Accounting Information Disclosure and Collective Bargaining

219 Pages·1977·19.858 MB·English

by  B. J. Foley, K. T. Maunders (auth.)

ACCOUNTING INFORMATION DISCLOSURE
AND COLLECTIVE BARGAINING
Accounting
Information
Disclosure and
Collective
Bargaining
B. J. FOLEY
Lecturer in Economics
University of Hull
and
K.T. MAUNDERS
Professor oj Business Finance and Accounting
University oj Leeds
© B. J. Foley and K. T. Maunders 1977
All rights reserved. No part of this publication may be
reproduced or transmitted, in any form or by any means,
without permission
First edition 1977
Reprinted 1979
Published by
THE MACMILLAN PRESS LTD
London and Basingstoke
Associated companies in Delhi
Dublin Hong Kong Jolwnnesburg Lagos Melbourne
New York Singapore Tokyo
ISBN 978-1-349-81537-1 ISBN 978-1-349-81535-7 (eBook)
DOI 10.1007/978-1-349-81535-7
This book is sold subject
to the standard conditions
of the Net Book Agreement
Contents
Preface vii
The Legislative Background: Some International
Comparisons
2 The Disclosure Debate 27
3 Disclosure, Collective Bargaining and Inflation: Some
Empirical Evidence 54
4 Collective Bargaining Models and the Theoretical Role of
Information 81
5 Trade Union and Management Uses of Company
Accounting Information 120
6 Some Issues for the Accountant 159
7 Conclusions and Implications for the Future 193
Index 205
Preface
As indicated by its title, this book is concerned with the impact of
accounting information on collective bargaining. We take accounting to
be 'the process of identifying, measuring and communicating economic
information to permit informed judgements and decisions by users of
the information' [I, p. I]. It follows that 'accounting information' is all
information which may be relevant to economic decision making.
Whilst this may clearly encompass quantitative financial information of
the type commonly associated with accounting reports such as baiance
sheets and profit and loss accounts, it also covers information of a non
financial nature insofar as this may be relevant to decision making.
The identification of what information is indeed relevant in a
particular decision-making context has been the subject of much recent
accounting research, especially in relation to the needs of investors [2],
[3]. It was, in fact, a consciousness of the relative neglect of the needs of
other users of accounting information which first prompted the present
authors to begin the research which led to this book. Unlike investment
decision making, however, which already had strong links with
accounting as a teaching and research field, the present subject matter
required an integration of two disciplines which have had little academic
or professional interface in the past - accounting and industrial re
lations.
We expect, therefore, that, like each of the authors initially, most
readers will be unfamiliar with at least one of the underlying disciplines
involved. Nevertheless, readers with prior accounting experience and/or
education should find the material of the book relatively self-contained,
at least as far as Chapter 6. For a full appreciation of Chapter 6 some
comparative knowledge of modern accounting theory is probably
Vlll Preface
desirable. Because of its specific relevance, we recommend Revsine [3]
for this purpose.
For those readers who are not accounting specialists a plethora of
books exist on 'accounting for the non-accountant', a dip into anyone
of which should be sufficient to deciphe'r the accounting terminology
used as far as Chapter 6. For Chapter 6, we again recommend the book
by Revsine[3] which includes a good introduction to and critique of the
methodology of modern accounting theory.
This book then is intended to serve a variety of readerships, although
we should expect the material to be of particular interest to students on
degree level courses in accounting or industrial relations/labour econo
mics, practitioners in the same fields (both management and union
based), and fellow academics.
Chapter I describes the legislative background to information
disclosure in collective bargaining and compares this as between the
U.K., the U.S.A. and certain European countries.
Chapter 2 examines the arguments which have been put forward for
and against the disclosure of information in general.
Chapter 3 then looks at a particular issue raised in Chapter 2 - the
possible macro-economic relationship between the financial results of
employers and wage and earnings levels. Particular attention is focused
on the question of whether there is empirical support for the thesis that
the declaration of increased profits may lead to increased labour costs
and cost led inflation.
Chapter 4 surveys the literature of labour economics and industrial
relations for collective bargaining models from which predictions can be
made about the effects of information disclosure on bargaining
outcomes. The results of some empirical research into the effects of
information on particular bargaining outcomes are also examined.
Chapter 5 discusses the practical background to the use of infor
mation by both sides in company level bargaining. Properties of
information actually used are examined, together with arguments for
and against the disclosure of specific types of information.
Chapter 6 offers some preliminary analysis on a range of issues which
the disclosure of information in collective bargaining raises for account
