ACCOUNTING AND THE POLITICS OF DIVESTMENT

Critical Perspectives on Accounting (1996) 7 , 437 – 460

ACCOUNTING AND THE POLITICS OF DIVESTMENT DEAN NEU*

AND

ALISON TAYLOR†

* University of Calgary , † Ontario Institute for Studies in Education This study examines how accounting discourses and calculations were deployed in the divestment debate at a Canadian university to articulate a politics of the status quo. Starting from a political economy of accounting perspective, we argue that: (1) the ideological effect of accounting is to foreclose other narratives and value positions, (2) in doing so, accounting plays a central role in the accumulation of capital and the appropriation of surplus value, and (3) accounting is able to fulfil these functions not only because it harmonizes with other discourses but also because accounting expertise is asymmetrically distributed. The current analysis furthers our understanding of the roles played by accounting and financial experts in the maintenance of dominant class hegemony. ÷ 1996 Academic Press Limited

Introduction The relationship of industrialized core countries to peripheral countries tends to be taken for granted by people living in the industrialized world (Amin, 1990). Seldom do we stop and consider that the higher average standard of living enjoyed by people of the core vis -a -vis the periphery is predicated on the past and continued exploitation of the latter1. Instead, influenced by the discourses of ‘‘global competitiveness’’, ‘‘individualism’’, and ‘‘materialism’’, exploitative social relations are accepted as the natural consequence of the superior economic efficiency of core countries. Occasionally, however, capitalist relations are called into question. Debates over corporate investment in South Africa during the 1980s challenged the role of these transnationals in sustaining the relations of apartheid (Arnold and Hammond, 1994). These debates spilled over, as other institutions that were tied into this matrix of relations were called upon by their various stakeholders to account for their practices. As a result, the ‘‘social responsibility’’ of university investments in corporations doing business in South Africa became an issue. This study examines a case where this occurred. The purpose of this study is to examine how accounting discourses and calculations were deployed by anti-divestment proponents to articulate a politics of the status quo. Starting from previous work on the political economy of accounting (PEA), we analyze the roles and location of Address for correspondence: Professor Dean Neu, Faculty of Management, University of Calgary, 2500, University Drive, Calgary, Alberta, T2N IN4, Canada. Received 10 January 1993; revised 28 September 1994 , 23 May 1995 , 12 June 1995; accepted 9 September 1995. 437 1045 – 2354 / 96 / 040437 1 24 $18.00 / 0

÷ 1996 Academic Press Limited

438

D. Neu and A. Taylor 2

accounting within the divestment debate at Queen’s University, Ontario. In essence, our argument regarding the roles of accounting within this conflict consists of three interrelated strands. We argue that: (1) the ideological effect of accounting is to foreclose other narratives and value positions, (2) in doing so, accounting plays a central role in sustaining the accumulation of capital and the appropriation of surplus value, and (3) accounting is able to fulfil these functions not only because it harmonizes with other discourses, but also because accounting expertise is asymmetrically distributed. Since this view of accounting may be unfamiliar to some readers, the next section articulates the theoretical perspective that guides our interpretation of the case. This section also highlights the differences between a PEA perspective and conventional understandings of accounting. The case of the divestment debate at Queen’s University follows.

Accounting and Capital Accumulation In recent years, there has been an increasing recognition that accounting functions as both a distributive and hegemonic mechanism that allows transnationals to justify the continued appropriation of surplus value in core and peripheral countries. This view of accounting is referred to as a political economy of accounting (PEA) approach and draws upon Marxist and neoMarxist writings. For the purpose of this study, it is useful both to highlight the key features of PEA approaches and to indicate the differences between PEA views and conventional views of accounting. The observations that capitalism is predicated on exploitative social relations and that accounting is enmeshed in the social struggles that result from these relations is the starting point for most PEA studies. Cooper and Sherer (1984, p. 208), for example, comment: ‘‘[A]ccounting policy is essentially political in that it derives from the political struggle in society as a whole but also the outcomes of accounting policy are essentially political in that they operate for the benefit of some groups in society and to the detriment of others.’’

From this perspective, accounting is always partisan, mediating the unequal raced, classed and gendered social relations that exist under contemporary capitalism. But assuming that accounting is a partisan mediator of unequal social relations, we might ask: how is this accomplished? Prior PEA research suggests that accounting has both distributive and ideological effects that are not only predicated on unequal social relations but that also perpetuate these relations. Although these two effects are intertwined, individual PEA studies have tended to emphasize either the distributive or ideological aspects. Early PEA work, for example, highlights accounting’s distributional roles: ‘‘Accounting practice is a means for resolving social conflict, a device for appraising the terms of exchange between social constituencies, and an institutional mechanism for arbitrating, evaluating and adjudicating social choices’’ (Tinker, 1985, p. 81).

Politics of divestment

439

Accounting numbers can be said to ‘‘measure’’ the terms of exchange between different constituencies. Measure, however, does not mean an unbiased, impartial summation of events since measurement is predicted on a ‘‘value rationale’’ which influences the events to be measured and the values to be placed on these events (p. 87). And, as this previous work suggests, conventional accounting has adopted marginalist notions of value which ‘‘elevates the individual to center stage and extinguishes class and other social structural considerations’’ (Tinker, 1985, p. 164). Accounting, therefore, is reflective of not only specific economic exchanges but also existing social relations. Furthermore, accounting practices perpetuate unequal social relations—relations that are often partitioned along class, gender and racial lines. Decisions on what items to count (i.e. paid versus unpaid labour) and how to classify these items (i.e. an expense versus a residual) in accounting reports reinforce and legitimize unequal social relations. For example, Cooper and Sherer (1984) illustrate how accounting privileges capital at the expense of labour by treating labour as cost; Waring (1989) documents how distinctions between paid and unpaid labour in macro GNP calculations reinforces partiarchal relations; and Tinker (1980) shows how accounting reports reinforce the superiority of core countries and transnationals vis -a -vis peripheral countries and their inhabitants. All of these studies illuminate how accounting simultaneously measures specific exchanges and perpetuates the unequal relations upon which the exchanges are based. The aforementioned studies hint at the ideological effects of accounting in legitimizing unequal social relations. A second group of PEA studies have sought to systematically explore these ideological effects. These studies are concerned with: ‘‘[E]xploring and assessing the ways various social protagonists use accounting information and corporate reporting to mediate, suppress, mystify and transform social conflict’’ (Tinker and Neimark, 1987, pp. 71 – 72).

Central to these studies is an acknowledgement that discourses of accounting are ideological and play a role in the construction of dominant class hegemony (Cooper, 1980, p. 164). Discourses such as accounting constitute a ‘‘matrix of meaning’’ or system of linguistic relations in which individuals make sense of, describe and reproduce the material conditions of their existence (Eagleton, 1991, pp. 194 – 195). But although these discourses appear commonsensical and transparent, they may in effect erase, homogenize, naturalize and universalize social practices (Eagleton, 1991, p. 194). These ideological effects, whether intended, rationalize the prevailing material conditions and mask the fact that all groups do not benefit from these conditions (Eagleton, 1991, p. 209). The ideological effects identified in this earlier work are central to the current study in which we examine the ideological functioning of accounting discourses and accounting calculations within the debate over divestment. For example, we consider (1) how the anti-divestment frame—of which accounting was a salient part—erased the history of transnational complicity with

