10/1 Hiding behind the back of high performers 10/10 The well-informed co-decisive employee who owns the company in the long term 5/5 Preferent stocks, where there are different types of
Trang 1long term, directive–participative and inner and outer locus of trol can be reconciled in an integrated culture.
con-A good example is the all-employee stock option plan at Cisco Theorganizational leadership stresses that the program alone does notcreate an ownership culture; it is just a manifestation of it Cisco’scorporate culture stimulates teams whose individual employees areempowered to make significant decisions, linking short-term actionswith long-term strategies Moreover, employees can’t be motivated
by options if they don’t understand them, so the company runs aneducation program And there is no cultural environment wherethat doesn’t work (Figure 7.7)
It is striking how many research findings have indicated that money
is not a motivator But Etzioni wrote about this in the nineteenthcentury when he said that there were three ways of controllingpeople: by force, by money, and through normative controls and thatonly the third was a motivator Money is in fact a “dissatisfier.”Employees quickly get used to the good feeling and jump to the nextexpectation
10/1 Hiding behind
the back of
high performers
10/10 The well-informed co-decisive employee who owns the company
in the long term
5/5 Preferent stocks, where there are different types of owners
1/10 Short-term gains
at the cost of long-term company productivity
Rewarding individual performance 10 0
10
Figure 7.7 The pound in your pocket
Trang 2The process of internationalization forces us to adapt much of theexisting logic in management thinking There are some options that
do not work as well You can choose a reward system stimulatingteam spirit People from Japan excel at that, but it often leads to col-lective mediocrity Even worst is the compromise – rewarding thesmall team Both the individualist and the team player feeldemotivated The classic solution is “co-opetition,” meaning cooper-ating in order to compete Such reward schemes are aimed at havingcreative individualists molding teams that achieve beyond expecta-tion
THE NECESSARY ROLES OF A SUCCESSFUL TEAM
Belbin (1996) described an effective team as a group of people thataim for a shared goal through four phases: forming, storming,norming, and performing In reality, however, the dynamic of a team
is a function of the differences in the contributing team roles of viduals It is these tensions that flow from the range of resourcesavailable to the team to different skills and thinking that have to bereconciled But even more, the contributions from individual mem-bers are not restricted to their primary team role, but to changes andflexing to other roles as the members of the team influence and inter-act with each other as they try to perform In the transitions betweeneach of the four phases the differences between the roles becomeeven clearer, and the reconciliation of the different orientationsbecomes essential
indi-Thus there is the potential for tension between any two primaryroles When these manifest as dilemmas and are not reconciled, theteam remains in the storming phase When the dilemmas are recon-ciled, the team can move to the higher levels of the “performing”mode
270
Trang 3Dilemmas are necessarily played out between people and it is thejob of the HR professional to provide an environment in the organi-zation in which such dilemmas can be reconciled At the meta-level,the overall task for HR is to reconcile the tension between the organi-zational perspective and the individual perspective of eachemployee.
Trang 5Finance and accounting
across cultures
CHAPTER 8
Trang 7In their classic work May, Mueller and Williams (1976) define
accounting as a “language.” If so, perhaps it is not surprising that
it is afflicted by the curse of Babel Not only do countries havetheir own rules, but so do industries and even individual companies
As in the other functional areas discussed in this book, this bringsabout a whole series of different dilemmas As we will see, manydilemmas owe their origin to rules (universalism), which will bedifficult to reconcile with company-specific needs (particularism)when we are faced with unaccommodating agencies and foreigngovernments
Accounting exists to provide comparisons over time and betweencompanies for three main purposes The first is to provide informa-tion to the shareholders to know how and where their investment isrepresented, the second is for the market, and the third is so thatmanagement can manage Whilst these purposes are different, thesource information, although not its presentation, will be substan-tially the same
COMPARABILITY VERSUS COMPLIANCE
We all recognize that accounting rules can be used to deliberatelydistort the activities of an organization and that this remains a prob-
lem The BBC’s Money Programme frequently asserts that “profit is
just a number, it depends on the accounting policies employed.”International accounting standards exist to reduce the variationbetween sets of accounts Other standards exist, but are more likeconventions and don’t necessarily have the force of local law, letalone international law And of course a global company has to rec-oncile the differences between the rules of the country where its HQ
is based and its subsidiary companies in their own local setting.Management Accounts, as opposed to Financial Accounts, may be
Trang 8easier to reformat to provide a common basis for reporting and sion making.
