Management and Organization Paradoxes (Advances in Organization Studies)

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Management and Organization Paradoxes

Advances in Organization Studies Advances in Organization Studies includes cutting-edge work in comparative management and intercultural comparison, studies of organizational culture, communication, and aesthetics, as well as in the area of interorganizational collaboration — strategic alliances, joint ventures, networks and collaborations of all kinds, where comparative, intercultural, and communicative issues have an especial salience. Purely theoretical as well as empirically based studies are included. General Editors Stewart Clegg School of Management University of Technology Sydney Quay Street, Haymarket P.O.Box 123 Broadway, NSW 2007 Australia [email protected] Alfred Kieser University of Mannheim D 68 131 Mannheim Germany [email protected]

Volume 9 Management and Organization Paradoxes Edited by Stewart R. Clegg

Management and Organization Paradoxes Edited by

Stewart R. Clegg University of Technology, Sydney

John Benjamins Publishing Company Amsterdam/Philadelphia

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TM

The paper used in this publication meets the minimum requirements of American National Standard for Information Sciences – Permanence of Paper for Printed Library Materials, ansi z39.48-1984.

Library of Congress Cataloging-in-Publication Data Management and organization paradoxes / edited by Stewart R. Clegg. p. cm. (Advances in Organization Studies, issn 1566–1075 ; v. 9) Rev. papers from the APROS2000 conference in Sydney. Includes bibliographical references and index. 1. Management-Philosophy-Congresses. 2. Organization-Philosophy-Congresses. 3. Paradoxes-congresses. I.Clegg, Steward. II. Australian and Paciﬁc Researches in Organization Studies (Organization). III. Advances in organization studies; 9. HD29.M283 2002 658’.001-dc21 isbn 90 272 3307 1 (Eur.) / 1 58811 257 8 (US) (Hb; alk. paper) isbn 90 272 3306 3 (Eur.) / 1 58811 208 X (US) (Pb; alk. paper)

2002021463

© 2002 – John Benjamins B.V. No part of this book may be reproduced in any form, by print, photoprint, microﬁlm, or any other means, without written permission from the publisher. John Benjamins Publishing Co. · P.O. Box 36224 · 1020 me Amsterdam · The Netherlands

Table of contents

Acknowledgements 1. General introduction Stewart R. Clegg Part I Representing Paradoxes 2. Management, paradox, and permanent dialectics João Vieira da Cunha, Stewart R. Clegg and Miguel Pina e Cunha 3. The meanings of risk and interorganizational collaboration Paul K. Couchman and Liz Fulop

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4. Workers’ playtime?: Unravelling the paradox of covert resistance in organizations Peter Fleming and André Spicer

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5. Paradox in symbols and subjects: The politics of constructing “The Wharﬁe” André Spicer, John W. Selsky and Julian Teicher

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6. Politics and popular culture: Organizational carnival in the Springﬁeld nuclear power plant Carl Rhodes

119

7. From value conﬂicts to multiple mandates: On organising ethical knowledge and its paradoxes Fernando Leal and Patricia Shipley

139

Part II Materialising Paradoxes 8. Organizational paradoxes and business ethics: In search of new modes of existence Eduardo Ibarra-Colado

165

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Table of contents

9. Beyond the ‘war for talent’ hype: Occupational and organizational change in the business professions Timothy Morris and Ashly Pinnington

185

10. Expectations, emotions and money: Finance organizations and futures Jocelyn Pixley

199

11. Psychoanalysis and auditing David Crowther

227

12. A paradox of governance: Convergent policy and divergent practice in corporate governance in Asia Thomas Clarke

247

13. Multinationals, corporate governance and ﬁnancial internationalisation Glenn Morgan

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14. Managing the interconnected organization: An internal tension perspective Antoine Hermens

295

About the contributors

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Index

315

Acknowledgements

This book would not have been possible without the assistance of many people and some organizations. First, I would like to acknowledge the work of all the stream coordinators at the APROS 2000 conference in Sydney, at which earlier versions of these chapters ﬁrst appeared as papers — their work is appreciated greatly. Second, I would like to thank, in particular, Jenny Onyx, Thomas Clarke and Stella Ng and Thomas Clarke, from the UTS School of Management, and Ernie Waldstein, Jenni Stevenson and Mary Noonan, from the Executive Development Unit, for all the support they gave in facilitating the conference. Third, my appreciation to my colleagues in ORCA (Organizational Researchers in Collaboration and Alliances), a Key Research Strength at UTS, who helped in the organization of APROS, especially Thekla Rura-Polley. Fourth, I want to thank Peter Booth, the Dean of the Faculty of Business at UTS, and Robert Lal, Information Technology (IT) Manager, for their assistance at key stages. Salvador Porras did a great job of helping out at crucial times, especially with the website. However, it is one person, in particular, who deserves my thanks and those of all the contributors, and that is Cleusa Lester, whose executive assistance was - and continues to be - of inestimable value in achieving various projects.

Chapter 1

General introduction Stewart R. Clegg

The paradox is the orthodoxy of our age Niklas Luhmann

The Academy of Management Review, under the guest editorship of Kathleen M. Eisenhardt (2000), published a special issue of the journal dedicated to “Change and development journeys into a pluralistic world.” Taking “Paradox, Spirals, Ambivalence: The New Language of Change and Pluralism” as the theme, Eisenhardt said in her introduction: Several unanticipated themes emerge in the special issue. The most central is paradox. Paradox is the simultaneous existence of two inconsistent states, such as between innovation and eﬃciency, collaboration and competition, or new and old. Rather than compromising between the two in some sort of Goldilocks fantasy, vibrant organizations, groups, and individuals change by simultaneously holding the two states. This duality of coexisting tensions creates an edge of chaos, not a bland halfway point between one extreme and the other. The management of this duality hinges on exploring the tension in a creative way that captures both extremes, thereby capitalizing on the inherent pluralism within the duality (Eisenhardt 2000: 703).

It is not clear from Eisenhardt (2000) whether the paradoxes that she sees the journal dealing with reside in either the means of representation (a Goldilocks fantasy?) or in the material world, where “vibrant organizations, groups, and individuals change by simultaneously holding the two states.” In many respects the tension between materialisation and representation is the central issue. Are the paradoxes inherent to the nature of that which is being represented or the means of representation? It is the centrality of this question that determines the structure of the present volume,1 with its binary division between “representation” and “materialisation” — or, as I prefer in the active voice, between “representing” and “materialising”. The focus is on how we represent and materialise dialectics, (dis)organization and contradiction Of course, any division between materiality and representation is in part artiﬁcial, as the word is invariably material (Silverman and Torode 1980). Ever

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since the ordinary language philosophers, after Wittgenstein (1972) and Austin (1975), attended to the performative functions of everyday speech, one has been well aware of the things that words do. Some aspects of the world may well be seen as paradoxical, irrespective of the words used to represent them. Some paradoxes that are extant in reality may well be obliterated by the words — the theories — chosen to represent them. Marianne Lewis’ (2000) contribution to the Academy of Management Review, “Exploring Paradox: Towards a More Comprehensive Guide”, argues that conceptions of management and organization theory have, more often than not, stressed smooth rationality, linearity and planned change, rather than dialectics, discord and contradiction. Thus, the recognition of paradox is an eﬀect of relatively recent forms of representation — because long-standing approaches have stressed singular rather than plural multi-dimensional perspectives.

Representing paradoxes The chapter by João Vieira da Cunha, Stewart Clegg and Miguel Pina e Cunha on “Management, Paradox, and Permanent Dialectics” addresses themes of dialectical representation of paradox in management and organization theory. A synthesis of these paradoxes emerges from a dialectical view of strategy and organization, built from four identiﬁable principles: those of simultaneity, locality, minimality and generality. In many respects this chapter functions as an excellent introduction to the overall themes of the volume. The fact that the concepts of dialectical strategy and dialectical organization oﬀer a way to achieve a synthesis between opposing schools demonstrates the potential of a dialectical view of management. Competing representations can be held in conjunction, as Eisendhardt (20000) suggests. “The Meanings of Risk and Interorganizational Collaboration” by Paul Couchman and Liz Fulop, deals directly with issues of representation in a speciﬁc research project. How do management researchers represent the realities that they construct when working cooperatively with others whose constructions are very diﬀerent? How should the ensuing paradox and tension of competing views of the same reality be dealt with? In this chapter they deal with sensemaking as discursive practices, shaping meanings; they also examine how organizations and subjectivities are constituted. Organization texts shape choices between contradictory and competing meanings. The choices between these competing and contradictory positions are not resolved through rational argumentation so much as the power of rhetorical representation. The chapter analyses how competing discourses emerged in a discursive arena (and how a particular discourse came to dominate). Various aspects of management practice were obscured by discursive dominance. However, the dialectical position of holding simultaneous ways of making sense

General introduction

was a source of risk, contestation and contradiction for the project. Not surprisingly, the dominant discursive practices, whose roots were in rationalism and modernism, overcame any sense of dialectics, paradox and contradiction. The dominant discourse provided a distinctive mode of talking and writing about collaborative projects. However, the consequence was that management was weakened to the extent that it did not engage with paradox and incommensurability — both of which are endemic to securing multi-disciplinary engagement in cross-sector collaborations. The dialectics of power and resistance have been staples of the labour process perspective in industrial sociology and organization theory for over twenty years. Authors such as Willis (1974) and Burawoy (1979) argue that resistance, when articulated in the form of humour, irony and cynicism, rather than overt “struggle”, may have the paradoxical outcome of inadvertently reproducing the domination that workers seek to escape, because it provides a specious and illusory sense of freedom. It is this false freedom that inclines them to disengage from more “material” and traditionally located resistances. Resistance through joking and cynicism can actually assume the (paradoxical) status of consent due to its “safety valve” eﬀects in power relationships. In “Workers Playtime: Unravelling the Paradox of Covert Resistance in Organizations” by Peter Fleming and André Spicer, models of power underpinning judgements of “eﬀective” or “ineﬀective” resistance in relation to humour, irony and cynicism are discussed. The standards of radical upheaval and economic transformation may be important criteria. However, holding to these standards may also marginalise many other forms of transgression that can eﬀectively alter organizational status quo. Diﬀerent forms of resistance may interact in complex, ambiguous and often paradoxical ways. Humour, irony, and cynicism may be subversive on one set of co-ordinates but support or undermine resistances at other levels. In order to think about resistance in this multiple sense, the authors develop the notion of “plateaux of power and resistance.” Representationally, they draw upon a spatial metaphor to illustrate how resistance may overlap, collide and interrelate in unpredictable ways with diﬀerent outcomes. In the following chapter, “Paradox in Symbols and Subjects: The Politics of Constructing ‘The Wharﬁe’”, André Spicer joins with John Selsky and Julian Teicher to research one of the most celebrated industrial relations disputes of recent times in Australia. The Maritime Union of Australia was involved in a longrunning dispute with Patrick, a stevedoring company. The dispute involved secret meetings between government and business to organize strike breakers (what price the liberal state?) and a campaign of struggle waged on many fronts — not least in various media representations of the union. The symbolic aspects of the conﬂict centred on struggles around how “the wharﬁe” was constructed. The authors use

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Bakhtin’s (1981) concept of dialogue to analyse the paradoxical discourses adopted by key parties to the dispute. By examining the role of symbolic identity struggles concerning the ways that subjects are recognized, the authors show how discourse is central to workplace disputes. Bakhtin is also central to “Politics and Popular Culture: Organizational Carnival in the Springﬁeld Nuclear Power Plant” by Carl Rhodes. As most readers will be aware, Springﬁeld is home to the most famous family in America — The Simpsons. The proposition is that this television show provides the opportunity for a compelling and political critique of the logic of “normal” organizational life. In providing both a parody and a critique of organizations, The Simpsons also oﬀers viewers the possibility of questioning alternatives to existing and potentially oppressive social relationships at work. There are clear continuities between the analysis of The Simpsons and the previous two chapters. Methodologically, Bakhtin is the link between Rhodes and Spicer, Selsky and Teicher, while the importance of humour links the chapter with that of Fleming and Spicer. However, all three of the previous chapters raise important and implicit issues about ethics — an issue that takes centre-stage in the chapter on “From Value Conﬂicts to Multiple Mandates: On Organizing Ethical Knowledge and its Paradoxes” by Fernando Leal and Patricia Shipley. Leal and Shipley start from the single most inﬂuential representation of the modern condition for organization theory — that of Max Weber’s “Outline of an Interpretive Sociology.” The key concept for Weber was “rationality”, which Weber placed at the centre of his framework for understanding modernity. Modernity was understood as a sphere in which conﬂicting rationalities and values were normal, and it is the clash of values that forms the focus for Leal and Shipley. At this point they connect Weber with another titan of modernity — Emile Durkheim. Durkheim sought to illuminate the problems of society from an ethical point of view, particularly as these were constructed in relation to the division of labour in society. It is through the particular roles that the division of labour frames that people learn both who they are and what is valuable within society and organizations. Leal and Shipley go on to argue that, increasingly, the moral order of modernity, in which divisions of labour functioned as a basis for moral order, is now disintegrating. The recent tendency is for a division to develop where the ties bind less than they cleave; the division is between disorganised junk jobs — parttime and secondary labour market options — and organized good jobs, which are challenging, varied, and creative, through which cleavage a contradictory reality is symbolised and materialised.

General introduction

Materialising paradoxes The second part of the book opens with a chapter by Eduardo Ibarra-Colado, “Organizational Paradoxes and Business Ethics: In Search of New Modes of Existence”, which also focuses on the possibility of ethical business practice. Management guru’s, whose voices became so insistent from the 1980s onwards, argue that the dynamics that govern organizations stress the normalcy of inconsistencies — rather than consistencies — in rationality. The chapter analyses business ethics, dilemmas and paradoxes, using three scenarios. The ﬁrst scenario demonstrates the paradoxes that occur when corporate discourses and representations do not correspond to practices and actions. The second scenario shows the symbolic devices used by corporations to generate identiﬁcation and to build consensus, especially in the “management excellence” framework. The framework of excellence projects an imaginary subject that permanently confronts and defeats the real nature of the person at work. The third scenario shows that the “ethical explosion” of the last decade of the 20th century reveals the business of ethics as a “non-ethical ethics”. In the ﬁnal part of the chapter some ideas are presented for the construction of a diﬀerent kind of organizational ethics. It might be possible to transform corporations from structures of subjugation and domination to spaces of greater equity, plural coexistence and recreation, in which free will might ﬂourish. While Ibarra-Colado dealt with corporate companies, Timothy Morris and Ashly Pinnington, in their chapter on “Beyond the “War for Talent” Hype: Occupational and Organizational Change in the Business Professions”, address another aspect of organizational reality. The chapter develops a framework for understanding how the formation or adaptation of professions may aﬀect, as well as be aﬀected by, organizational dynamics. It challenges arguments that the new professional ﬁrm archetype is more managed and bureaucratic than the previously autonomous realm of professional practice. Some professional ﬁrms actually display anti-managerial values that mimic those of entrepreneurial innovation favoured by excellence models. The entrepreneur is seen as a heroic ﬁgure, replacing the previously held aspirations of a professional service ethos. Ironically, although work on professional ﬁrms initially focused on the interaction of occupational and organizational systems of control, the two types of control have become increasingly disconnected. Here is the paradox: as the professional ﬁrm became more researched by organization theorists, they focused less and less on what made it distinctive. When that paradox is faced, radically diﬀerent interpretations of the professional ﬁrm occur. Jocelyn Pixley argues in the chapter “Expectation, Emotions and Money: Finance Organizations and Futures” that, in ﬁnance organizations dedicated to

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making money, rationality appears to be prevalent. On the other hand, tension, insecurity and irrationality also prevail in the ﬁnance sector, because of the fundamental uncertainty of speculation in the face of an unknown future. Corporate entities routinely compete and engage in internal conﬂicts concerning investment decisions, as they assess opportunities. The considerable quantities of data available for decision-making always “looks through the rear window” and cannot predict the business future. Decision-makers have to rely not only on data but also emotions, such as feelings of conﬁdence and trust in organizations and their managers. Instinct and organizational rituals, as well as a constant preoccupation with “the news”, shape the reality that their investment decisions make and respond to. In such a scenario, it is irrational to represent the outcome of a complex data-driven and emotional decision-process, as if it were wholly rational. In David Crowther’s chapter on “Psychoanalysis and Auditing”, the critique of rationality is extended further. If corporations cannot make money rationally, as Pixley suggests, what are they doing? Crowther uses audits of company accounts as data. By applying psychoanalytic theory, he proposes in Freudian terms that the managers of organizations project their insecurity and a need continually to seek reaﬃrmation of individual worth and recognition. In Lacanian terms, managers see their own value as individuals by means of representation in the mirror of organizational existence. In this mirror, organizational routines and rituals provide a validation of the present through its connection to a sanctiﬁed past. Accounting routines are seen to fulﬁl a quasi-religious purpose within organizations, for both authors and interpreters of corporate accounts. The managers of the organization are depicted and instituted as a type of priesthood, in an organizational religion. Thomas Clarke also looks at the audit performance of organizations but does so in terms of their governance regimes. In a wide-ranging review of “A Paradox of Governance: Convergent Policy and Divergent Practice in Corporate Governance in Asia”, he argues that the Asian ﬁnancial crisis proved a severe shock to the conﬁdence of “miracle economies”. It revealed that a quarter century of rapid economic growth was based on frail foundations of corporate governance. The East Asian economies have adopted reformed codes of governance, at least formally. However, these reforms in codes may not transform practice nor alter the dependent status of economies based on the branch production of technology commodities for Western multinationals. The Asian crisis was symptomatic of a profound instability in the operation of international ﬁnancial markets. Paradoxically, the introduction of global standards of corporate governance makes the developing world more, rather than less, exposed to unanticipated and overwhelming pressures from ﬁnancial markets. In his chapter on “Multinationals, Corporate Governance, and Financial Internationalization”, Glenn Morgan analyses UK, German, Japanese and US

General introduction

multinationals, in terms of their ﬁnancial internationalisation. Overall, Japan is the least internationalised, while US multinationals have the smallest amount of ownership by foreign investors. On the other hand, Germany is in an intermediate position, whilst the US and the UK hold the most foreign assets, and have changed least as a result of internationalisation pressures. Internationalisation of ﬁnancial structures has variable impacts on corporate governance structures. The chapter argues that governance regimes vary according to the existing structure of the ﬁrm. Japanese ﬁrms are least aﬀected by governance changes, because activities are cross subsidised, businesses built slowly, and failing units restructured without extensive external monitoring, because of the availability of long-term credit. German multinationals have to deal with competing modes of corporate governance while UK and US ﬁrms combine a strong hierarchy in terms of ﬁnancial controls, with strong heterarchical organizations. The conclusion to be drawn from Clarke and Morgan’s chapters is that it would be inappropriate to assume that there is either a convergence in organization form or in capitalism — capitalism and organizations still have distinct national ﬂavours. Hence, the national embeddedness of economic activity means that many of the discourses of modernity — the theory of the ﬁrm; of organizations; of governance — that assume a settled and stable ontological object for their reﬂections, theory and inquiry are fooling themselves. They are living in a paradoxical world because its material reality confounds their theoretical assumptions: the reality is highly contingent, embedded and variable, while the assumptions proﬀers grand narratives that deny the diﬀerences illustrated in these chapters. Antoine Hermens, an Australian strategist, contributes the last chapter on “Managing the Interconnected Organization: An Internal Tension Perspective.” The argument harks back to the themes of the second chapter, by João Vieira da Cunha, Stewart Clegg and Miguel Pina e Cunha, in its suggestion that strategic alliances should be examined as dialectical systems. The organizational strategies of ﬁrms in strategic alliances are comprised of a mix of embeddedness, cooperation, and a long-term orientation, while ﬂexibility, competition and a short-term orientation frame the markets in which the alliances are formed. The balance between the multiple conﬂicting forces of ﬁrms and markets determine alliance stability, and the outcomes are linked to imbalances in these dialectical forces. It is only when market and hierarchy forces are in equilibrium, and cost beneﬁt trade oﬀs are equal, that alliances will be stable and eﬀective. Overall, the contributions to Paradoxes and Dialectics in Management and Organization are diverse and challenging. Each contribution takes a diﬀerent angle on the central theme. Although there are family resemblances between some of the chapters, at their outer limits these resemblances appear faint; nonetheless, all of the chapters illuminate diverse aspects of contemporary paradoxes in management

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and organization theory. The book provides, in each of its chapters, a challenge to the still overwhelmingly rationalist views of theory and practice that dominate the ﬁeld and provides new directions for understanding organizations and management.

Notes 1. The volume arose from papers presented at APROS — Asia Paciﬁc Researchers in Organization Studies. The APROS 2000 conference was organized by the editor in collaboration with colleagues from the University of Technology, Sydney, as well as others from the world-wide APROS network, and was held in December 2000. The papers selected are a small sample from the various streams of the conference. The papers were all substantially revised within the design chosen for the structure of the book, through a process of mutually constructive criticism by the authors. The theme of “paradox” was clearly signalled as the rationale and theme for the volume and thus the selection of contributions and the revisions were all made with this theme explicitly in mind.

References Austin, J. L. (1975). How to do things with words. Oxford: Clarendon Press. Bakhtin, M. (1981). The dialogic imagination: Four essays. In Michael Holquist (Ed.). Austin: University of Texas Press. Burawoy, M. (1979). Manufacturing consent: Changes in the labor process under monopoly capitalism. Chicago: University of Chicago Press. Eisenhardt, K. M. (2000). Paradox, spirals, ambivalence: The new language of change and pluralism. The Academy of Management Review, 25: 703–5. Lewis, M. W. (2000). Exploring paradox: Towards a more comprehensive guide. The Academy of Management Review, 25:760–76. Silverman, D. and Torode, B. (1980). The material word: Some theories of language and its limits. London: Routledge & Kegan Paul. Willis, P. E. (1977). Learning to labour: How working class kids get working class jobs. Farnborough: Saxon House. Wittgenstein, L. (1972). Philosophical Investigations. Oxford: Blackwell.

Part I

Representing Paradoxes

Chapter 2

Management, paradox, and permanent dialectics João Vieira da Cunha, Stewart R. Clegg and Miguel Pina e Cunha

Introduction Few words appear more often in the recent literature on management than “paradox”. In the popular business press, managers are alerted to emergent trends in the “age of paradox” (Handy 1995), called on to “master paradox” (Peters 1987: 391–397) and to “own up to the great paradox” (Peters 1992: 615). In fact, Tom Peters — probably the most well-known business “guru” — when asked what would be the most important lesson he would like to teach humanity, answered the following: “success is the result of deep grooves, but deep grooves destroy adaptability [which is the touchstone of success]” — the “great paradox” (Peters 1992: 616). Academically, paradox has been a central topic since the Ancients. Zeno, the ﬁfth century BC Greek philosopher from Elea, devised a number of ingenious brain-teasers constructed around the idea of inﬁnity that have come down to us as “Zeno’s Paradoxes”. The most famous of these concerned a race between a tortoise and the Greek hero Achilles, where the tortoise — a notoriously slow reptile — is given a head start. According to Zeno, the speedy Achilles could never overtake the reptile because when he reached the point at which the tortoise began he would have moved on to a further position, a process that he took to be inﬁnite. Philosophically, as many have attested since, the various “proofs” of the paradox have foundered on some aspect of other of the terms of their expression, as for instance, when, after Aristotle, inﬁnity is conceived in either its “actual” or “potential” characteristics. What characterizes a paradox is the seeming impossibility of the existence of two simultaneous states of aﬀairs because of their contradictory quality. In Zeno’s paradox it is the contradictory qualities attributed to time and motion. In the academic literature on management and organizations, paradox has a less august pedigree, but can be traced back at least as far as Adam Smith’s “pin

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factory”, where integration and diﬀerentiation surface as one of the major tensions underlying the rise of the modern industrial organization (Smith 1991). More recently scholars have found paradox in such diverse ﬁelds as organization theory (Weick 1993a; Hatch 1999), time and organization (Burrell 1992), organizational change (Orlikowski and Hofman 1997; Edelman and Benning 1998), organizational culture (Machin and Carrithers 1996), leadership (Thayer 1988) and communication (Yates and Orlikowski 1999). Ever since scientiﬁc management (Taylor 1947) several attempts have been made to tackle paradox. These attempts fall mainly into two approaches that succeeded each other historically, and that now can be said to co-exist. First, scholars attempted to ﬁnd the “best way” to come to grips with the tensions between two terms — in Taylor’s case the classical terms of “time” and “motion”, which he redeﬁned as being bounded by the poles of diﬀerentiation and integration. Thus, Taylor (1947) sought to ﬁnd the best way to diﬀerentiate tasks along a production line (motion) and to deﬁne the principles that should guide managers’ behaviour for integration to be as eﬃcient as possible (time). Fayol (1949) and Barnard (1938) aimed at the higher echelons of the corporation. The ﬁrst attempted to formalize administrative principles, being concerned more with integration than with diﬀerentiation (seeing integration as the most pressing problem for top management). Barnard was more ambitious and coupled a normative statement of the functions of the executive — all related to coordination roles — with a descriptive statement of the basis and need for diﬀerentiation that aims to explain the need for the very existence of organizations. A diﬀerent approach, often labelled contingency theory, emerged around the middle of the century. At this time, inquiry into the relationship on the determinants of organizational structure showed that diﬀerent environments (Burns and Stalker 1961) and technologies (Woodward 1965), among other factors, determined the “right” organizational structure to adopt. These ﬁndings inspired a stream of research aiming at mapping diﬀerent possible states of these factors and the adequate organizational conﬁgurations and decisions best able to succeed in each state. Hence, paradox was tackled by framing its poles as options that were ﬁtter for diﬀerent environmental and organizational states. Thus, assessing whether the environment favored one strategy or the other would solve the paradox of eﬃciency/eﬀectiveness and determine the strategy to be implemented (Lawrence and Lorsch 1967). The contingency perspective is still dominant in academia but the explosion of normative theories (e.g. Peters and Waterman 1982; Peters 1987; 1992; 1994) in the popular business literature has reviviﬁed “one best way” approaches (Shapiro 1995). These have been driven by a social construction of the future of business environments that includes features such as “hypercompetition” (D’Aveni 1995),

Management, paradox, and permanent dialectics

shortening of product life cycles (Bettis and Hitt 1995), a highly educated work force (Drucker 1996; Handy 1991), and ever-shifting consumer tastes (Peters 1992). With such emphases emerged a series of prescriptions that set standards for organizational practice as well as strategies for success. Additionally, paradox gained pervasiveness in organizational settings for three other main reasons. The adoption of information technology has been seen as inherently paradoxical (Johnson and Rice 1984). E-mail communication, for example, is at the same time both formal and informal (Yates and Orlikowski 1999) and the implementation of this type of technology is a process that is both eﬃcient and eﬀective, and emergent and planned (Orlikowski and Hofman 1997). Second, environmental changes place increasingly contradictory demands on companies. Taking the personal computer industry as an example, companies in that sector need to have a high rate of innovation while keeping costs low (and lowering them further), which means they have to master the paradox bounded by the opposite poles of eﬀectiveness and eﬃciency (Brown and Eisenhardt 1997). Not only has paradox become more pervasive in organizations but also has been more acutely felt and perceived by organizational members, especially by managers. While “management gurus” have been articulating the problems organizations face in a way that makes managers perceive their importance and urgency, when these “gurus” switch from being problem-tellers to problem-solvers, they advocate a series of policies and behaviours extremely counter-intuitive for the average manager (Micklethwait and Wooldridge 1996). These policies and behaviours usually come from the analysis of so-called “success cases”, and more often than not, these cases involve large, often multinational companies, which can call on resources and workers far beyond the reach of the “average” company. In addition, these prescriptions are frequently contradictory, not only between authors but also in the work of the same author. Tom Peters oﬀers a striking example of this feature of “guru” advice. In a clear allusion to In Search of Excellence, he wrote in a later book that “Excellence isn’t, there are no excellent companies” (Peters 1987: 3) and then goes on to argue that the prescriptions he oﬀered together with Waterman in the ﬁrst book were wrong and fallacious. These contradictions increase the perception of paradox felt by managers by creating bipolar tensions not only in the problems they face but also in the solutions available to handle them. The presence of paradox thus becomes a problem on its own (Shapiro 1995; Peters 1992). Three possible answers to the problem of paradox appear to emerge in the literature. The ﬁrst one, present in both business and academic literatures, states that paradox is essentially unsolvable — something to be sustained or endured, not tackled. In this vein, Miller (1993) has shown that success inevitably breeds failure, and Mintzberg and McHugh (1985) demonstrated that planning always brings

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unintended consequences that may end up jeopardizing the plan itself. In the practitioner-oriented literature, Peters (1992) has argued that success comes from both adaptivity and “deep grooves” (i.e. from exploration and exploitation), which are irreconcilable, while Senge (1990) contended that learning breeds ignorance (by hampering new learning). The second strategy available to deal with paradox is to reach a compromise between the two poles that frame it. This compromise may result from a contingency approach (Burns and Stalker 1961), where the organization chooses the right mix of opposites (e.g. foregoing some eﬀectiveness in order to obtain more eﬃciency) in order to make the best of external and internal conditions. Alternatively, such a compromise may emerge from an outright inability to hold such a state of tension, allowing a solution to emerge from its pattern of actions and decisions. Finally, one can attempt to integrate these opposites and “solve” the paradox through a synthesis, foregoing any compromise. According to this line of reasoning, it is possible for the organization to be eﬃciently eﬀective, loosely tight coupled, and follow a deliberately emergent change strategy. Dialectical reasoning, where thesis and antithesis are combined into a synthesis, is a potentially useful framework to address this challenge, and to help managers tackle paradox without having to subdue any of the contradictory goals often entailed. We argue for the relevance of this view by showing the need for an integrative dialectical view of management. We present its potential, for both theory and practice, by discussing its application to what Mintzberg, Quinn and Ghoshal (1995) labelled manager’s foremost concerns — strategy and organization. After assessing its ﬁt under the four characteristics that Benson (1977) put forth as necessary for an approach to organization theory to be considered dialectical, we show that this perspective has relevant theoretical and practical implications and then proceed to draw four overarching principles guiding this perspective. In order to do so, our argument is organized as follows: ﬁrst, we discuss the fundamentals of organizational dialectics, highlighting the importance of considering an approach to this topic in which thesis and antithesis are present simultaneously, and not sequentially, as previous approaches to dialectics in management have assumed. We then proceed to show how this approach can be used to shed a new light on the topics of strategy and organization and then present the four major principles guiding such a “permanent dialectics” view of management.

Fundamentals of organizational dialectics Dialectics can, in essence, be understood as a process or as a permanent state. Understanding dialectical phenomena as a process means that a given condition

Management, paradox, and permanent dialectics

and its negation come in a never-ending succession, in which a thesis gives birth to its antithesis, which is in turn transformed into its own antithesis. This view of dialectics started as a rhetorical strategy developed by Socrates (Durant 1991) and was employed by Marx (1978) to explain the historical evolution of society in an attempt to extrapolate the future of capitalist systems. The underlying principles of this approach — articulated by Engels in his Dialectics of Nature (Engels 1873) — are threefold. First, there will be a mutual struggle whereby a phenomenon inevitably generates its opposite. The second principle is the negation of the negation (the struggle of opposites is cyclical and never-ending), while the third is the transformation of quantity into quality (incremental changes lead to discontinuous change). The various applications of this approach to dialectics to organizations resulted in the building of a (process) dialectical model of organization. Table 1 categorizes the major contributions of a dialectical view of management. Blau and Scott (1962) ﬁrst proposed the merits of approaching management through this lens but it was Benson (1973; 1977) who ﬁrst built an overarching argument for its relevance for organization theorists. This author drew on Mills’ (1962) criticisms of reliance on natural dialectical laws to understand social phenomena, to reframe the bureaucratic-professional conﬂict as a dialectical phenomenon (Benson 1973) and to formulate the four underlying principles of this approach for the study of organization. These principles were social construction, totality, contradiction and praxis (Benson 1977). Other authors followed by explicitly or implicitly addressing organizational phenomena dialectically. Lourenço and Glidewell (1975) explicitly treated organizational conﬂict in such terms and Greiner’s (1972) understanding of the evolution of organizational structures also showed clear manifestations of this approach, although in a somewhat implicit form. Greiner (1972: 84) states that “delegation, which grows out of and becomes the solution to, demands for greater autonomy in the preceding [revolution] eventually provokes a major revolutionary crisis that is characterized by attempts to regain control over the diversity created through increased delegation.” In these words, although he may not know it, Greiner echoes Engel’s principles discussed above. The growing presence of contradictions, tensions and paradoxes in organizations and their articulation in the management literature provide evidence that thesis and antithesis not only occur in succession but can also be present simultaneously (e.g. increasing demands for “aﬀordable innovation”). This led authors to adopt an approach to permanent dialectical phenomena in organizations. A similar conception would be that grounded on Heraclitus’ (more recently developed by Hegel [1892]) view of dialectics as a phenomenon where two distinct/ contradictory entities engage each other in conﬂict, generating a synthesis that incorporates, and diﬀers from each of them (Duran 1991; Van de Ven and Poole

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Table 1.Major contributions towards a dialectical view of management Dialectics as process

Permanent dialectics

‘Total’ approaches

Benson (1975, 1977) Goldman & Van Houten (1977)

–

‘Partial’ approaches

Blau & Scott (1962) Chanin & Shapiro (1985) Georgiou (1973) Greiner (1972) Lourenço & Glidewell (1975) Mason (1969, 1996) Nielsen (1990, 1996) Schumpeter (1934)

Authors on organizational improvisation (for a review see Cunha, Cunha & Kamoche [1999]) Brews & Hunt (1999) Brown & Eisenhardt (1997) Burrell (1992) Camillus (1982) Church (1999) Edelman & Benning (1998) Eisenhardt & Tabrizi (1995) Follett (1940a, 1940b) Mintzberg & McHugh (1985) Mintzberg & Waters (1982) Stacey (1991, 1996) Weick (1979, 1995)

1995). The application of this approach to organizational research has, however, been limited to isolated themes. Thus, Follett (1940a; 1940b) showed how autonomy and control could be coupled in an organization; Edelman and Benning (1998) argued for the possibility of incrementally punctuated organizational change; Yates and Orlikowski (1999; Orlikowski and Yates 1998) showed how organizational communication could be formal and informal and how opposite views of organizational time can be integrated, while Brews and Hunt (1999) contended that strategy can be simultaneously emergent and deliberate. Nonetheless, these aforesaid authors have not put forward an integrative view of management from a position of “permanent dialectics”, such as Benson (1977) has done for “process dialectics”. However, they have proved the pervasiveness of paradox in organizational life and the potential that dialectics has to provide insights to study and to tackle those paradoxes. Drawing on this stream of research, a dialectical model of organization, strategy and change can be developed in order to show the potential of integrating these ﬁndings and laying out the groundwork for future eﬀorts at a dialectical understanding of organizational phenomena. To accomplish this task, we will look at research that surfaces opposite forces in organizations, such as planning and action (Crossan and Sorrenti 1997; Moorman and Miner 1998a; 1998b), organization and disorganization (Weick 1995), incrementalism and punctuated equilibrium (Brown and Eisenhardt 1997), and exploration and exploitation (Orlikowski 1996),

Management, paradox, and permanent dialectics

arguing that they can be harnessed, via synthesis, for the beneﬁt of an organization’s competitiveness and sustained success.