440

D. Neu and A. Taylor

respect to apartheid; (2) how anti-divestment discourses masked the ‘‘interests’’ of members of the University community who opposed divestment; and (3) how accounting calculations contributed to this frame by reifying economic rationality and eclipsing issues of morality by framing the issue of divestment as a question of financial consequences rather than social justice. At this point, it is useful to comment briefly on two strategies that guide our subsequent analysis. First, our analysis situates accounting discourses and calculations within other anti-divestment discourses since the persuasiveness of anti-divestment arguments depends on the sum of all the discourses. This strategy acknowledges that accounting is a potent social ideology as a consequence of the ability of accounting to harmonize with other prevailing discourses (i.e. the discourses of marginalism and the discourses of business). Stated differently, it is necessary to avoid adopting an accounting-centric perspective if we wish to understand the ability of discursive formations to perpetuate unequal social relations. Second, since the intent of antidivestment arguments is to foreclose opposing narratives and to erase the interests that underlie the arguments, it is necessary to introduce institutional material that steps outside of the anti-divestment frame. For these reasons, we introduce material on the history of transnational involvement in South Africa and material on the background and ‘‘interests’’ of anti-divestment proponents. It is only through these methods that one can step outside the ‘‘commonsensical’’ and see the relationship between anti-divestment interests and discursive strategies (Eagleton, 1991, p. 208). The preceding discussion proposes that accounting functions as a distributive and hegemonic mechanism which, through its intersection with other prevailing discourses, defends and perpetuates unequal social relations. But how does this view differ from conventional understandings and does it help us to understand accounting’s role in social conflicts?3 The working definition of accounting found in most introductory and intermediate textbooks stresses that accounting is concerned with the identification, measurement and communication of financial information to interested parties (cf. Kieso et al., 1991, p. 2). Implicit (or explicit) is the assumption that accounting strives to be ‘‘representationally faithful’’ (CICA; Kieso et al. , 1991, p. 42)—to accurately measure the underlying economic reality and to provide a neutral map of this reality (cf. Solomons, 1991a, p. 294). Further, the information to be provided is expected to be ‘‘useful’’ for decision-making purposes. As the CICA Handbook states: ‘‘The objective of financial statements is to communicate information that is useful to investors, creditors and other users in making resource allocation decisions and / or assessing management stewardship’’ (S 1000.12).

Thus, conventional understandings emphasize that accounting is a neutral measurement activity concerned with providing useful information to shareholders and creditors. What is noteworthy about conventional views of accounting is more what is not said, as opposed to what is. For example, claims regarding representational faithfulness and neutral map-making ignore the fact that decisions about what to count and how to measure are based on a set of social relations

Politics of divestment

441

that privilege capital at the expense of other groups. Thus, while claims to representational faithfulness may be correct in a very narrow sense, these very claims reinforce / perpetuate the status quo by effacing exploitative relations. Similarly, an emphasis on providing information that is useful for investors and creditors obscures and perpetuates the subordination of labour to capitalists: it also fails to acknowledge that other societal members are affected by the outputs of accounting (Burchell et al., 1980). Thus, conventional understandings, because of their decontextualized focus, rule out the very types of analyses that are crucial to understanding the broader functioning of accounting. For these reasons, we adopt a PEA approach to inform our interpretation of the functioning of accounting within the divestment debate at Queen’s University.

The Case of Queen’s University Historical Overview Queen’s, a public university founded in Kingston, Ontario in 1841, has a long tradition of educating Canada’s business and social elites. Alumni / ae and other publications emphasize this tradition and it is not uncommon to hear a student say, ‘‘I am the third generation to attend Queen’s’’. As a result of this allegiance, personal and business donations from alumni are important sources of funding for the university. Administrators and other members of the university community tend to view Queen’s as equivalent to an institution such as Harvard. The issue of divestment of shares from companies that conduct business in South Africa was initally raised in the early 1980s4. A few years earlier, students had expressed concern about the university’s investment portfolio, in particular, the proposed development of a Chilean copper mine by Noranda Mines (I. Smith, 1986, p. 11). However, this issue dissipated when Noranda decided not to proceed with the project. The Board of Trustees of the university responded to questions about investment policy (e.g. Noranda Mines) by creating a Committee on Social Responsibility (CSR). Comprised mostly of Board members, the CSR interpreted its mandate as ‘‘reporting to the Board on matters of wide-spread concern in the university community relating to investment policies and practices at the university’’ (CSR 1986, p. 5). Throughout the divestment debate, the CSR acted as a factfinder and advisor to the Board of Trustees. Throughout the 1980 – 1986 period, the increasing media coverage of the insurgency and state repression in South Africa provided the impetus for pro-divestment advocates on campuses throughout North America. Although the South African state’s use of force was accepted as necessary by capitalists within South Africa, it created problems for transnationals in their home countries (Greenberg, 1980, p. 402). The media’s portrayal of the violence occurring in South Africa and their suggestion of the complicity of transnationals in maintaining apartheid contradicted the socially responsible image that businesses were attempting to portray at home (Minter, 1989, p. 427). As

442

D. Neu and A. Taylor

Minter comments, this contradiction became quite visible in 1985 when the South African state instituted a state of emergency, and when the ‘‘Free South Africa’’ demonstrations captured the attention of the North American public (p. 427). The media coverage of events in South Africa arguably had an effect on the Queen’s University community. In 1983, 59% of the students polled favoured divestment (I. Smith, 1986, p. 11); in 1986, an Ad Hoc Faculty group favouring divestment presented a brief to the Board of Trustees (Ad Hoc Faculty Group, 1986). The CSR itself was not of one mind; a Minority Report outlining concerns over CSR policies and procedures was added to a report to the Board of Trustees for the period May 1983 – October 1985. However, increasing calls by students and faculty for divestment forced action by the CSR. In February 1986, members of the CSR voted on the motion that they recommend divestment of South Africian securities to the Board of Trustees. The motion was defeated 6 to 3; however, the CSR recommended that the Board of Trustees place the matter of divestment on its agenda as soon as possible (CSR, 1986). On 10 May the issue of divestment was placed before the Board. Preceding the formal vote, student representatives spoke in favour of divestment, but the chairpersons for the CSR, the investment committee5, the finance committee6, and the Principal David Smith (a former professor in the economics department at Queen’s University)7, argued against divestment (Board of Trustees, 1986, pp. 18 – 19). When the formal vote was taken, the motion to divest was defeated by a vote of 22 to 9 (Board of Trustees, 1986). Instead, the Board decided that a revised version of the Sullivan Principles8 be used to guide investment decisions. Throughout the remainder of 1986 and early 1987, the Board of Trustees and Principal Smith faced increasing pressure to change their positions. In September 1986, the Senate of Queen’s University asked the Board to reconsider its decision. Then, in early 1987, both the students and the faculty held referenda indicating that the majority of students and faculty favoured divestment. The faculty’s referendum also had a direct bearing on the university’s pooled investment fund, since the faculty’s pension fund was included in this fund. Apparently, these tactics had some effect. At a Senate meeting in May 1987, Principal Smith stated that he would recommend that the Board of Trustees reconsider adopting a policy of divestment (Philip, 1987, p. 1). In June, the CSR also changed its position and recommended that the Board divest, citing the faculty vote as the primary reason (Currie, 1987, p. 1). Consequently, the Board of Trustees voted 19 to 5 in September 1987 to divest its shares from companies operating in South Africa. Although the Principal and the majority of Board members eventually voted for divestment, the subject had wrought divisions within the university and ill feelings remained. As one Trustee commented: ‘‘I object to succumbing to pressure groups. Thus, it is with some reluctance that I will vote in favour of the motion’’ (Stackhouse, 1987, p. 10). Thus, while political pressure influenced some Board members to change their vote, their opposition to divestment remained.

Politics of divestment

443

Table 1. Board member affiliation Voted for divestment

Voted against divestment

Affiliated with transnational capital

2

16

Not affiliated with transnational capital

7

5

Log linear directional test: coefficient (voteyes p affiliationyes) 5 0.549 z -statistic 2.49 p , 0.01.

Board Composition and Voting Behaviour The divestment decision was the jurisdiction of the university’s Board of Trustees. They were responsible for the ultimate decision and for selecting the sub-committees that provided inputs into the decision-making process (Board of Trustees, 1986, p. 18). The Board was also responsible for selecting the Principal who, in turn, played a key role in the divestment debate. An examination of the composition of the Board of Trustees at the time of the divestment debate is instructive. Of the 30 Board members (excluding the Principal) who voted at the May 10, 1986 Board of Trustee meeting, 18 Board members (60%) were affiliated with transnational capital, where previous or current employment or business dealings with transnationals is taken to indicate an affilation9. For example, two Board members were current or past executives of Alcan, a transnational mining company with investments in South Africa (Taskforce on Churches and Corporate Responsibility, 1985, p. 39). Others were senior executives with financial conglomerates. Finally, other Board members held directorships in transnationals or had clients that were transnationals. In terms of the vote itself, 16 of the 18 Board members that were affiliated with transnational capital voted against divestment whereas 7 of the 12 Board members that were not affiliated with transnational capital voted for divestment. As Table 1 suggests, a Board member’s affiliation with transnational capital was related to the decision to vote against divestment10. The relation between transnational affilation and voting behaviour is not intended to suggest that Board members had a direct pecuniary interest in the stock being considered for divestment. Rather, as law professor Toni Pickard comments11: ‘‘It is, in my view, rather their personal backgrounds as people who live in, work in, and owe their allegiance to the corporate world which explains the fact that every Trustee with a corporate background voted against divestment’’ (1986, p. 10).

