Accounting history challenges the idea of perfect corporate governance model

Ivey researcher says accounting standards aren't cure-all

 

LONDON, ON, November 2, 2009 - There's a saying that those who ignore history are doomed to repeat it, and a historical look at accounting practices proves that sentiment to be true.

Mitchell Stein, an assistant professor of managerial accounting and control at Ivey Business School, analyzes accounting practices in terms of corporate governance reforms from both a contemporary and historical perspective.

Recent research from Stein examines archival materials, legislative reports, speeches and accounting journals from the U.S. - primarily New Jersey - from the late 1800s and early 1900s. New Jersey is the study focus because it was one of the first states to allow the formation of holding companies.

His research shows past corporate governance issues sound similar to those being discussed today. For instance, at the turn of the century, there was a move to require senior officers to sign off on financial statements, which is now required by the new Sarbanes-Oxley Act - designed to protect shareholders and the public from accounting errors and fraudulent practices.

Stein said the history of accounting is important because it shows efforts to change or reform standards sometimes lead to unexpected and unintended consequences. Results of his research also challenge the assumption that corporate governance can be optimized.

"The same fraudulent schemes went on 100 years ago. Now we claim to have all these sophisticated systems, yet one may argue that very little has changed," he said. "The only difference is that before it was millions and now it's billions - just add a few zeros."

While acknowledging the importance of corporate governance and accounting standards, Stein warned there's a danger in relying on them too much.

"Why spend so much time trying to figure out the perfect standard to resolve these corporate governance problems when there might not be one," he said. "Maybe we should sometimes think of these issues more in terms of just muddling through."

Details of the research were released today in the November edition of impact, an online monthly publication featuring new research from faculty at the Richard Ivey School of Business. The full article is available at http://www.ivey.uwo.ca/Publications/Impact/Vol15No11-Stein.htm

David Sharp, Ivey's Faculty Director of HBA International Opportunities, also discusses, in the Faculty Focus feature, international opportunities at Ivey and why it's so important for future business leaders to have a global perspective. The full article is available at http://www.ivey.uwo.ca/Publications/Impact/Vol15No11-FF-Sharp.htm

 

About the Richard Ivey School of Business, The University of Western Ontario

The Richard Ivey School of Business at The University of Western Ontario (www.ivey.ca) offers undergraduate (HBA) and graduate degree programs (MBA, Executive MBA and PhD) in addition to non-degree Executive Development programs. Ivey has campuses in London (Ontario), Toronto, and Hong Kong. Ivey recently redesigned its curriculum to focus on Cross-Enterprise Leadership - a holistic issues-based approach to management education that meets the demands of today's complex global business world.

 

For more information, please contact:
Dawn Milne, Richard Ivey School of Business, 519-850-2536, dmilne@ivey.ca