Dialectical strategy One of the most pervasive debates in management is that between the “planning school” (Ansoﬀ, Avner, Brandenburg, Portner, and Radosevich 1970) and the “learning school” (Mintzberg 1990; Mintzberg and McHugh 1985). Proponents of planning argue that the main triggers of organizational action are pre-planned events (Miller and Cardinal 1994). They claim that the way to sustained competitiveness comes from excellence at environmental scanning and at organizational assessment, in order to combine the corporation’s strengths with market opportunities, into a plan for subsequent implementation (Porter 1982). This approach materializes in a process of high eﬃciency, because resources are allocated to the more proﬁtable business units (Wooldridge and Floyd 1990), but of low eﬀectiveness, because obedience to the plan hinders managers’ ﬂexibility and reaction speed. Those adhering to this view see strategy as mostly deliberate, i.e. emanating from the organization’s will. Those that espouse the “learning” school contend that the high level of turbulence most companies now experience cannot be handled via reﬂection alone (or at all) (Lindblom 1959). Instead, organizational action is triggered by any event in the environment perceived as either a threat or as an opportunity, and not only by those events prescribed in a plan. The more radical adherents to this view, the members of the “action school”, argue that even without the presence of environmental stimuli for action, organizations must change and experiment. Their rationale for this statement is twofold. First, since environments are social constructions (Berger and Luckmannn 1991; Smircich and Stubbart 1985) stimuli may be misperceived as absent when they are in fact there, and thus uncalled-for action allows reﬁnement of the organization-wide perception of the environment. Second, experiments allow the organization to shape its environment, increasing its competitive basis and depleting that of its competitors (Hamel and Prahalad 1994). In this vein, strategy is a highly eﬀective process. The inexistence of a formal plan permits a high ﬂexibility and a high reaction speed, allowing organizational members to reap unexpected opportunities or parry unexpected threats in the environment (Eisenhardt 1989). What is gained in eﬀectiveness is often lost in eﬃciency. The use of experiments is costly due to the often low ratio of successes over failures (Cooper 1979) and the danger of the company “spreading itself too thin” over numerous opportunities, which is always a problem for a very ﬂexible strategic process (Miner, Moorman and Bassoﬀ

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1996). Thus, as far as this perspective is concerned, the results of a company’s strategy tend to be emergent and are only made coherent via a post-hoc interpretation of action (Mintzberg and Waters 1982). Recently, a synthesis between these two opposite views of strategy has emerged. This synthesis, through organizational improvisation, allows for integration between planning and action, without calling either for a compromise between these opposites or for the presence of one in spite of the other (Table 2 summarizes this approach). Instead, organizational improvisation or “real-time planning” shows that learning “action” strategies happen because of a plan and not in spite of it (Weick 1998). This view of strategy argues that organizational action is triggered when environmental stimuli call for fast, ﬂexible action, grounded on a preformulated plan, aimed at providing the grounding for this posture. Jazz musician’s use of musical scores to improvise collectively (Berliner 1994), and Shell’s use of scenario planning to respond to an unexpected discontinuity in oil prices (Wack 1985), are but two examples of how plans can be used to foster adaptiveness and ﬂexibility. This results in a process that is both eﬀective and eﬃcient. It is eﬀective because the plan is used to foster ﬂexibility by creating an unobtrusive means of coordination that allows action to be integrated towards a common goal (Bastien and Hostager 1988), permitting a substantial degree of ﬂexibility. It is eﬃcient because the bricolage dimension of improvisation (handling tasks with available resources) allows the organization to deploy its resources to multiple uses and thus escape from the increasing costs that using specialized resources for planned or emergent activities normally entails (Scribner 1986). As far as results go, one can classify improvisation as a deliberately emergent strategy inasmuch as a deliberate plan is composed in order to facilitate the organization’s ability to adapt and swiftly respond to emerging internal and external threats and opportunities (Barrett 1998). Organizational improvisation is grounded on the realization that organizations prefer following plans to constantly re-inventing themselves (Weick 1998) and thus, depends on the pre-existence of a plan and of an organizational infrastructure to guide its practice. However, these are not the only two factors that are needed to plan in real time. There are additional conditions necessary for the practice of improvisation and one can unearth a set of inﬂuencing factors that determine its success. These conditions and inﬂuencing factors can be grouped, using a dialectical lens, along three syntheses: (1) an experimental culture coupled with tight controls; (2) memory both as friend and foe, and (3) skilled individuals coupled with unskilled resources. As far as the ﬁrst synthesis goes, the point is that a mix of formal controls can help foster an experimental culture. This type of culture results from a set of values and beliefs that promote action and experimentation — as opposed to reﬂection and planning — as a way of understanding and dealing with reality. The point is to

Management, paradox, and permanent dialectics

Table 2.A dialectical approach to strategy Thesis

Synthesis

Antithesis

Overarching synthesis Strategy is planned

Strategy is deliberately emer- Strategy is emergent gent

Elements Complying culture

Complying experimental culture

Experimental culture

Past helps future success (memory as friend)

Past can be recombined to Past hinders future success help future success (memory (memory as foe) as friend and foe)

Skilled/specialized individ- Skilled individuals with gen- Generalist individuals and resources uals and resources eralist resources

be able to tolerate errors and, ideally, be able to espouse what Weick (1999) calls an “aesthetic of imperfection”. Those that do, recognize that in turbulent environments it is diﬃcult to survive, let alone prevail, without seriously pursuing innovation. These companies accept the 90%+ failure rates for which innovation is well known in the business arena (Craig and Hart 1992) as the price to pay for the 10% that do succeed and for the learning that ensues (Crossan and Sorrenti 1997). Cultures, in this kind of organizations, have strong “pro-innovation” biases and believe that a great plan can only be accomplished from ﬁnding an emerging pattern in actions taken in the past, through sensemaking (Weick 1995). To foster such a culture, these companies can use two major mechanisms. First, they reward people based on the number of “competent mistakes” they have made (a competent mistake being one that results from novel ideas and not from ﬂawed execution) (Picken and Dess 1997). Second, they can tap the power of symbolic action and stories as third order controls (Perrow 1986; Weick 1999) by diﬀusing tales of “competent mistakes” as role models for the organization’s members. Another value that an organization must espouse for improvisation to occur is that of urgency. The occurrence of an unexpected and “unplanned-for” event is not enough for improvisation to happen. Those that aim to tackle this event need also to feel that only fast action can address it (Perry 1991). Otherwise they can fall back on planning (because they perceive that they have time to do so) instead of being pushed to compose a course of action in real-time — a process of a far more daunting nature than the former (Eisenberg 1990). In order for this culture to thrive, it must be coupled with a mix of control mechanisms that allow it to converge with corporate-wide goals. Otherwise it

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would risk sharp disaggregation and cross the thin line between ﬂexibility and unproductive random action (Stacey 1991). This control mix is composed by three major elements: (1) ﬁrst and second order “invisible” controls, (2) milestones and (3) clear goals. Most authors on improvisation argue that the only kind of control mechanisms applicable in an organization that aims to improvise are third order controls, meaning indirect controls that coordinate via culture or ideology (Perrow 1986; Mintzberg 1995; Weick 1993a). Such an argument can be justiﬁed by drawing on the work of Dougherty, who has shown the diﬃculties of pursuing novel actions in organizations stiﬂed by ﬁrst (direct supervision) and second (standardization) order coordination mechanisms (Dougherty 1996). However, drawing on recent ﬁndings in critical studies of organizational control, we contend that improvisation can happen in environments where ﬁrst and second order mechanisms are abundant. The touchstone for controlling improvisation lies, we argue, not in the degree of obtrusiveness of those mechanisms, but in their invisibility. In what concerns ﬁrst order controls, direct supervision can be “delegated” from superior to peers, allowing for the maintenance of this type of coordination without hampering creativity (Sewell 1998). In jazz improvisation, band members are often chosen because of their reputation not among critics but fellow players (Hatch 1999). Second order controls can be rendered invisible by incorporating them in the production technology itself (be it of tangible goods or services) (Joerges and Czarniawska 1998; Barley and Kunda 1992). Milestones or action deadlines have been found to be an eﬀective mechanism to hold the momentum/sense of urgency ﬁrst triggered by an unexpected and “unplanned-for” event (Gardner and Roggoﬀ 1990). Furthermore, milestones are opportunities to perform a check between current actions and the development of the situation the organization is facing, allowing detection of any deviations/ misperceptions that need to be corrected (Eisenhardt and Brown 1998). Moreover, milestones are currently set in advance and planned, thus providing a sense of structure/routinization to improvisational activities often perceived to result from chaos and disorder (Eisenhardt and Tabrizi 1995). Finally, milestones serve as moments of feedback as partial stages/steps are concluded and thus, potentially increase individual motivation — building the momentum and the sense of urgency needed for improvisation to be sustained. Clearly articulated goals serve the all-important function of ensuring that improvisational activity amounts to the attainment of organizational objectives. In organizational settings clearly articulated goals perform a very similar function to that of the song in jazz improvisation. They are akin to a magnetic ﬁeld (or a strange attractor, to use complexity theory) that, although not prescribing individual action, are strongly normative in concerning the results of such action (Weick

Management, paradox, and permanent dialectics

1993a). They also contribute to coordination among individual members by deﬁning the results of their activity in a similar process to that of standardization of outputs (Mintzberg 1995). Memory, as stated by the second synthesis, can be both helpful and harmful to improvisation. On the one hand, as far as procedural memory goes, a small number of routines will be a central condition for improvisation. In this light, improvisation appears to occur only when an organization/individual does not have an adequate routine/procedural memory to respond to an unexpected situation (Moorman and Miner 1995). In situations for which an adequate routine does exist, then improvisation will be highly unlikely. This rationale is grounded on the following: ﬁrst, it would be ineﬃcient to invest in ﬁnding an improvisational course of action when another that is just as eﬀective is already stored in memory; second, these response processes are often unconscious, automatic and undetected, lowering the deliberateness of choice. However, in spite of empirical proof that procedural organizational memory does hinder improvisation (Moorman and Miner 1998b), it is at least theoretically arguable that the opposite is also true. If we understand routines as grammars (Pentland and Rueter 1994), knowing that the elements in grammars can be combined in endless possibilities, procedural memory would be the organizational counterpart of the score of a song. Organizational improvisers could embellish/modify the score at will during action (Moorman and Miner 1998a; Weick 1998). Moreover, there is also empirical evidence that this is so: in a study of improvisation in the computer industry, Brown and Eisenhardt (1995) found that ﬁrms with established routines are more likely to improvise than others that do not. Our contribution to the untangling of this paradox lies in aﬃrming that although organizational memory hinders improvisation, its ability to do so can be severely attenuated if the organization can build the necessary will to depart from current grammatical forms and use their elements to create new routines as action is unfolding. On the other hand, declarative memory, or knowledge of facts (Anderson 1983), is more related to qualitative variations of organizational improvisation. It plays an important role in the degree of improvisation: the more facts an organization knows the broader and, arguably, more diversiﬁed its basis for creativity, and thus for improvisation (Amabile 1998; Woodman, Sawyer and Griﬃn 1993; Moorman and Miner 1998b). Nonetheless, it must also be stated that a wide span of declarative memory may slow the speed of improvisation because of the time that individuals must invest searching through all available alternatives (Moorman and Miner 1998a). However, one could argue that bounded rationality would act to counter this phenomenon (Simon 1990). Finally, regarding the synthesis between specialization and generality, improvisation seems to call for skilled individuals to deal with unskilled/general-purpose resources. In an organization that aims to be proﬁcient at real-time planning the level of

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performative skill that each individual possesses determines his/her ability to pursue improvisational activity very distant from organizational routine (Weick 1999 1993a; Crossan, White, Lane and Klus 1996). Additionally, when improvisation is a group phenomenon, this group’s improvisational performance will be limited by the ability of its least skilled member (Bastien and Hostager 1991; Hatch 1999). The relevance given to skill rests on it being a vehicle for creativity to be put in practice. Thus, individual creativity is also an important trait that an improviser must possess (Erickson 1982; Crossan 1998). Only high levels of individual creativity will allow for radical departures from current organizational practice. According to Weick these will reﬂect “purer instances of improvisation” (1998: 545), where lower levels result in “variations” or “embellishments” that still retain much of the original routine/idea and that may not be as eﬀective. Another organizational attribute that can do much for the eﬀectiveness of improvisation is member skill diversity. Homogeneous organizations are not prone to use diverse approaches to solve problems or to reap opportunities (Hannan and Freeman 1989). Thus, the “novel” element of organization improvisation will be seriously compromised if the organization does not beneﬁt from a diverse population and it will probably be limited to mere embellishments or small variations upon existing ideas, products, practices and routines (Weick 1998 1999; Hatch 1997). Contrary to what happens with organizational members, the resources the individual/team/organization possesses are more favourable to improvisation if they are unskilled and unspecialized. In fact, specialized and limited purpose resources can thwart improvisation by limiting organizational members’ ability to turn their ideas into practice. Conversely, multi-purpose resources are ﬂexible enough to be deployed in a variety of uses, even if those uses were never part of the organization’s original intentions (or even imagination) for their applicability (Weick 1993a). Thus, resources may aﬀect improvisation through the bricolage dimension by augmenting the possible courses of action an organization can take, due to resource ﬂexibility. General-purpose resources reduce the number of constraints upon those that are conceiving action as it unfolds, thus increasing their potential degree of departure from standard practice/ideas and, ultimately, their ability to reach “purer” forms of improvisation. Taking these three syntheses into account, one can argue that improvisation amounts to an integration between planning and action and thus oﬀers a path for building a dialectical view of management.

Management, paradox, and permanent dialectics

Dialectical organization Paralleling the debate between the “planning” and “action” schools, both academicians and practitioners have been discussing whether the hierarchical/bureaucratic organizational model should be maintained or whether organizations should migrate to self-regulating and managing forms, such as networks. Those espousing the “hierarchy” school argue that the existence of tacit knowledge (Polanyi 1966), technological, human physical and mental limitations (Barnard 1938), and the appeal of lower transaction costs (Williamson 1971), justify the need for hierarchy and order-based relationships. Their emphasis is on the mechanisms that will allow the diﬀerentiation of workers in specialized roles and on how to control their eﬀorts in order to attain the higher-order organizational goals. These control mechanisms are often of a formal nature, because organizational growth makes interpersonal coordination, such as mutual adjustment and direct supervision, very ineﬃcient and sometimes outright impossible (Greiner 1972). Standardization of procedures, outputs and skills are thus the favoured integration devices (Mintzberg 1995). Control, and not mere coordination, seems to be the main goal of this type of organizations. Opposing this view are those that claim that changes in the environment, such as a higher competitive pressure (Bettis and Hitt 1995) and a better educated workforce (Handy 1991; Drucker 1996) allow and demand the shift towards selfmanaged/network-based organizational forms. Drawing from research on organizational learning, this view argues that shared values and beliefs are more pervasive than the “hierarchy” view holds. Shared beliefs serve as a powerful normalizing force that bind organizational members invisibly to a shared mental model of themselves, the organization and its relevant environment (Argyris and Schön 1992; Senge 1990). Thus, the major challenge for the organization is to harness this force in order to attain a higher integration level allowing employees, as a group, to meet the diversity/complexity of the environment (Emery and Trist 1965; Stacey 1996). Integration is thus assured by informal controls, such as culture transmitted by socialization and rituals (Schein 1985), in an attempt to manage what the “hierarchy” approach left unattended, thwarting its ability to change and adapt. The major goal of the “self-management” view is thus to foster integration/ coordination by engaging organizational members in the process of building a shared mental model of where the organization is, as well as what it aspires to be. The integration of these two opposing perspectives into a synthesis has already been attempted. The most notable of these attempts was Mary Parker Follet’s writings on business as an integrative unity (Follett 1940a), where she showed how to integrate the disparate needs of employers and employees, and how to give orders (Follett 1940b). She showed how framing orders as a “law of the situation”,

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instead of as a personal demand from management, allows the coordination and control of employee action while freeing it to take whatever course is adequate to handle the task at hand. Follett’s groundbreaking writings, however, did not take into account the pervasive role of culture and manufacturing technology as powerful, yet unobtrusive, controls and limitation mechanisms able to jeopardize any eﬀort towards diversity (Barker 1993). Drawing on Follett’s work, we propose an integrative view of organization, which favours integrative diﬀerentiation (Table 3 summarizes this approach). Again, we present a set of syntheses to make this argument: (1) trusting unmet organizational members (minimal trust), (2) uncommitted commitment (minimal commitment), (3) agreeing on disagreeing (minimal consensus) and; (4) control to liberate (minimal structure). Table 3.A dialectical approach to organization Thesis

Synthesis

Antithesis

Minimal structure (loosely-tight organization)

Self-managed teams (loose-organization)

Overarching synthesis Hierarchy (tight organization) Elements Power / standardization (impersonal relationships)

Trust via standardization Trust (impersonal personal relation- (personal relationships) ships)

Uncommitment

Committed uncommitment

Commitment

Homogeneity (agreeing)

Diversiﬁed homogeneity (agreeing to disagree)

Diversity (disagreeing)

Control

Control to be free

Freedom

As far as the ﬁrst synthesis goes, this apparent paradox is resolved by using trust as an integrating mechanism. Trust is grounded not in interpersonal ties but in stereotypes, thus exempting organizational members from the personal disclosure that trust-based organizational forms often entail (McAllister 1995), allowing for the necessary diﬀerentiation needed to meet the complexity of turbulent environments (Emery and Trist 1965). This “minimal trust” amounts, therefore, to organizational members trusting someone they do not know. The elements normally associated with building trust are kept to a minimum level just about necessary for the degree of integration needed to ﬁght fragmentation. The point here is to create the conditions needed for trust to emerge (the belief that the

Management, paradox, and permanent dialectics

individual with whom someone is interacting, will act in a way that is beneﬁcial or at least not detrimental to him or her), with the minimum level of commonality and personal disclosure. This is coordinated by means of a generalized other (Jarvenpaa and Shaw 1998), instead of social similarity. In this type of coordination, trust arises from a self-fulﬁlling prophecy of trustworthiness the individual develops, based on stereotypes of interactants and on previous network/team experiences. Indoctrination mechanisms have an important role to play in this process. Indoctrination need not to be related to the inculcation of particular organizational values and beliefs. Its purpose may be to facilitate coordination by a generalized other. The process would now aim at creating favourable stereotypes of the categories of people that newcomers are prone to interact with. It would seek to develop a favourable attitude towards working in trust-based settings (Armstrong and Cole 1995). Creating an attitude favourable to trusting other members of the organization is ultimately equivalent to fostering institution-based trust, because members are trusted on the basis of their aﬃliation with the organization (Frances, Levacic, Mitchell and Thompson 1991). For this to be possible, a diﬀerent (one is tempted to say “minimal”) conception of culture and structure must also be present. The second and third synthesis can be grouped under the umbrella of a “minimal” organizational culture. Here, the high levels of commitment and consensus favoured by much of the prescriptive management literature — arising from the self-management approach — are replaced by minimal levels of both factors in order to avoid the detrimental eﬀects potentially generated by this approach. As far as minimal commitment goes, its purpose is to promote the level of commitment needed to assure the necessary level of performance on behalf of the individual, while avoiding blind adherence to individual, group and organizational decisions. Organizational members must take the success of their organization as a central value, but they also have to be permeable to information that goes against decisions made both by them as individuals, and by the group or organization to which they belong as a whole. The dynamics that underlie a “healthy” level of commitment to an organization are coincident with those that explain individual and group pathologies found in organizations, such as groupthink and individual defensive routines (Janis 1971; Argyris 1992; Harvey 1996). Commitment is the result of attempts to resolve cognitive dissonance arising from making public and explicit choices without suﬃcient external justiﬁcations (Salancik 1977; Eiser 1980). The challenge lies in promoting a set of values and beliefs that foster a positive attitude towards public and explicit errors (Weick 1999), that attenuate the need for triggering the dissonance reduction process, because the organization values mistakes, when they are an input for learning (Sitkin 1992).

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Minimal commitment needs, however, to be coupled with minimal consensus in order to avoid the negative consequences brought by strong cultures, without losing the unobtrusiveness of the controls they rely on. Minimal consensus is grounded on the understanding that diversity of perceptions favours a richer understanding of the environment and, therefore, allows the organization to act in a more informed way (Starbuck 1965). Moreover, diversity in the composition of the organization’s population allows a wider repertoire of solutions and a higher level of ﬂexibility (Hedberg, Nystrom and Starbuck 1976). These characteristics facilitate, in turn, a higher degree of adaptability to changing environments (Brown and Eisenhardt 1997) — the major reason why trust-based organizations are adopted (Powell 1990). This is accomplished by matching external complexity, which can reach signiﬁcantly high values in this kind of environment (Emery and Trist 1965), with complexity of individual organizational members, instead of with complexity of organizational design (Weick 1993a). In short, the organization copes with environmental complexity by having very diverse members, instead of adopting complex structural forms. Minimal consensus rests on a deliberate and intentional eﬀort to reduce commonalities among organizational members to the minimum level required for integration to be feasible. Creating such a basis for integration requires abandoning the pursuit of common perceptions of the environment, values and beliefs in favour of promoting compatibility among these in diﬀerent organizational members. The purpose of this is to allow trust to emerge by a perception of compatibility instead of one of similarity (Weick 1993b). In this way, individuals acknowledge that they hold a valuable perception of reality, but also realize that perception is limited. Real capacities for action and decision-making can only be harnessed when combined with diﬀerent views from other members. It is important, though, that those perceptions, while not being identical, are compatible in the sense that they illuminate a certain reality from diﬀerent but complementary (as opposed to antagonistic) perspectives (Hedberg et al 1976). Finally, the fourth synthesis, which we label “minimal structure”, is constituted by three elements: coordination by action, based on a minimal set of rules and, on a shared social objective. Due to the absence of a strong culture from which trust and coordination can be derived, this type of organization replaces a shared system of values, beliefs and perceptions, by coordination through action. This means that the integration of the individual eﬀorts of organizational members does not rely on sharing the same culture but on having a compatible perception of the challenges posed by the environment (Weick 1993a), that creates a “law of the situation” (Follett 1940b) for individuals to obey. Like coordination by culture, this is still a third order control, but one that promotes, instead of hinders, diversity. It fosters the emergence of compatible (as opposed to shared) views on the problem or

Management, paradox, and permanent dialectics

opportunity, facing the group, allowing for a broad variety of alternative courses of action to appear (Eisenberg 1990). Control in minimal networks is also achieved through a small set of rules that govern the interaction among their members (Weick 1999; Bastien and Hostager 1991). Those rules can emerge from the nature of the task faced by the group or from broader social norms (Hatch 1997). As far as the nature of the task is concerned, these rules are embodied in a restricted set of cognitive and behavioural alternatives the members can choose from. In spite of the diversity desirable in this kind of organization, this set of alternatives is restricted because of the necessary compatibility among its members for minimal integration to occur (Brown and Duguid 1991). This set of alternatives can be equated to an organizational grammar: a set of elements and combination rules among those elements that allow for the formation of an almost inﬁnite set of diﬀerent courses of action, from a limited set of inputs (Pentland and Rueter 1994). In minimal networks, social norms are limited to those coming from the professional and industry-speciﬁc cultures of its members (Hutchins 1991). The organization should restrain itself from adding to those rules at the expense of limiting the scope of diversity (Weick 1995). Another important mechanism of coordination in minimal networks is a shared social objective. In fact, because of the parsimony of control mechanisms, its members must explicitly share the organization’s goals (Orr 1990). Otherwise, although individual teams may adequately respond to problems or opportunities in the environment, the ad hoc basis on which they do so could continuously increase the fragmentation of the organization as a whole, compromising its longterm integrity (Senge 1990).

Towards a dialectical view of management The fact that the concepts of dialectical strategy and dialectical organization oﬀer a way to achieve a synthesis between opposing schools begins to demonstrate the potential for a dialectical view of management. In order to accomplish this task, we will draw on Benson’s (1997) four principles of a dialectical view of organization theory. In fact, although this author’s approach is wedded to a “process” view of dialectics, the underlying principles of his approach appear to apply to a “permanent dialectics” perspective of this phenomenon. The principle of social construction calls for identifying sources both of constraint and of deviation/construction. As far as dialectical strategy goes, the source of constraint is the plan, the “minimal” prescribed part of strategy that allows for adaptivity to emerge (Brews and Hunt 1999). Its source of variation comes from the stimuli that press the organization/individual to adapt and to be ﬂexible as

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action unfolds and from the ability to “bricolate” with and around the prescribed plan (Berry and Irvine 1986). In dialectical organization, the source of constraint is the minimally formalized structure, including shared goals and the stereotypes acquired in the indoctrination process (Covaleski, Dirsmith, Heian and Samuel 1998). Deviation and construction comes from the perception of errors as learning opportunities (Sitkin 1992) and from the role of action as a ground for coordination (Follett 1940b). The principle of totality calls for an underlying “whole” to which semi-autonomous parts are linked. At the organizational level, the “whole” behind an instance of a dialectical strategy is the overarching action culture that grounds it. Individually, looking at this phenomenon as an enactment of distilled experience (Crossan and Sorrenti 1997), and a high level of skill, organizational member’s life experiences frame the background that allows for discrete instances of improvisation to appear (Hatch 1999). These overarching elements notwithstanding, each dialectical strategy is autonomous in the way that it depends on the speciﬁc details of the plan driving it and on the people working towards it. Dialectical organizations, on their side, take much of their rules and structure from general societal norms (Bastien and Hostager 1988; Eisenberg 1990) and depend on the diversity of their members, who encompass a wide span of settings of which a particular organization is just a single element. Nonetheless, each organization uses these norms and this diversity uniquely, rendering it partially autonomous from the milieu where it stands. The principle of contradiction gives, perhaps, the clearer illustration of dialectics by stating that this type of phenomena only emerges where two opposing forces are at work. The fact that plans necessarily possess an emergent component (Minztberg and McHugh 1985), either because of the complexity of environmental interaction, or because of communication distortion, allows us to unearth this principle in a dialectical strategy. The fact that human interaction creates an informal “shadow” system in every formal structure (Krackhardt and Hanson 1993; Sayles 1989), allows the contradictions to emerge as a characteristic of the concept of dialectical organization. Finally, praxis (which Benson deﬁnes as “free and creative construction of social arrangements” [1977: 5]) is also visible in both concepts. Dialectical strategies are often prone to formalization, which eventually ends up creating punctuated change via an incremental process (Edelman and Benning 1998). Dialectical organizations, with their low levels of commitment and consensus, allow their arrangements to be in permanent reconstruction, a state of “organizing” (Weick 1979). Summing up, this argument appears to have the potential to contribute towards a dialectical view of management suﬃciently for its major underlying principles to be worthy of closer scrutiny. By attempting this, we go beyond the

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current state of the art of the dialectical perspective on management — which has been focusing on demonstrating its relevance and applying itself to several disconnected ﬁelds of management inquiry — by proposing a set of underlying principles of permanent management dialectics. This is done with the purpose of providing a novel basis for research into the paradoxes present in organizations as well as contributing a new understanding for practitioners to beneﬁt from those paradoxes. Four principles guide this approach: simultaneity, locality, minimality and generality (Table 4 contrast these with those of a “process” approach). Table 4.Contrasting ‘approaches to management dialectics Dialectics as process

Permanent Dialectics

Social construction – Source of constraint – Source of deviation / construction

Simultaneity – Mutual support of opposites – Manager as ‘surfacer’ and – holder of tension – Pervasiveness of paradox

Totality – Overarching whole – Determinants of parts autonomy

Locality – Local enactment – Action as arena of integration – Probability of formalization

Contradiction – Presence of embedded opposites

Minimality – Small causes lead to big eﬀects – Quantity: border of necessity – Quality: unobtrusiveness

Praxis – Process of creative reconstruction of social arrangements

Generality – Toleration of opposites – Low skill resources – Eﬃcient eﬀectiveness

Simultaneity means that a dialectical view of management is grounded on the interplay of contradictory forces and not in the attempt to subdue one to the other. Under this principle, a thesis does not exist despite its antithesis but because of it. Each pole of the dialectic needs the other to sustain its presence. The concepts of dialectical strategy and dialectical organization support this argument. Research has shown that, under a dialectical view of strategy, the design of a “minimal” plan, where goals and deadlines are scrupulously prescribed and enforced, enhances the ﬁrm’s ﬂexibility and adaptability to unexpected internal and external shifts (Brown and Eisenhardt 1997). Additionally, Hutchins (1991) proved that some level of structure is needed for informal cooperation to emerge and Ezzamel and Willmott (1998) found that loosely coupled structures were heavily dependent upon highly structured relationships and reward systems. Thus,

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a second insight from this principle is that the role of the manager shifts from choosing between the poles of a given paradox, as contingency theory prescribes (Lawrence and Lorsch 1967), and from holding this paradox, to surfacing it, making it visible, promoting an integration between its opposites. In fact, Follett (1940b) contended that using the “situation” as a source of “law” (or orders) allowed for integration between a directive and a democratic approach to leadership and organization. Weick’s research into ﬁreﬁghting has proved this point eloquently, and shown how rules and plans are critical in unexpected and unplanned-for situations (Weick 1993b). Finally, simultaneity means that one can seldom escape paradox in managerial life. Mintzberg has documented the close linkage between deliberate and emergent strategy (Mintzberg and Waters 1982; Mintzberg and McHugh 1985), showing that emergent and unplanned/unintended action will probably sprout from the most deliberate of plans. There are two brief explanations for this phenomenon. First, communication distortion impedes people in understanding a message exactly as its conveyor understands it (Mintzberg 1990). Second, changes in the environment surround most businesses (Bettis and Hitt 1995), shifting them towards a “turbulent ﬁeld”, where emergence is the norm because of the complexity of relationships between environmental factors (Emery and Trist 1965; Lane and Maxﬁeld 1996). Locality means that the synthesis between two opposing poles of a paradox does not result from an overarching design eﬀort; but from case-by-case enactment. The ﬁrst inference one can make from this principle is that a synthesis is a local phenomenon, resulting from the decisions taken by an organization or individual concerning a speciﬁc challenge or problem. Second, this synthesis occurs not in reﬂection but in action. Given most organization’s biases towards pre-conception (Weick 1998), few would endure the poles of paradoxes dealing with deviation from current practice if it were not because of poignant challenges from the environment (Mintzberg 1996). Moreover, it is these poles’ demand for action that permits and facilitates the integration between opposites as action unfolds (Crossan and Sorrenti 1997; Crossan 1997). Finally, and in spite of this, the transition from local responses to organizational (global) routines is possible. This is accomplished as those responses good results carry them throughout the organization via stories (Orr 1990) that get shared and slowly creep into the organization’s memory (Moorman and Miner 1998a 1998b). Again, the concepts of dialectical strategy and dialectical organization support these claims. The “planned” part of a dialectical strategy would go forever undisturbed without an external event demanding ﬂexibility, because of most organization’s bias towards planning (Weick 1998). It is only in response to such an event that organizations/individuals adapt in and around a plan and, through action, create novel solutions that may end up stored in the organization’s memory, be it

Management, paradox, and permanent dialectics

procedural or declarative (Miner, Moorman and Bassoﬀ 1996; Vera and Crossan 1999). As far as organizing goes, research into innovation implementation and group cooperation has shown that structures are often as enduring as the life span of a project (Johnson and Rice 1987), and that these structures emerge from action, which acts as the prime coordination mechanism (Bastien and Hostager 1988). Additionally, these organizational conﬁgurations are often formalized and crystallized in the organization (Orlikowski 1996). Minimality means that the ability to use a paradox to build a synthesis depends on maintaining only suﬃcient levels of each of the paradox’s poles in order to avoid one taking over the other. There are three arguments underlying this principle. The ﬁrst is that, as complexity theory posits, big eﬀects come from small causes (Prigogine 1984). Thus, synthesis occurs when the necessary “strange attractors” create an “organizational force ﬁeld” that will bind corporate action, preventing it falling into an orbit that is too close to one of the poles of paradox. Two diﬀerent tasks are called for, which one ﬁnds in the two remaining arguments sustaining this principle: creating the necessary quantity and quality of structure (plans, rules, procedures, organizational conﬁgurations) for integration to be possible. As far as quantity goes, this implies searching the level that is suﬃcient for synthesis to emerge, while taking care to stay on the thin line that separates stiﬂing order from entropic disorder (the “edge of chaos” [Pascale 1999]) and that integrates them both (Lane and Robert 1996). As far as quality goes, this calls for procuring an unobtrusive type of structure, one which allows for both dialectical strategy and organization to thrive (Sewell 1998). Otherwise, independently of the extent to which that structure is developed its eﬀect will always be more restraining than liberating. Thus, a dialectical strategy not only needs plans more akin to a jazz rather than classical music score (the latter having much more prescribed notes to be played [Perry 1991]), but also plans that do away with prescribed actions and replace them with goals and deadlines (Eisenhardt and Tabrizi 1995). In the same vein, a dialectical organization not only needs fewer controls but also less visible ones (Covaleski et al. 1998). Although one can expand the span of control almost to inﬁnity, this will not transmit the perception of freedom of action that an empowerment program will, but it will reduce the perceived amount of control one has to endure (McGregor 1960). Replacing orders with the law of the situation (Follett 1940b), superior supervision with peer vigilance (Romme 1999) and procedural speciﬁcation with technological limitations goes a long way in promoting nimbler organizational forms. Generality means that obtaining a synthesis requires that the “minimal” that is prescribed and pre-conceived must possess a high degree of generality. The ﬁrst insight emerging from this principle is the need to “tolerate” opposites. If results have to be eﬀective and eﬃcient; structured and unstructured, and deliberate and

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emergent, then individuals and resources cannot be committed or specialized to a speciﬁc set of courses of action/solutions. They must be ﬂexible enough to accommodate several, which may well be contradictory (refer to the concept of patching [Eisenhardt and Brown 1999]). The second insight is that the resources available to organizational members, whether materials, plans, structures or information systems, must be “fool-proof”. This means shifting the responsibility for avoiding dysfunctions from the individual to the organization (Anderson 1983) by embedding the necessary mechanisms for these dysfunctions to be avoided in what is formalized. Instead of relying on recruiting some special kind of employees that do not fall to phenomena such as groupthink (Janis 1971), one could build an organization and a strategy that subsumed this type of behaviour in an emergent way. Finally, generality allows us to answer what some consider the greatest paradox in modern organizations — the dilemma between eﬀectiveness and eﬃciency (Peters 1992; Bennis 1989). By relying on general resources and plans, an organization can shift strategy and form using bricolage, that is, it can “make do” with available resources (Levi-Strauss 1966) without having to acquire new ones, thus exploiting those it possesses even as it changes direction. A dialectical view of strategy and organization supports these arguments because its plans and conﬁgurations, respectively, show how generality allows for several syntheses to emerge. Turning to dialectical strategies, research has shown that general plans that do not specify steps but instead provide major goals and deadlines allow for innovation to take place with high levels of eﬃciency (Sobek, Ward and Liker 1999). However, these plans, as Perry (1991) shows, allow organizations to adapt to unexpected circumstances and thus make its realized strategy a much more deliberate endeavour, allowing for opposite directions to be weaved into a synthesis. Moreover, such plans generally are simple and can be understood and improvised around even by the most junior of organizational members (see Orlikowski 1996 for an example). Dialectical organizations rely on systems such as MBO and mentoring (Covaleski et al. 1998). These allow and facilitate opposite goals of controlling and liberating and do not require much skill because they are either embedded in the general social fabric or built into the technology of production (Ezzamel and Willmott 1998). Additionally, the unobtrusiveness of controls allows for creative eﬀectiveness-seeking behaviour, coupled with the necessary normalization for eﬃciency to be attained (Sewell 1998).