According to Pickard, the divestment decision was more an issue of corporate solidarity than an issue with immediate financial consequences for the Board members affiliated with business. Although this particular vote might not have had immediate financial consequences for Board members, we would suggest that the decision to divest is tied to issues of distribution and the expansion of capital. In particular, one message sent by the decision to divest is that transnational capital is not free to make decisions using strictly economic criteria and that profit calculations should not take precedence over other values (subsequent

444

D. Neu and A. Taylor

sections discuss how accounting calculations were used to efface these other values). Therefore, while divestment from particular shares within the current portfolio of stocks might not have affected individual Board members, adherence to the principle to consider socio-political criteria in future investment decisions undoubtedly would. Similarly, a decision to divest would set a precedent for other universities dealing with the issue. As a consequence, such a vote may have longer-term financial consequences for all transnationals. Furthermore, a vote for divestment would directly challenge the autonomy of transnationals to determine where and how they conduct business. Amin (1990, p.12) notes that this autonomy has allowed transnationals to generate huge amounts of surplus value in peripheral countries for the benefit of shareholders in the industrialized, core countries. In South Africa, for example, Pillay (1989, p. 307) documents that state-sanctioned apartheid arrangements allowed transnationals to earn an average rate of return of 22%—approximately three times the average rate in industrialized countries. These observations are consistent with Marx’s comment that ‘‘as soon as capital is subjected to state control (e.g. in core countries) . . . it seeks compensation all the more unrestrainedly at all other points’’ (1977, p. 621). Divestment, in challenging the autonomy of transnationals to determine appropriate modes of operations in peripheral countries would also expose exploitative modes of operation in these countries—for example, the use of force by colonial powers to oppress the indigenous population and to maintain a captive reserve army of labour (Fanon, 1963, p. 54; Magubane, 1979; Wolpe, 1988, pp. 66 – 74)12. The preceding analysis implies that the decision of certain Board members to oppose divestment was, in part, a consequence of their social location, particularly their affiliation with transnational capital. This provides an alternative frame for interpreting the discursive strategies utilized by antidivestment proponents. As Eagleton (1991, p. 209) notes, discourses and the resulting ideological effects offer sets of reasons for existing material conditions and existing social relations. Therefore, consideration of the linkages between transnational affilation and opposition to divestment makes visible the benefits involved in encouraging the deployment of certain discursive strategies. Framing the Debate Consistent with the responses of other university administrators (cf. Kendall, 1986), Queen’s administrators argued that divestment was not tenable, nor was it desirable. For example, the CSR report on the investment activities of the university for the 1983 – 1985 period adopts the rhetoric of ‘‘fiduciary responsibility’’, and equates fiduciary responsibility with financial responsibility . It states: ‘‘The first duty of the Queen’s Board of Trustees in managing the investment portfolio of the university, particularly in this difficult period of shrinking government support of universities, is to generate as much income for our teaching and research programs as possible. As investors, we would have to be concerned that other investment policies we might adopt could affect negatively the rate of return of our investments. As

Politics of divestment

445

Trustees, we have a fiduciary responsibility to the university, and an unwitting negligence could find us in breach of our responsibility’’. (CSR 1986, p. 7, emphasis added).

This theme of financial responsibility was echoed by the Principal in his comments made prior to the divestment vote (Smith, 1986, p. 13). For Principal Smith, the Board of Trustees’ primary role was stewardship of the university’s assets. Emphasis on the economic aspects of the Board’s duties brought questions of costs and benefits and, hence, calculations to the fore. While the next section examines the deployment of accounting calculations in more detail, the rhetoric of financial responsibility had the effect of obscuring other considerations in the divestment decision, especially questions of social justice. Discerning the implications of such a position, Archbishop Scott of the Anglican Church asks: ‘‘Are we afraid to pay a little bit because we believe in certain principles of justice? Or are we only prepared to talk about justice when it doesn’t cost us anything?’’ (1986, p. 3).

The equation of fiduciary responsibility with financial reponsibility is arguably a selective interpretation of the role of the Board of Trustees. As Law Professor Pickard states ‘‘money management is neither the only, nor, it seems, the most important power of the Board’’ (1986, p. 45) suggesting that financial responsibility was but one of the responsibilities of the Board and that fiduciary responsibility includes, but is not limited to, financial responsibility. Whereas the notion of financial responsibility was used to argue that divestment was untenable, academic freedom was used to argue that it was undesirable. Principal Smith argues: ‘‘Presidents of many major universities—Derek Bok of Harvard, Hannah Gray of Chicago, for example—have argued against total divestment on the grounds that it weakens the independence of universities for free inquiry . . . Universities have long striven to retain independence from outside constraints on intellectual freedom. Over the years external forces with economic power have sometimes tried to influence university policies through threatening to use their power. If we now turn and use similar techniques, our critics can be expected to rethink the case against using such threats against universities’’. (Smith, 1986, p. 5, emphasis added).

In his comments, the Principal suggests that universities have traditionally sought ‘‘independence from external forces’’ in order to protect academic freedom and to maintain a position of neutrality on the issues of the day. This implies that the act of divestment constrains academic freedom by adopting a partisan position (cf. CSR 1986, p. 6). While the phrase ‘‘academic freedom’’ itself warrants further scrutiny, the suggestion that universities have been allowed to pursue academic freedom because they have been economically autonomous is problematic. As several researchers document, a long tradition of close relations between transnational corporations and North American universities exists (Axelrod, 1982; Buchbinder & Newson, 1988; Slaughter, 1990). This research documents that economic autonomy with respect to universities has always been illusory and

446

D. Neu and A. Taylor

that universities are increasingly becoming active participants in corporate endeavours. The chairperson of the CSR describes the dependence of Queen’s on corporate and alumni donations when he says: ‘‘I think that the university has to be very hesitant about using its economic muscle because we are in a much more vulnerable position than the people we are trying to use our muscle on and we’re also in the position of asking them for help from time to time’’ (Broadbent, 1985, p. 19).

It is clearly the university’s lack of economic autonomy that makes the issue of divestment so ‘‘tricky’’ for the administration, and the ideal of academic freedom so difficult to attain. Besides appeals to academic freedom, characterization of the divestment debate as ‘‘political’’ (Kendall, 1986) was also an important part of the anti-divestment rhetoric. For example, the Principal states: ‘‘A university should be a place where individuals explore and develop positions on the moral issues of the day. Individuals are then free to take responsible action and voice their views through political institutions. There is a great danger in thinking that universities should be the means. As President Hannah Gray of the University of Chicago said: ‘I do not think that the university should be a surrogate for our taking action as individuals in the public forum.’ ’’ (Smith, 1986, p. 5, emphasis added).

This dual suggestion that universities are outside of politics, and that political action must be individual action, can be interpreted as a politics of the status quo since this position effectively precludes the possibility of collectively challenging and mobilizing to resist current political and social relations within the university. The rhetorical elements presented form an ideological whole. Thus, on one side we have the liberal ideals of the university: objectivity, rationality, academic freedom and economic autonomy, and on the other we have a political intervention (divestment) which is equated with bias, the dominance of particular constituents within the university community, and loss of economic autonomy. What the appeal to liberal ideals does is to set the parameters for debate. Instead of being a debate about the historical role of transnationals in sustaining the relations of apartheid, the debate is reduced to arguments over legal and conceptual definition. By framing the debate in this manner, anti-divestment proponents emphasized the rationality of not divesting. Defining fiduciary responsibility as financial responsibility privileged quantifiable costs and benefits. The emphasis on liberal ideals reinforced this ideological effect by stressing the virtues of objectivity and freedom from bias. As a consequence, there was no need for anti-divestment Board members and university administrators to ground arguments in the actual material practices of transnationals operating in South Africa. Employing this particular frame enabled the avoidance of the more troubling historial ‘‘facts’’ such as the complicity of transnationals in the perpetuation of apartheid (Magubane, 1979; Greenberg, 1980; Lacey, 1981). For example, Greenberg (1980, p. 203), in talking about South Africa of the 1960s and 1970s comments that:

Politics of divestment

447

‘‘Business itself has come to terms with the constraints and opportunities in the racial order, even in areas where business associations have historically contested state policy. The racial segregation and inequality that characterize society have been readily reproduced in the workplace ’’ (emphasis added).