ing theory and practice.
Chapter 7 is also concerned with identifying and making general
comments on some possible problem areas - in this case the implications
of a prediction of substantially increased disclosure in the future for
certain interested groups.
As a result of legislation, in both the U.K. and U.S.A. union
Preface IX
bargainers now constitute an effective demand for company accounting
information. In view of this, the objectives of this book can be
categorised as:
(1) summarising the current 'state of the art' with respect to the problem
of identifying what union representatives' needs are; and
(2) bringing together practical and theoretical material which may be
useful in taking decisions on what should be disclosed.
A root and branch approach to the identification of what should be
disclosed requires the assistance of a logically sound, empirically verified
model of the bargaining process by means of which the relationship
between information inputs and bargaining actions could be predicted.
With such a model the expected costs and benefits of disclosure could be
quantified and disclosure decisions 'optimised'. Unfortunately, as will
be seen herein, no such model yet exists. A third objective therefore is:
(3) to draw the attention of potential researchers to the many gaps in
knowledge which need to be filled if disclosure decisions are to be
more nearly ·optimised'.
It needs to be made clear, however, that the material of this book does
not form a complete analytical structure for evaluating disclosure
decisions. We do not ourselves propose any new model of the bargaining
process herein - our research is at a stage where we feel this would be
presumptuous.
Instead, recognising the need for people to take decisions now on what
should be disclosed, we have brought together material which we feel
represents the best assistance which can be offered at this stage. Thus the
book will, we hope, at least enable decision makers to identify more
easily the sources and nature of costs and benefits associated with
information disclosure. The relative importance of these will still need
evaluating in terms of the specific circumstances which apply. We do
however, offer certain fairly definite conclusions about the nature of the
necessary evaluation process (see Chapters 4 and 7).
We should like to thank the Nuffield Foundation for financing our early
work with trade unions - the results of which contributed substantially
to Chapter 5.
Thanks also, for the gargantuan task of deciphering and typing, must
go to Mrs V. Wilson, Mr J. E. Price and the secretarial staff at Hull.
Our colleagues at Hull and Lancaster have, wittingly and unwittingly,
contributed towards any academic merit the finished product may have.
We alone are responsible for the defects.
Finally, for the fact that the book was completed at all we owe a great
x Preface
debt to the ever-persistent pressure (encouragement?) from our wives,
Julie and Pauline. The fact that it was delayed, on the other hand, owes
something to the activities of Millie and Timothy James.
K. T. Maunders
University of Lancaster
B. J. Foley
February 1976 University of Hull
REFERENCES
I American Accounting Association, A Statement ofB asic Accounting Theory (Evanston,
Ill .. author, 1966).
2 N. J. Gonedes, Accountingfor Common Stockholders: An Eclectic Decision Making and
Motivational Foundation (Austin, Texas: University of Texas, 1971).
3 L. Revsine, Replacement Cost Accounting (Englewood Cliffs, N.J. Prentice-Hall, 1973).
1 The Legislative
Background: Some
International Comparisons
Unlike their counterparts in other developed economies, trade unions
and employers in the United Kingdom have traditionally concentrated
upon and developed collective bargaining at a national level. In such
circumstances, i.e. where industry-wide negotiations have been either
the rule or the ultimate objective, interest in the fortunes of any single
company is obviously fairly limited. As a consequence of this historical
bias, pressure from the official union movement for a general policy of
company disclosure has only really built up strongly in the last decade.
This pressure is, in turn, partly attributable to the emergence of shop
floor, plant or domestic bargaining which has been a growing feature of
U.K. industrial relations over the past 25 years. Other countries with
different systems of industrial relations, e.g. those where company
bargaining has been prevalent, or those which have established formal
structures at company or plant level, have in contrast been dealing with
the disclosure issue for a much longer period.
The purpose of this chapter is twofold: first we shall look at some
international experience in the practice of disclosure -this is important
insofar as such practice may influence policy by example, as has
certainly been true of American labour law in the case of the U.K., 1 or
even directly, where European developments may affect the legislation
of member states of the E.E.C.; secondly, we shall review critically
recently proposed or enacted statutes which deal with disclosure of
company information to trade unions and/or employees as they relate
specifically to the United Kingdom.
(A) THE U.S.A.
Collective bargaining in the United States has generally been regarded
as relatively decentralised, operating primarily at company, rather than