Strategy and accounting in a U.K. conglomerate

Article Abstract:

A case study involving the hostile takeover of a corporation by a conglomerate is used to show the differences in the relationship between the use of accounting for business performance reporting and control and the design and implementation of corporate strategic planning. The conglomerate's managers have been allowed to follow a strategy of corporate growth through acquisition, market dominance, and unit company control. The corporation's managers were aware of their company's exposure to hostile acquisition, but the awareness did not reach senior executives. Following the acquisition, the conglomerate's managers avoided developing a dependence on the acquired corporation's managers for accounting reports. External auditors were used to locate areas of loss and cost. The external auditing revealed nothing of the possible destructiveness of the conglomerate's actions that had been designed to secure short-term financial gain.

Strategic planning (Business)

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Ownership changes, accounting practice and the redefinition of the corporation

Article Abstract:

Accounting data and systems facilitated and legitimized the merger movement in US business during the 1960s, a process characterized by the formation of conglomerate corporations. Accounting practices further facilitated a redefinition of the corporation as a financial rather than as a productive entity. The movement was a precursor to acceptance by the public and the business community of hostile takeovers as a normal and ethical business practice. During the 1960s, the American Institute of Certified Public Accountants failed to provide any guidance on merger accounting, freeing firms to devise accounting methods to serve their own purposes. The purpose of conglomerate accounting was to find a way to inflate earnings and share prices. The tools used by conglomerates to trick the public into accepting them as legitimate included the price earnings multiple, convertible securities, and pooling-of-interest accounting.

American Institute of Certified Public Accountants

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Accounting magic and corporate control: a discussion of Espeland and Hirsch

Article Abstract:

Wendy Nelson Epseland and Paul M. Hirsch assert that accounting data and systems have helped to facilitate and legitimize the conglomerate form of corporations and have exerted a negative influence on markets of corporate control. Evidence supporting the first part of Epseland and Hirsch's assertion is insufficient for legitimating the second part of their assertion, that accounting systems, by facilitating the conglomerate corporate form, have had a negative impact on corporate control. However, by elucidating the nonneutrality of accounting in the area of corporate change, Epseland and Hirsch illustrate the role of accounting beyond a traditional rationalist setting, thus adding to an appreciation of theories of rationalization and rationality as simultaneously complementary and competing.

Research, Espeland, Wendy Nelson, Hirsch, Paul

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