E. Richard Brownlee

Financial disclosure regulation and its critics

Abstract In February 1985, the Subcommittee on Oversight and Investigations of the House Energy and Commerce Committee began a series of hearings that may lead to a proposal to expand the Securities and Exchange Commissions (SECs) disclosure regulations. This article presents a synthesis of a growing body of literature that questions the need for any such regulation. Three types of critiques are discussed: first, studies that have examined the historical process through which the SEC was formed; second, empirical studies that have analyzed the effects of regulated disclosure on the capital markets; and third, theoretical studies that have questioned the fundamental rationale for financial disclosure regulation. Following these critiques, brief consideration is given to the role of security analysts and to the financial disclosure implications of modern portfolio theory. Finally, two alternatives to conventional financial disclosure regulation are presented. The purpose of this article is to stimulate interest in a critical examination of the SECs existing disclosure program by providing a basis for discussion and analysis of the issues and the evidence and by presenting some alternatives based on the experiences of other countries. It is directed toward intermediate accounting courses, graduate courses in accounting theory and policy and graduate courses in corporate financial reporting.

Rethinking Pension Fund Investment Strategies

This paper addresses the need for companies to reexamine their pension fund investment strategies because of certain changes that occurred during the 1980s that enhanced the attractiveness of fixed-income securities. Of primary importance was the issuance of a new pension accounting standard that substantially changed the determination of annual pension expense, pension plan asset and liability recognition, and pension footnote disclosures. Both the concepts and the information resulting from the pension standard have promoted a more integrative perspective of the relationship between pension funds and their corporate sponsors. This broadened perception of companies and their pension funds comprising a single economic entity has important financial consequences for corporate managements and capital providers. One such consequence pertains to pension portfolios. Fixed-income securities become a more desirable pension fund investment for two principal reasons: they reduce financial reporting risk without increasing economic risk and they are an integral component of corporate tax arbitrage, a strategy initially proposed by Fischer Black in the early 1980s.

Integrative Stakeholder Engagement: Stakeholder-Oriented Partnership Between the Coca-Cola Company and World Wildlife Fund

Stakeholder engagement lies at the core of stakeholder theory even though management scholars have not researched engagement thoroughly relative to other aspects of stakeholder theory. In fact, practicing managers, not academics, have led exploration of and innovation in stakeholder engagement. This paper provides scholars with analysis of a practical integrative stakeholder engagement conducted by The Coca-Cola Company (TCCC) in partnership with World Wildlife Fund (WWF). This case is unique in that the analyzed integrative stakeholder engagement was both extremely successful and sustainable by going beyond the original partners and spreading among stakeholders across the entire value chain and beyond. Triggered by community concerns in India, TCCC’s best practices in engaging multiple stakeholders to preserve freshwater spread across all continents and went on to be adopted by other companies and their stakeholders which were outside of TCCC’s direct reach. The analyzed case is also valuable in showing that TCCC, though enjoying the leading position in its industry and having considerable influence over its value chain, chose to engage stakeholders in its freshwater conservation initiative through a collaborative, dialogue-based process, demonstrating a stakeholder mindset both on the part of the company and multiple stakeholders.