Similarly, the emphasis on rationality, objectivity and cost / benefit served to efface the linkage between participant ‘‘interests’’ and the opposition to divestment highlighted in the section on Board composition and voting behaviour. In the following section, the role of accounting calculations in supporting as well as adding coherence and legitimacy to the anti-divestment frame is examined in greater detail. Accounting Calculations As previously noted, the effect of anti-divestment arguments was to emphasize the rationality of not divesting. In this section, we examine: (1) how accounting calculations were used strategically to reinforce this effect, (2) why accounting calculations were successful in doing so, and (3) why accounting calculations went unchallenged in this case. The Deployment of Accounting Calculations Throughout the divestment debate, accounting calculations were used to support the argument that divestment would be costly to Queen’s University because transnationals earning excess returns coincidentally have a minor portion of their operations in South Africa, thus avoiding the argument that high rates of return result from the exploitation of Africans (cf. Pillay, 1989). Consequently, accounting calculations were used ‘‘strategically’’ (Burchell et al., 1980; Amernic, 1985) both to demonstrate the high costs of divesting, and to indicate that the benefits received from the South African portion of transnational operations were insignificant. The following examples illustrate how accounting calculations were used to overstate the apparent costs of divesting and to understate the portion of benefits pertaining to South African operations13. In the months preceding the divestment vote, the chairpersons of three of the most influential sub-committees all stressed the expected costs of divestment. For example, the chair of the CSR stated that divestment would involve substantial transaction costs: ‘‘We know right off the bat that there would be brokerage fees in the 100 thousand dollar range to divest of the South African holdings that we have now’’ (Broadbent, 1986, p. 18).

The minutes of the May 1986 Board meeting reiterate a similar theme: ‘‘Mr. Stackhouse, speaking as Chairman of the Finance Committee, said that the university was facing a $1.2 million deficit in its operating budget. The finance committee believed that it was urgent to seek additional funding so that the university could meet its basic objectives. The committee believes that divestment could lower revenues and would not help in seeking additional funding’’ (Board of Trustees, 1986, p. 18).

448

D. Neu and A. Taylor

The concerns of the Finance Committee chair were echoed by the Investment Committee chair: ‘‘The most far reaching financial cost would arise from the impact of a new set of rules on the investment advisor’s modus operandi and performance. Queen’s has had a distinctly above average investment return. A drop to the average return would imply a loss of $4.4 million per year. The investment committee unanimously rejected total divestment (Board of Trustees, 1986, p. 19).

For the chairs of the CSR, Finance, and Investment Committees, divestment meant significant costs for the university, including portfolio costs (transaction costs and lower future returns) and the cost of foregone future corporate donations (cf. Fleming, 1986, p. 8). Turning to the specific use of accounting calculations to ‘‘support’’ these claims, it appears that, from the information that is publicly available, accounting numbers were used selectively. The following two examples indicate where this seems to be the case. The first instance pertains to the expected cost of holding a South Africa-free portfolio. CSR documents indicate that the Queen’s investment portfolio had approximately $25 million invested in transnationals operating in South Africa as of 1 May 1986 (CSR, 1987, p. 4). This represented 22.9% of the total portfolio. At the time of the May 1986 Board of Trustee meeting, the chair of the Investment Committee stated that, ‘‘a drop to the average return would imply a loss of $4.4 million per year’’ thus suggesting that divestment would cost the university $4.4 million per year. It is not possible to determine what the impact of divestment would have been if the Board had chosen to divest at the May 1986 Board meeting. However, it is possible to examine historical investment trends as a way of assessing the reasonableness of the $4.4 million expected cost as of May 1986. Table 2 examines the reasonableness of this figure in light of a passive portfolio strategy whereas Table 3 considers the reasonableness in terms of the performance of other investment funds for previous periods. Table 2 reports the change in market value of the South African stocks Table 2 . Estimated cost of divestment under a passive portfolio management strategy 1 May 1986 per CSR (Cdn $)1

1 May 1985 per Globe & Mail (US $)

1 May 1986 per Globe & Mail (US $)

Difference

$25 221 000

$14 176 000

$17 988 000

26.9%

Standard & Poor’s 500 Stock index

—

180

235

31.0%

Difference in performance

—

—

—

(4.1)%

Difference in portfolio value between University portfolio and a portfolio approximating Standard & Poor’s index

—

—

—

US$(581 000) C$*(814 000)

Portfolio of transnationals operating in South Africa

1

Source: CSR Report (1987). * Converted at the rate implied by CSR market values (1.40).

Politics of divestment

449

Table 3. Estimated cost of divestment under an active portfolio management strategy Compounded annual returns for period(s) ended 30 June 1986 ———————————————————————– 10 years 5 years 3 years Top Canadian Mutual Fund performer (assets . $25 million)

21.8%

16.5%

21.8%

Average Canadian Mutual Fund performer (assets . $25 million)

15.4%

10.6%

12.0%

Standard & Poor’s 500 index

14.6%

19.3%

19.2%

7.2%

22.8%

2.6%

$1 800 000

($700 000)

$700 000

0?8%

28.7%

27.2%

$200 000

($2 200 000)

($1 800 000)

Difference between top performer and Standard & Poor’s index Estimated cost (benefit) of divestment for period ended June 1986 (C$)1 Difference between average performer and Standard & Poor’s index Estimated cost (benefit) of divestment for period ended June 1986 (C$)1

Sources: Financial Post Survey of Funds (30 June 1986) CSR Report (1987). 1 Calculated as the ending portfolio value multiplied by the percentage difference in returns.

between 1 May 1985 and 1 May 1986. Over this period, the weighted market value of these stocks increased by 26.9%14. However, the Standard & Poor’s 500 stock index increased by 31.0% over the same period. If one accepts that this index is representative of a normally diversified South Africa free portfolio, as members of the CSR did (CSR, 1986, p. 3), there would have been no cost associated with divestment for the period ending 1 May 1986, rather a gain of $814 000. Table 3 examines the performance of Canada’s mutual funds compared to the Standard & Poor’s 500 index for the period ending 30 June 198615. This comparison highlights the difference between the performance of a South Africa free portfolio (i.e. the Standard & Poor’s 500 Index) and Canadian mutual funds of a size similar to the Queen’s Investment portfolio. Since most investment funds pursue an active investment strategy, one could argue that the comparison in Table 3 provides a better estimate of the costs of divesting than does the passive divestment estimate provided in Table 2. Depending on one’s assumption regarding the proficiency of Queen’s investment managers and the period of time examined, the estimated impact per year of holding a south Africa-free portfolio ranges from a cost of $1.8 million to a saving of $2.2 million16. Our calculations suggest that the expected cost of divesting arrived at by the Investment Committee appears excessively pessimistic given publicly available information. Even if one assumes that the university’s portfolio performance was comparable to the best of Canadian mutual funds, the estimated cost of divesting amounts to $1.8 million per year compared to the $4.4 million estimate. Further, the $1.8 million can be interpreted as an upper bound on the estimated cost since it was calculated by comparing the

450

D. Neu and A. Taylor

performance of an active investment fund with a passive benchmark and by selecting the time period that resulted in the largest possible cost. Additionally, the chair of the CSR estimated brokerage fees for divesting to be in excess of $100 000 for a portfolio of $25 million. However, in 1987, when the actual decision was made to sell $5.3 million worth of shares in one of the South African companies, the transaction costs were expected to be seven to fifteen cents per share for a total expected cost of $8000 (MacDermaid, 1987, p. 4). Thus, a similar assumed selling cost for the 292 000 shares held at 1 May 1986 (CSR, 1987, p. 4) would result in transaction costs of between $20 000 and $44 000. On the basis of these calculations, the estimated transaction costs associated with divestment appear to be excessively pessimistic in light of subsequent transaction costs17. Perhaps more important than the deployment of accounting calculations to emphasize the expected costs of divestment, was the use of accounting calculations to support the argument that the benefits generated by South African operations were an immaterial portion of transnational operations. For example, in addressing the Board of Trustees prior to the May 1986 vote, the Principal states: ‘‘A rough calculation indicates that Queen’s holdings are equal to only about 5 / 1000 of 1% of the market value of these companies and Queen’s income share is about $7500’’ (Board of Trustees, 1986, p. 2).