Conclusion Environmental changes and organizational opportunities have been planting paradoxes in several areas of organizational theory and practice. Some authors

Management, paradox, and permanent dialectics

drew on a process view of dialectics to show how the opposing poles of these paradoxes succeeded each other in the course of time. Nonetheless, new competitive landscapes demand more of organizations. Contradictions now co-exist in time and must be tackled simultaneously. Several authors have acknowledged this and have been looking at how this could be accomplished in several ﬁelds of management inquiry. However, this eﬀort has, until now, lacked the necessary overarching framework for its integration and fruition into insights for practice. In this light, we have presented a rationale for the potential of such an approach for current management theory and practice by developing a “permanent dialectical” view (where opposites exist simultaneously instead of in succession) of strategy and organization. Having surfaced the need and the potential for this perspective, we then postulated four principles that underlie a “permanent” dialectical view of management, after ﬁrst assessing whether it was truly a dialectical approach by showing its compliance with Benson’s (1977) basic principles of dialectical analysis. Thus, the present eﬀort goes beyond current theory because, ﬁrst, it presents the need and potential for an overarching view of management as an act of synthesis, thus providing a platform to integrate the separate ﬁndings researchers have obtained when applying this view in a somewhat implicit manner to particular ﬁelds of inquiry. Second, it argues for the need to go beyond the process approach, to a permanent dialectical view of management, because of the growing simultaneity in the presence of opposite forces and demands upon organizations. Finally, the principles we put forth go beyond the argument for the relevance of such a view to management research by surfacing common themes found in dialectical phenomena in organizations — providing a basis for both investigation of, and action upon, this type of phenomena. Our eﬀort has implications for both theory and practice. As far as theory goes, we contribute an argument for the need and the potential of a dialectical view of management and a set of principles to guide the construction of such a view. As far as practice goes, a dialectical approach shows that “traditional” practices, such as planning and formal organizations, are alive and well. Obtaining the results that “gurus” claim are demanded by current competitive environments does not mean adopting the practices they proclaim. It is just the opposite: plans foster adaptivity and ﬂexibility, while structure and norms foster creativity and liberation. The challenge is to ﬁnd a synthesis that integrates two opposing forces or demands, which means that one has to hold two contradictory ideas in thought and in practice, at the same point in time. According to F. Scott Fitzgerald (1968), to be able to do so is the nature of true genius. We might not go as far as this but we do think it might make for better management and organization theory and practice.

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Chapter 3

The meanings of risk and interorganizational collaboration Paul K. Couchman and Liz Fulop

Introduction: Paradox and meanings Paradox can be described as an all-embracing concept for dealing with conﬂicting demands, opposites or contradictions in organizational aﬀairs that help expose seemingly irrational and absurd relationships, processes and practices (Lewis 2000: 760). Paradox itself does not represent something new in management and organizational theory but rather, what has changed is its meaning. It is now more than ever seen by many theorists as the sine qua non for making sense of a world that is both global and local, diverse in its workforce, technologically fast and smart, and destined for disruptive experiences and the unexpected. Indeed, paradox is an “umbrella” term for understanding the universal conditions of life, and for managing the inevitable complexity, ambiguity and diversity that this brings into organizations (Lewis 2000: 760). In this chapter we focus on two key aspects of paradox. The ﬁrst is that paradoxes are constructed through sense making (Ford and Backoﬀ: 1988, cited in Lewis 2000: 761). In this chapter we refer to sense making in terms of how discursive practices and discourses shape meanings. We examine how organizations, as sites of discursive practice, are constituted and, in the process, constitute the subjectivities of those who engage in sense making (Mills 1993). This notion of sense making is concerned with how contradictory and competing meanings become undecidable because of the nature of the texts themselves (Linstead 1993: 59; Jeﬀcutt 1993). In short, we are dealing with indeterminate meanings as understood from a deconstructionist perspective (Hassard 1993: 20) in which subjectivity is treated as an artifact of diﬀerent historical and social traces that enter consciousness through symbolic systems that both diﬀerentiate and ﬁx meanings (Linstead 1993: 58–9). Sense making renders any understanding or meaning of risk undecidable and contested in ways that are denied in the self-understandings of positivist approaches, such as in techno-scientiﬁc methods (Burton and Carlen 1979: 17;

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Linstead 1993: 68–9). As Linstead says, organizations as text partially constitute the subjectivity of those involved in their production but they can never completely constitute meanings. “Readers” come with traces of other texts, cultural forms and ways of reading (or reading positions) that change the nature of the text thus altering how textual materials are consumed by the “reader” (Linstead 1993: 59; also see Hassard 1993: 21). Deconstruction thus oﬀers a way of theorizing and understanding risk as paradoxical. Such an approach to risk has been unexplored in the management and organizational literature. Deconstruction is at the heart of understanding paradox. One of its key tenets is that every text bears within it the disruptive potential of deconstruction and for “ironic self-negation” with each proposition or statement potentially containing its own contradiction (Norris 1982: 48; Hassard 1993: 21). There is no necessarily correct way to deploy deconstruction but the process is committed to self-engendered paradox because, from this perspective, texts defy any settled or deﬁnitive reading, and all texts are open to further deconstruction (Norris 1982: 48). The second focus of the chapter is on how paradox becomes evident through self-reﬂections or interactions (Ford and Backoﬀ: 1988, cited in Lewis 2000: 761). We draw on the reﬂective account of one of the authors who became involved in a cross-sector collaborative research project. The reﬂections are based on recollections of discussions that took place over a six months period (between 1997–1998) that represented the developmental phase of the project. The recollections were written in a draft paper drawing on both the narrative form and theoretical arguments. The draft was then passed to the co-author to undertake a discourse analysis. The co-author questioned the account given in the draft and sought a more critical and reﬂexive rendition by its author. So the text was modiﬁed. The co-author, acting as the “other” or interpellator, interwove the text with other traces in the form of theories, insights and certain ways of framing questions, eﬀectively de-centring the subject (the author of the text) as the authoritative source of meanings. The original author’s reﬂections were treated as “…a convenient location for the throughput of discourses” (Hassard 1993: 13; Linstead 1993: 59). In other words, once the text was written and passed on, the reading of the text by another created its intertextuality or multiple meanings that remain independent of any individual interpretations (Hassard 1993: 15; Linstead 1993: 59). We expand on this approach later in the chapter when we outline how language games and discourse shape meanings. The project, which was funded under the Australian Government’s Cooperative Research Centre (CRC) Program,1 aimed to provide support for collaborative R&D projects in the Australian manufacturing sector. The later part of the chapter analyses how three competing or incommensurate discourses emerged in the initial

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discussions over the direction that the project should take. It explores how risk management and techno-scientiﬁc ways of knowing were introduced into the emerging discourse and how these were contested. As Foucault (1972, cited in Chan 2001: 79–80) states, for a topic such as risk to become constructed in a discourse requires that three conditions be met. First, the ability to think, choose, speak and question has already to be part of “…broader disciplinary and institutional contexts … and disciplines that act to discipline and control their practitioners” (Linstead 1996, cited in Fulop, Linstead and Clarke 1999: 323). There has to be evidence of a disciplinary regime. Cross-sector collaborations bring into tension and conﬂict extraordinarily complex ways of framing problems, as well as divergent knowledge and truth claims based on competing disciplinary paradigms, particularly in academia. Second, to meet Foucault’s other criteria, such collaborations must bring together disparate institutional systems. The CRCs arose from deliberate attempts by government to break down barriers between the public sector and business and to use collaboration to change how specialist practitioners, with their distinctive forms of knowing (for example, scientists, product development engineers, academic researchers, business managers, etc.), solve major industry problems. Thus, collaborations of this kind across industry sectors create demarcations and contestations over diverse linguistic forms and truth claims within disciplinary practices and serve to redeﬁne power relations across disciplines and within various ﬁelds of practice (see also Chan 2001: 72–4). Lastly, the settings have to be ordered to establish which issues have importance and whose interests are privileged. The CRCs’ policies clearly gave prominence to industry needs and privileged applied research over pure or discoverybased research. The policies were designed to create a more relevant and vibrant research agenda through university-industry partnerships and multi-disciplinary research. It also sought to shift the funding of public sector research increasingly into the private sector. Fairclough (1992, cited in Chan 2001: 78, 30) argues that discursive formations have to be examined in the context of economic, political and institutional settings that give rise to them and allow the object of a discourse, such as risk management, to emerge in the ﬁrst place. In other words, the conditions of possibility of a discourse have to be understood in terms of the contextual conditions (described above) that mediate the emergence of a discourse. Discursive practices and relationships create the conditions of possibility through which material events are related to words and through which they attain some meaning (Jacques 1995: 19). Discourse analysis requires that account be taken of the constitutive role of such discourses and the historical conditions from which they emerge and become part of the discursive nature of reality (Sturdy and Morgan 2000: 4).

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Meanings of risk It is not our intention to cover all the many ways in which risk has been written about. Instead, we provide a brief historical overview of its place in modernist thinking and then consider its representation in the management, organizational and, more recently, interorganizational collaboration (IOC) literatures. The concept of “risk” emerged during the period of modernity and has been central to economic and business discourse since the 18th century. As Giddens (1990: 34) observed, the notion of risk has to a large extent replaced the idea of fate in human aﬀairs and this “represents an alteration in the perception of determination and contingency, such that human moral imperatives, natural causes, and chance reign in place of religious cosmologies. The idea of chance, in its modern senses, emerges at the same time as that of risk.” While ﬁnancial practices for coping with the hazards of trade can be traced back to antiquity that we would now call “risk management” (for example, Baskin and Miranti 1997), the word risk appears to have entered the English language from French as recently as the 17th century. By the early 18th century, the word was clearly associated with commerce and risk referred to as “the chance or hazard of commercial loss, (speciﬁcally) in the case of insured property or goods” (Oxford English Dictionary). In the new discipline of political economy, the discourse of risk was associated with proﬁt, positing the entrepreneur as the model of virtuous individualism in capitalist society. The chance an entrepreneur took in venturing an investment was seen as the source of any proﬁt obtained and the higher the risk taken, the greater the potential for proﬁt. Investing entrepreneurs take a risk, deﬁned as exposure to the chance of loss, in the expectation of a return on the investment. The risk can be a “calculated risk” (calculated through various technoscientiﬁc approaches), in that the entrepreneur may be aware of the threats facing a chosen course of action (also see Luhmann [1988] for a similar view). Herein lies the fundamental element of risk management in contemporary management discourse: to identify, evaluate and take action to manage risk is to reaﬃrm individuality (as embodied in the heroics of the male entrepreneur) and to do so by acting rationally. Put formally, this may be stated as: The theory of risk evaluation and management is a department of a wider theory of rationality in choice and action. In particular, it belongs to the domain known as practical reasoning, whose object is the rational choice of courses of conduct. The risks it involves are clearly one of the salient features of such a choice (Rescher 1983: 5).

In management-related studies risk is almost entirely presented within a dominant discourse described by Lupton (1999: 2) as a “techno-scientiﬁc approach.” Risk is

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largely taken-for-granted as an objective phenomenon, one that can be identiﬁed, for which causal factors can be mapped, and predictive models of risk relations built. People’s responses to various types of risk can be estimated and ways of limiting the eﬀects of risks proposed. The notion of rationality, and even bounded rationality, governing management action has permeated management discourse and is also well established in organizational theory (for example, Abrahamson 1996). This phenomenon is most clearly observed in the ﬁeld of ﬁnancial risk management. While ﬁnancial risk management has long been a key element in capital investment decision-making it has undergone something of a “revolution” since the late 20th century (for example, Lore and Borodovsky 2000). The theory and practice of risk management has advanced considerably. Following a number of widely reported major ﬁnancial disasters in the 1990s it has now become “the paramount topic” in ﬁnance management. Shrivastava (1995: 120) describes nine diﬀerent ways in which ﬁnancial risks have been described in the literature and these are not exhaustive. The concept of risk also appears in other areas of contemporary management discourse, which we do not intend to explore at this point. We are more interested in how risk has been incorporated into the ﬁeld of project management, where risk management has been embraced as a central element. The recognition of risk as a special concern of project managers was formalized in 1987 when the US-based Project Management Institute included risk management in its “Project Management Body of Knowledge” or “PMBOK”. PMBOK was a document that sought to cover “all those topics, subject areas and intellectual processes which are involved in the application of sound management principles to … projects” (Project Management Institute 1996: vii). Interest in risk within project management was given a major stimulus and institutional legitimacy in the 1990s as a result of major failures, and other problems in the management of software-intensive projects, especially defence procurement projects in the USA (for example, Conrow and Shishido 1997). The PMBOK is an attempt, by an organization that has sought to professionalize the practice of project management to crystallize the discourse of risk around a set of would-be disciplinary practices. The 1996 revision of this document (renamed “A Guide to the PMBOK”; Project Management Institute 1996) clariﬁed this purpose, as to identify and describe that subset of the PMBOK which is generally accepted. Generally accepted means that the knowledge and practices described are applicable to most projects most of the time, and that there is widespread consensus about their value and usefulness (Project Management Institute 1996: 3).

The PMBOK model of project management deﬁnes its project management task as “the application of knowledge, skills, tools, and techniques to project activities in

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order to meet or exceed stakeholder needs and expectations from a project” (p. 6). Risk management is seen as one of nine distinctive knowledge areas included in the management of projects. Project risk management encompasses “the processes concerned with identifying, analyzing and responding to project risk. It includes maximizing the results of positive events, and minimizing the consequences of adverse events” (p. 11). As a number of writers in this ﬁeld have emphasized, it is due to their uniqueness that projects are “risky” and are prone to things going wrong or not proceeding according to plan: Projects are particularly susceptible to risk because each project is unique in some measure. The degree of uniqueness can vary dramatically. …. This uniqueness means that the past is an imperfect guide to the future. We are never completely sure what the future holds. There is always the risk that things will not go as planned (Frame 1994: 75).

Rational managers — those who accept the PMBOK discourse — plan and act to ensure that positive outcomes are achieved and negative outcomes avoided or minimised. Management is promised control of its future and destiny. Another dimension contributing to project risk occurs in those projects that involve IOC, as is the case for projects carried out under the auspices of an R & D consortium or a supply chain partnership. Here a number of diﬀerent sources of risk are identiﬁed and, although the concept of risk has long been central to management practice and discourse, and the “risky” nature of IOCs is widely acknowledged (see Powell 1990: 318), the concept of risk in this context remains poorly understood in theory. Of the many diﬀerent approaches to the analysis of IOC, it is the Transaction Cost Economics (TCE) perspective that particularly privileges risk. The approach is embedded in techno-scientiﬁc methods and is premised on the argument that there are many incentives for self-interested opportunistic behaviour by actors in relationships of dependence. It is based on notions of what would be the rational behaviour of a self-regarding and possessively individualistic actor in determining appropriate forms of governance to minimize economic transaction costs (Williamson 1985). Because of this, the approach focuses on means to pre-empt the risk of opportunism and the associated lack of trust between exchange parties, for example, through employment contracts and the use of management ﬁat. However, the TCE approach to risk is poorly developed in addressing power dynamics and asymmetric power relationships amongst collaborating organizations (Gray 1999), and it ignores the embeddedness of economic activities in their social, cultural and historical contexts (Powell 1990; Granovetter 1985). However, there have been attempts to address these criticisms and further develop the TCE framework and position it as a dominant discourse in the ﬁeld of IOC studies.

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Further developments of the TCE approach have introduced a number of diﬀerent sources of risk, notably relational risk, and the trust dynamics involved (Ring and Van de Ven 1992; Nooteboom, Berger and Noorderhaven 1997; Nooteboom 1999). These sources of risk include the possibility of one partner opportunistically exploiting other partners to its own advantage (for example, by breaking conﬁdentiality agreements, misappropriating proprietary knowledge, appropriating all or a disproportionate share of beneﬁts, etc.). Additionally, there may be spill overs (that is, through collaborative relationships, a company’s strategic knowledge and core competencies are leaked to competitors, and competency-related risks (where one or more parties are unable to deliver on their agreed contribution due to a lack of the necessary capability or resources, rather than any opportunistic intention). Nooteboom (1999: 110) notes that unpredictable events in the environment can increase the risks of opportunism because such events may be the catalyst for one or more of the partners to act opportunistically, bringing risk into the foreground of theories of IOC (also see Das and Teng 2001). However, such work does not go far enough. One needs to regard risk as a construct of management discourse and as a language game (see Hardy and Phillips 1999) in which complex and indeterminate meanings defy the drive to rationalize the world. Additionally, the privileging of rationality, science and technological progress has been contested in more sociologically grounded approaches to risk. Socio-cultural approaches seek to understand risk and risk discourses as products of their social, cultural and historical contexts (for example, Douglas 1992; Douglas and Wildavsky 1982; Beck 1992; Lupton 1999). Socio-cultural approaches stand in stark contrast to the techno-scientiﬁc approaches that treat risk as an “unproblematic” fact. While risk is acknowledged as a generic feature of all epochs, the risk society thesis (Beck 1992) argues that post-industrial society is marked by a redeﬁnition of the meaning of risk and the politicization of science itself (Shrivastava 1995: 120). Beck argues that we live in a world — a risk society — where, increasingly, disasters, catastrophes and other unknown and unintended consequences of new industrialized, decision-produced incalculability spread unanticipated threats globally (Beck 1992: 22). Germ warfare, ozone holes, genetically modiﬁed food and pesticides, global terrorism and even Internet viruses are immediate examples of such threats. The paradoxical nature of the risk society lies in the fact that science (and the techno-scientiﬁc method) is simultaneously one of “the causes, medium of deﬁnition and the source of solutions to risks” (Beck 1992: 155). In the period of modernization, risks were produced in tandem with wealth creation and were minor, often seen as the latent or side eﬀects of modern production and scientiﬁc progress. In post-industrial society this relationship is reversed and risk comes to dominate social change and all notions of progress (Shrivastava 1995: 119).

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Science’s monopoly over the rationality of risk decisions is called into question once the knowledge base of science, and hence techno-scientiﬁc methods, is seen as ﬂawed. Reﬂexive approaches to science open up debates about its failures and ﬂaws and help politicize its knowledge claims. The risk society is one in which the fallibility of science is extended beyond its own knowledge-practices — as a matter internal to scientiﬁc practice — and opens up the possibility of breaking its monopoly over the rationality of risky decisions. New meanings can emerge around diﬀerences in the conceptualization of risk and knowledge (Shrivastava 1995: 120), developing new discourses of risk and hence, competing meanings.

Discourse and language games and competing meanings Discourse can be interpreted in terms of “what can be said” and is concerned with the “relationship between bodies, meanings, power and language” (Jacques 1995: 19). Foucault (1972, 1980) sees language as the embodiment of knowledge and power, which always implicated in how sense is made of the world (also Linstead 1993; Clegg 1998, and Chan 2001). Foucault contends that speaking embodies particular ways of seeing that give advantage to certain groups and give rise to particular forms of action and practice as expressions of power. Following Foucault, we conceive of discourse as a “complex nest of ideas, linguistic expressions, assumptions, justiﬁcations, defences, social institutions and practical actions” (Fulop, Linstead and Clarke 1999: 3). Our concern is with how power is inscribed in a discourse and how it transforms subjectivities through the language games within and between organizations. Chan elaborates on this point: “[P]arties construct competing discourses — and each discourse is linked to a contestation over power. Implicit within a discourse are the continued productivity of power and the movement of meaning” (2001: 72). Language games based on diﬀerent knowledge regimes (Lilley 2001, citing Deleuze 1986: 51) ensure that various forms of discourse circulate in organizations (as discursive and non-discursive practices) and have the potential to create “collective” and unacknowledged blindness to entire courses of action or ways of understanding. Discourses in themselves cannot do anything: “Discourses inform texts … which in turn are ‘read’ by managers or others in speciﬁc organizational contexts — discourses must have participants in order to function” (Fulop, Linstead and Clarke 1999: 326). But participants are often “enrolled” into discourses (in the form of texts) that involve restricted styles and narrative forms that set up a self-referential context, foreclosing certain actions and thoughts. Discourses can involve highly restricted semantic ﬁelds, where meanings seem perpetually ﬁxed, or have ﬁxed criteria of relevance, where some ideas, tools or

The meanings of risk and interorganizational collaboration

techniques seem immutable, “natural” or cast, as it were, as if they were inevitable (Fulop 1992). That fact that so many managers unreﬂexively resort to technoscientiﬁc ways of making sense of risk is partially explained by these aspects of discursive formation. Texts are crucial in revealing how collective and “unacknowledged blindness” emerges through discourse and discursive practices.

Texts, genres and subjectivity Texts comprise utterances (the use of language) in a social setting, including discussions between managers, as well as the most banal of social exchanges. Language, however, is patterned by genres and these include particular forms of narrative (the heroic, the epic, the tragic, etc.) and, as mentioned above, language games (see Clegg, 1975; Jeﬀcutt 1993; Downing 1997; Fulop and Rifkin 1999; Chan 2001: 71–2). Language is also made up of rallying symbols, myths, metaphors and imagery that act on social subjects emotionally and linguistically and help form particular reading positions from which meanings emerge (Fulop Linstead and Clarke 1999: 328; Browne, Banerjee, Fulop and Linstead 1999: 402; Linstead, 1993; Linstead 1999). Genres assist in reinforcing how narratives should be read, who should read them, and the contexts in which they should be read. They help create the stability of reference within discursive practices (Fulop 1992), even though multiple meanings and narratives circulate at any given time. In any activity (be it a discussion or some other form of linguistic exchange), more than one text is produced, and can include minutes, agendas, and other “products” (Fairclough, 1992 in Chan 2001:78). Texts are central to how we create multiple meanings because their constituent messages can never have a single, ﬁxed meaning or remain static. One of the most signiﬁcant factors accounting for a plurality of meaning arises from how a discourse is recognized by its readers. Such “acts” of recognition are based on the perspectives or positions adopted in any reading of texts. Texts also possess a speciﬁc staging, referred to as “genre”. “Participants understand texts in social contexts or speciﬁc social occasions because they have prior experience of them and genres assist in making texts identiﬁable and meaningful in speciﬁc settings” (Fulop, Linstead and Clarke 1999: 329; Linstead 1993). Genres are the signals, conventions and cues that allow someone to understand the meanings to be negotiated in a text — to anticipate what utterances, demeanour and expressions are warranted, and how they are likely to be received by the audience hearing or reading them. To a large extent, genres help deﬁne the rules of inclusion and exclusion, the silencing of some voices and the privileging of others, the marginalizing of certain accounts, and deﬁning who are the objects and subjects of a discourse (Fulop 1992; Hardy and Phillips 1999).

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Challenging dominant forms of representation in any discourse, such as risk management, means understanding how individual subjects constitute their sense of reality and identities, and how these meet the needs of the knowledge produced. Discursive formations are only partially constitutive of subjectivity because of the traces of other texts that “readers” bring to any organizational encounter (Linstead 1993: 59). In eﬀect, “subjectivity refers simultaneously to the conditions of individuality and self-awareness, which are continually formed and reformed under changing social, economic and historical circumstances” (Fulop, Linstead and Clarke 1999: 329; Linstead 1993: 59: Chan 2001: 17). Subjectivity is itself produced through diﬀerent discourses, and “…for a discourse to ‘work’, the discourse has to produce the subject and to deﬁne the subject-positions from which knowledge proceeds” (Chan 2001: 18; citing Hall 1997: 61). Social subjects read discourses in diﬀerent ways because we each adopt certain “reading positions” from which a text appears meaningful and coherent. In adopting a reading position, the subject complies with how the discourse is constructed in it. This compliance leads to the subject being deﬁned and described by, and even identifying with, the discourse. Compliance leads to an inability to see contradictions and conﬂicts and, in particular circumstances, adopting such a position might be rewarded in the organization ensuring contradictions and conﬂicts are not “noticed”. Subjects who resist an obvious reading position encoded in a text are referred to as resisting or oppositional subjects (Linstead 1985). Power is exercised continually to ensure that there is complicity with particular discourses and to adopt compliant reading positions, as though there were no other choices (Clegg 1998). For Lilley (2001) the nature of language games means that there are a multiplicity of appropriate sites for our possible allegiances as well as inappropriate sites to stand against and that any potentially enduring site will almost always be immediately subverted by webs of micro-strategies. Power and knowledge are contested, as it were, and reside in a bewildering array of multifarious allies and assailants within certain language games (Lilley, 1995). We draw on this framework to make sense of how three competing discourses arose in a project that, for all intents and purposes (at least from the accounts of the author involved in the project) had nothing to do with risk management. What follows is a recollection of the events and discussions that occurred over a critical part of the project. These recollections will be treated as discourse and texts, as mentioned earlier. The recollections are imperfect, incomplete, and unlikely to be made the same way by other participants in the project. Thus, from the outset we acknowledge that what we are dealing with here is, to quote Jeﬀcutt (1993: 43), an “Unﬁnished Analysis”. More importantly, as we stated in the ﬁrst part of the chapter, the subjectivity at issue here involves both the authors as writers and readers of texts.

The meanings of risk and interorganizational collaboration

Reﬂections on a collaborative project In this part of the chapter we recount discussions and events that occurred during the formulation of a new CRC-funded cross-sector research project that was aimed at supporting collaborative R& D projects in Australian manufacturing. The project did not begin with any explicit consideration of risk but came to focus on it for various reasons that will soon become apparent. The discussions took place within the CRC for Intelligent Manufacturing Systems and Technologies, which was then one of ten centres under the CRC Program dedicated to manufacturing technology. The core participants of this CRC at this time comprised six companies, four universities, and the CSIRO Division of Manufacturing Science and Technology. At the time of the project discussions, R & D activities under the Centre’s three research programmes were all project-based, with each project being formulated and managed by a sub-set of the partners. Projects were mostly initiated in response to a speciﬁc industry need (that is, an operational or technical problem identiﬁed by one of the industry partners) and were developed during a preliminary “deﬁnition phase” that involved close collaboration between two or more of the research and industry partners. Once a full project had been agreed and approved by the CRC Board, a Project Leader and a Project Management Committee were appointed and CRC funds allocated (which were usually matched or exceeded by “in-kind” and other resource contributions from the collaborating partners). Projects were established and funded for a deﬁned period of time to produce speciﬁed products, usually referred to in the CRC as “deliverables”. At the time of the discussions, there was a strong preference for projects producing intellectual property that could become a future source of income to the CRC (for example, as royalties from the licensing of a patent). Within the CRC, “intelligent manufacturing systems” were very much seen from an engineering perspective as encompassing the hardware and software employed in manufacturing processes (for example, computer software to optimize the cutting of shapes from ﬂat steel plates, motor controllers for metal cutting machines, industrial laser cutting devices, etc.). The project discussions were initiated by one of the CRC’s industry partners, a supplier of structural components to several major high technology manufacturers overseas. Since the early 1990s, as in most areas of manufacturing in Australia, this company had adapted to major changes in its industry and these changes were themselves a response to a dominant government discourse. Changes included: – –

A policy environment in which there was a reduction in Government protection and support Volatility and change in the levels of demand for the industry’s products

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–

–

Signiﬁcant change in the relationship between the major manufacturers and their suppliers, with a move towards collaborative risk-sharing contracts (requiring suppliers to undertake R & D and component design, rather than just building components to customer speciﬁcation) and towards sole source suppliers for components (a trend which reduced the number of suppliers and increased competition for contracts) Increasing pressures from the major manufacturers to reduce the cost of components supplied.

It was in this context that the company had joined the CRC in order to gain access to knowledge and resources that it was believed would help improve its performance and expand its capabilities, thereby contributing to increased competitiveness. Prior to the discussions, one of the areas for possible collaborative research identiﬁed by the company had been support for new product development activities under the rubric of “enhanced concurrent engineering”. The company had pursued a concurrent engineering approach2 to the management of its design and development projects since the late 1980s. It had done so in response to pressures from customers to reduce development lead times, maintain tight delivery schedules, improve responsiveness to customer requirements (including the ability to respond to design changes initiated by the customer), and reduce both the costs of development and of the manufacture of the components produced. Furthermore, most of the major companies in the industry had adopted some form of concurrent engineering in their development programs, and the company had learned from a number of these through its various supply contracts. Through the proposed CRC-based collaborative research projects, the company now sought “process enhancements” that would help reduce development lead times and enable it to undertake projects of broader scope through strategic alliances. The company provided a starting point for the consideration of suitable projects by identifying a number of possible development initiatives. These suggested initiatives ranged from the establishment of a demonstrator networking technology (which could support 24-hours a day operations across global time zones) through to “a review of prospective alliance partners” (which would enable the company to undertake collaborative contracts of broader scope). Finally, in the discussions with representatives from potential research collaborators (from two universities and CSIRO), initiated at the instigation of the CRC’s Executive Director, two key problems experienced by the company in its project activities were identiﬁed. This was the ﬁrst visible hint at an emerging discourse, not around the notion of risk, but around general problems and the management of projects. The ﬁrst was that of more eﬀectively managing the relationships with other organizations involved in development projects, most notably suppliers and the customer.

The meanings of risk and interorganizational collaboration

Experience had shown that these relationships sometimes became problematic for the company during the course of a project; for example, when a supplier failed to meet a deadline, when there was conﬂict with a customer over the detail of a component design, or when a customer unexpectedly initiated design changes to a component. The second problem was that of ensuring the company’s two manufacturing sites were able to work together on development projects. These were geographically separated and had diﬀerent backgrounds, cultures and specializations. Again, experience had shown that the desired level of collaboration had been diﬃcult to achieve and manage and caused problems during projects.

Incommensurate discourses Initial discussions on an appropriate project focus and “deliverables” revealed diverging perspectives among the potential partners. Each of these perspectives was framed by a distinctive discourse, both in terms of the framing of the problem and the language used to demarcate it. An engineering perspective (adopted by the representatives from one university and CSIRO), was to focus on “collaboration technology”, described as hardware and software required to support geographically dispersed development teams. Under this approach, the emphasis was on the development of a technology “platform” — networked computers with design support software — which would enable project personnel to work together across time and space in a “virtual team”. Such an approach has been the focus of considerable interest within the engineering community, as a form of discourse, since the early-1990s (for example, Munkvold 1996). Key statements proﬀered by the engineers focused on structures and ediﬁces that engineers could physically “construct” and were captured in the metaphor of a “platform” as a technological system on which to build support for human activity and thereby create “virtuality”. The emerging discourse was couched in the truth claims of expert knowledge specialized in information technology, system design and implementation. The obligatory passage points (Clegg; 1989; 1998; Chan 2001) in this language game concerned technical and physical mastery and objects of manipulation, such as circuits. From an organizational studies perspective (advanced by the author of these reﬂections, who was a management researcher at the second university), a diﬀerent approach was proﬀered — one that drew on the ﬁndings and methods of the burgeoning ﬁeld of “CSCW” or “Computer Supported Cooperative Work” (for example Shapiro, Tauber and Traunmüller 1996) to investigate practices and tools that would facilitate communication, cooperation and collaboration within geographically dispersed cross-functional teams. According to this approach, recent

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advances in information and communication technologies should not be seen as a panacea for the problems involved in collaborative projects. So, the proposed project should focus on “human factors” in the introduction of collaboration technologies. Support for this view was gained from a number of scholarly sources: It is now widely recognized that, despite the considerable investment in the development of these technologies, the results to date have fallen far short of expectations. A large and growing body of behavioural research has addressed this problem … and in virtually every case it has been discovered that the failure or poor performance was due to a lack of attention to the human and organizational aspects of the technology (Department of Management, University of Wollongong, CRC Project Discussion Proposal March 1997).

To address this issue of useability, a “user-centred approach” to technology design was proposed (Olson and Olson 1991) and a starting point for the project proposed as research into “user needs” within the social context of innovation in Australian manufacturing companies. Key ideas and concepts were derived from organizational studies, informed as it is by a rich and eclectic knowledge base drawn from the social sciences, and it was hoped that this would be the dominant discourse within which the project was framed. The following terms were proposed as core foci: – –

–

“Communication” — the exchange of ideas and information between cooperating parties “Cooperation/collaboration” — where parties work together eﬀectively towards common objectives, a focus of considerable recent interest in the management and IOC literature “Useability”, addressing the interface between people and machines and focusing attention on the “ﬁt” between technology and social systems.

The discourse, with its distinct discursive practices such as trying to encourage a polyphony of voices, was quite explicitly set against that of the engineers. From the management researcher’s point of view this was seen to be far too concerned with “technical ﬁxes” and insuﬃciently concerned with the human and social elements of what many in the social science community see as “socio-technical systems”. A concern to reinstate the “user” as an actor in the design and development of the system, as both object and subject, was central to this discourse and stood in opposition to that of the expert-driven approach oﬀered by the engineers, in which the human elements disappeared. The senior company manager, whose background was also engineering, and who was responsible for ensuring the proposed project would meet his company’s needs, took a very diﬀerent approach to that of the engineers and the management researcher. According to him, the key issue associated with the setting up and

The meanings of risk and interorganizational collaboration

management of collaborative R& D projects was the establishment of eﬀective risk management systems. His approach was framed within a techno-scientiﬁc discourse of risk management, thus, already privileging rational action above all else — action that seeks both control and predictability. Rather than adopt a fatalistic, or more common ad hoc approach to project risk, this discourse positions the rational manager as calculating on the basis of “an understanding that unanticipated results may be a consequence of our own activities or decisions” (Giddens 1990: 30). As noted above, this perspective on risk management has become a central element in the discourse that informs the practice of project management. It provides for many managers the genre in which they make sense of risk, giving them a dominant reading position from whence it becomes exceedingly diﬃcult to entertain oppositional views or competing discourses. From this can form the basis of the collective blindness referred to earlier. According to the company manager, his managers needed to be fully informed about possible sources of risk across the project life cycle, and needed to be able to develop strategies to manage the identiﬁed sources of risk. The managers and other project personnel did indeed act to manage perceived risks, but they did so in an unreﬂective and mostly ad hoc way, using rules of thumb and methods they had learned through experience. From the company manager’s perspective, the problems with such informal approaches to risk management in projects were several. Unforeseen risks could arise for which the project team was not prepared, the company could lose crucial risk management knowledge when experienced personnel left the company, and the lack of reﬂection and documentation meant there could be little or no organizational learning of eﬀective risk management practices. The company manager argued that a more systematic risk management procedure would overcome these problems, and developing such a procedure would help the company identify and address the various problems that it had experienced in managing collaborative R & D projects. The language game that was being developed invoked, ﬁrst, the heroics of “rational action”, of taking deliberate action aimed at maximizing positive outcomes and minimizing negative outcomes, and, second, “systematization”, the replacement of the informal, ad hoc, tacit, and unreﬂected, with action that is formalized, routinized, explicit and documented. The discourse generated privileged ways of seeing the world, worked from a ﬁxed criterion of relevance (the technical-rational), and drew on a restricted semantic ﬁeld (“the company” as represented by management’s voice) that preﬁgured the emerging discourse of risk within the project. Even while discussions were ongoing, and these tensions had not been resolved, the pressure was to deliver something tangible to the company. It was this that led to agreement to proceed with a formal proposal outlining the project’s aim, which

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was “to develop a user requirements speciﬁcation for a Risk Management Toolkit, that will assist Australian ﬁrms to set up and manage collaborative R & D partnerships”. A key deﬁning aspect of the collaborative project was the multiplicity of texts and traces that were creeping into relations, which were beginning to structure the collaboration into a particular form of discursive arena (Fulop 1992). Even though the dominant discourse of risk management was gaining pre-eminence, its meaning was far from agreed to by all but rather, was becoming fragmented, messy and intermingled with multiple meanings. In the context of a collaborative CRC project, the company is usually very powerful and can be decisive in framing the terms of reference for a project. In eﬀect, it shaped the power relations of collaboration and eﬀectively set the ground rules for legitimate knowledge claims and a “regime of truth” (Chan 2001: 17), to which all participants are expected to subscribe. Thus, it would not be unusual for the company representative on the CRC Board to promote the project and frame it in a particular discourse. The engineering-oriented Board of the CRC in question, with its focus on the creation of intellectual property rights through R & D projects, found the metaphor of the “toolkit” both familiar and acceptable. It provided a valuable rallying symbol (Fulop 1992) for focussing attention and making certain meanings stick. More practically, the risk management discourse gave the project a stable and legitimate focus from the vantage point of the company. A “toolkit” is a tangible and visible “deliverable”. The project proceeded with a clearly expressed industry need: technologies, tools and practices to support collaborative development projects (as in supply chain partnerships) involving Australian manufacturers. The project was to address this need through the development of a “Risk Management Toolkit”. The engineers and management researcher were embarking on a project that was largely outside their know-how and expertise, and the disciplinary bases upon which they could make their knowledge claims and assert their authority. While this had the potential of enrolling them as compliant subjects who would go along with things, this is not quite what happened. The risk management discourse was an interesting and an unexpected phenomenon for the management researcher, given the engineering orientation of the CRC with its bias towards “technical ﬁxes”. However, the ﬁxed criterion of relevance of the techno-scientiﬁc view of risk and the restricted semantic ﬁeld of “toolkits”, and other such symbols, created instabilities and contradictions in how risk was being talked about by the participants. Risk management, which, before the project discussions, had not been considered as a possible option to pursue, became an object of interest and study and the more that was learnt about it, the more its methods and theories were questioned. By engaging with this discourse, the management researcher was aﬀorded the opportunity to contest its more conventional

The meanings of risk and interorganizational collaboration

meanings, even though the initial discussions were cast in terms of the narrow referential context of a techno-scientiﬁc solution. This narrowness did not go unchallenged and oppositional and resistant reading positions did emerge, as seen by the manner in which risk management was presented at the end of the project.