deci-Many regulations make comparability difficult International ard 17 recommends the capitalization of leases in line with theprinciple that substance should take precedence over form Germanaccounting rules, for example, require accounts to be prepared on atax basis and prohibit this treatment – thus making comparabilitydifficult unless multiple sets of accounts are prepared for differentpurposes A fundamental dilemma is thus between the need forcompliance versus the degree of de jure and de facto harmony (com-parability) A variation of this dilemma is that the fundamentalprinciple of fair presentation is found to compete with compliance
Stand-In the European Union, many directives have been developed towhich individual nations must now comply Difficulties can occur as
a once-only problem when new rules are introduced (like a requiredchange in liquidity following the specification of a new solvencymargin that is different to previous practice), or can be ongoing
In many ways, the origin of these problems comes from the notion ofhistoric cost accounting because this is open to different interpreta-tions Thus LIFO (last in, last out) stock valuation is not common inEurope because there are no tax advantages During inflation usingLIFO, the cost of goods sold is higher and the value of stock lowerthan under FIFO (first in, first out) In contrast share prices rise in the
US when LIFO is introduced, despite a short-term reduction inreported earnings This is because the effect of LIFO is not to reducethe value of the company, but to increase it by reducing tax pay-ments without changing the added value of the company’s basictrading activities in any way Some research suggests that the marketplace gives insufficient attention to the detail behind the accountingpolicies of published accounts – although of course, there are
276
Trang 9specialist analysts who study such detail carefully to provide mation to stock market traders and other clients.
infor-The question of whether it is possible to define a universal set ofaccounting policies has been posed may times Demski (1976)debated this at length and concluded that accounting is necessarily
“particularistic.” Chambers (1976) then stated that if Demski’s ciple was true, we should immediately abandon the pretence thataccounting is disciplined Demski’s reply to that was that it is theuser’s needs that differ and that each user is best served by a differ-ent (particularistic) set of accounts However, there will always bemarket forces that will disclose information in the absence of regula-tion and it is becoming common practice to enforce contractualrestraint on employees to prevent disclosure that might otherwise
prin-be to a competitor’s advantage or influence the perceived value ofthe company in the market The practical aspect of disclosure isdetermined to a large extent by accounting standards, which areembodied in the principle that those who read and use financialaccounts should be aware of the basic assumptions on which theyare based
However, this approach is far too simple We have to consider issuesthat derive from:
1 Objective versus subjective presentation
2 Different meanings (especially in different cultures)
3 Political will in different countries
OBJECTIVE VERSUS SUBJECTIVE PRESENTATION
Accounting policies are the rules which companies use to determinethe manner in which they prepare their accounts They are usually
Trang 10based on the premise that the policy to be adopted is that judged to
be the most suitable But most suitable for whom? One area forimprovement is that disclosure of accounting policy is virtually use-less and it is often difficult to determine exactly what bases andassumptions have been employed There is often considerable infor-mation but little explanation In many situations, not only is there
no single standard in place, but often no simple choice betweenalternatives But recall that it is the responsibility of management tochoose the optimum accounting policy for their business It wouldnot be surprising therefore if a manager, planning to take on a loanwhich required a covenant, chose accounting policies which made iteasier for his company to comply with that covenant
Often published accounts are summarized in a few pages, thoughthey are supported by extensive supplementary information, which
is often unintelligible Even if the basis on which the accounts areprepared is stated overtly, we might still draw different conclusionsfrom the same data
Let’s give a simple example to illustrate the point If only one native is published or available, the reader may not consider that analternative presentation could have been made
alter-Note that exactly the same data is used to tell two different stories.Before the acquisition, it is projected that HQ will double its revenuefrom its current performance, partly because some of the customersfrom the new subsidiary will be included in HQ’s sales The pro-jected revenue for the subsidiary acquired by HQ will as aconsequence fall, and the total projected revenue is forecast to drop
to one half of its current performance As Figure 8.1 shows, there is aprojected overall mean gain of 25 percent from the acquisition
A year later, the past CEO of the acquired company claims that the
278
Trang 11acquisition was not successful He could argue (using the identicaldata) that the parent company may have increased its revenue from
50 percent a year ago to where it is now but, as shown in Figure 8.2,this is offset by his subsidiary company losing half of its revenueand that therefore the total effect of the acquisition was an overall
50%
Performance of subsidiary
Figure 8.1 Projecting successful acquisition
Trang 12decline by 25 percent from 125 percent of the total current level ayear ago to now.
