Accounting disclosure and industrial relations: A review article

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  • British Accounting Review (1988) 20, 141-157




    University of Toronto


    An area which has only recently begun to receive the sustained attention of accounting researchers is the impact (actual and potential) of accounting information on industrial relations and collective bargaining. Indeed, Craft (1984, p. 107) has referred to the undernourished intersection between accounting and industrial relations. The potential uses of accounting information in industrial relations and collective bargaining are many (including assisting in the estimation of ability to pay, developing dis- closure policies, contract costing, use of accounting data in productivity sharing programs, among others), as are the potential research questions which may be of interest to accounting scholars. Walton and McKersies description of collective bargaining suggests the richness of this phase of the industrial relations process as a focus for the study of accounting, and its potential strategic and tactical roles, when they write (1965, p. 3):

    First, the agenda in labor negotiations usually contains a mixture of conflictful and collaborative items. The need to defend ones self-interest and at the same time engage in joint problem solving vastly complicates the selection of bargaining strategies and tactics.

    Second, labor negotiations involve more than a transaction of substantive items. Attitudes, feelings, and indeed the tone of the relationship represent an extremely

    important dimension of labor negotiations. Several characteristics of labor nego- tiations heighten the attitudinal dimension: the issues themselves often involve

    human values, and how they are handled affects the overall relationship; the weapons chosen involve sanctions which can exert a strong influence on the tone of the relationship; negotiation of the agreement represents only the beginning of

    the transaction; and whether the terms of the agreement are fulfilled depends on the character of the relationship. Moreover, the relationship between the parties to

    labor negotiations is usually unique, continuing, and long term-the attitudinal dimension providing one mechanism by which the successive negotiations are linked together.

    Third, the negotiations of interest to us involve complex social units in which constituent members are very interested in what goes on at the bargaining table and

    *The Social Sciences and Humanities Research Council of Canada has provided support for this project through a leave fellowship.

    0890-8939/88/020141+ 17 $03.00/O $3 1988 Academic Press Lnnited

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    have wmc influence over the negotutors. This dimension to nrgotlation\, hke the

    others, makes its own demands upon the negotiator and complicates his bargammg job.

    The objective of this paper is to provide an overview of the accounting and industrial relations disclosure literature, and to point out research areas which may be fruitfully addressed by accounting researchers. The paper is set out as follows: the next section (Section 2) outlines the importance of accounting information in collective bargaining and industrial relations by describing three diverse situations in which accounting information played a prominent role. The third section deals with the various ideo- logical frameworks which underlie alternative approaches to industrial relations-it will be shown that different ideological frameworks suggest different roles for accounting information, and indeed different research questions (normative versus descriptive). The fourth section of the paper reviews the literature on disclosure from union, management, and public policy perspectives.


    In this section, three illustrations of the often pervasive importance of accounting information in industrial relations are offered. Although the illustrations are restricted to the profit-seeking sector, not-for-profit examples could be readily provided (for an example from the university sector, see Amernic, 1985).

    (a) Ford (UK) and the introduction of injlation accounting in collective bargaining To support its 1977 bargaining position, Ford Motor Company Limited in the United Kingdom (Ford UK) introduced a form of current cost accounting based upon the Morpeth committee recommendations (ED 18), about which the companys directors asserted more accurately reflect the trading results of the group in todays inflationary environment. The current cost accounting profits were 25.1 million pounds before taxes and 5.6 million after taxes, compared to 121.6 million and 59-1 million, respectively, in the historic cost accounts.

    The union organizations involved-the Ford NJNC and the Transport and General Workers Union (TGWU)-hired stockbrokers Phillips and Drew Ltd to provide an independent and expert opinion (Transport and General Workers Union, 1977, p. 6) on Ford UKs current cost accounts. The results were included in a TGWU publication entitled Ford Wage Claim, 1977 (TGWU, 1977), and made the following points:

    -the method of current cost accounting used by Ford UK seriously


    understates the real profits of the year, since it ignores the effects of inflation on the companys net liabilities. Phillips and Drew suggested that 67 million was a more meaningful indication of the results of the years operations . . . (TGWU, 1977, p. 6).

    -Fords method of inflation accounting was only one of many, none of which was generally accepted.

    -deferred taxes were virtually eliminated from the current cost accounts.

    -the level of capital investment was substantially less than the amount set aside for depreciation under the current cost system of inflation accounting . . . the implication would be that the company was failing to maintain its volume of fixed assets and other equipment. (TGWU, 1977, p. 7).

    The union then concluded (p. 7): If we take Fords exercise in inflation accounting seriously what those accounts seem to show is that Fords is failing its labour force and the UK community by not maintaining and expanding its productive capital, despite the great increase in profits that the restraint in pay increases have enabled Ford to make. This case is interesting and important not only because of the size of Ford UK and their use of current cost accounting in negotiations, but also because the union hired an outside expert to critique the current cost accounts, and made the entire result public. It shows that when accounting information becomes the focus of attention,

    What is accounted for can shape organizational participants views of what is important and that once implemented, the same accounting system can be used to serve even a different variety of ends as it is used by different actors in different

    ways (Burchell et al., 1980, pp. 5, 18).

    (b) Major league baseball Full-fledged labour relations has emerged over the past decade in various professional sports industries in North America. Major league baseball has been the most prominently in the public eye (players strikes in 1972, 1981 and 1985; an owners lock-out in 1976; etc.), but collective action has also been significant in football, basketball and hockey, as well (Tischler, 1986).

    In the summer of 1985, the Player Relations Committee representing the baseball club owners in their collective bargaining with the players representative (the Major League Baseball Players Association, MLBPA), hired Accounting Professor George Sorter to analyze the financial state- ments of the major league clubs and express an opinion . . . on whether these clubs, in the aggregate, were making or losing money on baseball operations. This issue was one of the bones of contention between the owners and the players in negotiations (Sorter, 1986, p. 126). In turn, the

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    MLBPA hired Stanford University Professor of Economics, Roger Nell, to perform much the same function for them (Noll, 1985).

    After describing various controversial issues in baseball and sports accounting, such as initial-roster depreciation, deferred compensation, and related-party transactions, Sorter concluded (p. 133)

    everyone was unhappy with my findings. The owners couldnt understand why proper GAAP accounting doesnt serve every purpose and had to be adjusted to

    their circumstances. The players couldnt understand why and how there could be a loss when there was a $9 million excess of cash receipts over disbursements for the clubs as a whole. It is that excess which the players union insisted on calling

    income. . The fact that the nature-the substance--of accounting is so little understood,

    even by intelligent, interested parties (suggests) we have to do a better job

    explaining what we do and why we do it.

    In his report for the MLBPA, Professor No11 concluded that (pp. 5-6) @uncial statements regarding the operations of a team are essentially useless for determining its viability as an enterprise, unless substantial work is done to incorporate the consequences of tax treatments and ownership rela- tionships. (Emphasis in original.) Nolls report deals not only with general problems of measuring viability as an enterprise in sports, but also analyses individual club situations. An example follows (pp. 20-21):

    Atlanta . the Atlanta Braves are part of Ted Turners holdings that include the Turner Broadcasting System, and WTBS holds the television broadcasting rights to

    Braves games. For television alone, the Braves receive $1 Million, whereas the league-wide average is $2.686 Million. Obviously i


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