Contesting the meanings of risk The task of the project moved to producing the speciﬁcations for a “toolkit”, which would help those involved in collaborative R & D projects to manage project risks both within the company and hopefully, Australia-wide. The management researcher was forced to engage with the risk discourse, particularly as it had been applied as part of the prescriptive-normative discourse in project management. Even at a common sense level, it is easily recognized that projects can and often do “come unstuck”. That is, projects may not proceed according to plan, various problems may arise or be encountered, which lead to project objectives not being achieved or being only partly met, to budgets being “blown out”, and schedules “over-run”. Thus, projects are prone to risk, and the most signiﬁcant source of project risk identiﬁed in this literature is what has been termed “human risk”. For example, as one project management practitioner put it: Human risk arises from the fact that the human players in projects — project staﬀ, managers, customers and vendors — are complex, marginally predictable beings. Projects are constantly plagued with problems of human resource reliability, competence and availability. They are further buﬀeted by the consequences of political struggles, the turnover of key players, and the ﬁckleness of customers. If one were to create a detailed list of risk factors aﬀecting a speciﬁc project, the list of human risks would surely be the longest (Frame 1994: 81–82).

The essence of project management, as a formalized managerial practice, is that it seeks to systematize the activities through which risks are identiﬁed, evaluated, and managed. Risk management is the crucial aspect here and may be deﬁned in this language game of managers as: The practice of reacting to a perceived risk (through risk analysis or other observations) in such a way as to minimize the adverse consequences that may arise, should the risk materialize. It can form part of a plan; it can be a purely reactive procedure; or it can be a combination of both (Webb 1994: 294–5).

Drawing on this “how to”, pragmatic, discourse, the project developed a risk management procedure. The overall aim of this was to provide a structured framework (a system or formal procedure accompanied by a set of supporting “tools”) to enable companies to move beyond an ad hoc approach and so develop

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a more systemic risk management capability for its collaborative R & D projects. The procedure was designed to lead project team members through four main phases of activity, in a programmed way, with speciﬁc tasks to be performed and designated outputs to be produced at each phase. The risk management discourse served to impose a structure on management action, somewhat akin to the “standard operating procedures” frequently deployed by industrial engineers to deﬁne manufacturing jobs on the shopﬂoor (for example, at assembly-line work stations). This was a form of disciplinary practice well recognized in the literature as a potential regime of control and surveillance (Foucault 1972). Under this framework, systematic action is meant to replace the informal and the ad hoc, and the activities of project managers thereby become rationalized. It is in essence a form of standardization and, as such, represents a signiﬁcant departure from the discourses on organizational reform that have more or less dominated the management literature since the 1980s (for example du Gay, Salaman and Rees 1996: 266). The second step in this procedure (“risk identiﬁcation and assessment”) provided a system to help project team members identify, evaluate (that is, make subjective judgements in terms of the probability of occurrence and the likely impact of occurrence) and prioritize all possible foreseeable sources of project risk. Such risk-sources were seen as events, decisions, resource changes or other phenomena that could detrimentally aﬀect the project or its outcomes. As part of the formulation of this component of the toolkit, a typology of possible risk sources was developed, drawing on the risk assessment literature, the project experiences of company employees and input from the researchers. This was used to create one of the risk management “tools” — a risk identiﬁcation “checklist” (see Table 1). Checklists are widely used in engineering practice and in project management. They serve as prompts for action and as guides for the sequencing of tasks. In this case, the aim of this tool was to ensure project team members identiﬁed all possible sources of risk to a project. The operators became the objects of risk (project team members) to be programmed to anticipate risks, avoid risks, and even “live” risk in their roles as employees. Examination of the checklist reveals fragments of the competing discourses in the project’s formulation, signalling an indeterminacy of meanings. Neither of the two competing discourses was “written out of the script” as one might have expected, with the engineering being the most marginalized. For example, the engineers’ focus on a technological platform to support a geographically dispersed collaborative project team, which in the engineering discourse was the solution to the industry problem, is found interspersed in the toolkit’s checklist. But the “platform”, rather than a solution to the problem, has become in this risk discourse a potential problem to be managed, that is, a possible source of project risk (D3). That is, the checklist prompts project team members to consider if such things as

The meanings of risk and interorganizational collaboration

Table 1.Overview of the toolkit’s risk identiﬁcation checklist A A1 A2 A3 A4 A5

Process-related sources of risk Project estimates and planning Project management Project integration Project activities Hand-over to production

B B1 B2

Resource-related sources of risk Human resource availability Availability & eﬀectiveness of tools & systems

C C1 C2 C3

Organizational sources of risk Organizational culture Organizational support for the project Potential sources of interference from within the organizational environment

D D1 D2 D3

Relationship sources of risk Relationship with the customer Relationship with key suppliers Relationship with other collaborating organizations

network-based collaborative technologies (for example, e-mail, Intranet, etc.) are likely to be an area where problems will arise during the course of a project. If so, the team members are charged with detailing the nature of the risk and assessing its probability and likely impact on the project. In the event that the risk source is judged to be a priority, then the team is required to formulate an explicit risk response strategy either to pre-empt it or to deal with its eventuation. Fragments of language used in the organizational discourse are more evident. Under “project integration”, communication among team members, coordination of the project activities, level of collaboration within and across the cooperating organizations, and teamwork eﬀectiveness, are introduced. The sources of risk listed here derive from the concerns addressed in the organizational discourse though they remain subordinated in the hierarchy of the toolkit where the rational still dominates. While there has not been an overturning of the dominant discourse of risk management and the privileging of the techno-scientiﬁc discourse, the toolkit, as part of discursive practice, does reveal how contradictory and competing meanings are now inscribed in the text. Also, it shows that the readers of these texts — the employees and managers — will make sense of them diﬀerently and paradoxically.

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Conclusion The acceptance of paradox, as a central feature of organizational theorizing, signals the abandonment of the search for authoritative interpretations of meanings and instead favours representations that capture diversity and multiple voices (Jeﬀcutt 1993). Drawing on deconstruction and discourse analysis we have shown how in discussions leading to a CRC project, some things became permissible while others did not; some became imaginable while others were not, and some choices and options about the project’s direction were foreclosed by the adoption of a dominant discourse. Our analysis begs a number of unresolved questions: was it possible to have created another autonomous discourse and if so, how would it have unfolded? Was the context of the project, and the genre it adopted, impossible to change or transcend? More importantly, were the project participants engaged in a “collective blindness” and if so, would it have been possible to change this in any way (that is, alter the dominant discourse of risk management as rational practice)? More practically, given the industry problem facing the CRC project, what could have been an acceptable alternative to the toolkit as a “deliverable”? We have sought to highlight paradox and to show that, even though the risk management discourse worked to sustain a particular knowledge/power nexus, oppositional thinking did emerge. The analysis reveals that resistance and opposition are inherent in the nature of intertextuality but suggests that is diﬃcult to overturn a dominant discourse in any radical way. It seems that making science socially fallible, the centrepiece of the risk society, will proceed only in small steps. By accepting the discourse approach, we have also subscribed to certain ways of seeing and reading risk that have likely foreclosed other possibilities. What we have presented here is only one of several diﬀerent ways in which we could have analyzed risk as sense making. We chose to adopt a speciﬁc form of discourse analysis to apply to the management of a cross-sector collaboration and in so doing, have opened up this area of research interest to a potentially new mode of analysis, one which has rarely been attempted before. Our analysis shows how competing discourses emerged in a given discursive arena (as is typically the case during the establishment of every cross-sector IOC), and how a particular discourse came to dominate thereby providing a potentially powerful truth regime for all concerned. Through our representation of risk, as a dominant discourse of technoscientiﬁc rationality, we revealed how various aspects of management practice are obscured, that can become sources of project risk (for example, managerial incompetence, dishonesty, and intra- and inter-organizational politics), notably those arising from the “human aspect” of management action. Many of these aspects exist as sub-texts in our analysis and require further elaboration. However, not all elements of the three competing discourses were written out of the script of

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risk management and traces of them were incorporated within the discourse, “humanizing” it to some extent and opening a vitiating space for further contestation and contradictions to creep in. Perhaps most importantly, the analysis helps to make sense of risk management as a distinctive discursive practice with its roots in rationalism and modernism, through which (contrary to the claims of many) management action cannot be successfully systematized and rationalized. Thus, risk management discourse, as embodied in the toolkit procedures, provides a framework for the practice of management. It is a distinctive mode of talking and writing about collaborative projects that not only shapes the subjectivity of all involved but positions them in certain discursive relationships that frame the way in which they gain knowledge of the world. Management can be enriched when it has to engage with paradox and incommensurability and we have shown that both are endemic to cross-sector collaborations and multi-disciplinary engagement.

Notes 1. The CRC Program was launched by the Australian Government in May 1990 and since its inception 72 CRCs have been established (at the time of the discussions reported here, there were 65 in operation). Commonwealth funding for the CRCs was around $140 million in the 1999 ﬁscal year (about 3.5% of the total funds allocated for Science and Innovation Programs in that year), which made up around one third of the resources available to the CRCs. 2. The concept of concurrent engineering emerged in the USA in the late-1980s, and has since become institutionalized as a distinctive approach to the management of product innovation activities within an organization. It stresses the integration of new product design and development activities, for example through cross-functional teamwork (see Gerwin and Susman 1996).

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Sturdy, A. and Morgan, G. (2000). Beyond organizational change: Towards a discursive approach to change and a structural approach to discourse. Paper presented at Asia Paciﬁc Researchers in Organization Studies (APROS) Conference, Organizing Knowledge Economies and Societies. Sydney: University of Technology, Sydney. Webb, A. (1994). Managing innovative projects. London: Chapman and Hall. Williamson, O. (1985). The economic institutions of capitalism. New York: The Free Press.

Chapter 4

Workers’ playtime? Unravelling the paradox of covert resistance in organizations* Peter Fleming and André Spicer

Introduction When corporate relations of power target the hearts and minds of workers, is employee resistance possible? That question has become an increasingly important issue in recent critical organization studies. With the advent of “cultural cleansing” (Strangleman and Roberts 1999), “designer selves” (Casey 1995) and other forms of “normative controls” (Kunda 1992) related to culture engineering and teamwork, numerous studies have argued that even the capacity for workers to resist management has been insidiously undermined. In the past, workers could usually resist corporate controls because they tended to be less normative but when attempts are made to shape the very identities of workers, dissent is all but erased from the discursive landscape (Willmott 1993). There is a problem with such a pessimistic reading of new management technologies, of course. It oﬀers unwarranted exaggeration of the success of management power and the underestimation of the myriad of ways some workers resist corporate control, even under the most claustrophobic hegemonic conditions (Thompson and Ackroyd 1995). Just because open, overt and collectivised forms of resistance characteristic of Fordism are less prevalent today it does not necessarily mean that the recalcitrant worker has ﬁnally been subdued. Indeed, a recent stream of research has pointed to more covert, quotidian and even “subjective” modalities of worker resistance in “high-commitment” organizations, which were perhaps missed in the past because of their subtly and ostensible innocuousness (Fleming and Sewell forthcoming). In light of attempts to broaden deﬁnitions of worker opposition, an array of employee practices have been highlighted as possible strategies of resistance to cultural control. Joking, irony, cynicism and scepticism, for example, have been documented as “weapons” workers may use to block and resist new types of

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corporate domination at the level of selfhood, as our review will shortly demonstrate. In evaluating the research investigating these expressions of resistance, however, we have identiﬁed an interesting tension, or paradox, regarding their eﬀectiveness as forms of opposition. Some commentators have argued that resistance articulated in the form of humour, irony and cynicism may have the paradoxical outcome of inadvertently reproducing the domination workers seek to escape because they are given a specious and illusionary sense of freedom and thus disengage from more “material” and traditionally located resistances. Indeed, Collinson (1992; 1994) and du Gay and Salaman (1992), among others, demonstrate how resistance through joking and cynicism can actually assume the (paradoxical) status of consent due to the “safety valve” eﬀects they can have in certain power relationships (also see Fleming and Spicer forthcoming). In this chapter we attempt to unravel this paradox by surfacing the models of power underpinning judgements of “eﬀective” or “ineﬀective” resistance in relation to humour, irony and cynicism. It is suggested that those interpretations that consider humour, irony and cynicism as outright ineﬀective still implicitly employ a singular model of power, one that judges all forms of opposition against the standard of radical upheaval and economic transformation. Such an approach is, of course, important for highlighting cases in which some types of resistance are inadvertently functional for a dominant system of power. However, it may also marginalise many other forms of transgression that are eﬀective in altering diﬀerent status quo (to pluralise the Latin term) operating in contemporary organizations. Although cynicism, for example, may not necessarily yield higher wages, it may still challenge, in transformative ways, the emotional or “psychic” normalcy of organizational life. Resistances to diﬀerent status quo, however, are not mutually exclusive as they may interact in complex, ambiguous and often paradoxical ways. That is to say, humour, irony, and cynicism may be subversive on one set of co-ordinates but have spill over eﬀects that either support or undermine resistances on other levels. In order to think about resistance in this multiple sense, we develop the notion of “plateaux of power and resistance”. We use this to conceptualise diﬀerent articulations of force and their respective oppositions. The concept draws upon a spatial metaphor to tease out the multifarious power and resistance relations present in organizations and illustrate how they are not isolated from one another or mutually exclusive. They may overlap, collide and interrelate in unpredictable ways with diﬀerent outcomes. Whether humour, irony and cynicism undermine or support traditional forms of organized resistance such as unionism or collective action, for example, becomes an important issue to explore in speciﬁc contexts.

Workers’ playtime?

Resistance to corporate colonisation? The emergence of culture engineering and normative control as prominent mechanisms of control in contemporary organizations has received much attention in organization studies. “Guru’s” of culture management argued that if managers instil in employees a unifying set of values, beliefs and norms about the company, then workers can control themselves and come to want what senior management wants of them, through their own volition (Peters and Waterman 1982; Deal and Kennedy 1982). The identities of workers have been a concern for managers since the dawn of the industrial era (Parker 2000). However, the extent and reach of corporate culture manipulation, as it has emerged in tandem with teams and electronic surveillance, has surpassed even the wildest control fantasies entertained by previous movements. Critical management scholars have been interested in this modality of control, showing how the relaxation of formal control and the promotion of empowerment and participation is to a large extent nominal, and often belies a more insidious network of inﬂuence operating at the level of selfhood. Under this form of governance, the subjectivities of workers are “colonised” (Casey 1995), thereby reducing or even erasing the desire to resist corporate hegemony. Consequently, the emphasis has been on the cultural constitution of “engineered selves” (Kunda 1992), “designer selves” (Casey 1995), and “enterprising selves” (du Gay 1996) — that is, the production of types of worker subjectivity that identify with the company and are compatible with the maintenance of asymmetrical relations of power. One of the most striking aspects of this research is what appears to be an almost total lack of employee resistance to management. As Thompson and Ackroyd (1995) forcefully argue, these studies give a totalising portrayal of new managerial controls whereby workers obediently mirror the demands of the dominant discourse (also see Ackroyd and Thompson 1999; McKinlay and Taylor 1996; Rosenthal et al 1997). Part of the reason why resistance is underplayed in this literature is because its conceptualization proﬀered an inadequate or incomplete notion. If one studies culture engineering and thinks of resistance purely as overt, organized and openly confrontational practices, then one will often come to the conclusion that employee recalcitrance has disappeared. Under the normative rhetoric of current management discourse (often using phrases like “We’re all friends now” or “We’re all members of one happy family”) resistance may seem an outmoded and old-fashioned concept. A relatively recent stream of research, conducted among others by Kondo (1990), Jermier et al (1994), Edwards et al (1995), Gabriel (1999), and Knights and McCabe (2000), is very useful in extending deﬁnitions of resistance to include forms of opposition that are more inconspicuous, covert, unorganized and

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“subjective”. This scholarship has attempted to re-evaluate traditional conceptions of resistance and, in the process, de-romanticise it to include what might appear to be more mundane and quotidian aspects of organizational life (de Certeau 1984). With this in mind, a whole range of employee responses to and experiences of culture engineering should be examined as potentially transgressive activities. Here we concentrate on three so-called subjective and often covert modalities of resistance identiﬁed in the literature as ways workers may endeavour to escape the insidiously psychological and identity constituting technologies of modern culture management. Humour, irony and cynicism have received some attention in organization studies as alternative responses to corporate culture programmes and possible strategies of employee dissent. Even those studies considered over determinist by Thompson and Ackroyd (1995) registered the presence of employee humour, irony and cynicism. However, we have noticed that the literature discussing these phenomena is riddled with uncertainty and theoretical ambivalence regarding their eﬃcacy as opposition to corporate culture. That is to say, if we are to consider joking, sardonic humour and an ironic disposition, for example, as forms of resistance, then are they actually eﬀective in changing the status quo and transforming relations of power? In light of earlier studies of counter culture (Willis 1977; Burawoy 1979), is an inadvertent outcome an “ideological” eﬀect whereby workers gain a specious sense of freedom and autonomy that unwittingly reconciles them even more profoundly to their own domination? Or in a similar vein, may humour, irony and cynicism work as a “safety valve” that enables workers to let oﬀ steam in a manner that does not threaten prevailing relations of power? Or are these conclusions overly pessimistic and miss the point regarding the pragmatic validity of even the smallest of refusals? In order to unravel the tension animating these explanations we will set the scene by examining, in turn, the literature on humour, irony, and cynicism, as strategies of “eﬀective” and “ineﬀective” employee resistances.

Humour Humour is a signiﬁcant part of day-to-day interaction in the workplace. Jokes, parodies and spoofs can all be found in the informal interaction amongst coworkers, and between superiors and subordinates. There is a good deal of literature that reveals particular functions of humour such as reinforcing group norms and identities (Bradney 1957; Roy 1958; Coser 1959), a managerial tool of control (Malone 1980), and as a way managers negotiate paradoxical situations (Hatch and Ehlrich 1993). However, here we aim to probe humour as a strategy of resistance

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in organizations, particularly in the context of high commitment organizations and corporate culture strategies. One stream of research examining humour has pointed out that it can be a signiﬁcant way workers subvert dominant forms of control. Linstead’s (1985a) analysis of employee humour in an industrial bakery highlights how it symbolically reverses dominant cultural myths supporting particular power relations. In another article, Linstead (1985b) extends this idea by arguing that humour is used to establish a discursive realm “outside” that which can be controlled by management. Building on Willis (1977) and Burawoy (1979), Collinson (1988: 184–5) observed in his study of workers in an auto factory how “shop-ﬂoor humour was in part a form of resistance both to the tightly controlled repetitious work task and to the social organization of production within the company”. This humour enabled resistance to management and corporate culture but also had a darker side, in particular the psychological abuse, individualism and masculinity associated with this workplace counter-culture. Indeed, resistance through “humorous distance” often ended up reinforcing the non-participation of workers in key management functions, thus having the outcome of consolidating and even perpetuating their own subordination. As a result, humour and joking are “unlikely to be eﬀective forms of resistance given the disciplinary processes that characterise contemporary organizations” (Collinson 1994: 51) because they take place in the subjective realm rather than being emancipatory in any concrete way. Examining more formalised types of humour, Deeks (1993) argues that the cartoons found in the New Yorker magazine provide both a humorous look at corporate life and a cutting critique of the structure and norms of the modern corporate world. Similarly, Rodrigues and Collinson (1995) investigate how humorous cartoons produced in a union newspaper within Brazilian Telecom were employed as a subversive form of critique of a corporate culture program, staﬀ redundancies, and managerial favouritism. They maintain that these humorous cartoons were eﬀective because they created an alternative narrative or script for workers to understand their experience at Telecom, one for which they could not be directly punished. The cartoons also proved to be instrumental in so far as they facilitated an already established union movement and were crucial in changing some managerial policies (such as training) and augmenting bargaining power. Filby and Willmott (1988) also reﬂect on the transgressive potential of humorous cartoons used by members of a public relations division to resist and make sense of the incompetence and absurdity of bureaucracy. As Ackroyd and Thomson claim, in the context of corporate culture building, “a good deal of contemporary joking at work features cynical comment on the validity of managerial claims and the actions and motives of managers. It is no exaggeration to say that it constitutes a continuous undercurrent of satirical debunking of management pretension”

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(1999: 103). But as we can see from the literature, there is a tension between interpretations that view worker humour as a useful form of resistance in certain circumstances, and those that view it as a reaction that paradoxically reproduces employee dependence and disenfranchisement.

Irony A second form of resistance to managerial strategies, some writers argue, can be found in the phenomenon of irony.1 Irony overlaps signiﬁcantly with humour, often with the two categories being conﬂated, such as examination of ironic humour or humour being seen as an ironic strategy (Hatch 1997). It is important to emphasise the distinction because although irony may take a humorous form (or visa versa) it is possible to have forms of irony that are not humorous (Trethewey 1997). The “ironic disposition” (Kierkegaard 1992) is sometimes referred to as a cultural symptom of post-modernity (Rorty 1989) but the question that concerns us here is whether it can be considered an eﬀective form of resistance to corporate colonisation. Or, as Johansson and Woodilla (1999) ask, is irony a form of resistance that subverts the status quo or reinforces it? In the ﬁeld of social theory, Richard Harvey Brown (1987) makes an interesting distinction between practices of irony that are “ritualistic” and those that are “dialectical”. Ritualistic irony works as a safety valve that allows subordinates to let oﬀ steam in a manner that does not radically challenge the existent social order. Some sects of the medieval Church, for example, celebrated the “day of the ass” once a year in which the ﬁgure of Jesus was replaced by a wooden ass and mockingly worshipped. Such a release provides a manageable outlet for tension and frustration, reinforcing the power of the Church for the rest of the year. Dialectical irony, on the other hand, is a practice that indicates how the ideals of power (freedom, democracy etc.) have the unintended and often opposite eﬀect for those who are subjected to them (servitude, autocracy etc.). This kind of ironic insight disrupts power at an ideological level because it symbolically reverses the very foundational discourses of dominant groups. We could apply the rough distinction between ritualistic and dialectical irony to the scant but growing literature on employee responses in the context of culture engineering. First, in the context of a consideration of irony as subversive resistance, Fleming and Sewell (forthcoming) develop the concept of “Švejkism” taken from Jarošlav Hasek’s novel The Good Solider Švejk and illustrate how irony can operate as a practicable mode of resistance at the level of self. An ironic practice of self is not only a useful form of resistance when the target of power is the very subjectivity of workers. It may also be one of the few options immediately available,

Workers’ playtime?

in a context where team normalisation is intense and traditional opposition, such as unionism, has lost its legitimacy. However, some have given a more “safety valve” interpretation of irony in this context. In his Engineering Culture (1992), Kunda argues that one element of role embracement was the perceived capacity to distance oneself from the demands of the culture. In “Tech”, the managerial push to build a high commitment culture was met by workers with a sense of irony, which he called “cognitive distancing”: Cognitive distancing — disputing popular ideological formulations — is manifested when one suggests that one is “wise” to what is “really” going on. Being “wise” implies that despite behaviours and expressions indicating identiﬁcation, one is also fully cognisant of their underlying meaning, and thus free of control: autonomous enough to know what is going on and digniﬁed enough to express that knowledge (Kunda 1992: 178).

This sense of autonomy among workers, Kunda argues, was vitally important in the process of subjective incorporation because their very ability to distance themselves through irony allowed them to internalise the culture without feeling they were being colonised. In not taking the culture seriously, they were even more profoundly controlled by it because of the psychic distance they felt they could achieve. Thus, ironic resistance did not really change the material power relations at Tech and, if anything, helped maintain managerial domination because of the illusion of freedom it often gave workers. A similar argument has been made by Kets de Vries (1990) in his analysis of the organizational fool. He argues that the fool deploys irony and other strategies of sanctioned critique in order to help leaders recognise their follies and bring them down to earth. The principal use of the fool’s irony is to sustain existing structures of power rather than radically transforming them.

Cynicism A third way that employees may respond to attempts to colonise their subjectivity via corporate culture management is cynicism. It has become somewhat commonplace to identify the widespread nature of cynicism in contemporary society (Lasch 1978; Sloterdijk 1988; Žižek 1989) and the workplace (Kanter and Mirvis 1989). We understand cynicism to be situations where people look for the “naked truth” behind the oﬃcial “party line” so that blatant contradictions are laid bear: Cynical thinking can only arise when two views of things have become possible, an oﬃcial and an unoﬃcial view, a veiled and a naked view, one from the viewpoint of heroes and one from the viewpoint of valets. In a culture in which one is regularly told lies, one wants to know not merely the truth but the naked truth. Where that cannot be that is not allowed to be, one has to draw out what the

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“naked” facts look like, no matter what morality has to say about it. In a certain way, “ruling” and “lying” are synonymous. The truth of the rulers and truth of the servants are diﬀerent (Sloterdijk 1984: 218).

A cynical search for the “naked truth” is evident in a number of recent studies of organizations where we meet workers who secretly voice statements of disbelief about the oﬃcial culture and are rather jaundiced with respect to managerial exhortations. These workers could “see through” the hollow promises of human resource departments and do not really “buy into” the hype of the corporate culture pundits. Kunda (1992) found employees calling the culture “California bathtub crap.” Collinson (1992) records workers referring to the push to build a culture of excellence as “Yankee propaganda” and the company newsletter became known as “Goebbels Gazette”. Managerialist writers such as Kanter and Mirvis (1989), Anderson, (1996), Dean, Brandes, and Dharwadkar (1998) and Wanous, Reichers and Austin (2000) identify employee cynicism as a “problem” that impedes the smooth functioning of culture, team aﬃliation and other human resource management initiatives. Subsequently it is claimed that “research on cynicism should help us to better understand a phenomenon that is pervasive in modern organizations, and perhaps ﬁnd better ways to manage or prevent it” (Dean, Brandes, and Dharwadkar 1998: 350). Scholars with a more critical view have interpreted cynicism as a defence mechanism, a way of resisting the corporate colonisation of the self. Kunda (1992) and Casey (1995), for example, argue that workers use cynicism to protect their “backstage selves” from the insidiously ubiquitous culture machine when it gets a little too claustrophobic. Cynicism is a way of escaping the encroaching logic of managerialism and provides an inner “free space” for workers when other avenues for opposition have been blocked. In Work, Self and Society (1995) Casey observed how a number of employees resisted the psychological “siege and assault” of the culture through cynical detachment. “Ironic cynicism protects against both commitment to the company… and its further encroachment into the private realm of (relative) individual choice and apparent self-determination” (Casey 1995: 175). Casey categorised the cynical response under the heading of capitulation, a last resort attempt to escape the culture, but an attempt that simply reconciles workers to the domination they are trying to escape. Again, this safety valve, or more accurately, “ideology” approach, is a popular way critical scholars make sense of cynicism in this context because, although cynicism has the appearance of opposition, it can actually give employees a feeling of freedom without changing their social status of subordination. Such an approach to cynicism can be found elsewhere. Willmott (1993) evokes Berger and Luckmann’s (1966) notion of “cool alternation” to argue that cynicism is a strategy whereby individuals subjectively “distance” or dis-identify themselves

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from the roles they play. Willmott then develops Kunda’s (1992) ﬁndings to show how such cynical dis-identiﬁcation can actually incorporate workers into the relations of power they seek to escape. Cynicism at “Tech” may have allowed employees to resist naive seduction by the corporate culture. However, there was “a less obvious and perverse eﬀect of playing the game of cool alternation … an undermining or numbing of a capacity directly to criticise or resist the cultural logic [because it] was interpreted as evidence of Tech’s commitment to openness, freedom of expression, etc.” (Willmott 1993: 537). According to Willmott, that there exists a possibility to be cynical about the culture is something that is perceived by employees as a sign of the company’s partial dedication to freedom. It is this partiality that consequently forestalled any initiative to organize more eﬀective forms of opposition on the part of employees. The capacity to challenge company culture provoked a counterfeit sense of selfdetermination that allowed corporate roles to be enacted without the friction that is usually present when one feels hard done by. Employees became trapped in a “vicious circle of cynicism and dependence” (Willmott 1993: 518), which disarmed them of any ability to challenge the existing power structure. A similar reading of worker cynicism can be found in du Gay and Salaman’s (1992) analysis of enterprise culture. They discuss how the recent push to build cultures of excellence in the UK guilefully transmogriﬁes workers into entrepreneurial, enterprising selves. In broaching the topic of worker resistance to enterprise in the organizations they studied, it is claimed that: Certainly the discourse of enterprise appears to have no serious rivals today … even if people do not take enterprise seriously, even if they keep a certain cynical distance from its claims, they are still reproducing it through their involvement in everyday practices within which enterprise is inscribed (du Gay and Salaman 1992:630).

Similarly to Willmott (1993), du Gay and Salaman insist that even when we negatively distance ourselves from the dictates of enterprise culture, nevertheless, the discourse is reproduced. In approaching cynicism in this way, du Gay and Salaman draw directly from the work of Žižek. For Žižek “cynical distance is just one way to blind ourselves to the structuring power of ideological fantasy: even if we do not take things seriously, even if we keep an ironical distance, we are still doing them” (Žižek 1989: 32, emphasis original). Can cynicism be dismissed so easily as an eﬀective form of resistance? Ackroyd and Thompson (1999) make the point that more subjective forms of resistance (such as irony and cynicism) may be eﬀective in the limited sense of blocking identity colonisation. They write that “ironic, sardonic and satirical commentary on management initiatives … become in the current context signiﬁcant forms of misbehaviour. Management today has an interest in trying to incorporate the

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sentiments of its employees and to harness their goodwill by doing so” (Ackroyd and Thompson 1999: 103). Similarly, Sturdy and Fineman (2001: 146) argue that, “cynicism is much more than a psychological safety valve; it is a conduit for questioning and resistance which may produce alternative, sceptical, rationales and rhetoric’s. These can provide the basis for challenges to existing orders or, more simply, limit the scope of totalising control.” Cynical commentary, in the vein of its originator, Diogenes of Sinope, may hold up to ridicule the hollow rhetoric of empowerment, teams, and participation and, in doing so, either facilitate other forms of resistance (Rodrigues and Collinson 1995) or simply deﬂect attempts to mould person-hood (Fleming and Sewell, forthcoming). To summarise our review of humour, irony and cynicism, we notice an important tension when they are investigated in the context of corporate culture building. Critical scholarship now recognises that workers often enact more covert expressions of resistance, but the problem then becomes how to judge its eﬀectiveness. An implicit concern that we see in this research is whether resistance to corporate culture through humour, irony and cynicism actually transforms the status quo, or paradoxically reproduces it. A closer look at the problem reveals a set of complex and extremely ambiguous questions. What do we mean by eﬀectiveness? What criteria do we use to judge the “success” of resistance and are such criteria singular or multiple? What do we mean by “transform”? If power is not manifested in one form but many, do we need to rethink what we mean by transformative resistance to account for multiple planes of inﬂuence? Similarly, is there simply one status quo in organizations or is the category manifold? And what are the relationships among diﬀerent levels of power and resistance? In the next section we want to address these questions by developing the notion of “plateaux of power and resistance” in order to evaluate the eﬃcacy of humour, irony and cynicism as resistance in contemporary workplaces.

Plateaux of power and resistance In many critical studies of workplace power and resistance, a rather simple notion of the status quo is used to posit a singular totality which is either shaken by resistance, chipped away at gradually, or inadvertently supported and reproduced. Here the status quo usually involves an assemblage of hierarchies, authority relations and forms of domination revolving around capitalism, and sometimes patriarchy. The sheer structural materiality of this status quo therefore calls for resistance that does not happen only in the minds of workers but is also engaged concretely. Thus, one of the reasons critical scholars often treat humoristic, ironic and cynical resistance with suspicion is because the spectre of “idealism” is deemed

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to be not far a way. That is to say, there is a danger of over-emphasising the power of the merely subjective to change, inﬂuence or challenge the “material” power arrangements of an organization. In romanticising subjective forms of resistance, we may be led to conclude that these kinds of opposition are suﬃcient to radically transform relations of exploitation and domination. We have sympathies with this cautious admonition because it does question some of the more naive “post modern” interpretations of resistance that are currently gaining vogue.2 However, privileging material resistance in this way has some problems of its own. It almost seems that power is seen as a singular force emanating solely from the relations of capitalist production. Eﬀective resistance, from this perspective, must block power at this arcane material level because it is here that the totality of organizational domination coalesces and is maintained. As du Gay and Salaman (1992) stated earlier, subjective resistance may give workers some breathing space but it does not change the one important thing (ie, the material relations of late capitalism). Not only is the rather simplistic mind/body dualism perpetuated here, but the extremely complex play of diﬀerent dimensions and articulations of power and resistance go unacknowledged. We argue that there are invariably a number of status quo in contemporary workplaces that matter to management and employees and are maintained by modalities of power that are not necessarily reducible to one singular articulation. If resistance is in some way immanent in the very act of power, and these power relations are multiple rather than singular, then transformations may occur and be eﬀective in their own right, on diﬀerent levels. We call this approach “plateaux of power and resistance” and hope that it may be useful to negotiate the tension in readings of humour, irony and cynicism. The term plateaux evokes a spatial metaphor that points to diﬀerent (yet inter-related) planes of power relations, with the implication that upon each plateau we may see modalities of resistance that are best suited (or not, as the case may be) to challenge that particular line of force. We use the metaphor of plateaux in a geometrical rather than geographical sense. In geometry the notion of a plane refers to a ﬂat surface that is rendered possible by a class of similarities and equivalences. Such surfaces in a social setting are multiple and semi-autonomous, but also intimately connected at unpredictable points. Although such a concept could be seen as too abstract and far removed from the processes of organizational life, we think it can make a signiﬁcant contribution to the way we conceive power and resistance in the contemporary workplace. In the following sections the diﬀerent elements of our model are discussed in turn.

