the notion that money is not everything when itcomes to motivating a certain category of employees and also that non cash rewards appeal toemployees on a personal level (Uzonna, 2013; Olugbodi, 2017).
motivation without money
The sixth practical technique of motivating workers is to throw challenges at them.Assignments provide opportunities for employees to develop skills expand knowledge andincrease visibility within the organization. When considering such assignments, supervisorsshould consult with employees about the types of assignments they would value (Velnampy,2007)
I was given lots or responsibility with my work being showed to the CFO very motivated to do well as this was a project that was 100% me
Studies using data collected in the United Kingdom also attests to the role of non-financial incentives in motivating employees to high productivity. In a 2009 McKinsey Quarterlysurvey of 1,047 executives, managers and employees from a range of sectors in the UnitedKingdom (Vrancic, 2015), the respondents view three non-financial motivators: praise fromimmediate managers, leadership attention (for example, one-on-one conversations) and achance to lead projects or task forces as no less or even more effective motivators than thethree highest-rated financial incentives: cash bonuses, increased base pay, and stock or stockoptions
While working lots of one and one talks I was surprised at how much of an interest my colleagues took in myself as well as my future progression. Helped my settle in but also made me more motivated to complete work to a high standard when doing a task for them
in a caring and considerate manner andreceiving positive recognition are inherent in the job itself
Kudos points and LM benefits such as discount shop and learning courses for leadership coding excel skills
By motivation here we mean the way and manner in which an individual or group of individualsare inspired to behave in a desired manner with a view to receiving some positive rewards or tosatisfy certain human needs
Motivation