According to Principal Smith, the benefit received from the activities of transnationals operating in South Africa was negligible when compared to the university’s entire investment income. Presumably, the Principal’s comments were intended to suggest that the divestment debate was ‘‘much ado about nothing’’. Principal Smith’s usage of accounting calculations in the aforementioned comment is interesting for two reasons. First, as Table 4 indicates, the dividends received by Queen’s from its investment in transnationals Table 4. Estimated appreciation of portfolio pertaining to transnationals operating in South Africa Dividends received by Queen’s University from transnationals operating in South Africa for the year ended 31 December 1986

C$815 0001

Principal Smith’s estimate of income (dividends) relating to South African operations

$7500

Estimated percentage of dividends relating to South African operations ($7500 / 815 000)

1.00%

Change in Queen’s University portfolio value for year ended 1 May 1986 under a passive investment strategy (all numbers from Table 2)

1 May 1986(US$) 1 May 1985 Appreciation(US$) AppreciationC$

Amount of stock appreciation pertaining to South African operations (using the assumption that only 1% of transnational income results from South African operations) Sources: meeting.

1

17 988 000 14 176 000 3 812 000 5 300 000

$53 000

Financial Post Dividend Summary Minutes of the 10 May 1986 Board of Trustee

Politics of divestment

451

operating in South Africa amounted to $815 000 for 1986. Thus, this $7500 income share implies that less than one percent of these dividends, and, hence less than one percent of transnational income, results from South African operations. If one accepts the Principal’s calculations at face-value, the superior returns of transnationals operating in South Africa and exploitation of Africans are unrelated. However, given that Canadian GAAP does not require public companies to segregate operating results by geographic area unless ‘‘significant’’, it is unclear how the Principal arrived at this rough calculation. Second, while the income from these investments may have amounted to only $7500, the value to Queen’s of these stocks consists of both dividends (presumably what the Principal meant when he referred to income) and capital appreciation. As Table 2 indicated, the appreciation of these stocks in the year ended 1 May 1986 was 26.9% or Cdn$5.3 million. If we assume that one percent of this appreciation relates to the transnational’s South African operations, the estimated benefit to Queen’s from these shares is at least $60 000 per year ($7500 dividends plus $53 000 capital appreciation). Further, as Table 4 indicates, the expected benefit is extremely sensitive to the percentage of transnational operations assumed to pertain to South Africa. The preceding analyses suggest that accounting numbers were used by influential Board members and university administrators to assert that divestment would have significant costs. These costs were based on a projected drop in the average return on investment at Queen’s and on transaction costs associated with divestment. Our calculations, based on available stock market data and on transaction cost data released later by the CSR, indicate that the expected costs of divestment were excessively pessimistic. On other occasions, accounting figures were used to obscure the link between the superior returns of transnationals and their presence in South Africa. More specifically, accounting calculations were used to argue that the activities of companies doing business in South Africa represented a tiny fraction of their overall operations and that this translated into a tiny fraction of investment income for Queen’s. Therefore, the decision to divest was presented as ‘‘throwing out all the apples, even those that are only slightly bruised’’. Again, our calculations indicate that the university received a greater benefit from these stocks than was acknowledged. Why accounting numbers? Accounting calculations used to argue against divestment emphasized the high costs and the low benefits of the divestment alternative. The legitimacy of these calculations depended, in part, on other aspects of the anti-divestment discourse: in particular, the emphasis on financial responsibility provided rhetorical space for the deployment of accounting calculations. As Power (1992, p. 478) commenting on Gorz (1989) notes, accounting calculation is the means by which economic knowledge (and marginalist notions of value) are mobilized thereby allowing economic knowledge to intervene in areas from which it was previously excluded. However, the relationship between ideological effects and accounting calculations is not unidirectional in that accounting calculations, in turn, reinforced the rationality of not divesting.

452

D. Neu and A. Taylor

Accounting calculations reinforced this rationality in two ways. As numerous commentators have noted, accounting calculations denote apparent facticity and objectivity (cf. Cohen, 1982, p. 226). For example, Ijiri argues that historical cost accounting numbers tend to be objective since they are built up from a virtual infinity of atomistic journal entries (Thornton, 1984, p. 94). Similarly, Solomons argues that representational faithfulness and neutrality are characteristics of accounting numbers (1991a, p. 288). Thus, this appearance of facticity and objectivity echoed and reinforced the ideological effects found in the discourses pertaining to financial responsibility and the ideal of the liberal university, particularly the notions that university decisions should be objective and free from bias. Accounting calculations also provided reinforcement by effacing the underlying exploitative relations of apartheid along with the ‘‘interests’’ of anti-divestment advocates. Gorz’s (1989, p. 122) comment that, ‘‘economic rationality itself is formalized into calculation procedures and formulae inaccessible either to debate or reflection’’ succinctly captures this characteristic of accounting calculation. Accounting profitability and stock market share prices for transnationals operating in South Africa are predicated on the exploitation of Africans. Thus, while accounting numbers could be interpreted as measuring these unequal social relations (cf. Tinker, 1980, p. 154), the ideological effect was that these relations were erased. Instead, the cost arguments stressed that the current beneficiaries of these unequal social relations would be harmed by divestment. Returning to our theoretical frame, this example highlights not only the distribution but also the hegemonic uses of accounting calculations. Besides prepetuating exploitative relations through the erasure of transnational involvement in South Africa, the calculations masked the ‘‘interests’’ of anti-divestment advocates. They could argue the disadvantages of divestment using notions such as cost and benefit without acknowledging their interests in the outcome. In these ways, accounting calculations effectively buttressed the anti-divestment frame by concealing the very points— transnational complicity in apartheid and anti-divestment interests—at which this frame was most open to challenge. In sum, it appears that the intersection of accounting calculations and other anti-divestment discourses created a circular, self-reinforcing argument that deprived debate participants of a way of seeing other possibilities (cf. Tinker, 1988, p. 177). We refer to this as an ideological circle (Smith, 1990a) whereby the textual account (the accounting calculations) relied on an ideological frame which then determined the selection of the ‘‘particulars’’ of the account. In this case, the ideologies of ‘‘financial responsibility’’ and the ‘‘ideal of the liberal university’’ led to an emphasis on the costs of divestment for the university and the selection of particular accounting figures to reveal the costs of divesting. It is small wonder then that the particular accounting figures justified and supported a ‘‘no’’ vote with respect to divestment. Uncontested accounting The suggestions by Gorz (1989, p. 122) that calculation precludes debate or reflection partially answers the question as to why the deployment of accounting calculations was not challenged. For Gorz,

Politics of divestment

453

such calculations are inaccessible and impermeable to debate yet they have the ability to eclipse other issues. However, the private nature of accounting calculations and the role played by expert cultures also seem salient when explaining the absence of challenges (Amernic, 1985; Power, 1992, p. 495). Organizational insiders control financial reporting processes and employ strategic accounting calculations. These insiders are thus able to rationalize a particular course of action by influencing the dissemination and use of information which will shape attitudes prior to making decisions (Amernic, 1985, p. 250). As a result of this information disadvantage, external parties often avoid accounting information when arguing their position (p. 251). In looking back at the debate, there was some discussion about the nature of fiduciary responsibility but the actual accounting calculations were not challenged. In a conversation with a contributor to the Ad Hoc Faculty Report (13 July 1993) it was revealed that the lack of publicly available information encouraged the acceptance of accounting data as ‘‘facts’’. As is often the case, the bases of the Board members’ calculations were not made public. Thus, anti-divestment Board members were able to use these numbers to justify their desired course of action without having their calculations challenged. The argument that the nature of accounting calculations and the bargaining process mitigated possible challenges points to a structuralist explanation. However, ‘‘expert cultures’’ are often an important influence on how accounting calculations are deployed and whether they are challenged: ‘‘it is these organizational structures (of expert cultures), rather than calculation in some phenomenological sense, which represent the greater obstacle’’ (Power, 1992, p. 495). In this case, the alignment of the majority of Board members with business backgrounds (including the managing partner of one of the ‘‘big-six’’ public accounting firms) against divestment minimized the likelihood of the accounting calculations being challenged for two reasons. First, there was a sense throughout the debate that these Board members were the experts in financial matters and therefore that their calculations were legitimate. Also, the near unanimity of these Board members along with the private nature of the information needed for the calculations provided little opportunity for pro-divestment supporters to challenge the accounting numbers. The suggestion that financial experts play a partisan role in such social struggles runs contrary to conventional understandings of accounting. Solomons (1991a, p. 291), for example, argues that accountants attempt to convey information in a neutral manner. However, it may be argued from the case that the overlapping interests of capitalists and ‘‘financial experts’’ (Johnson, 1977, pp. 103 – 104; Lehman and Tinker, 1987) influenced the deployment of accounting calculations and limited ‘‘informed’’ challenges to these calculations. In sum, the ‘‘intrinsic’’ nature of accounting calculations, especially the apparent facticity and objectivity, along with the private nature of the financial reporting process decreased the likelihood of challenges. In turn, the solidarity of internal financial experts in opposition to divestment reinforced the impermeability of the calculations. Thus, it would have taken greater disclosure of information as well as courage for divestment proponents to have challenged the calculations!