A thousand plateaux of power There has been a signiﬁcant and ongoing debate about how power should be conceptualised in the study of organization (see Clegg 1989 for review). Recent

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developments have seen a thorough rejection of agent-based views of power (Pfeﬀer 1981) where it is understood as a characteristic of the individual. State based views of power (Clegg and Dunkerly 1980), where power has been conceptualised as residing with the structure of the (capitalist) state, have also been rejected. These two conceptions have been largely challenged by a theory of power that examines relations of force as dispersed or “capillary” (Foucault 1980; Knights and Willmott 1989; Clegg and Hardy 1996). These dispersed power relations have been imagined as constituting multiple “circuits of power” (Clegg 1989) instead of a system that makes up a single relation of force and inﬂuence. This increasingly prevalent conception of power has seen attention be given to the various circuits of power that operate in contemporary organizations. These can include systems of technocratic knowledge (eg., Bihamini 1994; Sewell and Wilkinson 1992; Townley 1994), popular culture and consumption (du Gay 1996), and gender (Alvesson and Billig 1997) to name a few. This growing range of studies points out the qualitatively diﬀerent and speciﬁc ﬁelds of power that co-inhabit a particular space, and show how each ﬁeld of power tends to make particular courses of action seem rational while other courses of action are marginalised. It is these multiple ﬁelds of power we refer to as “plateaux”, after Deleuze and Guattari (1987). We use the term plateaux because it provides a spatial understanding of power that is especially handy for stressing the multiple lines of force and resistance. A number of other analyses of power and resistance use spatial metaphors such as “beyond the pale”, “transgressing the boundaries” and “escape attempts.” But for us the notion of plateaux (or plane, level, line) makes it easier to isolate the montage of diverse power/resistance assemblages without necessarily privileging one as more “real” (which is not to say all forms of power and resistance are equivalent). To be sure, a plateau is a system of force/resistance relations organized around a particular issue that may be visible or invisible to the actors involved. Examples of plateaux are gender, corporate culture, the wage/eﬀort bargain, aesthetic codes, professionalism, and sexual orientation. On each plateau of power it may be possible to identify an attendant set of resistances that are constituted and characterised by the speciﬁc logic of the power in question (and vice versa). An important element of our model is the idea that plateaux of power and resistance do not necessarily exist in complete independence of one another but overlap and inﬂuence each other in ambiguous ways. Using the language of Deleuze and Guattari (1987: 7), each plateau is interconnected to the others by a rhizome — a complex system of underground aﬃliations where “any point of a rhizome can be connected to any other, and must be”. Thus, a particular movement or articulation on one plateau of power may also simultaneously initiate an action on another plateaux of power with congruent, conﬂicting or independent outcomes.

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The ﬁnal aspect of our model is the idea that within a particular spatialtemporal context there are not an inﬁnite number of equally important plateaux of power. Rather, some plateaux of power may encompass people’s lives more than others. For instance, multinational capitalism and scientiﬁc management might be some of the most encompassing plateaux of power for a worker in the Maquiladora on the US/Mexico boarder (Pena 1997), whereas power relations demanding an aesthetic form of labour or particular ethnic background may be of little consequence. Within a service sector company in a post-industrial Western city (the hospitality industry for instance) the plateau of aesthetic power may be central to workers lives (Nickson, Warhurst, Witz, and Cullen 2001). For women performing unpaid domestic labour in the home, the gendered division of labour may be experienced as the central plateaux of power. At any rate, the key task in an analysis would be to identify the plateaux of power that “matter the most” within a located situation, examine the inter-relationships between diﬀering plateaux and how these inter-relations feed into one another.

A thousand swarming refusals Now that we have tentatively sketched a model of power, we turn back to the issue of resistance. As we pointed out above, many theories of resistance are based on a rather singular understanding of power — that is, there is one dominant system of power against which an act is judged oppositional, ineﬀective or even self-defeating. Using this approach, only acts that aim for some sort of “great refusal” (Marcuse 1972), or that radically overthrow the dominant system of power, are counted as eﬀective opposition. On the other hand, resistance that does not pose any serious or systematic challenge to a dominant system of power is typically seen to be ineﬀective, and even reproductive of that power. This is why organized forms of resistance with more “revolutionary” intent have usually been privileged, whilst more covert forms of resistance are marginalised, or judged as nothing more than safety valves. If we adopt the model of power that we have advanced, we would see any particular act as implicated on a number of plateaux of power. This would mean, as Foucault suggests, a multiplicity of resistances are possible: There is no single locus of the Great Refusal, no soul of revolt, source of all rebellions, or pure law of the revolutionary. Instead there is a plurality of resistances, each of them a special case: resistances that are possible, necessary, improbable; others that are spontaneous, savage, solitary, concerted, rampant, or violent; still others that are quick to compromise, interested, or sacriﬁcial; by deﬁnition, they can only exist in the strategic ﬁeld of power relations. But this does not mean that they are only a reaction or rebound, forming with respect to the basic domination an underside that is in the end always passive, doomed to defeat (Foucault 1978, 94–5).

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Following Foucault, we maintain that there is not a single locus of opposition but a swarm of multiple refusals, because there are many plateaux of power that organize the power/opposition terrain in contemporary workplaces. We can then add a degree of complexity to this model and argue that each particular action is imputed simultaneously on a number of plateaux of power, which are interconnected. An act may be considered resistant in terms of the co-ordinates of one plateau, but may be thoroughly functional in terms of another plateaux. Or conversely, while an act may be deemed resistant on one plateau, it can be judged as thoroughly functional on another plateau but subversive on yet another. Finally, not all forms of resistance should be considered equally important or in some way “revolutionary”. A small refusal on the grounds of asserting one’s right to listen to punk music in the workplace, and thereby challenging the plateaux of aesthetic power emphasised by bureaucratic rules, may have little eﬀect on race and sex discrimination. This is not to say, however, that such small refusals may not be strategically connected to other plateaux of power. For instance, by challenging a ruling on music in the workplace our recalcitrant punk fan may open up a space to challenge other aesthetic rules, such as dress, decoration of personal workspace, and perhaps even jolt latent gender discrimination based on aesthetics (“they don’t look professional”). Collective unionism in the hyper-Taylorised Maquiladora organizations may be useful whereas humour may facilitate eﬀective forms of opposition but, on its own, will not change exploitation. For sure, if the resistance that these workers express is only humour and cynicism it may allow them to “get by” but it is surely a modality of dissent that multinational capital can live with. However, in an organization demanding the loyalties and sentiments of workers, that has an actual “investment” in the subjectivities of workers and the way they experience organizational life, then cynicism and humour may be extremely eﬀective for challenging power on this particular level. For example, an exaggerated service smile or the “over identiﬁcation” with a culture campaign may actually harm the productive and sales activities of the organization and undermine the legitimacy of management even more profoundly than traditional acts of dissent.

Discussion How should we approach humour, irony and cynicism given our model? The central insight of “plateaux of power and resistance” is that a number of interlinking resistances may occur simultaneously, with diﬀerent eﬀects on diﬀerent planes of power and resistance. Humour, irony and cynicism may be judged eﬀective forms of resistance against types of managerial power that speciﬁcally targets the selves of

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workers, a type of power that is signiﬁcantly novel to the traditional wage/eﬀort bargain (although the aims are the same). In other words, humour, irony, and cynicism may reside as opposition on a particular plateau of power and be best suited to deal with organizational domination of the “soft” HRM type. Such a disposition may not over-turn the economic apparatus and hierarchy of late capitalism. However, as Johansson and Woodilla (1999:29, emphasis original) point out in relation to irony, it “can be interpreted as turning the emotional hierarchy upside down and thereby, from a broader perspective, irony is altering the power relations.” However, plateaux are not separate but linked in ambiguous ways. When one of these resistances is articulated towards, say a corporate culture campaign, it may have outcomes that are subversive on one plateau but thoroughly functional and reproductive on another plateaux. For example, when an employee is cynically ironic towards a culture-engineering program, this may eﬀectively block the colonisation of self by managerial interests or disrupt the emotional economy of managerial domination, but will also have ramiﬁcations for other struggles being waged on diﬀerent political territories. These ramiﬁcations are almost always unpredictable and complex. Let’s look at some examples already discussed. Rodrigues and Collinson (1995) illustrated how worker humour actually facilitated and consolidated eﬀective union opposition by caricaturing management and lampooning the corporate culture strategy. Here, humour is a strategy of resistance geared speciﬁcally towards dealing with managerial power that targets the sentiments of workers. Traditional unionism may not necessarily be enough to deal with this type of force. The two plateaux of resistance form a congruent relationship, giving employee dissent greater impact. The outcomes of resistance to power on one level (cultural symbolic system) support and are harmonious with those on another level (the eﬀort/wage bargain). Rather than reducing all power to its capitalist/economic variant, and all resistance to that which successfully or unsuccessfully overturns economic exploitation, we produce a more multi-dimensional portrayal. It is one that surfaces the diﬀerent criteria by which we identify power and the eﬀectiveness of the resistance it may provoke, as well as the interrelationships among the diﬀerent levels we have outlined. In the case of Collinson’s (1988; 1992; 1994) investigation of Slavs we witness a diﬀerent situation regarding the outcome of the intermingling of cynical humour with the wage/eﬀort bargain. The cynicism and wry humour of workers, in this case, obviously blocks the incorporation of their subjectivities into the corporate culture program designed by the new American managers. So at this level we have an eﬀective modality of resistance because the managerial aim of identity colonisation and “cleansing” is thwarted. But how does this response spill over onto other plateaux of power and resistance relations, especially the capitalist wage labour arrangement? As Collinson argues in a number of articles, cynicism and

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ironic humour actually undermined resistance against economic privilege because it distanced workers from important managerial functions (managers were seen to be inferior and they did not want to have anything to do with them) and, thus, perpetuated their own emasculation. The outcome of cynical humour was, therefore, eﬀective on its own plateau, but had self-defeating spill over eﬀects on more traditional forms of organized dissent. In the Slavs case it would be tempting to simply dismiss cynical humour and irony as illusory forms of opposition that merely operate as a safety valve to capitalist domination. Such an interpretation would exclude, however, the signiﬁcance of these so-called subjective types of dissent outright, which does not necessarily have to be the case. Although it is obvious that in this empirical example cynicism reinforces asymmetrical gender relations, and undermines “traditional” resistance that could have challenged economic subordination, we maintain that it is still best to have a pluralistic understanding of lines of inﬂuence and opposition rather than a reductive one. We should therefore speak of links, relationships and interferences instead of “illusions”, “falsity” or “ideology” because to categorise humour, irony and cynicism as merely safety valves underestimates the potential eﬃcacy of seemingly innocuous words, gestures and emotions. This is especially the case when the very hearts and minds of workers is the terrain of struggle. We oﬀer a third example to substantiate our argument. In a call-centre organization one of the authors is researching (“Sunray” Customer Development), union membership is strongly “discouraged” and there is an absence of other organized forms of worker opposition. Indeed, economic exploitation is rife. Management control strategies involve a whole variety of techniques typical in callcentre organizations, one of which is the promulgation of a high-commitment corporate culture. Even though some workers do become committed and loyal to Sunray as a result of the culture program, we also discovered an informal network of communications and appraisals marked by a high degree of cynical and humoristic satire. For instance, workers cynically transformed the company slogan into their own bawdy anagram that mocks such blatant attempts at thought control. It was in this way that workers resisted the almost ubiquitous corporate culture and the concerted managerial attempts to co-opt their very senses of self. Because this type of resistance does not overturn the capital/labour hierarchy one should not assume that it is merely “illusionary” and “unreal” (Knights and Collinson 1987: 472). Such resistance, in its own terms, disrupts and even transforms the linguistic and symbolic status quo upon which the unitary culture depends for its perpetuation. This very material aim of Sunray management, one in which authority has both economically and symbolically invested, is derailed by a marginal few. The cynicism we observed also helped employees to highlight economic exploitation at Sunray because the “discourse of empowerment” was

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turned back on management and used to accentuate the very real economic disempowerment faced by workers. This is possibly one factor that has created the conditions for more collective forms of labour dissent, as Sunray workers have contacted the local service workers union and have seriously discussed formally organizing their opposition. In speciﬁc contexts the ﬁndings will be diﬀerent, of course. Our point is that we should be identifying the multiple lines of force and their attendant resistances without presuming a singular model of power and resistance when making judgements about the eﬀectiveness and outcomes of opposition. Or put simply, one act or expression of transgression may have diﬀerent consequences that should be judged by diﬀerent but associated criteria. The temptation to reduce appraisals of power and resistance to “all or nothing” logic is strong, given the importance of totalities in the tradition of critical social research. Moreover, we have no intention of romanticising humour, irony and cynicism as resistance(s) that are always eﬀective. Rather, we aim to place a more sophisticated theoretical grid onto our interpretations so that we can develop an appreciation for polymorphous logics of resistance and power, as well as their complex mutual inﬂuences.

Conclusion To conclude, both safety valve and transformative interpretations regarding the eﬀectiveness of humour, irony and cynicism as resistance (to culture- engineering) seem to be underpinned by particular models of power and resistance that are either too reductive or unclear regarding the mosaic nature of force in any given situation. By introducing the notion of plateaux of power and resistance, we hope that future research may be in a better position to tease out the complex and often paradoxical dimensions of both overt and covert resistance in contemporary organizations. We are by no means advocating some sort of post-modern relativism that makes all forms of power and resistances equivalent and equally important. Rather, we are calling for a contextual sensibility that can distinguish, in concrete situations, the diﬀerent lines of force (and the resistance that they may provoke), the characteristics that mark those lines of force as diﬀerent, and then judge (using semi-autonomous criteria) their eﬀectiveness on their own speciﬁc grounds. Only then can we gain a more nuanced understanding of humour, irony and cynicism as means through which employees may oppose the multifaceted and often paradoxical regime of contemporary employment.

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Notes * We would like to thank Campbell Jones, Andrew Sturdy, Yiannis Gabriel and Stewart R. Clegg for their comments on earlier drafts of this chapter. 1. Some research examines irony as a methodological tool for investigating organizational life (eg. Trethewey 1999; Johansson and Woodilla 1999; Sewell forthcoming). Here, however, we deal with irony as a phenomenon within organizations. 2. Here we are referring to the political (rather than epistemological) implications of post modern approaches. As Fraser (1995) points out, this has largely lead to an assertion of a ‘politics of recognition’ whereby issues of signiﬁcation and representation become central at the expense of ‘politics of redistribution’. Examples of the former include Rorty’s (1989) suggestion of holding multiple views at once (also see Rorty 1998), carnivalesque celebrations where subordinate identities are over thrown (Rhodes, this volume), or the ‘re-signiﬁcation’ of economic regimes (Gibson-Graham 1996). The main criticism levelled at such approaches is the ‘idealism’ of the assumption that simply changing our discourse (words) about the world will lead to radical transformations (Bourdieu 1983; Eagleton 1991).

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Chapter 5

Paradox in symbols and subjects The politics of constructing “The Wharﬁe”* André Spicer, John W. Selsky and Julian Teicher

Introduction In this chapter we examine how a bitter industrial relations dispute that occurred in Australian seaports during 1997–98 became important because it concerned not only economic entitlements but also symbolic reality. The symbolic aspect of the conﬂict centred on struggles around how a key ﬁgure, or subject, “the wharﬁe”, was understood. We use Bakhtin’s concept of dialogue to point out how multiple, often paradoxical discourses are related in an “ecology” of discourses to make sense of the subject. The chapter investigates the ways that diﬀerent key parties constructed the wharﬁe in public media texts. We use a critical discourse analysis method, uncovering signiﬁcant discursive struggle around the subject position of “the wharﬁe”, illustrating how diﬀerent understandings of that subject led to diﬀerent patterns in its engagement. By examining the role of symbolic identity struggles around the ways that subjects are recognized in discursive dialogue, we show that discourse is central to economic struggles in the workplace. The waterfront dispute that occurred in and around Australian seaports during 1997–98 was a central event in the changing nature of the Australian workplace. As is typical in labour disputes, many commentators explained it in terms of conﬂict around economic resources such as proﬁts, jobs, and wages (e.g., Griﬃn and Svensen 1998). In Australia, industrial relations have always been strongly framed by legal process, so it was no surprise that the parties to this dispute contended in the legal arenas of the Industrial Relations Commission and the courts. But they also fought bitterly in the media and the “court of public opinion” (Trinca and Davis 2000). How are we to understand this dispute, deeply etched as it was with both economic and symbolic features? In such disputes, how can we interpret their symbolic features, which have not received adequate research attention? In this chapter we oﬀer an understanding that draws on theories of language, discourse and identity as developed and empirically tested in organization studies.

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A number of researchers have highlighted how symbolic forms of power are not totalising but are sites of struggle (Ackroyd and Thompson 1995). Thompson and Ackroyd (1999: 100) have argued: “Struggle at work was, until recently, centrally concerned with material issues, with amounts of work done and the reappropriation of time and materials as the principal matters of dispute. These days, struggle is more centrally concerned with the matter of identity.” Power exercised through symbolic representations, such as discourse and identity, thus are crucial aspects of labour conﬂicts in today’s workplaces. Important research on power in the workplace has examined popular regimes of knowledge and highlighted the construction of identity or subjectivity, such as management rhetoric and the construction of the employee (Jacques 1996), as key sites of power (Knights and Willmott 1989; Clegg 1989). Such insight ﬁnds resonance in political studies, where the recent decline in traditional ways of voicing material struggle has been noted: [T]he language of distribution is less salient today. The movements that not long ago boldly demanded an equitable share of resources and wealth have not, to be sure, wholly disappeared. But thanks to the sustained neo-liberal rhetorical assault on egalitarianism, to the absence of any credible model of “feasible socialism” and to widespread doubts about the viability of state-Keynesian social democracy in the face of globalization, their role has been greatly reduced (Fraser 2000: 107–108).

Fraser (1995) argues there has been a shift from a politics of redistribution to a politics of recognition. The latter is concerned with how identities are constructed and who has a legitimate voice in society. This is reﬂected in the many contemporary movements of identity politics, such as around queer, women’s, and indigenous identities. According to Fraser (2000: 71), a politics of recognition aims to challenge cultural or symbolic injustices “rooted in social patterns of representation, interpretation”. She suggests that new theoretical frameworks are needed to encompass both the new identity as well as more traditional distributional politics. Fraser’s politics of recognition may enrich the understanding of political struggles in organizations. The politics of identity or recognition recapitulate the symbolic aspect of such struggles, while the politics of redistribution recapitulate the economic or material aspects. Thus, in this chapter we intend to show the paradoxical interplay between the politics of recognition and the politics of redistribution in a speciﬁc labour dispute. Such disputes have usually been associated with Fraser’s politics of redistribution but we employ conceptual tools associated with the politics of recognition in order to highlight their symbolic features. We show that paradox lies in how workers, in this case Australian “wharﬁes” (longshoremen or dockers), resisted attempts by key players in the waterfront dispute to construct and inscribe certain identities for them. By focusing on struggles in the symbolic arena of this dispute we are not suggesting that

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material issues were any less salient than in other disputes during the past century. However, in this dispute the material struggles were waged in part through the diﬀering understandings of the identity or subject position of “the wharﬁe”, which did appear to be new or at least much more prominent than previously. There has been little research into the role of discourse and identity in the context of industrial relations disputes. An exception is Herod who argues that “discursive practices — how a dispute, process or situation is represented to a broader audience — can thus be important elements in the institutional reproduction of labour markets and, consequently, of workers themselves” (1998: 178). In this chapter we aim to further this insight by examining an important symbolic aspect of the waterfront dispute. We focus on how conﬂicting and sometimes paradoxical images of the Australian wharﬁe were mobilized and used by “business” and “union” networks of interest during the dispute. These images were constructed by diﬀerent actors’ discourses as reported in the public media. We argue that the diﬀerent ways in which the wharﬁe was represented led to very diﬀerent courses of action becoming possible and legitimate for the actors within each network. We proceed ﬁrst by reviewing the literature on discourse studies of organization in order to develop a framework to understand struggles around symbolic resources. Drawing on the work of Mikhail Bakhtin, we suggest that discourses in a social arena can exist in an “ecology” of dialogue, one that sometimes generates paradoxical constructions of the same object. We then describe the empirical setting, its history, and the context in which the waterfront dispute occurred. Next, we analyse the discourses used by the two key interest groups in the dispute to construct the wharﬁe and examine how these discourses connected to “legitimate” courses of action. We conclude with two implications for critical discourse theory: the need to appreciate the politics of multiple discourses, and the need to “materialize” discourse analysis by understanding the role of discourses in the reproduction of social structures.

Symbolic aspects of labour disputes Meaning and critical discourse analysis Meaning and sensemaking are central concerns in organization studies (Pondy and Mitroﬀ 1979; Manning 1979; Smircich 1983; Weick 1995). A variety of approaches seek to understand processes of meaning in organizations (see Putnam and Fairhurst 1999 for a review), and one important recent approach is discourse (Grant, Keenoy and Oswick 1998). Broadly, discourse can be conceptualised as texts that momentarily ﬁx a particular framework of meaning about something.

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According to Heracleous and Hendry (2000), discourse approaches in organization studies can be divided into three broad categories: interpretive, which examines discourse as constructive of social and organizational reality; managerialist, which examines discourse as a tool in the service of managerial processes such as leadership and change, and critical, which considers relations of power in the discursive construction of objects. In a previous paper (Spicer, Selsky and Teicher, 2000) we used an interpretive approach to study the process of active sensemaking during the waterfront dispute. In this paper we adopt a critical approach in order to examine how power worked through discourse in the same dispute. In the critical discourse approach, a discourse is a set of statements (Foucault 1972) found in texts that do not just describe but also construct or “make up” (Hacking 1986; 1999) an “object”. An object is understood here as a generic term for some aspect of reality; it can stand for a person, a physical entity, an event, an issue, etc. Understanding discourse is [a] task that consists of not — or no longer — treating discourse as a group of signs (signifying elements referring to contents or representations) but as practices that systematically form the objects of which they speak. Of course discourses are composed of signs; but what they do is more than use these signs to designate things. It is this more that renders them irreducible to language (langue) and to speech. It is this “more” that we must reveal and describe (Foucault 1972: 49).

These systems of signs may include written texts (e.g., literature, manuals, annual reports), spoken texts (conversation, interviews, speeches), visual texts (ﬁlm, paintings), spatial texts (buildings, landscapes), and performance (drama, dance, non-verbal cues). The set of discursive statements found in any set of texts not only describes the object(s) with some degree of accuracy, but also constitutes the very object(s) that it purports to describe (Grant, Keenoy and Oswick 2000). Hay notes that this occurs through narratives or stories. In a particular case: [w]hat is interesting… is not so much the descriptive accuracy (or otherwise) of the presentation of key events. Ultimately far more signiﬁcant is their narrativisation, the subject positions constructed and the resulting attributions of causality and responsibility — in sum, the discursive selectivity imposed by such narratives upon the decoding process (Hay 1996: 265–266).

Discourses and the narratives they create/construct fundamentally shape how actors act with respect to the object(s). That is, discourses “do not just describe things; they do things. And being active they have social and political implications” (Potter and Wetherall 1987: 6; see also Austin 1966; Van Dijk 1997a; 1997b). Moreover, actors in a social arena can use discourses as resources to seek legitimacy for their interest(s) and position(s) and to enact strategy (Hardy, Palmer and Phillips 2000). Discourses inﬂuence social constructions of the arena and make

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certain “strategies of engagement” with it sensible and legitimate (Hardy and Phillips 1998). Extant discourses in a particular social arena do not have equal prominence and political legitimacy (Fairclough 1995). In any discursive arena a dominant discourse is likely to be used by powerful actors and it will be rendered legitimate; other discourses may be voiced and used by less powerful actors and those discourses are likely to be marginalized. We can expect the dominant discourse to entrain a particular way of thinking and acting being considered normal or rational, whereas other ways of thinking and acting get branded as abnormal or irrational. For example, if the dominant discourse of the day “makes up” killer whales as dangerous creatures or economically valuable commodities, then a whaling industry is likely to develop to destroy or harvest them (Lawrence, Phillips & Hardy 2000). On the other hand, if the dominant discourse makes up killer whales as a natural beauty, then an eco-tourism industry and research stations are likely to develop to manage and enjoy them. One particular class of objects that has attracted recent research attention in organization studies is subject positions, how they are constructed through discourse, and how power works through them. The analysis of power relations should focus on the creation of an image of subjectivity in discourse (Foucault 1977). Judith Butler nicely summarises the central lesson in Foucault’s study of power and discourse in the prison: Foucault suggests that the prisoner is not regulated by an exterior relation of power, whereby an institution takes a pre-given individual as the target of its subordinating aims. On the contrary, the individual is formed or, rather, formulated through his discursively constituted “identity” as prisoner. Subjection is, literally, the making of a subject, the principal of regulation according to which a subject is formulated or produced. Such subjection is a kind of power that not only unilaterally acts on a given individual as a form of domination, but also activates or forms the subject (Butler, 1997: 84; emphasis in original).

A number of empirical organizational studies of the construction of subjects through discourse and the implications for power have been produced in the past decade (e.g., du Gay 1996; Fournier 1998; Townley 1996; Garsten and Grey 1997; Kunda 1992; and Sewell and Wilkinson 1992). In this chapter we examine the complex construction of the subject position, “wharﬁe”, in the context of the Australian waterfront dispute and the implications of these constructive activities in the dispute itself and for labour relations in Australia more generally.

Resistance and dialogue The approach outlined above couples a single dominant discourse tightly to a certain strategy of engagement with the subject. However, one cannot assume that

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a single dominant discourse is able to “inscribe” one or more subjects unproblematically (Ackroyd and Thompson 1999; Mumby 1997; Newton 1998; Gabriel 1999). Rather, subjects may resist and re-articulate the subject positions within which they ﬁnd themselves inscribed. It is this insight that has stimulated a fertile research area on resistance to dominant discourses through humour (Collinson 1992), worker irony and “Švejkism” (Fleming and Sewell forthcoming), cynicism (Fleming and Spicer in this volume), and alternative or sub-cultural identities. Such a line of research pushes us to re-think the relation between discourse concerning a subject position and the frameworks of meaning and power mobilized around the subject position. This recent work on resistance may need to appreciate the contribution of traditional collective forms of organized resistance such as unions. For instance, as we indicate from the waterfront dispute below, a union and its allies organized a visible, articulate and potent response to a discourse that other interests were trying to position as dominant. In order to understand how worker resistance to and through a particular discourse takes place in an organized situation, it may be useful to think in terms of an ecology of discourses in dialogue. Mikhail Bakhtin argued that language should be understood as a dialogue in which diﬀerent words come into contact with one another. Meaning is the result of this contact: The word, directed towards its object, enters into a dialogically agitated and tension-ﬁlled environment of alien words, value judgments and accents, weaves in and out of complex interrelationships, merges with some, recoils from others, intersects with yet a third group: and all this may crucially shape discourse, may leave a trace in all its semantic layers, may complicate its expression and inﬂuence its entire stylistic proﬁle (Bakhtin 1981: 276).

Following its recent usage in organization studies, we use dialogue to mean a situation where two or more relatively legitimate systems of discourse co-exist within an organized site: Dialogical analyses explicitly acknowledge that “organization” is comprised of a multiplicity of discourses which reﬂect the “plurivocal” meanings brought to bear by participants. Potentially, this permits a multitude of “organizational realities” which, although relatively autonomous discourses, may overlap and permeate each other. Similarly, actors who are “locked into” particular discourses may experience and interpret the same discursive event — such as a conversation — diﬀerently (Grant, Keenoy and Oswick 1998: 7).

In situations where relatively organized groups oﬀer alternatives to the dominant discourse, the notion of dialogue may help us to understand their positionality. From a critical discourse perspective, the “inscribed” subjects may understand discursive processes in an organization as a dialogue potentially involving both

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acceptance and resistance. This implies that diﬀerent and often paradoxical understandings of the same subject position may be present simultaneously in the same social arena. Moreover, a dialogue of discourses means that diﬀerent courses of action may be legitimated in the same discursive arena because, as suggested above, each discourse in a dialogue does not speak from a position of equal power and legitimacy — some may dominate and others may be marginalized. Some recent examples point out the diﬀering discourses of a particular subject by diﬀerent groups, and how this leads to certain relations of power and (often uneasy) interactional dynamics. Hardy and Phillips (1998), for instance, demonstrate how three diﬀerent types of organizations constructed and hence acted on the subject of “the refugee” in diﬀerent ways. By examining discourses in dialogue we may be better able to understand conﬂicting and often paradoxical constructions of particular identities and how these may enable paradoxical strategies of engagement to become viable. Indeed, examining discursive processes as a dialogue may prove to be relevant in situations where more than one organized actor voices a coherent discourse, as in industrial relations disputes.

Method For this case study we used a ﬁve-step process informed by previous studies of critical discourse analysis (e.g., Potter and Whetherall 1987; Fairclough 1995; Van Dijk 1997a). First, we examined the historical, political, and industrial relations contexts within which the 1997–98 waterfront dispute occurred. Second, we gathered a deﬁned body of naturally occurring texts. For this project, the database consisted of 439 public media reports (see Appendix) about the dispute obtained from the Reuters Business Brieﬁng database for the full years 1997 and 1998, using the search terms “port” and “Melbourne”. (Melbourne was the initial and primary site of contention in this dispute.) Third, through a close reading of these texts, we identiﬁed the discourses used to understand a particular object — in this case, the subject “wharﬁe”. Fourth, we interpreted each of the discourses that emerged by means of expansion analysis (Gephart 1993)1 and grouped them according to networks of interest. Using evidence from the contextual analysis and from existing studies of the dispute we identiﬁed two prominent networks of interests: – –

Union network: workers (including wharﬁes), their unions, and support groups in the community; and Business network: relevant ﬁrms, certain business support groups, parts of the Liberal-National Party federal government, and elements of the state administrative apparatus.

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Finally, we examined the ecology of discourses in dialogue in each network and derived which activities, or strategies of engagement, actors in each network considered legitimate. That is, discourses were used in each network to construct certain images and identities of “the wharﬁe”, and by each network in their dialogues with the other network and with the public.

The Australian waterfront dispute and its historical context The events of the 1997–98 waterfront dispute are receding into Australian history. Both key antagonists, Patrick Stevedores and the Maritime Union of Australia (MUA), have not only survived but also created a more productive and cooperative relationship. At one level the dispute was just one in a century-long series of “stoushes” on the waterfront but at another it was far more signiﬁcant. There were clear resonances with the sometime violent history of class conﬂict on the Australian wharves. Indeed, the dispute bore more than passing similarity to the Great Strikes of the 1890s. Judging by the level of support from seafarers’ unions around the world, including the United States and the United Kingdom, this dispute resonated with their own battles. But the dispute also held particular signiﬁcance in the contemporary Australian political scene. A confrontation between a militant union and an employer had been widely expected since the election of a Liberal-National government in 1996. In contrast to its Labor Party predecessor, which had cultivated a close relationship with the unions, the LiberalNational government was elected on a policy of reducing union power and inﬂuence in the workplace and reforming the waterfront.

The waterfront and unionism The importance of the waterfront and waterfront struggles is reﬂected in both art and history. For example, the legendary ﬁlm On the Waterfront, was inspired by union corruption on the docks at Hoboken, New Jersey, its theme being that “selfappointed tyrants can be fought and defeated by right-thinking men in a vital democracy” (Murray 1978: 95). Numerous books recount the history of waterfront struggles and demonstrate the wider political ramiﬁcations of these confrontations (e.g., Nelson 1988). In the Australian situation, history and literature about the waterfront are intertwined (e.g., Morrison 1955, 1984; Lowenstein and Hills 1982). Unions of wharf labourers were formed in Australian ports in the 1870s and combined into a loose federation in early 1890. In August of that year these unions became key participants in the Maritime Strike, a major confrontation over the principle of freedom of association, a dispute that involved employers in the pastoral, mining and transport industries in the eastern colonies of Australia. In the

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ensuing struggle the waterfront was de-unionised and maritime labour came to be regulated through an employer-controlled agency (Svensen 1995). Following federation in 1901 (which created the nation of Australia out of what had previously been separate colonial states), the unions were formed into the Waterside Workers Federation and then registered under the ﬂedgling Conciliation and Arbitration Act in 1904, thereby gaining access to arbitrated awards which regulated wages and conditions. Despite this, the waterfront was periodically convulsed by major conﬂicts, with de-unionisation a temporary outcome. For example, the union’s involvement in the 1917 General Strike resulted in the reestablishment of employer operated labour bureaux. Also, in 1928 strikes protesting an Arbitration Court decision reducing wages and conditions led the Bruce Government to enact its “Dog Collar Act” requiring wharﬁes to be licensed. Nonunion labour was again introduced to the waterfront and in the ensuing struggle in Melbourne police shot several unionists, one fatally. The union did not recover until World War 2 when labour shortages and the need to prosecute the war eﬀort enabled it to secure an early form of tripartite industry regulation, marked by a shift from the “bull system” under which supervisors selected workers for regular employment. Permanent employment was not introduced until 1967. However, the continuance of industry employment and the “monopoly” position of the union and its strong inﬂuence over recruitment and redundancy were seen to inhibit the development of employee commitment and innovative working arrangements (Turnbull 1991; Productivity Commission, 1998). Under this regime work and technology on the waterfront was transformed, beginning with mechanization in the 1950s and containerization in the 1970s. Over the period 1957–1987 the workforce fell from 25,600 to 5,500. While the waterfront workforce continued to decline throughout the twentieth century, by the 1980s a range of business and political interests argued that the nation’s ability to compete globally required a quantum leap in waterfront productivity. The docks were represented as a crippling bottleneck to productivity elsewhere in the economy. The Labor Party held oﬃce from 1983 to 1996, having been elected on a platform that emphasized its corporatist relationship (“The Accord”) with the union movement, through the union peak body, its national federation, the Australian Council of Trade Unions (ACTU). Despite close links to the unions, this government also implemented a range of neo-liberal economic reforms including “deregulatory” labour market measures in 1987. The implementation of waterfront reforms was part of this wider program of microeconomic reform, though, characteristically, the mechanism was the creation of a tripartite Waterfront Industry Reform Authority (WIRA). The major outcomes of the WIRA process were a move from industry to enterprise employment; a retirement and redundancy program leading to a 57% reduction in the workforce at a cost of over

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$400 million; introduction of collectively bargained agreements allowing work arrangements to reﬂect the requirements of individual workplaces, and a merger of the Waterside Workers Federation with the Seamen’s Union of Australia to create the MUA (Productivity Commission 1998; Griﬃn and Svensen 1998). These measures were intended to facilitate more ﬂexible labour utilisation through the elimination of restrictive working practices and greater use of “supplementary” (casual) labour (Turnbull 1991). Average levels of productivity — measured in TEUs (20 foot equivalent units) and crane lifts — increased between 1989 and 1997, although productivity levels remained below several major overseas ports and high levels of disputation were endemic, particularly in the ports of Melbourne and Sydney (WIRA 1992; Australian Bureau of Statistics 1997; Productivity Commission 1998). These outcomes fuelled calls from industry participants for further reform, calls only heeded with a change of government in 1996.