DIFFERENT MEANINGS
Solomons (1986) promulgates the benefits of objectivity to the pointthat accounts should be neutral rather than affective Although allinformation has an effect on human behavior, accountants shouldseek to make it neutral The corollary of this is that different accoun-tants should produce the same set of accounts, yet we know this willnot be the case
In Altman’s classic work (1968) on bankruptcy prediction, he did notconsider the issue of takeover Thus when Baring’s was in trouble in
1995, the Bank of England worked desperately to encourage its sale
to one of six international giants able to assume the losses and keepthe name alive In the United States banking industry at least, theconsequence of financial failure may include takeover But takeovercan also result from financial success
POLITICAL WILL
Some countries appear to operate with different sets of accountingphilosophy so as to help their economy or dominant political par-ties This can vary from governments who fail to clamp down ondrug barons to those who simply operate different levels of taxation
At one time, registering your company in the Isle of Sark to reducecorporation tax was known as the “Sark Lark.”
The less cooperative a country is in the fight against securities fraud,the more attractive it becomes as a locale for would-be securities lawviolators and the proceeds of their illegal transactions The IMF hasbeen actively involved in efforts, on both a country-by-country basis
280
Trang 13Who is calling whom immoral?
As soon as we go international, we have to remember thatdifferent cultures may apply different meanings to events.Compare the following, both of which we learnt from client sit-uations
An American telecoms
organiza-tion was supplying a telephone
exchange to a regional government
department of Nigeria.
A local elected politician
de-manded a “consultancy fee” to help
“facilitate” the finalization of the
contract.
The additional cost to the American
company was US$20,000.
A US company agreed to purchase
a large consignment of raw als from a Nigerian mining company Payment terms were agreed on the basis that the Ameri- can company purchasing the goods would approve the invoice from the Nigerian supplier within 30 days and payment would follow immediately in their next payment cycle.
materi-The invoice arrived on the first day
of February coincident with ery of the goods to the US But because February has only 28 days and not 30 or 31, the approved invoice did not reach the data pro- cessing department in time for payment to be made until the next cycle, then at the end of March The American company confirmed that
deliv-it had complied to the letter of the rules of their payment terms The additional bank interest cost to the Nigerian supplier because of the delay was US$20,000.
Trang 14and through international organizations, to encourage ative” countries to join the international enforcement community.
“non-cooper-As a result of this international pressure, the past few years havebrought about some changes in a number of secrecy havens
Michel Camdessus, a Managing Director of the International etary Fund from January 1987 to February 2000, has been at the fore-front of this globalization of the financial markets Although themarkets have attained a high degree of technical sophistication, thelarge volume of funds has made them prone to volatile movements
Mon-of capital because Mon-of many shortcomings, including weak bankinginstitutions, lack of transparency in capital movements, and anenvironment in which the regulation, supervision, and monitoring
of financial institutions around the world has just not kept up withmarkets’ evolution
This, in turn, has made the recipient emerging market countriesmore vulnerable to periodic crisis and contagion Second, as far astheir development is concerned, too few countries can yet benefitsufficiently – or at all – from the enormous potential that globaliza-tion offers A solution to the first problem, improving thepredictability of capital flows in a more integrated global economy,would increase the opportunities for sustainable development in theworld; it will of course not be enough This illustrates the impor-tance of reform of the international financial system and, indeed,one specific aspect of it, the soundness of the financial sector.Camdessus further stated (to the Board of Governors of the IMFFund Washington, D.C., on September 28, 1999) “The sound inter-national financial system that we all desire must include sound andresilient national financial systems throughout the world, regulatedand supervised according to a set of internationally consistent,transparent standards, and codes of good practice Establishing an
282