454

D. Neu and A. Taylor

Reinforcing the Frame In reinforcing the undesirability of divestment, anti-divestment proponents emphasized the economic benefits of transnational involvement in South Africa. These arguments were framed in terms of markets, employment and economy—for example, several trustees sought to justify the North American corporate presence in South Africa in terms of their ‘‘social contribution’’. In explaining her decision to vote against divestment, one Board member comments: ‘‘I have had the opportunity to visit South Africa. I’ve been down a gold mine, and seen an all black school. I don’t think that what we do here [i.e. divestment] is going to be of any help in solving their problems . . . . North American companies are providing employment for these people’’. (Benidickson, 1986, p. 8)

For this Board member and others, transnational involvement in South Africa was a positive force. Transnationals provide employment for Africans. They also promote social benefits such as better schooling and medical facilities for all, since presumably these benefits trickle -down to the African population as a result of transnationals’ involvement in the economy. Reminiscent of Adam Smith’s belief in an invisible hand, these Board members imply that selfserving behaviour on the part of transnationals makes all members of South African society better off. However, it is noteworthy that in their comments generally Board members made little reference to existing South African conditions, to the historical context of apartheid or to the divestment views of black South Africans. Discussion remained philosophical with little attempt to ground the arguments in actual material practices. Having emphasized the benefits of capitalist free enterprise, trustees went on to discuss how change was possible within capitalist structures. Solutions involved ‘‘constructive engagement’’ (Minter, 1989), and ‘‘selective divestment’’ using a modification of the Sullivan Principles. These responses were also typical of other Canadian universities at various times in their debates (for example, McGill University, the University of Toronto and Windsor University). Constructive engagement describes the attempt to influence companies through one’s influence as a shareholder. Several Board members indicated that this influence would be lost if the divestment option was chosen. For example, one trustee comments: ‘‘I don’t feel sanctions and divestment are the way to [influence South Africa]. I much prefer to have some foothold there, in the form of stock so that we can continue to influence and discuss the issue’’ (Davis, 1986, p. 8).

In other words, divestment would eliminate any influence that the university had over transnationals operating in South Africa. Similarly, the withdrawal of transnationals from South Aftica would eliminate the influence that transnationals had with the South African state. Selective divestment was also presented as an option; during the May 1986 Board of Trustees meeting, the Principal proposed that the university adopt a modified version of the Sullivan Principles as the basis for assessing

Politics of divestment

455

corporate social responsibilitiy (10 May 1986, p. 6). Based on the investment policies adopted by Harvard University, the modified guidelines state that the university would not hold shares in any company that persisted in selling significant quantities of goods or services used in the direct enforcement of apartheid, and would not hold shares in companies that did not respond to dialogue. At this meeting, the Board chose to accept the Principal’s proposal of selective divestment. Clearly, the modified principles were consistent with the belief of several trustees in the progressive influence of the capitalist free market and the possibility of change within these structures. The notions of constructive engagement and dialogue imply that structures of apartheid can be changed within the existing economic system. Wolpe (1988, p. 25) refers to this as liberal modernization theory, characterized by the belief that the racial order is essentially a political / ideological phenomenon that is separate from the economic sphere. According to this perspective, the presence of transnationals and the economic rationality that they bring will eventually eliminate irrational social relations such as apartheid, i.e. there is the assumption that discrimination or segregation makes bad business sense. Indeed, during the debate preceding the divestment vote, several Board members commented that apartheid and a free enterprise system were totally incompatible (Board of Trustees, 1986, p. 19). However, as was suggested earlier, an historical analysis of the emergence of apartheid indicates that capitalism and racism have been mutually supporting (Magubane, 1979; Greenberg, 1980; Wolpe, 1980; Lacey, 1981). The emphasis placed on the economic benefits of free enterprise for South Africans reinforces the rationality of not divesting. Emphasis on the economic rationality of market relations harmonized with the economic rationality implicit within arguments of financial responsibility. It also further justifies the appropriateness of using accounting calculations to determine what is the ‘‘best’’ course of action (Gorz, 1989, p. 112) thus fortifying the anti-divestment ideological frame by allowing anti-divestment proponents to argue that transnational involvement in South Africa was a ‘‘win – win’’ situation for both the university and black South Africans alike. And, like the other discursive strategies, these arguments ensured that questions regarding the benefits accruing to the transnationals and their supporters remained unasked. Postscript to the Debate Before turning to the implications of our research, we feel it is necessary to add this ‘‘postscript’’ which briefly considers events occurring after May 1986. It was mentioned earlier that the Board voted (19 to 5) in September 1987, to fully divest the university’s shares from companies operating in South Africa. The reader may well ask how this dramatic turn-around occurred in the relatively short time after the vote against divestment (22 to 9) in May 1986. University faculty played a role in this decision in that a faculty referendum in 1987 indicated that contributors to the Ad Hoc Faculty Brief (April 1986) were not in the minority; indeed, the majority of faculty favoured divestment. Since the faculty’s pension fund was part of the university’s pooled investment fund, this was more than a symbolic action. The Principal of Queen’s

456

D. Neu and A. Taylor

subsequently recommended that the Board of Trustees adopt a policy of divestment, citing the faculty referendum as one of his reasons. We have previously noted that over half of the Board were affiliated with transnationals. Slaughter (1990) suggests that university leaders also tend to align themselves with what she calls an ‘‘institutional class’’, and are increasingly concerned with maintaining their relations to the transinstitutional network in these times of scarce resources (pp. 223 – 227). However, Slaughter also notes that faculty occupy a more ambiguous social location. Echoing Ehrenreich and Ehrenreich (1979), Slaughter suggests that, as part of a ‘‘professional managerial class’’, faculty are often involved in technical innovation and / or the reproduction of cultural and class relations. However, they may also share a ‘‘professional consciousness’’ and sense of social justice (p. 266). In this case, a group of faculty members were able to mobilize sufficient support to resist the deployment of their funds for exploitative purposes, and to express their support for a policy of full divestment. Individuals were made to see their complicity in relations of collective domination (cf. Tinker, 1991, p. 305). Whether this will be possible at other times and in other places clearly depends on the changing social location of faculty members and the extent of alliances between corporations and universities. Discussion This study has examined how accounting discourses and calculations can be deployed to articulate a politics of the status quo. We focused primarily on the construction of the case against divestment at Queen’s University by the Board of Trustees and university administrators, paying particular attention to: (1) the interconnections between accounting and other discursive formations, and (2) the ideological effects of discourses such as accounting—e.g. obscuring exploitative social relations and masking the ‘‘interests’’ underlying a particular frame. The analysis demonstrates how a variety of discourses were interwoven to construct an anti-divestment frame—the ideological effect being to eclipse issues of social justice and to erase both the actual material practices of transnationals operating in South Africa and the ‘‘interests’’ of Board members in the debate. Further, the analysis illustrates how accounting calculations and the ideas of financial responsibility, the liberal ideal of the university and the benefits of free enterprise were, within the previously described ideological circle, mutually supporting. And while notions of economic rationality and objectivity rhetorically legitimated the deployment of accounting numbers, these same calculations in turn reinforced the anti-divestment discourses. Our examination of the functioning of accounting within the divestment debate challenges conventional conceptualizations of accounting by making visible the partisan nature of accounting numbers and calculations. Assertions that accounting provides a ‘‘neutral map’’ of economic reality or that accounting and colonialism are unrelated (Solomons, 1991a, p. 287) are themselves ideological since they obscure unequal social relations. In this