The 1997–98 waterfront dispute As indicated above, the key to the government’s involvement in this dispute was labour law reform. The Liberal and National parties had gone to the election promising waterfront reform and breaking of the MUA’s “monopoly stranglehold” of labour supply (Liberal and National Party 1996). Following the election, linked ministerial task forces were established in the areas of waterfront and labour market reform. The ﬁrst outcome was the Workplace Relations Act (WRA) with its core objective of increasing the relative bargaining power of employers. Particularly important were provisions increasing the severity of penalties for engaging in unlawful industrial action, as well as easier access to industrial law to establish the illegality of disputes. The statute also established an award simpliﬁcation process that reduced the safety net of wages and working conditions to 20 items and enacted new freedom of association provisions primarily directed against union closed shops. The WRA also made it unlawful to “injure” an employee because of their membership of a union (s.298K[1][a]); this provision proved pivotal to the course of the upcoming dispute (MacCallum 1998). The National Farmers Federation (NFF), a body representing 28 sectoral councils and individual farmers, shared the government’s interest in waterfront reform. Although the economics of shipping (including labour costs) is a major concern for exporters of primary products, the NFF has long exhibited an antagonism to union inﬂuence that exceeded the economic interests of its members and aﬃliates (Kitay and Powe 1987; Svensen 1998; MacCallum 1998). Certainly, the NFF had shown little interest in combating the other major source of ineﬃciency in the industry, lack of competition (Griﬃn and Svensen 1998). Lack of competition on the waterfront was nowhere more evident than the Port of Melbourne,

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which was eﬀectively a duopoly between the Patrick Stevedores (a subsidiary of Lang Corporation) and the London-based transnational P&O Ports. Implementation of the government’s waterfront reform strategy began in early 1997. An oﬃcial of the Department of Employment, Workplace Relations and Small Business (DEWRSB) met with the chairman of Patrick Stevedores (Chris Corrigan) and they agreed on an activist scenario involving dismissal of the entire workforce following an externally induced disruption. In July, Cabinet resolved to support the company through legal, ﬁnancial and other means (Svensen 1998). P&O Ports declined to be involved, having concluded that the WRA was inadequate to deal with the MUA (The Age 1998). A scheme was hatched in which a newly formed company called Fynwest would recruit ex-military personnel to be trained in waterfront operations at a secret location, later revealed to be Dubai. It is alleged that Corrigan had funded the entire operation with a view toward replacing the entire workforce the following year (Wells 1998). This venture came to a halt following its disclosure by the MUA and exertion of pressure by the International Transport Federation (ITF) on the United Arab Emirates government to withdrew the trainees’ entry visas. Central to Patrick’s strategy to terminate its workforce but retain its stevedoring operation was a complex, covert corporate restructuring that established four labour hire companies. The companies had few assets other than a series of recently concluded contracts to supply labour to the parent company, and these were terminable without notice in the event of any disruption to the supply of labour. Thus, a strike or lockout would render the companies insolvent, providing a trigger for the companies to be placed in voluntary administration and then wound up (MacCallum, 1998; The Age, 1998). The Patrick strategy hinged its success on two elements. The ﬁrst was a series of managerial initiatives, including a decision to introduce a new rostering system in Melbourne and serve a log of claims that sought reductions in “penalty” payments and other working conditions, under the award simpliﬁcation provisions of the WRA. The second element was to use an NFF-owned company (P & C Stevedores) to provide stevedoring labour. On 28 January, Patrick announced that it had leased part of its Melbourne facilities (No. 5 Webb Dock) and stevedoring equipment to a “competitor”, P & C Stevedores. That evening the MUA workers were locked out of No. 5 Webb Dock and shortly after P&C Stevedores took control of the facility with the support of 60 security guards (Svensen 1998). The MUA responded by establishing a picket line protesting at the introduction of nonunion labour to the wharves. The MUA made no attempt to stop the operation and the union enforced strict discipline on its members. The MUA also responded with a series of stoppages and bans beginning in Melbourne and spreading to New South Wales and other ports.

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At this point Patrick resorted to legal measures. In Melbourne where the MUA had certiﬁed agreements with Patrick, the company obtained orders declaring the industrial action unlawful under s.127 of the WRA. In other ports, notably Sydney, where negotiations were ongoing, the MUA engaged in stoppages, ostensibly in support of their logs of claims, relying on the existence of a legal bargaining period (MacCallum 1998). The MUA sought to avoid being drawn into activities that could lead to its deregistration or the imposition of heavy penalties for unlawful industrial action. However, continuing industrial action provided Patrick with a trigger to place the labour hire companies into voluntary administration. Apparently, Patrick and the Government believed that by the time legal processes had been concluded, reinstatement orders would be impracticable (Griﬃn and Svensen 1998). If this was the case, the protagonists failed to grasp the scope and application of the freedom of association regime embedded in the WRA or the strength of public reaction. Events moved from skirmishes to confrontation at 11pm on April 7 when the Workplace Relations Minister advised Parliament that Patrick was terminating its MUA workforce and that it would be fully supported by the Government. Minutes later the public saw television images of uniformed and balaclava clad security guards with guard dogs removing the MUA members from Patrick terminals across Australia. If history had been any guide the MUA and other unions would have launched an immediate stoppage across the waterfront and related industries. Instead, the MUA worked closely with the ACTU and its assistant secretary (Greg Combet, a former MUA oﬃcial), to develop a strategic response. The centrepiece of the response was legal action in the Federal Court, along with isolation of the dispute to Patrick, and the garnering of international and ﬁnancial support for the locked out workers. Following the lockout, there were large and continuing protests at Patrick terminals around Australia. These were mostly peaceful. Community groups, members of the general public and other unionists joined picketing MUA members in Melbourne. The police conﬁned their role to preserving the peace and did not force an entry into the port for containers carried by truck or train. According to one analyst, “police and the union movement averted major confrontation and violence by concerted negotiation and planning” (Baker 2000). The international campaign involved a blockade of Patrick operations co-ordinated by the ITF. Threats of action against the MUA under the secondary boycotts provisions of the Trade Practices Act did not stop ships loaded by non-union labour being turned away from ports in India, the United States and Japan. The MUA responded to Patrick’s initiatives with legal challenges commencing in February 1998. The union alleged that Patrick’s plan to dismiss its members violated the freedom of association provisions of the WRA. On learning that the

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lockout was to occur around April 7, the union applied for and was granted a speedy hearing of its application for interlocutory injunctions. The decision of the Federal Court was followed by appeals to a Full Bench of the Federal Court and then to the High Court. Both courts essentially upheld the original decision. The ﬁnal act in this drama involved a series of negotiations among the MUA, the administrators of the labour hire companies, Patrick and the Government. These negotiations produced a framework agreement providing for a return to work for the MUA members (initially without pay), transfer of the employees from the labour hire companies to Patrick Stevedoring, and negotiation of an enterprise agreement with any outstanding matters being referred for conciliation and arbitration. Under the terms of the framework agreement the union accepted 626 redundancies and contracting out of operations such as cleaning and security but with agreement that the redundant workers be given preference for the contract jobs (Griﬃn and Svensen 1998). As part of this settlement redundancies were to be subsidized by a statutory industry levy (Reith 1998; Shergold 1998). Since 1998, Patrick and the MUA have negotiated two enterprise agreements, most recently (in 2001) providing concessions for both sides, including increasing the permanent workforce and provision for more ﬂexible rostering (Workplace Express, 2001). At the same time stevedoring productivity has continued to improve, with the benchmarks set by the government having been exceeded.

Constructing the wharﬁe In this section we examine how the actors in the waterfront dispute tapped into important economic, political and social trends by appealing to various discourses that they used to construct “the wharﬁe”. We examine the two key groups of organizations, which we call the business network and the union network.2 For each network we identify the discourses used to articulate the subject positions of the “wharﬁe” and show what particular series of actions were made rational by each understanding.

Business network The core actors in this network included Patrick Stevedores management, Fynwest, NFF, P&C Stevedores, senior oﬃcials in DEWRSB, and certain politicians in the Federal Government, most notably Prime Minister John Howard and Workplace Relations Minister Peter Reith. We include certain governmental ﬁgures and institutions here because academic (Wiseman 1998; Svensen 1998; Griﬃn and Svensen 1998) and journalistic (Trinca and Davis 2000) evidence strongly suggests that there was a close relationship between certain senior government ministers,

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the DEWRSB, and the central business interests in the dispute, as indicated in the abridged history presented earlier in this account. Around this core were a number of peripheral actors, including a wide range of businesses associated with the port (e.g., shipping companies, exporters and importers), multi-industry business interest groups, and other government oﬃcials and agencies. These groups were aﬀected in various ways by the dispute, and the core actors often claimed to speak for these stakeholders. Industrial dinosaurs: A major discourse used to construct an understanding of the wharﬁe by the business network was a neo-liberal economic one, which referred to them as industrial dinosaurs. This discourse promoted an understanding of the waterfront as a productive unit measured in terms of eﬃciency and productivity. These broad concepts were reduced to one very simple measure, crane-lift rates. Furthermore this discourse introduced a comparison of Australian crane lift-rates with the rates at other international ports. It was then concluded that Australian ports were so uncompetitive as to be “basket cases”. The reasoning stressed that this was a result of the labour monopoly on Australia’s waterfronts (Spicer et al. 2000). Given this chain of economic reasoning, wharﬁes were portrayed as being ineﬃcient, outdated monopolizers of waterfront labour. The ﬁrst key aspect of this neo-liberal economic view of the waterfront is that members of the MUA on the waterfront were industrial dinosaurs whose working practices had become “outdated”: Patrick attacked the Maritime Union of Australia, saying millions of dollars were lost because of their outdated approach to industrial relations (98_33).3 Australian container terminals still live with the result of rigid control by the MUA of the numbers on the work roster, and the precise order in which now-lucrative work is shared amongst permanent, casual, and overtime workers. Control of the “order of pick”, combined with pay linked to hours on the job rather than to productivity, means that the workforce is in a position to create and share out huge amounts of overtime almost at will… Every major initiative launched since [the WIRA regime of the early 1990s] has aimed at this one single issue: how to de-link pay from time spent on the job, and link it to productivity per man-hour and per crane instead (97_50). Late shipments and unﬁlled orders are undermining [meat exporters’] eﬀorts. “We are the laughing stock yet again of the international trade community”… referring to the reputation Australia has had for many years as a nation where labour unions, and especially the dock workers union, strike incessantly (Justin Toohey, Executive Director, Cattle Council of Australia: 98_206).

Moreover union members were portrayed as being wilfully ineﬃcient, and any resistance to reform was encoded as irrational, or caused by the entrenched nature of “the old way” of doing things:

Paradox in symbols and subjects

The continued industrial thuggery of the MUA and the union’s complete refusal to face economic realities have made today’s events inevitable…Put simply, the MUA’s blind ideology has cost its members their jobs…The union’s stubborn rejection of work practices that are the norm in the rest of Australia, has meant they have been left behind (Chris Corrigan: 98_150). But in other areas — most notably in the continuation of absurd penalties and working arrangements — the MUA has been a bulwark against change. In an international marketplace, you’re not competing against your previous best but the present performance of other people (98_28).

Finally the wharﬁes were seen as creators of a labour monopoly: Government ministers and oﬃcials… believe that Australia’s stevedoring duopoly is… part of the problem rather than the solution. A much more competitive market, the government reasons, would demand much more competitive labour deals. Employers would pick up the new union-curbing legislation and use it to get the best terms for industry. Competition would therefore consolidate all the other reforms (97_01).

This ﬁgure of the monopolistic wharﬁe not only posed a signiﬁcant threat to the continued operation of Patrick but also to other port-related ﬁrms and even to the nation’s business sector in general. Peter Reith condemned the actions [blackbanning of ships] as union blackmail and said Australian businesses would pay dearly for being held to ransom by the MUA (98_216). It will be the fault of the MUA and it won’t be the ﬁrst time that the activities of that union have cost people their jobs and damaged businesses (John Howard: 98_174).

These discursive images legitimised attempts to get rid of “the monopoly” of labour on the waterfront by dismissing the unionised workforce in order to institute changes in work practice such as increased container lift rates, pay-for-performance systems, decreased manning, and decreasing number of breaks. It also made rational changes in the labour market, in particular the employment of non-union workers on individual contracts. Those contracts had provisions for signiﬁcantly decreased base pay with a large pay-for-performance margin. Bludgers: A second discourse involved the way that the wharﬁe was assessed and referred to their work ethic. It was suggested that MUA members did not do a “fair day’s work for a fair day’s pay”. They were portrayed as doing little work in return for ridiculously inﬂated wages: The case for reform is overwhelming. Australia’s container ports, in particular Sydney and Melbourne, are expensive, ineﬃcient, and unreliable. In terms of the number of container lifts per hour, the performance of Australia’s ports rank well

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behind similar ports elsewhere in the world… The militant, 100-per-centunionised stevedoring force in Australia is extraordinarily well paid, with average earnings in the vicinity of $70,000 to $80,000 per year, for a semi-skilled occupation. Some stevedores are able to earn sums of up to $120,00 per year with the aggressive use of overtime (Judith Sloan, Executive Director, National Institute for Labour Studies, Flinders University: 97_168). …and let me say to the MUA, don’t damage the national interest in your own selﬁsh interest…The national interest of Australia demands that we have more competition on the wharves, … that we have the cheapest crane rates, … that we have the opportunity of selling at the most competitive prices (John Howard: 98_21). Most blue-collar workers ﬁnd it oﬀensive that anyone who works less than 38 hours a week can earn more than $100,000. Life on the wharves was once incredibly tough and genuinely dangerous — but the rise of automation and the adoption of stringent safety requirements means it is now no diﬀerent from most manual work. The industrial argot which the MUA favours might have washed at the turn of the century. But when ports around the world are shifting up to 30 cranes an hour — and Brisbane, Fremantle and Melbourne can hardly manage 20–it seems that the lads aren’t so much being exploited as pampered (98_28).

Again the subject position of the wharﬁe was cast negatively because they were constructed to be an active aﬀront to the traditional work ethic. This legitimated attempts to bring these “bludgers” back into the fold of the everyday work ethic through strategies such as union busting. Quasi-criminal thugs: A third discourse used to portray the wharﬁe was that of “quasi-criminal thugs.” The portrayal of the MUA as standing in the way of national competitiveness is buttressed by the creation of a particular image for the union and an iconic character for those who work on the wharves. Around the ﬁgure of the “wharﬁe” we ﬁnd a rich vernacular mobilised to make sense of the dispute. Terms often used to make sense of wharﬁes included rorters,4 thugs, monopolists, lay-abouts, and the rich wharﬁe. This portrayal of wharﬁes was well exempliﬁed in a series of press photos taken during the dispute (see reproductions in Trinca and Davies 2000). There were also media descriptions that point towards uncouthness, violence, “stand-over” tactics and even anarchism: We will never countenance as a government any breach of the law, any thuggery or any violent behavior anywhere in Australia — that’s not the Australian way (John Howard: 97_147). Patrick’s chairman Chris Corrigan was keen to tell the assembled media at the Port Botany Terminal his new work force was learning quickly and bettering the container lift-rates of the MUA. But his brieﬁng was rudely interrupted by union-

Paradox in symbols and subjects 103

aﬃliated crew who bellowed obscenities and told him to “go back to the sewer”. “I love it. Listen to it”, Mr Corrigan wryly said. “These are the gentlemen of the waterfront — these are the sort of stand-over tactics they use” (98_163). Patrick has claimed its managers “fear for their lives” if guards are withdrawn and expressed concern about its hundreds of millions of dollars worth of machinery (98_194). [The Western Australia Transport Minister] described the protestors as “anarchists” and defended the use of force…“They’re a group of people who are trespassing on private property… using abusive language towards other people, making threats towards personnel and property… including death threats, and no action has been taken against them” (98_174).

These are unambiguous images of MUA members as extremists who willingly upset law and order for their own selﬁsh gain. This discourse pushes for harsh action such as union busting. Intertwining discourses: The three discourses propose diﬀering understandings of the wharﬁe but all have a negative valence. The neo-liberal economic discourse casts the wharﬁe as ineﬃcient and outmoded, the work-ethic framework casts the wharﬁe as a bludger, and the conservative “law-and-order” framework casts the wharﬁe as a quasi-criminal threat to common decency. The diﬀerence among these discourses is in the diﬀering degrees of plausible action to be taken. The neo-liberal economic discourse’s construction of the wharﬁe leads easily to the need for organizational and labour market reforms based on a technical, rational logic. The constructions of the work-ethic and law-and-order discourses demand harsher strategies of engaging with the wharﬁes. By understanding wharﬁes as actively subversive of prevailing belief systems, forcible, even violent action becomes justiﬁed. Instead of “reforming” the wharﬁes, these discourses make it legitimate to break the wharﬁes’ collective identity, even using “extreme” measures of mass sackings, military style operations, and government intervention. In this instance, these two discourses came together to underpin the implementation of the government’s industrial relations agenda.

Union network The key actors in this network included the MUA and the ACTU. There was also important involvement by a range of other unions and the “general community”. Proud unionist: Throughout the dispute, participants in this network consistently and assertively drew on the concept of unionism and the preservation of collective identity. The “long proud history” of the watersiders union was often mobilised and framed in terms of what the waterfront workers were ﬁghting for. The understanding of the wharﬁe imputed within this discourse was as a proud bearer

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of the long history of union struggles. Examples included several union histories and related papers released during this period (MacIntyre 1998; MUA 2000). In these texts the history of the union and work practices on the docks were consistently invoked, such as 19th-century wharf labour practices (where “workers were treated no better than cattle”), often mortal struggles with police (such as the 1890 strike when protestors were ﬁred upon), and the subsequent development of the union (e.g., Lowenstein and Hills 1982; Svensen 1998). These union histories became a central part of the media debate about the waterfront dispute, both as academic research and as revered cultural objects to be handed down the generations: Unionists believe that the issue is not how much reform takes place, but on whose terms. A key factor is posterity. Many union members said they accepted outsourcing is inevitable, but they will insist that the unions keep the cargo handling jobs. As a generation, younger workers want to be the ones who keep the union and passed it on (98_209).

Within this discourse wharﬁes were also portrayed as representing the interests of the wider Australian working class. The 1997–98 waterfront dispute was seen as part of successive attempts by the representatives of capital (in this case, the Liberal-National Government and the management of Patrick) to destroy the hard won gains of the working class in order to increase proﬁtability. This discursive framework led MUA members and their supporters to understand their engagement with Patrick in terms of a long history of eﬀorts to gain and preserve labour rights. It also inspired them to try to ensure the continued existence of unionism — not just on the docks, but also in Australia at large. The mobilisation of union history and collective class identity was vital in explaining and justifying the long and tortuous sacriﬁce of many of the unionists and protestors, and in communicating the MUA’s leading role in defending the hard won rights of workers. New workers: Alongside the resistant “proud unionist” discourse there was a discourse of the “new workplace” with a more conciliatory tone. Here the key notion was that wharﬁes were post-industrial workers who (perhaps grudgingly) accepted ﬂexibility and pay for performance as a part of “the new realities of work”. These concepts arose in the late 1980s and provided an organizing discourse for union negotiations during the WIRA period. The concepts were based on the premise that the changing situation of Australian ports compelled fundamental changes in labour practices. The understanding of the wharﬁe in this discourse was as a member of a changing labour force whose work was now deﬁned in work more technologyintensive than the back breaking physical labour so emblematic of the past.

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Moreover this discourse constructed a vision of the post-industrial worker as ﬂexible and multi-skilled: [A] senior stevedoring industry source said yesterday that rorts, which once existed on the docks, were all but gone and most wharﬁes in the ‘90s were highly skilled and worked long, unsociable hours. The former stevedoring manager, with more than 30 years’ experience in the industry, said many of those criticizing the wharﬁes had no idea what they were talking about. “The waterfront is fully multiskilled” (98_33).

Acceptance of the discourse of the new workplace by wharﬁes and their leaders enabled concessions that would have been unthinkable previously, such as the MUA’s concession to a signiﬁcant number of redundancies at the end of the dispute. Ordinary workers: A third discourse used by the union network drew on a broad framework of class and “equality”. MUA workers were understood as being like any other Australian worker. This concept was coloured with images of “bread winners” and “family men” with important, though common, responsibilities: Sutton told the crowd the dockers were sacked as “sacriﬁcal lambs” for the political career of industrial relations minister Peter Reith, who was determined to break the waterfront union. “Peter Reith last night put 1,400 workers and their families on the street”, said Sutton from the back of truck, calling on workers to donate to the ﬁghting fund for sacked dockers. Maritime union oﬃcials warned that the dockers were the “thin end of the wedge” for unions in Australia. “If we allow this to happen on the waterfront, it will happen in the factories, in the hospitals, in the ﬁre stations, and in the schools,” Paddy Crumlin, MUA national assistant secretary, told the Sydney protest. “Our attitude is that an injury to one worker is an injury to all workers. It’s all about solidarity”, said Andrew Ferguson, a building union oﬃcial (98_149).

In this text the workers are portrayed as victims of a large corporation seeking proﬁts at workers’ expense, in cahoots with allies in government. The Dubai scheme was labelled by Labour opposition as “nothing more than a bunch a heavies being trained to break strikes on the docks and an attack on ordinary working Australians” (97_138). The men were being trained [by Fynwest in Dubai] to kick Australian workers oﬀ the waterfront. “This is about industrial mercenaries, this is about as outrageous and improper as it gets, this is Australia’s sandline…You have deceit and duplicity on a grand scale, you’ve got people connected with the defence forces… being used to attack Australian workers” (Opposition transport spokesman Lindsay Tanner: 97_129).

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The wharﬁe is constructed in this discourse as a kind of “every-worker” who had a family to support while being victimised by forces beyond his control. This makes mass protest action rational because the wharﬁe is seen not just as a worker in a speciﬁc occupation, but ﬁrst as a fully humanised subject and second as a representative of all workers. Defenders of social justice: A fourth discourse used to make sense of the wharﬁe in the dispute is a broad one dealing with social justice. This discourse linked union interests to some wider societal interests. The most important was the amorphous “the way Australia is going”, particularly due to the incumbency of a LiberalNational government in the state of Victoria (1992–99) and at the national level (from 1996 to date). Patrick’s dismissal of its workers came to be understood as part of the general ascendancy of “New Right” thinking in Australia, and the associated interests of “big business”. Hence this discourse was one of infringements or erosions of social justice. Within this discursive framework, the maritime workers were seen as people who had been pushed too far, and were standing up for what was right in the face of increasingly ruthless and powerful governments and corporations. The ﬁrst major component of this discourse was “Australian-ness”. In particular, we ﬁnd the idea that the waterfront industrial relations issue had been captured by an alliance of corporate and military interests which was “un-Australian”: “How can sacking 2000 people be a cause to celebrate?” asks Hawke… referring to the government’s support of the sacking. With images of Prime Minister John Howard and Workplace Relations Minister Peter Reith on screen, Hawke declares: “Your job is your right, not a political game. Divide and conquer is not our way, we must have government for all of us” (television advertisement featuring Hazel Hawke, wife of former Labor prime minister: 98_176). “I just think it is totally un-Australian,” wharf worker Chris Rumley said after he ﬁnished one of Australia’s most unusual industrial actions yesterday by working nine days for no pay. “I mean, they put the rosters up as normal with our names on it and we go to work and don’t get paid at the end of the day. It is just unprincipled” (98_131).

There were also attempts to point out that the “struggle” on the wharves dovetailed with larger issues of social justice. In this way a dock in Melbourne becomes not just a microcosm of all Australian workplaces, but also symbolic of other struggles for civil rights around Australia, and indeed the world. For example, the notion was proﬀered of not allowing “ordinary people” to be “pushed around” by corporations: [The MUA] attack[ed] straight back down the line of Patrick’s original advance, using freedom of association principles to carry a case that the workforce which

Paradox in symbols and subjects 107

Patrick dismissed had been discriminated against because they were union members… Moreover, the union has now built the mass sackings into a huge allegation of illegal conspiracy involving secret planning with the federal government, the recruitment of Dubai mercenaries, and many other issues (98_209). [A]t a massive union protest rally in Melbourne, Dwyer read an open letter to the Victorian public. “Since day one of this dispute we have stood united in our belief that these co-conspirators have placed themselves outside the laws of this land and today we stand vindicated”. The letter said, “To Mr Reith, you’ve unraveled the mystery of our waterfront to the Australian public — we are neither criminals, bludgers, liars or cheats. We’re just ordinary Australians who have our integrity attacked beyond regard” (Peter Dwyer, MUA delegate: 98_194). [D]espite vigorous court injunctions aimed at breaking the pickets, unions have managed to prevent any cargo leaving Patrick’s docks by organizing “community” blockades. “Peter Reith, John Howard and Chris Corrigan have created something here they will not be able to turn back — a worker and civil rights movement” (Paddy Crumlin, MUA national assistant secretary: 98_180).

This discourse began when Patrick restructured and tried to eliminate 2000 jobs, an issue that was then articulated into a more universal concept of social justice. This led to the important broadening of the public support base for the wharﬁes and the MUA. Intertwining discourses: The four discourses used by the union network led to a complex web of understandings and entrained their overall contentious strategy of engagement. There were signiﬁcant overlaps among the culture-based discourse of the “proud unionist”, the class based discourse of the “ordinary workers”, and those who were pushed so far they became “defenders of social justice”. Each of these discourses legitimated the worker as being resistant and doing “what’s right” in the face of imposed, oppressive changes. It was then possible for the union network, and the public at large, to think that if big business could infringe on workers’ rights with quasi-military force on the waterfront, then they could do it anywhere. This made possible the consistent resistance to the pressures of the business network as well as public support for the MUA evident in the mass protests. However the discourse of wharﬁes as “new workers” made possible concessions such as greater labour ﬂexibility. This represented a counter discourse to the other constructions of the union network. The juxtaposition of the two sets of discourses established a degree of tension; eg, redundancy concessions vs resistant pride in the historical context of radical conﬂict between waterfront management and labour. The tension was important in the union network in portraying and appreciating the wharﬁes’ struggles as linked to other struggles in the union’s history and in contemporary society.

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Other interests, other subjects In the material above we have focused on and analysed only two networks of interest in the waterfront dispute. There was some evidence of other networks operating in the Australian port industry during this period. For instance, actors in a “legal” network (consisting of the administrative and judicial organs of the state) saw the wharﬁe and their actions as demarcated by a series of laws that should be rationally administered and legal envelopes within which industry actors must operate, like a set of rules of engagement. They used a discourse that belied an understanding of their role as custodians of the public interest, an apparently neutral third party. The public media represent another possible network in this case, both in terms of the interactions among the numerous journalists covering the story, and in terms of their production of texts. Several researchers have undertaken analyses of Australian media portrayals of this dispute (eg, Warby and Morrison 1999). Space constraints prevent us from exploring these and other possible networks in the dispute.

Discussion Two main implications derive from the above analysis. First, the actors in the waterfront dispute accomplished several constructions of the wharﬁe, and discursive struggle occurred over these constructions. Second, these multiple constructions and struggles had important material consequences. These implications are discussed in turn.

Multiple constructions and discursive struggle Our analysis shows that no single dominant discourse was used to understand and construct “the wharﬁe”. Rather, diﬀerent, and in the case of the “new worker”, conﬂicting, discourses were used by both networks to understand that object. Between the two networks there were striking diﬀerences in the substance and valence of the discourses constructed and used. Certainly part of the reason for the diﬀerences in the networks’ constructions of the subject “wharﬁe” lies in the asymmetrical nature of the constructions themselves: the union network (or at least the MUA part of it) was constructing their own identity, whereas the business network was constructing the “other”. However, we also ﬁnd the wharﬁe understood in diﬀerent ways within the two networks. Thus, both within and between the networks diﬀerent and at times contradictory discourses interacted and played oﬀ each other, and the multiple constructions of “the wharﬁe” made diﬀerent (kinds of) action legitimate.

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How do we interpret the existence of the rich variety of discourses of the wharﬁe in this social arena? Our ﬁrst observation must be that a single dominant discourse of the wharﬁe did not exist and therefore could not be used to legitimate the activities of all actors in both networks. Rather, there was evident “discursive struggle” (Hardy and Phillips 1998) as the actors attempted to mobilise diﬀerent discourses of the wharﬁe in order to legitimate diﬀerent courses of action. Our second observation is that the discursive struggle in this case was not as simple as one group pitting a relatively well-deﬁned discourse against another group’s relatively well-deﬁned discourse. Rather, each network used a number of discourses, some of which constructed contradictory or incompatible identities. From the stance of any particular discourse this appears paradoxical. However, these discourses, both within and between the networks, arose and operated in relation to each other. An ecology of discourses existed in the arena of the Australian waterfront dispute, and the diﬀerent discourses we identiﬁed were in dialogue within that ecological space. The implication is that any particular discourse of the wharﬁe cannot be understood in terms of itself, but only in the context of other discourses. Stuart Hall’s notion of articulation (1985; 1988) helps to explain this. For Hall, diﬀerent, even inconsistent, discourses can be linked together (like an articulated truck), and the establishing and maintaining of these links creates a hegemonic discourse. We argue that it can also create discursive struggle in pluralistic situations. Mumby (1997), in supporting an articulation approach to understanding power in organized settings, argues that discourses need to be continuously articulated in order to establish hegemony — and also to mobilise resistance. In the waterfront dispute, linkages were created among the discourses of union history, social justice, and “ordinary working Australians”, which subsequently created a powerful resistant position and vocabulary. A diﬀerent set of linkages was established in the business network. There we found the discourse of neoliberal economics constructing the wharﬁe as an “industrial dinosaur” whose work practices were outmoded and whose “monopolistic labour practices” were a signiﬁcant block to the eﬃcient functioning of the system. This in turn justiﬁed the reform of work practices and the labour market in order to create a rational economic system. The connections that we have suggested between discourses used by the networks and actions that those discourses made sensible are summarised in Table 1. In sum, surfacing the diﬀering ways that the wharﬁe was constructed within these discourses is central in understanding how power operated in the waterfront dispute. In each network’s portrayals of the wharﬁe we ﬁnd the strategic construction of subject positions that exercise power through linkage to a series of limited, but diﬀerent, industrial relations options. Some of these options were at least partially contradictory. For instance the business network’s use of neo-liberal

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economic discourse to construct the wharﬁe as “industrial dinosaurs” legitimated reform activities, whereas the construction of wharﬁes as “bludgers” and “quasi criminal thugs” legitimated more radical courses of action such as using the military. Some proponents of the neo-liberal discourse were uncomfortable with or even opposed to the use of the “bludger” and “quasi criminal thug” discourses. Some actively sought to disassociate themselves from the actions legitimated by those discourses. Table 1.Summary of discourses used in 1997–98 waterfront dispute Network

Discourse

Image of wharﬁe

BUSINESS

Neo-liberal economics Industrial dinosaur

Reform

Work ethic

Reform Break the union

‘Bludgers’

Inferred actions made rational

Conservative rule of law Quasi criminals

Break the union

Union history

Proud unionists

Strong traditional union protest

New workplace

Post industrial workers

Concessions

Class

Ordinary workers

Wider public support

Social justice

‘Aussie battlers’

Wider public support

Legal

Judicial

Deﬁned by legal envelope

Media

Not examined

Not examined

Application of law; legal battles Not examined

UNION

OTHER

Material consequences The discursive struggle in this dispute makes clear that conﬂict occurred around symbolic as well as economic resources. Our evidence highlights that conﬂict did not just occur on a physical level on picket lines at the docks, or on a material level over the control of jobs in the courts, but also on a symbolic level around how the wharﬁe should be understood. There was a signiﬁcant interplay between the material and symbolic conﬂict in this case. The material eﬀects of this dispute clearly involved the legitimation of various economic and political claims; for instance, the MUA’s claims for maintaining conditions, wage levels, and collective organization; and business and government’s claims for increased eﬃciency and proﬁt through increasing productivity, decreasing overall labour costs through

Paradox in symbols and subjects

labour ﬂexibility strategies and work practices, and decreased union power. All the major parties gained and lost something economically: the MUA members retained many jobs, pay levels and some conditions, but lost 626 positions through enforced redundancies; Patrick implemented some ﬂexibility strategies and changed labour practices to increase proﬁtability, but was forced to re-hire MUA stevedores; and the Government was able to claim increasing eﬃciency on the nation’s waterfronts, but suﬀered major damage to its waterfront reform strategy. Politically however, the established positions and interests were sustained. We have attempted to examine the symbolic struggles in a case of ostensibly class based identity using concepts and methods drawn from critical discourse analysis. What emerges clearly from our analysis is that political struggles around economic issues can be waged on symbolic grounds. In this particular case we saw that the struggle over the distribution of work time, labour conditions, and wages during a labour dispute was conducted in part through a struggle around which identities were used to recognise and understand the workers. This implies that political struggles around economic issues and around symbolic issues in organized settings like labour disputes may not be so distinct. Indeed they seemed to intertwine, or “oscillate” (Dugdale 1999), in the waterfront dispute. More generally, our study illustrates that power operates through discourse and brings into being particular subject positions that subsequently make rational particular courses of action. These processes appear to be important in the reproduction of industrial relations regimes. This is not to claim that these regimes are constituted solely in discourse or to deny important structural forces that have traditionally been the focus of industrial relations research. It is to claim that discourse plays a key role in the reproduction of social structures (see for example Parker 2000). As Reed (2000: 528) argues: The discourses which assemble, represent and perform or enact institutional structures — such as markets, classes and organizations — locate and constrain actors within a matrix of social relations and linguistic rules denoting who they are and what they can do (e.g. landlords and tenants in the housing market).

In sum, our focus on the discourses used in the waterfront dispute is not to imply that particular conceptions of rational action were simply conjured from the air or from ideas disconnected from social structures. Rather, it is to point out the interpenetration of struggles over economic and material aspects (wages, working conditions, proﬁts) and struggles over symbolic aspects (how the wharﬁe was identiﬁed). This is consistent with Laclau and Mouﬀe’s (1985) argument that although material structures exist, they only continue to exist when they are bought into discourse, spoken, re-articulated. It is only through the consistent use of discourse from the position of these social structures that these same social

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structures are reproduced. This points to what we might call a “paradox of materiality” in the interplay of the politics of the economic and the symbolic.

Conclusion Our analysis of the 1997–98 Australian waterfront dispute has highlighted the role that discourses play in the struggle around work conditions. Our evidence has extended research in organization studies on how managerial discourses construct power relations and subject positions into the ﬁeld of industrial relations. The discourses mobilised during the conﬂict did not simply describe what happened to the wharﬁe, but constructed this ﬁgure in a conﬂicting and politically charged way. Moreover, each construction of the wharﬁe was central to legitimating particular patterns of action with respect to the wharﬁe. Our research has also extended recent research on resistance and discursive struggle by suggesting how dialogue occurs in an ecology of discourses in complex organized arenas. Our approach also has demonstrated how a critical discourse analysis framework can be used to examine the increasingly important symbolic struggles that take place in industrial disputes. In recent times, unions have had to deal with trials by the media, which have appeared quite willing to publicise negative images promulgated in neoliberal discourses. The union movement may beneﬁt from using discursive tools associated with identity politics to resist such images and to construct positive identities for unionists in the media, as has been done by aboriginal, gay and women’s movements. By pointing out the paradoxical ways that, on occasion, the same network constructed the wharﬁe in discourse, we have identiﬁed an important discursive tension that may exist in complex social arenas. The “articulation” of discourses that are sometimes paradoxical may be central to the operation of multiple discourses in such arenas. What remains to be investigated is how the articulations are continually formed and how subjects and groups cope with these articulations cognitively or phenomenologically. Examining processes of articulation more intensely may yield a more nuanced understanding of “multiple”, “paradoxical”, “plurivocal”, or “dialogical” discourses. Our study has trod a thin line between the economic/material and symbolic aspects of political struggles. We began by suggesting that it is important to understand the symbolic aspect of such struggles as reported in the public media if we are to understand the economic struggle of an industrial relations dispute (or more properly, the economic aspect of such a dispute). By highlighting how a discursive struggle led to important economic and political outcomes, we have attempted to point out the material implications of discourses. By contextualising

Paradox in symbols and subjects

the various discourses that appeared during the dispute, we highlighted an important “extra” aspect that shapes what discourses can appear and how they get understood. Thus, we have endeavoured neither to dismiss important institutional and economic aspects of industrial relations disputes, nor to discount their symbolic aspects as mere epiphenomena, but to hold the two in a dynamic tension. If the burgeoning ﬁeld of discourse analysis is not to fall prey to charges of idealism or discursive determinism it is vital that discourse analysis place the institutional context more centrally in its analyses, and examine critically the struggles and articulations between discourses in today’s workplaces.