Politics of divestment

457

case, notions of cost and benefit erased the relations of apartheid and defended the actions of transnationals. Besides illustrating the ideological functioning of accounting, the study suggested that accountants and other financial experts were partisan participants in the accumulation of capital and the appropriation of surplus value. This conclusion challenges the conventional view that accountants are neutral communicators of financial information (cf. Solomons, 1991a, 1991b). However, our conclusion is also subtly different from Arnold and Hammond’s (1994, p. 124) suggestion that accounting ideology is a ‘‘two-edged sword’’ in such social conflicts. While we would agree that ‘‘in theory’’ accounting calculations can be used to resist exploitative social relations, Gorz’s (1989) conclusion regarding the impermeability of accounting numbers, along with the observation that financial expertise is most often associated with class privilege, limits the probable counter-hegemonic uses of accounting. In conclusion, we reiterate the necessity of locating accounting arguments and other discursive formations in relation to the wider historical and socio-political context. Without an understanding of this context, it is difficult to see the erasing, naturalizing and homogenizing effects of ahistorical and largely conceptual arguments defending the status quo. In this case, for example, arguments regarding the role of capitalism in breaking down the relations of apartheid (what we referred to as liberal modernization theory) and equitably redistributing wealth (i.e. the notion of trickle down economics) along with arguments regarding the proper role of the university (i.e. the ‘‘liberal’’ university) and university administrators (i.e. financial stewardship) reinforced dominant class hegemony by effacing material practices and by focusing attention on the abstract. An understanding of how these discourses work sensitizes us to not only the hegemonic functioning of prevalent discourses, including accounting, but also to the possibilities of resistance. Acknowledgements The comments of David Cooper, David Livingstone, Duncan Green, Cheryl Lehman, Tony Tinker, Hussein Warsame and four anonymous reviewers are gratefully acknowledged. The SSHRC funding received by the authors along with the research assistance provided by Bill Thon made the current study possible.

Notes 1. It is important to note, however, the persistent economic crises currently experienced by certain core countries. For example, in Canada, restructuring, deindustrialization and the Free Trade Agreement have resulted in massive unemployment in provinces like Ontario, i.e. it might be argued that ‘‘the conditions prevailing for the vast majority of people in the underdeveloped world are returning to the centres of capitalism’’ (Mies, 1986, p. 17). 2. We use the term accounting to denote both discourses and calculations. 3. For a more thorough analysis of these differences see Cooper and Sherer (1984) along with the debate between Tinker (1991) and Solomons (1991a,b). 4. The debate over divestment at Queen’s was not an isolated case; in fact, similar debates were occurring at a number of North American universities in the 1980s. By January 1988, the Canadian universities that had divested themselves totally of shares from companies doing business in South Africa included McGill, Dalhousie, York, and Queen’s. Universities that had voted for selective divestment included Carleton, Simon Fraser, and Trent (Polanyi, 1988). In the United States, divestment debates also occupied the attention of student groups and

458

5. 6. 7. 8.

9.

10. 11. 12.

13.

14. 15. 16. 17.

D. Neu and A. Taylor administrators. Columbia University captured national media attention with its three-week divestment sit-in by students in April 1985 (Hoynes, 1986, p. 38). In response to student protest, several university and college boards directed their efforts toward urging a change in national policy through elected officials (Kendall, 1986, p. 58); for example, 95 college presidents sent a letter to the United States Congress calling for sanctions against South Africa (Hoynes, 1986). By 1987, ‘‘nearly four dozen U.S. colleges and universities . . . (had) either fully divested their South African portfolios or announced their intention to do so’’ (Hartman, 1987). As the name suggests, the Investment Committee is responsible for administering the university’s investments. The Finance Committee is responsible for financial policy and planning for the university. Principal Smith was the head of the economics department at Queen’s from 1968 until 1981 (Smith, February 1986, p. 12). Named after Reverend Leon Sullivan, a black Minister in the United States, the Sullivan Principles were proposed in 1977 as a voluntary code of conduct for transnationals operating in South Aftica (Love, 1985, p. 74). Transnationals are sent a questionnaire asking about their employment practices, and their responses form the basis for ranking the social responsibility of these companies (p. 75). In criticism, it has been suggested that the Sullivan Principles serve to legitimize the presence of transnationals in South Africa while allowing them to continue to benefit from the relations of apartheid (Whisson, 1980, p. 24; Arnold and Hammond, 1994). Board member’s affiliation with transnational capital was coded by one of the authors, based on Board member biographies contained in the Board of Trustees Handbook along with information reported in Canadian Who ’s Who and Canadian Directorates. The presence of corporate directorates, current or past employment in the corporate sector or clients that were transnationals were assumed to indicate an affiliation with transnational capital. Our coding of transnational affiliation is more conservative than that of Pickard (1986) who suggests that all Trustees with a corporate background voted against divestment. It is also worth noting that the Board tends to be all white and mostly male in its membership; 70% of Trustees were men according to the Board of Trustees’ Handbook 1987– 1988. The loglinear model presented in Table 1 provides a directional test of the relationship between voting behaviour and transnational affiliation. Because the loglinear coefficient is directional, it is preferred to simple chi-square tests (Norusis, 1985). Pickard (1986, p. 10) notes that three of four trustees identified by the students as having direct conflicts of interest abstained from voting. These three trustees were not included in the results reported in Table 1. As Magubane (1979, p. 99, 201) documents, the maintenance of reserves benefited both transnationals and the state. For the state, location of industry near the reserves prevented a mass of unemployed Africans from spilling out of the reserves and into the urban areas thereby helping to maintain apartheid. And for the transnationals, these arrangements provided access to a huge pool of labour at low costs. We acknowledge that by engaging with the accounting data we too are accepting the trustees’ ‘‘framing of the debate’’ in this section, but since this was an area that went unchallenged at the time, we feel the need to take a closer look. In other words, while we agree that the lack of attention to accounting data could have been a strategic attempt by pro-divestment supporters to shift the debate, there is no evidence to suggest this interpretation. Since all but one of these stocks are traded on the NYSE, percentage calculations are expressed in US dollars. However, the final cost of divesting is, for comparison purposes, translated into Canadian dollars using the rate implied by the CSR’s calculations. 30 June 1986 was the nearest comparison period to 1 May 1986 that was available. Results for a single year are not included because most financial managers recommend using longer-term measures of investment fund performance. In this case, the single year figures implied that divestment would result in an expected benefit for the University. We acknowledge that it might not be ‘‘fair’’ to extrapolate transaction costs from a single transaction to the entire portfolio but, in the absence of other information, this was the only alternative available.

References Ad Hoc Faculty Group, The Case for Divestment (Queen’s University, 1986). Amernic, J., ‘‘The roles of accounting in collective bargaining’’, Accounting, Organizations and Society, Vol. 10, No. 2, 1985, pp. 227 – 253. Amin, S., Delinking: Towards a Polycentric World (London: Zed Books Ltd, 1990).