Notes * The authors thank Susan Ainsworth, Stewart Clegg, Paul Couchman, Liz Fulop, Cynthia Hardy, Jon Stokes, and Andy Sturdy for comments on earlier versions of this paper. Support for this research was provided by a grant from the Department of Management, Monash University. 1. “An expansion analysis is basically a written interpretation of a segment of discourse (Cicourel, 1980) in which the analyst assumes that the meaning of the discourse is not self-evident. The expansion includes information on how the participants interpreted the discourse, including background knowledge necessary to understand the discourse” (Gephart, 1993:1484–85). 2. These are networks of interests derived from the structural and historical analyses of industrial relations on the Australian waterfront, which show clear continuing conﬂict between workers and their representatives and employers throughout the history of waterfront industrial relations. The most recent change to this framework is the role of the government. In a traditional industrial relations model, the government is considered as a relatively neutral third party (Dunlop, 1958), a supporting institution of capital (Hyman, 1975) or as a set of institutions that labour and capital struggle to control (Clegg, Boreham and Dow, 1986). However, in this case there was an alignment between speciﬁc business interests and certain aspects of the state, while other aspects of the state (e.g., the judiciary) appeared to remain impartial. (Although the breadth of the injunction issued by Supreme Court Judge Beech partly contradicts that assertion, it should be added that the scope of that injunction was narrowed on appeal.) The alignment can partially be attributed to the legislative framework within which this dispute took place, in particular the Trade Practices Act and the Workplace Relations Act. These Acts are generally acknowledged as favourable for business interests because they are designed to curb the exercise of union power (Ford, 2000; Thorpe and McDonald, 1998; Lee and Peetz, 1998; Mitchell, 1998). 3. Sequence number of media report; see ‘Media Reports’ section of References. 4. “Rorts” is a uniquely Australian vernacular term signifying semi-legal or illegal use of job beneﬁts or perks.

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Van Dijk, T. (Ed.) (1997b). Discourse as social interaction. Discourse studies, a multidisciplinary introduction, Vol 2. London: Sage. Warby, M. and Morrison, K. (1999). ABC-TV News and the 1998 waterfront dispute: Reporting or barracking? IPA Backgrounder, 11 (1): 1–16. Weick, K. E. (1995). Sensemaking in organizations. Thousand Oaks, CA: Sage. Wells, M. (1998). I Michael Wells, make oath and say… The Age, http://www.theage.com.au/ daily.981508/news/news12html, 8 May. WIRA [Waterfront Industry Reform Authority] (1992). Final report. Canberra: Australian Government Printing Service. Wiseman, J. (1998). Here to stay? The 1997–1998 Australian waterfront dispute and its implications. Labour and Industry, 9 (1): 1–16. Workplace Express (2001). New Patrick agreement starts Monday, http://www.workplaceexpress. com.au/workplace/wpredirect?in_id=34232.

Media reports Sequence #

Date

Source

Title

97_01

06/01/97

LL

Big divisions to the fore in terminals war

97_50

28/05/97

LL

Productivity keystone of waterfront reform

97_129

04/12/97

WAu

Defence army harbours trade unions WWF Australian cabinet

97_138

08/12/97

GN

Australian port ‘strike-breakers’ train at Jebel Ali

97_147

12/12/97

DT

Alston ﬁres $1b shot at MUA

97_168

22/12/97

Aus

Were they really waterfront mercenaries?

98_21

30/01/98

CT

NFF-Dubai mercenary link

98_28

31/01/98

Adv

Dockers wear black hats

98_33

31/01/98

WAu

Rorts in past — industry

98_131

25/03/98

Aus

Plenty kudos but no pay for productive wharﬁes

98_149

08/04/98

Reu

Australian unions protest dismissal of dock workers

98_150

09/04/98

ASX

Patrick to contract out services in major restructure

98_163

13/04/98

Aus

Stand-oﬀ, then Patrick’s ship comes in

98_174

17/04/98

Aus

Car workers face lay-oﬀs in dock delay

98_176

01/05/98

Reu

Australian unions use TV ad in waterfront war

98_180

04/05/98

Reu

Australian dockers declare ‘solidarity forever’

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98_194

07/05/98

n.i.

Last to go waits on a word to be ﬁrst back

98_206

20/05/98

JOC

Dockers strike bedevils US sailings

98_209

25/05/98

LL

Conspiracy claims abound as union battles for leverage

98_216

28/05/98

WAu

Non-union ship to return

Source abbreviations: LL = Lloyds List, London Aus = The Australian GN = Gulf News CT = Canberra Times Reu = Reuters News Service ASX = Australian Stock Exchange Feed AAP = Australian Associated Press

Dom = Dominion, Wellington, New Zealand WAu = West Australian, Perth DT = Daily Telegraph, Sydney Adv = Adelaide Advertiser CM = Courier Mail, Brisbane JOC = Journal of Commerce n.i. = not indicated

Chapter 6

Politics and popular culture Organizational carnival in the Springﬁeld nuclear power plant Carl Rhodes

When will I learn? The answers to life’s problems aren’t in the bottom of a bottle. They’re on TV! — Homer Simpson1 I am disgusted with the way old people are depicted on television. We are not all vibrant, fun-loving sex maniacs. Many of us are bitter, resentful individuals, who remember the good old days when entertainment was bland and inoﬀensive — Grandpa Simpson2 Mom, romance is dead. It was acquired in a hostile takeover by Hallmark and Disney, homogenized, then sold oﬀ piece by piece — Lisa Simpson3

Television is a medium that, in contemporary times, has become a platform for the development of cultural representations of organizations. Organizations are everywhere on television, whether they are hospitals, police stations, law courts, coﬀee shops, factories or oﬃces. At the same time, television programs are produced and broadcasted by organizations in pursuit of commercial interests. The result is that through television, commercial organizations are, in part, in the business of representing what we take commercial organizations to be. As Rowe (1995) points out, the result is a close, yet uneasy, relationship between cultural and economic activity. It would be simplistic, however, to suggest that the relationship between culture and commerce was one where commercial institutions seek solely to create cultural representations that support or advocate commercial or capitalist interests. Paradoxically, as this chapter will discuss, they are often quite corrosive. In relation to this, I wish to explore the apparent paradox whereby capitalist organizations can produce representations of organizations that oﬀer a critique of the modes of production and consumption that create and sustain them. To do this, I will examine the paradoxical organizational practices and work place relations portrayed in the prime time animated television cartoon show The Simpsons. My aim is to provide a cultural and political reading of how organizational life is represented

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in The Simpsons. In providing this reading I propose that television oﬀers an arena for understanding the cultural logic of organizations and for providing the opportunity for a compelling and political critique of that logic. Particularly, I will examine the relationship between Homer Simpson — the ‘star’ of the show, a bumbling, doughnut eating, beer drinking buﬀoon, and his employer, Montgomery C. Burns, the sole owner of the Springﬁeld Nuclear Power Plant (SNPP), an industrialist and Yale graduate. The SNPP is the main organization represented in The Simpsons. In the town of Springﬁeld, where the show is set it is the major industry and the chief employer, as well as being frequently both the subject, and the context, of the stories. My intention here is to examine how organizations are represented in this form of popular culture and how popular culture can provide the opportunity for compelling critiques of organizational life. Further, it is my argument that in providing both a parody and a critique of organizations, The Simpsons also provides its viewers with the possibility to interrogate alternatives to existing and potentially oppressive social relationships at work. As Weinstein (1998: 71) puts it: The show’s narratives celebrate the way individuals and corporations in positions of power — ranging from Homer to Mr Burns … can never entirely control their environment. Indeed, instruments and technologies that enable the exercise of power (money, video, nuclear energy) are rendered useless in the face of human unpredictability. Furthermore, a host of formal devices — non-linear narrative, verbal and visual puns, non-sequiturs, parody, animation, montage — suggest that not only television, but life itself, may be endlessly remade.

The chapter starts with a review of the contested relationship between popular culture and the commercial institutions through which it is created. The position taken is that the potential meanings of popular culture exist in paradoxical relation to those institutions in that popular culture can work to critique such institutions. The Simpsons is then explored as exemplifying this paradox through the way it represents organizations and organizational life in a way consistent with Bakhtin’s notion of the carnivalesque. The chapter concludes with a discussion of how The Simpsons can be seen to employ a critical ambivalence that provides a space for organizational critique without ﬁnalising or shutting oﬀ that critique fully for its viewers. This is a critique that oﬀers the opportunity to question organizational practices in a way that is not dogmatic, evangelical or revolutionary. Hassard and Holliday (1998: 1) have pointed out that “popular culture oﬀers more dramatic, more intense and more dynamic representations of organizations that management texts”. The chapter will argue that The Simpsons is a signiﬁcant contemporary popular cultural form in which such representations are oﬀered. The Simpsons is thus taken as a prime site for studying organizations — one where organizational life is vividly and irreverently represented. To develop an interpretation

Politics and popular culture

of these representations, the chapter uses Bakhtin’s model of the carnival to discuss the logic of how The Simpsons develops its critique of organizations. For Bakhtin, the carnival embodies a subversive culture of folk humour that mocks, satirises and undermines oﬃcial institutions. Extending beyond the actual event of the carnival, carnivalisation is presented by Bakhtin as having a subversive and liberating eﬀect in literature. The chapter argues that this “carnivalesque” spirit is alive and well in comic animation such as The Simpsons, and that this provides a wealth of knowledge about contemporary understandings of work — knowledge whose laughter and parody develops a compelling critique of modern organizations. The Simpsons started out as a series of short cartoons that were included in the adult comedy program The Tracy Ullman Show in 1987. From there The Simpsons was developed into a show of its own and premiered as a prime time weekly series in the US in January 1990. Today, The Simpsons is America’s longest running television situation comedy. The show currently airs in more than sixty countries and in 1999 it was proclaimed by Time magazine as the best TV show of the 20th century. Importantly, The Simpsons was the ﬁrst cartoon series since the 1960s to be placed in a prime time slot (8pm in the US) and has gained signiﬁcant popularity both with adults as with children. The Simpsons epitomises commercial success, but, as we shall see, this success has not tempered its critical stance. Kafner (1997) has argued that, although cartoons might seems on the surface to be without much substance or importance, on close examination, they can be seen to provide and important reﬂection on the society of our time. The Simpsons is an arena where such reﬂections have been particularly highlighted on account of the wide-ranging subject matter that the show has addressed. As Cohen (1998) points out, since the beginning, The Simpsons has broken the established “rules” and experimented with subjects traditionally seen as taboo for an animated series. This has included marital problems, adultery, sexual fantasies, drinking, swearing, gambling, suicide, and the ridiculing of religion. Signiﬁcantly, added to this list is a questioning of various organizational practices. Marc (1998:193) has claimed that The Simpsons is perhaps the most morally exacting critique of American society that has yet appeared on television. This critique oﬀers an array of texts for examining how organizations operate in contemporary western culture. This covers a material ranging from a questioning of consumerism or the role to the role of media organizations in society

Popular culture as business Postman (1987: 8) has suggested that the ascendancy of the “age of television” has recast the meaning of contemporary public discourse. He argues that “under the

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governance of television, [public discourse] has become shrivelled and absurd” (1987: 16) and has descended into a “vast triviality” (1987: 6). His proposal is that the growth of television means that we are “amusing ourselves to [cultural] death”, as culture becomes a burlesque where populations are distracted by trivia and culture becomes redeﬁned as mere entertainment. It is here, according to Postman, that “serious discourse dissolves into giggles” (1987: 162). Such concern that popular culture is damaging to society also has a long history in critical theory. Such approaches have “demonised mass culture by apocalyptically condemning it as the chief danger to civilisation, leading to mass acceptance of and lack of resistance to, all that is bad and wrong in the world” (Docker 1994: xvii). Recently, for example, Krönig (2000: 43) has argued that “television is the preferred and most eﬀective instrument in creating a culture based on consumption and commerce”. What Krönig proposes is that globalisation, commercialisation and the increasing concentration of media conglomerates have led to increased competition in the cultural industries — competition which, to his logic, has lead to deterioration in quality of today’s culture. As Krönig (2000: 44) puts it: Does the ratings war between competing media conglomerates inevitably lead to a process of dumbing down? I fear it does. It is understandable that people who work in the media industry want bigger audiences. This leads quite logically to the next step in the process. If you want to win new audiences, you have to appeal to there lower instincts. This is unfortunately quite a necessary assumption. The result is a dumbed down mass media culture, the triumph of banality and voyeurism. You have to lure the audience to titillate them and take into account their laziness.

Whilst agreeing in general that under capitalist conditions, cultural production is subject to economic exchange, Rowe (1995: 21) argues that it is an “unreﬂexive grand theorising” of the impact of capitalism that suggests that the production of popular culture is purely economic and/or exploitative. Instead, he proposes that the complex institutions and practices of popular culture are not reducible to an overarching economic regime and its ideologies. Rowe’s position is that the very notion of “popular” culture is diﬀerent from rival formulations such as “folk” or “mass” culture because it is founded in the industrialisation of cultural forms where popular culture is seen a the “shifting sets of social and cultural relations, meanings and texts which in varying ways emerge as a contemporary forms of pleasure, leisure, style and identity, and which are linked to personal and expressive politics, aesthetic address and cultural economy” (Rowe 1995: 8). Although critics such as Postman and Krönig do not seem to recognise or acknowledge it, popular culture has the capacity to engage in “serious” debates and issues, although, the form through which such matters are represented diﬀers from superﬁcially “serious” forums such as speeches, debates and learned writings. This

Politics and popular culture

is not to say that the growth of television, as a media, has not inﬂuenced the nature of what is publicly communicated. Indeed it has, not the least of which has been a retreat from elitism through a broader circulation of debates in formats that appeal to a greater number of people. Street (1997) discusses that popular culture is a form of “entertainment” that is mass-produced and made available to large numbers of people. Its categorisation as “entertainment” however, needs not to deﬁne popular culture in opposition of more “serious” cultural pursuits. As Street (1997: 13) goes on to argue, popular culture can be a form of resistance and critique by providing deﬁance as a weapon to deny power and where “actions of political resistance are commonly played out within popular culture, in the way ﬁgures of authority are mocked in satire and comedy”. Thus, for Street, although it emerges from the bureaucracies and agencies of the culture industry, popular culture has political signiﬁcance not only in its production, but also through its consumption — the ways that audiences have the capacity to interpret it. It is not that popular culture is necessarily a form of “serious” debate or of political resistance, but rather that popular culture has the potential to be such.

Bakhtin’s carnival Suggesting that popular culture has eﬀects beyond that of “mere” or trivial entertainment is not restricted to contemporary televised forms. In Rabelais and His World the Russian literary theorist Mikhail Bakhtin (1984a) studied the popular sources used in the literary work of the sixteenth century author Rabelais (1494–1553). Bakhtin traces Rabelais’ inspiration to the folk humour of the Middle Ages as manifested in the social practice of the carnival. Bakhtin identiﬁes that the carnival had an important role in the life of medieval people and that in large medieval cities an average of three months of each year were devoted to carnival. He discusses that the rituals of the carnival, which existed in all countries in medieval Europe, oﬀered a form of life that was non-oﬃcial, and outside of the feudal, ecclesiastical and political forms that dominated medieval life. This “carnival life” freed people from ecclesiastical dogma and operated outside of the religious sphere — carnival was subject only to its own freedom and was organized on the basis of laughter. As Bakhtin (1984a: 10) puts it himself, “carnival celebrated temporary liberation from the prevailing truth and from the established order; it marked the suspension of all hierarchical rank, privileges, norms and prohibitions.” A characteristic logic of the carnival is that of the “inside-out” through which a second world of folk culture is constructed — this is a parody of non-carnival life through travesties, humiliations, profanity and the comic crowning and uncrowning of kings. The result is a carnival laughter, which is not so much an individual

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spectator’s reaction to a comic event but rather laughter of all of the people, including the participants in the carnival themselves. Such laughter is ambivalent in that it is both triumphant and mocking but does not place itself above the object of its mockery. As Bakhtin (1984b: 129) puts it: It could be said (with certain reservations of course) that a person of the middle ages lived, as it were, two lives: one was that of oﬃcial life, monolithically serious and gloomy, subjugated to a strict hierarchical order, full of terror, dogmatism, reverence and piety; the other was the life of the carnival square, free and unrestricted, full of ambivalent laughter, blasphemy, the profanation of everything sacred, full of debasing and obscenities, familiar contact with everything and everyone.

Bakhtin suggests that the style of the carnival, the “carnivalesque”, is also employed in the novels of Rabelais. This style comes in the form of “grotesque realism” in which the material human body, including eating, defecation and sex, are represented in grandiose and exaggerated imagery. This is not the biological individual or the “economic man”, but rather a festive and abundant body. It is the body at a material level — a degradation of the “higher” principles of human existence; down to earth rather than up to heaven. This style has the attributes of exaggeration, hyperbolism and excessiveness where opposites are inverted and norms are transgressed. Such a carnival works to: liberate from the prevailing point of view of the world, from conventions and established truths, from clichés, from all that is humdrum and universally accepted. The carnival spirit oﬀers the chance to have a new outlook on the world, to realise the relative nature of all that exists, and to enter a completely new order of things (Bakhtin 1984a: 34).

The carnival is thus a practice that both opposes and destabilises oﬃcial views of reality. In doing so, it creates itself in opposition to oﬃcial culture on a series of planes; for example from seriousness to laughter, from the dogmatic to the open, from the immutable to the contingent and from control to identity (Storey 1998). As Jung (1998: 104) discusses, these oppositions question hierarchy by creating an ambivalent space between the high and the low where hierarchical distinctions are not respected — “carnival breaks up and “reverses” the colourless and prosaic monopoly of the established order of power.” Jung goes on to argue that carnival does this in a way that is “jesterly” — it distrusts and aims to deconstruct attempts at stabilising social systems by being playfully and non-violently subversive. It is a form of “clowning” that dethrones established hierarchies and transgresses and transforms oﬃcial orders of reality. In examining Bakhtin’s carnival, Stallybrass and White (1986) have noted that by the late nineteenth century the middle classes had rejected the carnival tradition, both culturally and through acts of legislation that attempted to eliminate carnival

Politics and popular culture

as a feature of European life. What had happened was that modernisation, with its movement towards urban industrialised society and the growth of the middle classes, had removed carnival as a festive form. Despite this removal of popular rituals in the form of the carnival, Stallybrass and White also point out that without the carnival, the carnivalesque spirit had been sublimated. Although the carnival proper had largely been removed, carnival as a social practice re-emerged in an altered and broken down fashion through new formations of popular culture. Through its sublimation, the gratiﬁcation of the desire for carnival was achieved through socially accepted behaviours instead of through the prohibited original. As Docker (1987) describes it, the carnivalesque became a repressed desire that in conscious terms was regarded merely as entertainment and sensationalism rather than as knowledge; despite this, the carnivalesque sphere of popular culture still refuses to lie down or to be regulated and remains “outrageously omnipresent” in popular culture.

Television, carnival and The Simpsons Where, then is carnival to be found today? Docker (1994) has argued that carnival, as a “cultural mode” remains a strong inﬂuence on contemporary popular culture, such as television. He suggests that this is a culture that is creative, vigorous, exuberant and, importantly, excessive. Such a culture, he proposes, supplements, challenges, destabilises, relativises and pluralises oﬃcial versions. Here television has signiﬁcant continuities with pre-modern carnivalesque forms. As Eco (1984: 6) describes, carnival exists as an authorised transgression that is limited and set aside from the oﬃcial — in this way: “modern mass-carnival is limited in space: it is reserved for certain places, certain streets, or framed by the television screen”. As well as being a potential site for the carnivalesque, television is also an important medium in terms of its relationship with organizations. Like many other forms of popular culture, television did not emerge until the post Second World War period when new consumer products were designed and manufactured for new consumer markets (Davies 1995). Television, as a mode of cultural (re)production is itself the product of big business. Interestingly this does not seem to have stopped television programs from biting the hand that feeds them and oﬀering critical views on organizations. Fiske (1987: 93) explains this apparent irony when he writes that: Television’s economics, which demand that it can be made popular by a wide variety of social groups, works against its apparent ability to exert ideological control over the passive viewer … it is the audiences which make a program popular, not the producers.

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The implication here is that cultural industries do not necessarily make products that promote capitalist ideology; instead they make products that will sell. The result is that there is not just one ideological position that is forced upon industrially produced texts — the products of the cultural industry, therefore, might contain more than just the seeds of resistance (Benshoﬀ 1992). Further, as Hassard and Holliday (1998) have noted, television representations of organizations are frequently diﬀerent from more conventional understandings of work — in particular they represent workplaces as embodied, personal and emotional and explore everyday work settings and interactions that can be seen to contain implicit critiques of capitalist frameworks. The Simpsons is a good example of critique that “satirises the diverse social, political, equal norms deﬁning American culture” (Korte 1997) in a self-reﬂexive way. The series’ executive producer James L. Brooks has described the show as “the normal American family in all its beauty and all its horror” (quoted in Steiger 1999). In being open both to this “beauty” and “horror”: Unlike many shows on TV, The Simpsons works to encourage critique, demanding that viewers be active in their consumption. Without hesitation or apology, it ridicules the advertisements, slated news stories, and inane talk shows that appear on their beloved TV set … very little is sacred on The Simpsons (Korte 1997)

This critique shares the dynamism of the carnival spirit, and as Lindvall and Melton (1998: 203) point out: Bakhtin’s notion of the carnival provides an inspired model for analysis of comic genres like the animated ﬁlm, genres often overshadowed by more “signiﬁcant” cinemas. Where the clown once ruled or misruled in medieval comedy, it is now the turn of the animator to show his motley.

Carnivalisation is made possible, particularly in animation, because cartoons “do not need the consistency or internal logic of a realist ﬁlm. New codes can emerge where a reader encounters the unpredictable articulations of the cartoon” (Lindvall and Melton 1007: 209). It is in this way that The Simpsons plays with our views of both organizational reality and reality in general. As Hodge (1984) discusses, The Simpsons is set up to recreate a “realist” setting of American suburban life — the realism, however, is not intended to reproduce reality itself but rather to reproduce the dominant social view of reality and hence to enable the audience to identify with the characters and to enable those social views to be questioned. The Simpson family are not represented as social leaders, but are rather shown as working class people and their experiences of subordination. What Hodge argues is that the mixture of this realism with the animated production allows for greater creativity because the viewer knows that anything can happen. Combined with the satirical nature of the program’s storylines, this enables The Simpsons to question and

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problematise diﬀerent aspects of everyday life by both representing a form of social reality yet being open to playing with the possibilities of that reality in a variety of ways. In so doing, The Simpsons addresses questions of the domination of powerful institutions such as the family, schools, police and, particular to this chapter, work organizations. The way that this is done has many features of Bakhtin’s carnival. One such feature of The Simpsons is the use of “grotesque realism” to portray its characters. Bakhtin highlights carnival’s preoccupation with the body and its “lower strata”, focussing on the materiality of the body in contrast with the “purity” of reason and “higher” cultural pursuits. Animation, in general, is an ideal medium for the representation of grotesque realism because it freely allows the human form to be represented in exaggerated ways. In The Simpsons the characters are frequently seen to be drawing attention to such bodily functions through, for example, the town drunk, Barney’s belching, Homer’s overeating and obesity, or Homer’s son Bart “mooning”. An episode, which makes particularly good use of such grotesque realism, is “Brush With Burns” (production code 7F18, original airdate 11 April 1991). In this episode Homer’s wife Marge decides to go back to study art at Springﬁeld Community College after having given up painting when she was a schoolchild. Her ﬁrst success is a painting of a fat Homer asleep on the couch in his underwear that wins ﬁrst prize at the Springﬁeld Art Fair; the painting is mockingly called “Bald Adonis”. Based on this success, Mr. Burns commissions her to paint his portrait. Marge struggles with the portrait and ﬁnds the challenge of painting Burns’ “inner beauty” too diﬃcult. During one of the sittings, Marge accidentally sees Burns naked and, armed with this new imagery, decides to paint his portrait this way. This is a “warts and all” (literally) painting which depicts Burns as an emaciated, scowling, cowering old man — stripped of his business suit and of the pretence of either power or inner beauty. His body, ancient, weak, ugly and powerless, is portrayed in opposition to his public persona as the powerful owner of the SNPP. His body is also in contrast to the portrait of Homer — obese, and lazy. Each of the portraits has its own grotesqueness and the nudity of the characters in each demonstrates a bodily preoccupation and a desire to strip away social pretensions (represented by clothes) that might hide the material, bodily reality beneath. In the case of Burns, this opens up an ironic space where he is alternatively frail and powerful depending on which of his representations is looked at. This brings into question the stability of his social power as an industrialist by suggesting the possibility of alternative ways of representing him. These paintings also serve as a good introduction to the dominant characterisations of both Homer and Burns. Burns is the evil, mean, self-serving capitalist whose social power is contrasted with his physical weakness. Homer, as the middle-American dad, is fat and lazy, yet

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asleep as if he is unaware of his own predicament. Burns and Homer represent, respectively, the capitalist and the worker, but neither is heroised — there is no story here of the easy, just or idealistic resolution of good vs. evil. Instead, we are presented with humanity that is more complex, and less subject to narrative closure. What this highlights is the ambivalence of the carnivalesque. Rather of oﬀering ideological answers that close down possibilities and options, the carnivalesque form is successful in opening up an arena for critique that does not seek ultimate resolutions. This creates a critical space without ﬁnalising the critique — a space within which change can be explored and critique can be made without the closure of dogma.

Homer, Burns and the SNPP A number of diﬀerent workplaces are present in The Simpsons, for example, there is the Kwik-E-Mart convenience store, or the Krusty Burger fast food chain (with all its “subtle” similarities to McDonalds) but by far the most dominant organization is the Springﬁeld Nuclear Power Plant. The SNPP is the place, where, in most episodes, Homer is employed and, at thirty-six years old, he holds the dubious honour of being recognised as the record holder for “the most years worked at an entry-level position”. The power plant, as a place of work, is staﬀed by largely unskilled workers, and is an occupational health and safety nightmare (where in the opening sequence to all the episodes a piece of glowing green nuclear material ﬁnds its way out of the plant into the town). The way the power plant is portrayed can be read as a television carnival, mocking and parodying the culture of organizations, just as the carnival of the middle ages did of religious and feudal culture. This parody is one, for example, where in the episode “Last Exit to Springﬁeld” (production code 9F15, original airdate 11 March 1993), Burns implements a cost-reduction scheme that sees him replacing the employee dental plan with free beer for employees. Homer, when realising the costs this will mean to get the braces for his daughter Lisa, uncharacteristically opposes the free beer. As events unfold, Homer, who is a member of the “Brotherhood of Jazz Dancers, Pastry Chefs and Nuclear Technicians Union”, becomes elected as the plant’s union representative. Following a strike at the plant and Burns turning oﬀ all of the power in Springﬁeld, the usually inept and apathetic Homer wins the battle with Burns and the dental plan is restored. It is here that the normal power relations between Homer and Burns are turned upside down. Homer, however, is not mythologised as a hero of the worker. In the industrial negotiations, Homer rejects Burns’ attempt to bribe him as a way to

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settle the dispute because he misreads Burns’ oﬀer as a sexual advance. The scene is played out as follows: Burns: We don’t have to be adversaries, Homer. We both want a fair union contract. Homer’s brain: Why is Mr. Burns being so nice to me? Burns: And if you scratch my back, I’ll scratch yours. Homer’s brain: Wait a minute, is he coming on to me? Burns: I mean, if I should slip something into your pocket, what’s the harm? Homer’s brain: Oh my god! He is coming on to me! Burns: After all, negotiations make strange bedfellows. (Burns chuckles and winks at Homer.) (Homer’s brain screams.) Homer: Sorry, Mr. Burns, but I don’t go in for these backdoor shenanigans. Sure I’m ﬂattered, maybe even a little curious, but the answer is no! (Quoted in Richmond and Coﬀman 1997: 110)

Despite Homer’s surprise transformation into the powerful union boss, the audience is left at the end not knowing what Homer might have done if he really had known that money was on the table. The inversion of Homer and Burns’ power is never complete and the heroisation of the working man is left in an open and ambivalent state. What this achieves is a critique of managerialism, in the form of the erosion of employee beneﬁts for proﬁt gain, whilst still not relying on an idealised or (left) ideological view of employment relations. Because Homer’s potential behaviour in response to the bribe is left unresolved (due to his ignorance) the episode resists the temptation to ﬁnalise the characterisation of Homer as the honest worker and Burns as the evil capitalist. Such simplistic logic is eschewed in favour of a more open and complex critique. Inversion is played out in other episodes in ways that transcend the more “realistic” setting of industrial relations disputes. Homer’s “normal” persona as the dumb proletarian is very much presented both as a stereotype and as a starting point that is frequently inverted in order to explore what might happen if the stereotype was otherwise. The program plays with the stereotype by enabling Homer to adopt various alternatives which see him become, for example, a prize ﬁghter in the heavy weight championship of the world or a pop music star in the one-hit-wonder barber shop quartet the “B-Sharps”. The stereotype is presented but never taken for granted. A good example of this is “Homer the Great” (production code 2F09, original airdate 8 January 1995), which is set in the secret organization of the Stonecutters (a less than subtle reference to the Free Masons). Despite initial rejection, Homer cajoles his way into being accepted as a member of the Stonecutters. After almost being expelled, it is revealed that Homer has a birthmark on his back that identiﬁes him as the true leader of the Stonecutters — “The

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Chosen One”. Here again is an inversion, as the normally unpopular Homer becomes the born leader. Burns is also a member of this organization, who, in the inverted order of the Stonecutters gets his nose tweaked hard by one of the SNPP workers and has to reply “thank you sir, may I have another”. This inversion, however, is not portrayed as heroic progress over dominant power relations in the power plant but, rather, just as a diﬀerent system of diﬀerence. The Stonecutters is another form of hierarchical organization where the reason for the power diﬀerences between its members is as arbitrary as the shape of a birthmark. Eventually Homer is rejected and the Stonecutter’s disbanded after they rebel against his suggestion (based on advise from his daughter Lisa) that the Stonecutters focus their eﬀorts on helping others in the community. The inversion presented in the Stonecutters episode highlights how organizational power is not a characteristic of a superior self, but rather is a condition that is based on highly contextualised social relations — relations that are always open to change. This is reinforced in the episode “Burns Verjaufen Der Kraftwerk” (production code 8F09, original airdate 5 December 1991) where Burns decides to sell the SNPP to a German company for $100 million. Soon after the takeover is complete, Burns goes for a drink at Moe’s Tavern and is mocked and abused by the townspeople who are there. Realising that because he no longer controls the plant he is no longer in a position of power, Burns says “What good is money if it can’t inspire terror in your fellow man?” The implication, of course, is that it is managerial control that can truly inspire such terror. Burns then buys the plant back. In each of these episodes, Burns’ power is questioned and in so doing the dominance of organizational power itself is also symbolically brought into question. What occurs here, however, is not a simple narrative of the triumph of good over evil, but rather a demonstration of the embeddedness of power in social relations. In the industrial dispute it is the power of organized labour that is balanced against Burns’ managerial power to eventually maintain the status quo. In contrast, in both the Stonecutters episode and following his sale of the power plant, the same character of Burns loses his power because he ﬁnds himself in a diﬀerent context and he exists in diﬀerent social relations. This carnivalesque treatment recognises that organizational power is a dominant social force, but simultaneously highlights that the power is a result of a particular set of relations at a particular point in time — it is neither immutable nor inevitable. Another demonstration of upside-down nature carnivalisation is seen in the episode “Simpson and Delilah” (production code 7F02, original airdate 18 October 1990) which takes the subject of corporate meritocracy and equality in career opportunities and turns it on its head. In the episode, the normally bald Homer discovers a miracle hair growth formula, which he fraudulently buys for $1000 through the nuclear power plant’s health insurance scheme. Overnight, Homer

Politics and popular culture

grows a full head of hair. Meanwhile Burns is faced with the dilemma of having to promote one of his workers as a result of a clause in his contract with the union. His initial reaction is that “none of these cretins deserves a promotion!”. When he sees the newly hirsute Homer Simpson through his security monitor, however, he announces to his assistant Smithers, “Wait, who’s that young go-getter?’ Smithers replies: “Well, it sort of looks like Homer Simpson … only more dynamic and resourceful”. Burns immediately decides to promote Homer and an announcement comes over the plant’s PA system: “Attention Homer Simpson. You have been promoted. You are now an executive. Take three minutes to say good-bye to your former friends and report to room 503 for reassignment to a better life.” With the help of an assistant named Karl, Homer impresses Mr. Burns. Particularly his scheme to reduce industrial accidents by adding tartar sauce to the ﬁsh sticks served in the cafeteria appears to be a great success. When accidents do fall Burns is so impressed that he even gives Homer the keys to the executive washroom — a symbolic parody of managerial privilege where even the act of going to the toilet exists in a privileged form for those in power. Of course the real reason that accidents have fallen is because Homer, now no longer on the shop ﬂoor, is not causing them any more. Eventually, Homer’s son Bart accidentally breaks the bottle of hair potion and Homer again returns to being bald. Without hair, no one takes him seriously any more and he is demoted back to his former position. Looking at this episode, we see that armed with his new hair, Homer has been able to climb the corporate ladder. His achievement, however, is not based on his skills or experience as an executive but managerial success is positioned as being a matter of “look”. My reading of this is that it oﬀers a resistance to managerial power by suggesting that hierarchical seniority in an organization is not the result of any inherent superiority, but is a question of appearance and grooming. Homer got the job because he looked the part, however, when his baldness returned, the normal power relations were restored. Burns is also bald but retains his position of power in the power plant. The commentary here is perhaps that “true” power that is beyond appearance is that of capital and tradition, whereas managerial power is ﬂeeting. What is apparent though, is the carnivalesque overturning of the oﬃcial recruitment and selection processes and policies in place in large organizations. These processes suggest that people are hired and promoted based on merit and that people are oﬀered equal employment opportunities without discrimination based on factors such as appearance. What happens in The Simpsons, however, is quite the opposite, when in fact, the least suitable candidate for the job (Homer) is successful merely because his appearance becomes that expected of a “young go getter”. Homer’s grotesque body is the source of inspiration for the episode “King-Size Homer” (Production code 3F05, original airdate 5 November 1995). Here Homer’s

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obesity and unhealthy eating habits are used to depict a carnivalesque “grotesque realism” in terms of Homer and the SNPP. Homer discovers that if he can increase his body weight to more than 300 pounds he will be classiﬁed as hyper-obese and will be oﬃcially declared disabled making him eligible to work from home. He pursues this goal by focusing on the “neglected food groups” such as “the whipped group, the congealed group and the choc-o-tastic”, as well as switching from chewing gum to chewing bacon. After gorging himself on every food possible, he achieves his goal and a computer workstation is installed in his home for him to work from. He proudly announces that “the slim lazy Homer you knew is dead. Now I’m a big fat dynamo.” Meanwhile, his proud son Bart fantasises about being a “lardo on workman’s comp, just like dad.” In an eﬀort to ﬁnd new ways to escape from work, Homer ﬁts a “bobbing head bird” in front of his computer to press the keys while he goes out. As a result of the bird’s “work” in Homer’s role as safety inspector, the nuclear reactor core at the plant is about to explode. Realising what has happened, Homer hi-jacks an ice cream truck to race to the plant, and upon getting there, he attempts to climb up to reach the “manual shutdown” switch. His enormous weight breaks the ladder on which he is climbing and he falls into the gap in the reactor and seals the leak. In comic grotesque ﬂourish, Bart announces: “for once Dad’s butt prevented the release of toxic gas”. Burns responds with the statement “Homer, your bravery and quick thinking have turned a potential Chernobyl into a mere Three Mile Island. Bravo!” Here we see the grotesque humour of Homer’s body used to parody both the worker and the capitalist. Homer is fat and lazy, and he takes advantage of his employer by ﬁnding a creative way to still get paid while not having to go to work, a task to which he employs himself assiduously. The SNPP is highlighted on the other hand as being an organization on the constant brink of creating an environmental disaster — irrespective of its “progressive” practices of using computer technology to enable Homer to “work” from home. The episode demonstrates again an ambivalent humour in which overturning (making obesity desirable) and hyperbolisation are used to draw attention to aspects of workplace relations — the unwilling worker and the environmentally corrupt organization. In the end, though, it is the organization that comes oﬀ the worse. Burns, as the character representing organization ownership is represented as a hyperbolised ﬁgure of evil. In commenting on the episode “King-Size Homer”, Hodge (1996) writes: The representation of Burns through the angle of the camera (or at least that which was conceptualised on the storyboard page) also informs the viewer of his villainy. He is always seen above his workers, showing his precedence over them — whether outside doing the callisthenic exercises on his purposely constructed podium (resembling various authoritarian regimes: Nazi speeches at Nuremburg, Communist China’s morning ﬁtness rituals, or the Japanese business ﬁtness plants, Japan

Politics and popular culture

being America’s new economic “enemy”), or in his oﬃce where, even though sitting down, the throne like chair rises (thus making his position) above whoever dares enter (in a reverse of the “halo eﬀect”, the chair’s armrests also rise up to appear as horns above his bald head).