Politics of divestment

459

Arnold, P. & Hammond, T., ‘‘The role of accounting in ideological conflict: lessons from the South African divestment movement’’, Accounting, Organizations and Society, Vol. 19, No. 2, 1994, pp. 111 – 126. Axelrod, P., Scholars and Dollars: Politics, Economics and the Universities of Ontario 1945 – 1980 (Toronto: University of Toronto Press, 1982). Benidickson, A., ‘‘Board members outline their views on Queen’s investments in South Africa’’, The Queen ’s Journal, 21 October 1986, p. 8. Board of Trustees, Excerpt from the Minutes of the Board of Trustees Meeting 9 / 10 May 1986 (Queen’s University, 1986). Board of Trustees Handbook, 1987 – 1988 (Queen’s University, 1987). Broadbent, A., ‘‘A trustee’s perspective on divestment’’, The Queen ’s Journal, 11 February 1986, pp. 18 – 19. Buchbinder, H. & Newson, J., The University Means Business (Toronto: Garamond, 1988). Burchell, S., Clubb, C., Hopwood, A., Hughes, J. & Nahapiet, J., ‘‘The roles of accounting in organizations and society’’, Accounting, Organizations and Society, Vol. 5, No. 1, 1980, pp. 5 – 27. Canadian Institue of Chartered Accountants, CICA Handbook (CICA: Toronto). Canadian Who ’s Who (Toronto: Financial Post, 1986). Canadian Directorates (Toronto: Financial Post, 1986). Cohen, P., A Calculating People: the spread of numeracy in early America (Chicago: University of Chicago Press, 1982). Cooper, D., ‘‘Discussion of towards a politic economy of accounting’’, Accounting, Organizations and Society, Vol. 5, No. 1, 1980, pp. 161 – 166. Cooper, D. & Sherer, M., ‘‘The value of corporate accounting reports: arguments for a political economy of accounting’’, Accounting, Organizations and Society, Vol. 9, No. 3 / 4, 1984, pp. 207 – 232. CSR, Report of the Committee on Social Responsibility in Investment Policy to the Board of Trustees, May 1983 – October 1985 (Queen’s University, 1986). CSR, Report of the Committee on Social Responsibility in Investment Policy to the Board of Trustees, October 1986 to August 1987 (Queen’s University, 1987). Currie, T., ‘‘CSR calls for debate over Queen’s investment policy in SA companies’’, The Queen ’s Journal, 21 July 1987, p. 1. Davis, E., ‘‘Board members outline their views on Queen’s investments in South Africa’’, The Queen ’s Journal, 21 October 1986, p. 8. Eagleton, T., Ideology: An Introduction (London: Verso, 1991). Ehrenreich, B. & Ehrenreich, J., ‘‘The Professional-Managerial Class’’, in Walker, P. (ed.) Between Labour and Capital (Sussex: Harvester Press, 1979) pp. 5 – 45. Fanon, F., The Wretched of the Earth (New York: Grove Press, 1963). Financial Post Survey of Funds (Toronto: Financial Post Information Service, 30 June 1986). Financial Post Dividend Summary (Toronto: Financial Post Information Service, 31 December 1986). Fleming, G., ‘‘Board Members outline their views on Queen’s Investments in South Africa’’, The Queen ’s Journal, 21 October 1986, p. 8. Gorz, A., Critique of Economic Reason. Trans. G. Handyside & C. Turner, (London: Verso, 1989). Greenberg, S., Race and State in Capitalist Development: South Africa in Comparative Perspective (Johannesburg: Ravan Press, 1980). Hartman, C., ‘‘Divestment at Harvard: the alumni weigh in’’, Social Policy, Vol. 17, No. 3, 1987 pp. 59 – 61. Hoynes, W., ‘‘Students and university divestment: is there a movement in the wings?’’, Radical America, Vol. 20, No. 2 / 3, 1986, pp. 37 – 42. Johnson, T., ‘‘The professions in the class structure’’, in Scase, R. (ed.) Industrial Society: Class, Cleavage and Control (New York: St. Martin’s, 1977) pp. 93 – 110. Kendall, P., ‘‘The values conflict in South African investments: is university divestment the answer?’’, Liberal Education, Vol. 72, No. 1, 1986, pp. 57 – 61. Kieso, D., Weygant, J., Irvine, B. & Silvester, H., Intermediate Accounting. Revised 3rd Canadian edition (Toronto: Wiley & Sons, 1991). Lacey, M., Working for Boroko: The Origins of a Coercive Labour System in South Africa (Johannesburg: Ravan Press, 1981). Lehman, C. & Tinker, T., ‘‘The ‘real’ cultural significance of accounts’’, Accounting, Organizations and Society, Vol. 12, No. 5, 1987, pp. 503 – 522. Love, J., The U.S. Anti -Apartheid Movement: Local Activism in Global Politics (New York: Praeger, 1985). MacDermaid, D., ‘‘Trustees divest $5.3 million, quoted by A. Holt, The Queen ’s Journal, 9 January 1987, p. 4.

460

D. Neu and A. Taylor

Magubane, B., The Political Economy of Race and Class in South Africa (New York: Monthly Review Press, 1979). Marx, K., Capital: A Critique of Political Economy, Volume One (New York: Vintage Books, 1977). Mies, M., Patriarchy and Accumulation on a World Scale (London: Zed Books). Minter, W., ‘‘Destructive Engagement: The United States and South Africa in the Reagan Era’’, in Johnson, P. & Martin, D. (eds) Frontline Africa (Peterborough: Ryan Publishing, 1989) pp. 387 – 440. Norusis, M., SPSSx Advanced Statistics Guide (New York: McGraw-Hill, 1985). Philip, M., ‘‘Smith urges board of trustees to reevaluate position on divestment’’, The Queen ’s Journal, 23 June 1987, p. 1. Pickard, T., ‘‘Trustees’ backgrounds, not interests dictate actions’’, The Queen ’s Journal, 23 September 1986, p. 10. Pickard, T., ‘‘Fiduciary duties, conflicts of interest and divestment’’, in The Case for Divestment, Ad Hoc Faculty Group (Queen’s University, 1986) pp. 44 – 51. Pillay, V., ‘‘Rising cost of apartheid: the economic crisis’’, in Johnson, P. & Martin, D. (eds) Frontline Africa (Peterborough: Ryan Publishing, 1989) pp. 305 – 338. Polanyi, M., ‘‘University to drop holdings in firms with South Africa ties’’, Globe and Mail (Metro), 22 January 1988, pp. A1, A2. Power, M., ‘‘After calculation? Reflections on Critique of Economic Reason by Andre Gorz’’, Accounting, Organizations and Society, Vol. 17, No. 5, 1992, pp. 477 – 500. Scott, T., ‘‘Archbishop Scott encourages Divestment’’, quoted by A. Uncles, The Queen ’s Journal , 5 December 1986, p. 3. Slaughter, S., The Higher Learning and High Technology (New York: SUNY, 1990). Smith, D., ‘‘Having to deal with divestment, street parties and everything in between’’, The Queen ’s Journal, 7 February 1986, pp. 12 – 13. Smith, D., Notes on Main Points of Principal ’s Remarks to the Board of Trustees on Divestment and South Africa (Queen’s University, 10 May 1986). Smith, D., The Conceptual Practices of Power (Toronto: University of Toronto Press, 1990a). Smith, I., ‘‘A decade of Queen’s divestment debate’’, The Queen ’s Journal , 12 September 1986, p. 11. Solomons, D., ‘‘Accounting and social change; a neutralist view’’, Accounting, Organizations and Society, Vol. 16, No. 3, 1991a, pp. 287 – 296. Solomons, D., ‘‘A Rejoinder’’, Accounting, Organizations and Society, Vol. 16, No. 3, 1991b, pp. 311 – 312. Stackhouse, R., ‘‘Board members outline their views on Queen’s investments in South Africa’’, The Queen ’s Journal, 11 September 1987, p. 11. Taskforce on the Churches and Corporate Responsibility, Annual Report 1984 – 1985 (Toronto: TCC, 1985). Thornton, D., ‘‘Agency theory for the novice’’, Camagazine, November 1984, p. 90 – 97. Tinker, T., ‘‘Towards a political economy of accounting’’, Accounting, Organizations and Society, Vol. 5, No. 1, 1980, pp. 147 – 160. Tinker, T., Paper Prophets (New York: Praeger, 1985). Tinker, T., ‘‘Panglossian accounting theories: the science of apologizing in style’’, Accounting, Organizations and Society, Vol. 13, No. 2, 1988, pp. 165 – 189. Tinker, T., ‘‘The accountant as partisan’’, Accounting, Organizations and Society, Vol. 16, No. 3, pp. 297 – 310. Tinker, T. & Neimark, M., ‘‘The role of annual reports in gender and class contradictions at General Motors: 1917 – 1976’’, Accounting, Organizations and Society, Vol. 12, No. 1, 1987, pp. 71 – 88. Waring, M., If Women Counted: a new feminist economics (New York: Harper Collins, 1989). Whisson, M., ‘‘The Sullivan Principles: striking a lost chord’’, Social Dynamics, 1980, pp. 17 – 24. Wolpe, H., Race, Class and the Apartheid State (Paris: UNESCO Press, 1988). Wolpe, H., ‘‘Capitalism and cheap labour-power in South Africa: from segregation to apartheid’’, in Wolpe, H. (ed.) The Articulation of Modes of Production (London: Routlege & Kegan Paul, 1980) pp. 289 – 320.