Paradox and ambivalence One of the things that I have tried to demonstrate in this chapter is that the animated television series The Simpsons shares many of the features of the medieval carnival discussed in the work of Mikhail Bakhtin and that these features can be seen as a way that television and popular culture operate on a level of critique that deﬁes the superﬁcial logic that sees television as trivialised entertainment. The carnivalesque is evident in the way that The Simpsons employs grotesque realism in its portrayal of its characters not only as “personalities” but also as partaking in the “real” life of the body. Further, The Simpsons’ carnivalesque features the regular transgression of the norms of organizational life. Where the medieval culture focussed on questioning and parodying the pre-modern dominant social institutions of the church and feudal society, The Simpsons parodies the more contemporary dominant social institution of the organization. Similar to carnival, this parody is enacted by playing with the rules of what is expected in more conventional or oﬃcial representations of organization. Further, and perhaps most markedly, The Simpsons employs the carnivalesque practice of inversion and overturning, where normal social relations are turned upside down — where boss becomes subordinate, where the powerful become weak, and where failures become successful. Through its carnival, The Simpsons is an example of how popular culture has produced representations that reﬂect both a political critique and ambivalence towards organizations. This is not the celebration of American free enterprise; neither, however, is it the fetishisation of working people as subjugated, powerless, suppressed, ineﬀectual and in need of emancipation. Instead the carnival is more ambivalent, more complex and less binary — it shows that existing patterns of social relations are not immutable, but at the same time does not portray an idealistic or utopian vision of change. This is a critique of organization that does not claim to know it all and does not claim solutions to problems; rather it plays out issues of power in a dramatic, comic and irreverent way. Eco (1984: 6) states that comedy is achieved through the breaking of frames where normal expectations are transgressed yet where the broken frame is assumed rather than articulated. Carnival, in order to be enjoyed, requires that rules and rituals be parodied, and that these rules and rituals already be recognized and respected. One must know

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to what degree certain behaviors are forbidden, and must feel the majesty of the forbidding norm, to appreciate their transgression. Without a valid law to break, carnival is impossible.

In this way, much of the humour in The Simpsons is derived from transgressing the cultural “rules” of working life and in doing so makes these rules both more clear and less taken for granted. Through the dramatisation and frequent inversion of the relationships between Homer (worker) and Burns (boss), The Simpsons dramatically examines what might happen if the relations of power in organizations were diﬀerent. The “rules” of organizational life are therefore made more transparent by the use of comedy to invert expected relations within organizations. Homer and Burns are presented on one plane as hyperbolised stereotypes of their social roles, yet subsequently these social roles are transgressed to reveal both their unnaturalness and arbitrariness. In terms of organizations, Ten Bos (2000: xii) questions the approach to management where “the popular is often suspect. It can’t be intelligent and it is linked to vulgarity, tastelessness, gaudiness, even to a certain laziness.” In line with Ten Bos’ observation about management fashion, at face value, popular culture seems like an inappropriate location to look for insight into, or critique of, management and organization. My argument, however, is that this is not the case and that popular culture serves as an important site for developing new understandings of organization life; understandings that are rooted in an experience of organizations unencumbered by the self imposed limitations of conventional theory. In terms of such theory, Burrell (1997: 52) has commented that organization studies ignores or, worse still, consciously hides that which is thought to be unacceptable in polite company. There is little mention of sex, yet organizations are redolent with it; little mention of violence, yet organizations are stinking with it; little mention of pain, yet organizations rely upon it; little mention of the will to power, yet organizations would not exist without it.

In popular culture, such as The Simpsons, however, the sex, violence, pain and power that permeate organizational life are permitted airtime through the carnivalesque representation of organizations. The implication is that popular culture oﬀers arenas for the complex representation of organizational life not available in convention academic forms. As I have tried to show in this chapter, these representation draw attention to the embodied and contradictory power relations that feature in organizations. Moreover, what this provides is a critique of organization through an exploration that transgresses organizational norms and overturns “normal” social relations. Further, it oﬀers this critique in a way that does not provide pre-digested solutions; it leaves a space in which the viewer can be active in making sense of the situations that are presented.

Politics and popular culture

In suggesting such critical implications, an important consideration is whether carnivalesque representation of organizational life, such as that in The Simpsons, is indeed critical, subversive and liberating, or whether by encouraging viewers to laugh at their own employment situations, it provides them with a “safety valve” that actually buttresses organizations from a more thoroughgoing critique. The question is whether The Simpsons provides opportunities to destabilise existing organizational relations or whether it reinforces them by providing a “safety valve” through which organizational members can let oﬀ steam before returning to the unchanged status quo of their employment conditions. Whereas a Bakhtinian reading of the carnivalesque suggests that the carnival and its manifestations are profoundly subversive of oﬃcial institutions, a “safety valve” argument suggests just the opposite. Indeed, the word carnival itself derives from the Latin carnem levare meaning “to put away ﬂesh”. The original medieval carnival was positioned as the last occasion before Lent that people were permitted to eat meat. The implication was that the desire to eat meat would be extinguished through the ritual of the carnival before the oﬃcial institution of the church forbade it altogether. Arguably, what this achieved was a reinforcement of the oﬃcial Lenten fast through the authorised transgression of the carnival. In tracing the ancestry of such a “safety valve” theory, Docker (1994) refers to the 1931 speech of the Russian intellectual (and Soviet Commissioner of Enlightenment) Lunacharsky to the Academy of Sciences. In this speech Lunacharsky argued that “carnival is a safety valve for passions that otherwise might erupt in revolution; the lower orders would let oﬀ steam in a harmless, temporary event” (Docker 1994: 171). An issue with such a view, however, is that it ignores the ambivalence of the critique that the carnival provides. It suggests that carnival can be considered either as a form of subversion or as a safety valve. Further, what is argued is that after such a consideration, it is revealed that carnival is indeed a safety valve. This is an argument that ﬁrst constructs and then resolves the binary opposition between change and order. My suggestion here is that the carnival oﬀers neither of these two — instead it provides a space for organizational critique without ﬁnalising the critique fully for the viewers. As I have tried to demonstrate in my reading of The Simpsons, the carnivalesque breaks the rules in order to make them more visible — in so doing, it opens up a paradoxical space where these rules can be interrogated, and questioned. By creating a representation of organization that is embodied and that plays out what might happen when norms are transgressed and social relations overturned, The Simpsons does not promise a new organizational utopia, but rather creates the opportunity for critique. It explores new behavioural and structural options for organizations and the people within them that reserve a right to critique and mock existing options. It does not limit itself to the status quo, yet at the same time it does not propose a new one — instead it explores the possibilities

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of what might happen if things were diﬀerent. This is a critique that is not rooted in ideology but is based on the exploration and exposition of possibilities. As Docker (1994: 197) puts it, the carnival enables “both social stability and social protest and change.” Bernard-Donals (1998: 113) comments that “it is the possibility of a radical transformation of the ways that a culture sees and understands the relations amongst its subjects that is the central contribution of a Bakhtinian notion of carnival to cultural studies.” The realisation of such a possibility is inevitably a question of how The Simpsons is read. I have attempted to oﬀer a particular cultural reading of organizations in The Simpsons — one that shows that in popular culture lie the opportunities to question dominant and oppressive forms of organizations and to explore alternatives in a way that is not dogmatic, evangelical or revolutionary. In The Simpsons we can laugh at organizations and see that no part of working life is immutable or to be taken for granted. It oﬀers a mockery of organizations and provides a compelling arena for the critique of organizational life, one that plays out the complex and contradictory relations that people have with the organizations in which they work. It depicts organizational life as the paradox we so often experience it as being.

Notes 1. From The Simpsons: “There’s No Disgrace Like Home”, production code 7G04, original airdate 28 January 1990. Quoted in Richmond and Goﬀman (1997: 20). 2. From The Simpsons “Bart the General”, production code 7G05, original airdate 4 February 1990. Quoted in Richmond and Goﬀman (1997: 21). 3. From The Simpsons “Another Simpson Clip Show”, production code 2F33, original airdate 25 September 1994. Quoted in Richmond and Goﬀman (1997: 151)

References Bakhtin, M. M. (1984a). Rabelais and his world. Trans. Hélène Iswolsky, Bloomington: Indiana University Press. Bakhtin, M. M. (1984b). Problems of Dostoyevsky’s poetics (Ed.) and trans. Caryl Emerson. Minneapolis: University of Minnesota Press. Benshoﬀ, H. M. (1992). Heigh-ho, heigh-ho, is Disney high or low? From silly cartoons to postmodern politics. Animation Journal, Fall: 62–85. Bernard-Donals (1998). Knowing the subaltern: Bakhtin, carnival and the other choice of the human science. In M. M. Bell & M. Gardiner (Eds.). Bakhtin and the human sciences, 95–111. London: Sage. Burell, G. (1997). Pandemonium: Towards a retro-organization theory, London: Sage.

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Cohen, K. F. (1998). Forbidden animation: Censored cartoons and blacklisted animators in America. Jeﬀerson North Carolina: McFarland. Davies, I. (1995). Cultural studies and beyond: Fragments of empire. London Routledge. Docker, J. (1987). In defence of popular TV: Carnivalesque v. left pessimism. Continuum, 1 (2). Docker, J. (1994). Postmodernism and popular culture: A cultural history. Cambridge: Cambridge University Press. Eco, U. (1984). The frames of comic “freedom”. In T. A. Sebeok (Ed.) Carnival!, 1–10. Berlin: de Gruyter. Fiske, J. (1987). Television culture. London: Routledge. Hassard, J. & Holliday, R. (1998). Introduction. In J. Hassard & R. Holliday (Eds.). Organization — representation: Work and organization in popular culture, 1–15. London: Sage. Hodge, B. (1996). King-size Homer: Ideology and representation. The Simpsons Archive, (http://www.snpp.com) Jung, H. Y. (1998). Bakhtin’s dialogical body politics. In M. M. Bell & M. Gardiner (Eds.). Bakhtin and the human sciences, 95–111. London: Sage. Kafner, S. (1997). Serious Business: The art and commerce of Animation in America from Betty Boop to Toy Story. New York: Scribner. Korte, D. (1997). The Simpsons as quality television. The Simpsons Archive, (http:// www.snpp.com) Krönig, J. (2000). Elite versus mass: The impact of television. In an age Of globalisation. Historical Journal of Film, Radio and Television, 20 (1): 430–49. Lindvall, T. R. and Melton, J. M. (1997). Towards a post-modern animated discourse. In J. Pilling (Ed.). A Reader in animation studies, 203–220. London: John Libbey. Marc, D. (1998). Comic visions: Television comedy and American culture. 2nd Ed Malden MA: Blackwell. Postman, N. (1987). Amusing ourselves to death. London: Methuen. Richmond, R. and Coﬀman, A. (1997) (Eds.). Created by Matt Groening. The Simpsons: A complete guide to our favourite family. New York: HarperCollins. Rowe, D. (1995). Popular cultures: Rock music, sport and the politics of pleasure. London: Sage. Stallybrass, P. & White, A. (1986). The politics and poetics of transgression. London: Methuen. Steiger, G. (1999). The Simpsons — Just funny or more? The Simpsons archive (http:// www.snpp.com) Storey, J. (1998). An introduction to cultural theory and popular culture. 2nd Ed. Athens: The University of Georgia Press. Street, J. (1997). Politics and popular culture. Cambridge: Polity Press. Ten Bos, R. (2000). Fashion and utopia in management thinking. Amsterdam: Benjamins. Weinstein, D. (1998). Of Mice and Bart: The Simpsons and the postmodern. In C. Deglin Esposti (Ed.). Postmodernism in the cinema, 61–72. New York: Berghahn Books.

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Chapter 7

From value conﬂicts to multiple mandates On organising ethical knowledge and its paradoxes* Fernando Leal and Patricia Shipley

At any given time we believe in many diﬀerent norms, which may have contradictory implications for the situation at hand. (Elster 1989:129.) The humanising of technology is likely to involve the increasing introduction of moral issues into the now largely ‘instrumental’ relation between human beings and the created environment. (Giddens 1990: 170.) The human animal, it is repeatedly said, is distinguished above all by his self-consciousness. This seems to mean that, having set up his society, he is not content to let things be; he must tell himself that the particular society in which he lives is the best of all possible societies, and that the arrangements within it mirror in their own small way the arrangements that providence has made outside. Hence every age breeds its philosophers, apologists, critics, and reformers. (Heilbronner 1992: 38.)

In this globalised world of the third millennium economies, societies and organisations are increasingly being deﬁned by knowledge. That was the starting point from which this book emerged. Knowledge is, or has become, a commodity that travels around swiftly and eﬃciently. As such, it has a profound impact both in the places in which it actually originates and in other places very far from that origin, either geographically or mentally. This is all part of the very meaning of knowledge societies, knowledge economies, and even of globalisation. Now for knowledge to be able to go from one place to another and to exercise such tremendous eﬀects, a previous process must have taken place, a process which we seldom think about: knowledge has to be packaged in appropriate ways, it has to be converted into bits and bytes, it has to be coded. Knowledge, whether true or false, sensible or meaningless, relevant or irrelevant, does not start its eventful and consequential career in the world in the form of clear, readily intelligible and communicable units of information. Knowledge is in the beginning always vague, formless, intuitive, elusive, hard to express. And means have to be found to do the work of expressing, means which are not innocent, which have all sort of intended

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and unintended consequences and even, we may say, a life of their own. We will never understand the nature of knowledge economies, knowledge societies or knowledge organisations if we don’t come to terms with this original fact. As such, it is an essential part of the diagnosis of our current malaise. If we may anticipate a little: our current malaise is ethical in nature. And it is the entanglement of knowledge and ethics that engenders a curious paradox. Whether it actually is a paradox for management or of management, you, dear reader, will have to decide. But in case you should be wary of such grand words as ‘ethics’ or ‘ethical’ and before you throw up your hands in despair, we want to make a point clear: we use them in full awareness of their complex history and of their being liable to all sorts of misunderstanding and misuse. The point we made before about the diﬃculty of expressing knowledge and the lack of innocence of the means of expressing that knowledge also applies to this particular case. Do we have misgivings about talking of ‘ethics’? Of course we do, which is why we shall introduce it as cautiously and gently as we can. For the undeniable fact is that no other word can do its work. The present paper, whose main task is to present a diagnosis of our malaise has thus to travel a long and somewhat meandering way to make its diﬀerent points. Knowledge is certainly at the centre of it, which you may think is good, but so is ethics, which you may think is bad. Yet neither knowledge nor ethics can be the place to start. As far as the modern world is concerned, in the beginning there was rationality. So that’s where we start, at the beginning.

Two kinds of rationality As is well known, Max Weber conceived modernisation as a process of rationalisation. His analysis is still considered one of the best, if not indeed the single best attempt at a comprehensive theory of what has been happening in, and to, the advanced societies and economies. A lot of things have taken place since he died eighty years ago, but the tendencies he painstakingly observed and meticulously described seem to have deepened rather than radically changed. In fact, the iron cage seems to be even more strongly forged than it was when he wrote, memorably, about it (Weber 1917). Weber’s scheme is based on a theory of individual action whose intelligibility to the observer depends on emotion, habit, and reason — or rationality — in quite complex ways. A very common misunderstanding of Weber’s subtle distinctions is that emotion and habit are excluded from rational action. He never intended that. When he talked about emotional (‘aﬀective’) and habitual (‘traditional’) actions as distinct from rational actions, he only meant to point out that some human actions are purely emotional or purely habitual, not that emotion and habit are not part of

From value conﬂicts to multiple mandates

rational actions. In other words: the intelligibility of an action (our capacity to give a reasoned account of it) is inversely proportional to the amount of pure emotion or pure habit that action contains. There is nothing here to make anyone think that Weber neglects the ‘dark’ side of people. Anyway, rationality as a source of intelligibility has a particularly prominent role to play, especially as the speciﬁc traits of modernity begin to unfold. No other sociologist has made such a profuse and subtle use of the concept, or concepts, of rationality than Weber. A simple count of the occurrences of the word and its cognates, in Weber’s work, runs to several hundreds. The most famous passage (and the one we will be mainly referring to in this section) is, of course, §2 of the ‘Sociological categories’ (a ﬁrst version of which was the general prolegomenon to his 1921 contribution to the Grundriss der Sozialökonomik, see Weber 1922). We shall see in a later section that another Weberian distinction (that between material and formal rationality) is as important as this one, if not more so. From the beginning Weber makes quite clear that there are, so to speak, two kinds of rationality, namely the rationality of ends (Zweckrationalität) and the rationality of values (Wertrationalität). Rationality of ends is usually deﬁned by means of three procedural traits: 1. Deﬁne the end you desire with as much precision as possible. 2. Among the available means choose those most appropriate to that end. 3. Direct your attention to the success of the endeavour. Rationality of ends has been formalised via decision theory and game theory. Its most popular model is Rosenblueth’s idea of a teleological machine: the envisaged result is allowed to control the outcome via a feedback mechanism (Rosenblueth et al. 1943). Critics have also called it instrumental rationality, and their objections can be summarised as follows: 1¢. There is no rational procedure to search, choose, and evaluate the means over and above the need for precision. In fact, rationality of ends seems compatible with the pursuit of irrational ends. 2¢. The only criteria for choosing the means are availability and appropriateness. Availability seems unobjectionable in that it seems to be a kind of realism. But appropriateness may on the one hand be unrealistic insofar as it presupposes perfect information on the part of the actor and on the other hand, and perhaps more importantly, may ultimately lead to Machiavellianism (‘the end justiﬁes the means’). 3¢. There are always hosts of unintended, unpredictable and undesirable consequences of human action. Such unintended consequences increase with the complexity of the environment and the technological sophistication of the means.

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The general picture emerging from these criticisms is that of a perfectly rational actor who is ruthlessly pursuing what may be horribly irrational ends. Hence the expression ‘rational fools’ coined by Nobel prize winner Amartya Sen long ago (see Sen 1976–1977). The critics’ picture can sometimes be quite bleak, for we know that there are no perfectly rational actors on earth, so what remains are only the possibly irrational ends. Yet in fairness to Weber, it must be said that he insisted on a fourth procedural trait to complete his picture of the rationality of ends, namely: 4. Foresee and monitor the consequences, desired and undesired, of the intended action, for not only the means should be appropriate to the ends, but the consequences of our actions should also be appropriate (commensurate, not disproportionate) to the ends. This other kind of appropriateness, clearly expressed in Weber’s writings, is often glossed over in discussions of rationality in general and of Weber in particular. Nevertheless, an objection immediately springs to mind: 4¢. Although concentration on success is mitigated by careful foresight and monitoring of consequences, the latter are increasingly diﬃcult in a complex world. Considering the four objections to rationality, the three questions to be addressed concern the acceptability of: – – –

ends we want to achieve by our actions, means we want to use to achieve our ends, consequences of the actions we carry out in pursuit of our ends.

People, who criticise rationality of ends, would probably agree that such three-fold acceptability, would make a far better rationality than the merely instrumental one. In Weber’s work we often ﬁnd that the concept of a rationality of values is introduced precisely to do part of that job. By the way, it is at least interesting to note that although the literature, both academic and professional, on the rationality of ends (often under the shape of ‘rational choice’) is enormous and multidisciplinary, writings on the rationality of values are rather scarce. In fact, rationality of values as a topic is clearly an underdeveloped ﬁeld. A remarkable exception to this remark is Raymond Boudon who, in a signiﬁcant series of books and papers written in the last 15 years, has been trying to develop Weber’s ideas (Boudon 1986; 1990; 1995; and for a direct interpretation 1996a; 1996b; 2000). Anyway, according to Weber rationality of values has to do with something like single-minded realisation of values, with acting in the world in accordance with deeply held convictions — duty, dignity, beauty, piety, truth, justice, ‘the cause’ — no matter what the (often quite predictable) consequences in the real world might be. The reader can sense here that rationality of values has its own problems. At its

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worst, it reminds one of old Roman adages like summum ius summa iniuria (‘the maximising pursuit of right produces a maximum of wrong’) or ﬁat iustitia pereat mundus (‘let justice prevail even if the world goes under’). It also inspired Weber’s important distinction between an ethics of responsibility (Verantwortungsethik) and a mere ethics of conviction (Gesinnungsethik). Idealists who just unﬂinchingly follow the latter sort of ethics will ignore the consequences of their actions at least as often as the amoral actors of the business and military worlds that we hear so much about. This theme, although present in Weber, constitutes a central subject of analysis in Pareto’s general approach to sociology, ﬁrst adumbrated in a number of papers and in his courses on economics, then more particularly applied to socialism and liberalism (1901–1902) and ﬁnally systematised in his massive Trattato di sociologia generale (1916). We probably don’t need to remind the readers of the enormous, if not yet properly investigated, inﬂuence that Pareto had — especially via L. J. Henderson (1935) — on the American theory of organisation. In any case, Pareto believed, and demonstrated in great detail, that all good things — as well as all bad things — on earth are produced by deeply held beliefs and values. Ignoring the consequences of one’s actions is foolish, whether we are ‘rational’ or ‘idealistic’. That’s why rationality of values was not unambiguously better for Weber than rationality of ends. He was obviously worried about both rationalities and about the eﬀects of both in the world. Nevertheless, he thought that rationality of values is often all we have to choose between incompatible or conﬂicting ends. In fact, one could say that for Weber the two kinds of rationality, in spite of their contrary nature, are more or less always combined in real human action. That’s one of the reason why we may want to say that rationality of ends and rationality of values are ‘ideal types’ in Weber’s terminology. Moreover, we will have to recognise that the distinction — albeit undoubtedly useful — masks the fact that ends are nothing if not an expression of values. (Incidentally, this is what Pareto meant when he classiﬁed ‘interests’ as a subclass of ‘residues’.) So what really distinguishes both sorts of rationality is not so much the opposition of ends and values, but the attention to consequences. Yet it is not clear that actions guided by instrumental rationality are necessarily always well aware of them.

From kinds of rationality to kinds of conﬂict In order to apply Weber’s analysis more aptly, we would like to remind the readers that the conﬂict between ends often takes place between diﬀerent actors, either individual or collective. We can here usefully distinguish between conﬂicts of

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interests and conﬂicts of values. Both the distinction and the following argument have been developed at more length in earlier papers (Leal 1998; 2000; 2001). In a conﬂict of interests, the values of the conﬂicting parties are the same; for instance, the quarrel is not about whether money is what both parties want, but about who gets how much. In fact it’s because the parties want the same thing that a conﬂict of interests emerges in the ﬁrst place. This sort of thing happens not only in proﬁt-making organisations but also in so-called disinterested ones. The frequent quarrels among scientists and scientiﬁc teams about priority of discovery are a very good example. The parties here also share values — in this case it’s not money but knowledge — but their interests — who gets the prestige — provoke a struggle. (Some readers might cynically add that clear ﬁnancial awards often accompany prestige. This may be true in our Big Science world, but only an outsider can truly believe the struggle is really at bottom over money alone.) Now, because conﬂicts of interests are founded on a solid rock bottom of agreement in values, they can be handled, and eventually even resolved, by negotiation. In fact, even the toughest negotiation is to some extent easy because the parties in a conﬂict of interests understand each other only too well. Not so in conﬂicts of values. To make our point perfectly clear, let’s imagine a situation in which the parties in a conﬂict of values share a common interest, say they are both interested in preventing the organisation in which they work from being swallowed by a bigger one; they want to preserve their organisation as it has been. Yet what each of the parties understands the nature and purpose of their organisation to be is subtly diﬀerent — because of the very diﬀerent values they cherish. Universities, for instance, can sometimes be very important from a political point of view in certain communities; this political weight can be something some administrators (and academics!) consider very valuable indeed. So, if such a university were to be threatened with cutbacks, privatisation, or dismemberment, the political people may be as interested in ﬁghting back as those academics (or administrators) that value university life because of teaching and research. An interesting conﬂict of values might ensue which may manifest itself only at the level of strategies (how can we save our university?), but is much deeper than that. The curious thing about conﬂicts of values is that they are tougher than any pure conﬂict of interests can ever be; and that is because the parties involved do not really understand each other. Of course, the distinction between conﬂicts of interests and conﬂicts of values is ‘ideal-typical’ in Weber’s sense. No actual conﬂict is as pure as all that; in real life agreements and disagreements over both interests and values are always mixed to some extent. But it is a useful construct all the same, especially in view of the widespread cynicism according to which interests is all there is to conﬂicts. We think this is wrong and misleading. Values are not interests and the picture of our

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all too human struggles and quarrels is essentially incomplete if we leave values aside or reduce them to mere interests. Having said that, we admit that values are only part of the whole picture; our emphasis on them is in a sense methodological. Most social scientists prefer to talk about culture, meanings, symbols, discourse, strategies, modes of negotiation, interests, power relations and whatnot; all these are certainly important factors in social life, but not to the exclusion of values. This is perhaps the most important part of Durkheim’s legacy; but we tend to forget it all too easily. When discussing division of labour in society (1893), Durkheim indulged in the metaphors, images and ideas which the rise of Darwinian biology and the invention of experimental physiology (Claude Bernard’s control mechanisms of physiological subsystems) had made very popular in the late 19th century. That’s why it has become too easy to criticise Durkheim’s structural functionalism. But while we may be partly justiﬁed in doing so, we may also lose sight of the fact that Durkheim’s central intention was to illuminate the problems of society from an ethical point of view. (Durkheim, of course, used the adjective ‘moral’ rather than ‘ethical’, but he was certainly far from conﬁning the meaning of ‘moral’ to the narrow ﬁeld of sexual mores, as many people have both before and after him.) Durkheim was deeply worried by the signs of disorder (anomie) which he detected everywhere around him and which would indeed end up in an allembracing conﬂagration (la grande guerre), to be rapidly followed by an even more extensive and destructive second world war. He was worried by poverty, crime, suicide, popular riots, and political corruption. So for him the problem of the division of labour in society was an ethical problem, and the usual functionalist answers relating it to the creation of wealth and economic development or the increase of scientiﬁc knowledge, eﬃciency and excellence, culture and civilisation he found very unsatisfactory. Division of labour is for Durkheim not only, nor even mainly, a matter of being a social fact but ﬁrst of all it is an ethical imperative (or rather, it is a social fact that it is an ethical imperative). Division of labour originates in ethical impulses, it serves ethical purposes, and it is the basis of the ethical order of society. How could that ethical order be maintained and developed? How could we prevent disorder from destroying human society? Durkheim’s great hope was that the diﬀerent ethical orders generated in the professions as a result of the increasing division of labour were the answer. At the beginning of the 21st century, however, this hope appears to be not only unfulﬁlled but in a sense completely wrong. Yet his question, and the ethical viewpoint which informs it, is all the more relevant. So in that respect it would be useful to complement Weber’s immensely important and subtle conception of rationality with the ethical sense more clearly to be found

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in Durkheim’s work, despite all the misgivings we may have about other aspects of his functionalism.

Diﬀerent kinds of people, diﬀerent kinds of jobs (and a further distinction within the realm of rationality) Division of labour is not only about labour; it is as much about values. And if values are what ethics is about, then division of labour is a matter of ethics. Not only the work we realise jointly but our values as such — all those good things we want to realise through our joint working eﬀorts — get divided and apportioned: some people take care of some of the good things and other people take care of other good things. In a university I take care of teaching, you take care of research, she takes care of the funds. In a commercial business I take care of the stock, you take care of the accounts, she takes care of the sales. In a police precinct I take care of the paperwork, you take care of the beat, she takes care of the prisoners. In a hospital I do the nursing, you do the room assignments, she does the diagnosing. This is, of course, a simpliﬁed version of often very complex arrangements. But the ethical essence of the thing is thereby preserved: each portion of the joint work is attached to certain values to be realised, either the comfort of the patients or the eﬃciency of the management, either the gentle introduction of beginners to the world of science or the astute manoeuvring between political agendas, either the satisfaction of the customer or the orderliness of a workshop. Thus each group develops its own norms, its own symbols, and its own moral climate. Within any single group produced by division of labour there are things one should do and things one should avoid at all costs. There are lines drawn, limits that cannot be trespassed, codes of conduct only insiders quite understand. This is how things work, and, more importantly, how people work, when division of labour is in place. That was the essence of Durkheim’s message. And also something that is only half clear in his own work, but which is, if anything, more important: human beings develop as human beings through such ethical division of labour.1 They learn what they are and what is valuable through the process of becoming a member of a group that has a particular role to play within society or an organisation. In this respect conﬂicts of value are absolutely central. They help us deﬁne who we are and what we stand for. This does not mean that we have to understand conﬂicts of value in a necessarily benign way. Our values, and the conﬂicts which emerge because of them, certainly make us; but they can also break us. For that is precisely what a value amounts to: the kind of thing without which we cannot live (because it gives meaning to our lives) and in whose defence we are prepared to go very far indeed. How far, that depends on circumstances. But people

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have been known to die, and even to kill, for an ideal, a vision, a dream. Of course, things are usually far less dramatic than that. But it is useful to remember we are not talking about triﬂes here. Otherwise we will be unable to understand the passion with which conﬂicts of value are experienced. Well then, what we are now witnessing is a post-Durkheimian order, in which division of labour thus understood is under massive and global attack. Or at least that is our diagnosis. Contemporary organisations and societies are increasingly polarising in that people are being assigned to one of two categories.2 On the one hand, we have people who only ﬁnd employment in what may be called junk jobs. These are poorly paid, mechanical and externally paced, routine-like, boring, unqualiﬁed (even for the qualiﬁed, who are underemployed in them). Women and young people are very often the particular victims of junk jobs. There are plenty of examples in modern electronic oﬃces as described by Garson (1988). The so-called ‘McJobs’ epitomise junk jobs as described by Ritzer (1998), who expounds the concept of ‘McDonaldisation’.3 On the other hand, we have people who have the good jobs, that is, jobs which are challenging, varied, creative, forever changing, self-paced, exciting, qualiﬁed and even highly qualiﬁed; in a word, the exact opposite of junk jobs. Everything is as it should be; or at least it may seem so until we notice that the old ethical structure, as found on the division of labour, is crumbling around the good jobs. (We don’t use inverted commas around the expression ‘good jobs’, because this would sound like cheap irony. The matter is too serious for that.) Not having a job at all is the deepest form of exclusion imaginable. But junk jobs are also a form of exclusion. On the face of it they are just an extreme form of division of labour. Its distant source is obviously Taylor’s ideas on ‘shop management’. In fact, there is a clear line of organisational thinking leading from Taylor through Ford to McDonald’s. It has to do with the kind of knowledge that can be deﬁned and packaged into job descriptions, those that are precise to the last minute detail. Yet something fundamental has changed here. To understand that, we need another of Weber’s extraordinarily fruitful and sagacious distinctions: namely, that between material and formal rationality, which is orthogonal to the distinction between rationality of ends and rationality of values. The concept of ‘formal rationality’ was introduced by Weber in relation to the sociology of religion around 1913, and later extended especially to the sociology of law and more schematically to economic sociology (the most important sources are Weber 1920 and 1922). If the two distinctions are orthogonal to each other, we can have four combinations in the good old Parsonian manner, as shown in Figure 1. We oﬀer there a list of some of the most obvious historical examples of people acting according to one or another combination of rationalities. The list is necessarily incomplete, but hopefully suggestive. Material rationality of ends is above all the province of the

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Rationality of ends

Rationality of values

Material rationality

Military strategists Peasants and landowners Artisans and craftspeople Judges and magistrates Magicians and doctors Businessmen Politicians Engineers Administrators

Priests and preachers Prophets and gurus Religious reformers Artists and writers Ascetics Zealots and freethinkers Moral leaders Kings/queens of fashion Advertisers

Formal rationality

Historians Lawyers Mathematicians Physicists Biologists Economists Psychologists Teachers Organisation theorists

Theologians Religious thinkers Rhetoricians Sophists Philosophers Ideologists Journalists Intellectuals Propaganda experts

Figure 1.Weber’s four types of rationality, and some social actors who typically embody them

‘man of action’. (No apology for the gender bias, for it reﬂects a social bias throughout history.) It is based on some form of means-end calculus that is rarely reﬂected upon, not systematic and mostly intuitive. At some point in history another kind of people emerged, more or less at the service of the ‘men of action’, who started to give formal (intellectual, cognitive) expression to that kind of rationality. Whole systems of thought, disciplines and even ‘sciences’ were constructed for that purpose and with more or less success. A parallel development took place in the domain of the rationality of values, where pundits of all colours have tried to ﬁnd verbal and systematic well-reasoned formulations for the values which ﬁrst made their appearance in the world via a diﬀerent brand of ‘practical men’, those who dictate and pontiﬁcate on divine things, the order of the universe, the right morals, the good taste, and so on.4 Now Weber is often credited with the idea that the emergence of the modern world through rationalisation is a movement from rationality of values towards rationality of ends, and there certainly are passages in his work that suggest that. But he was actually more insistent on the movement from material towards formal rationality. And it is in this context that our argument about junk jobs can be stated. These are jobs embodying certain ends and certain values in such a way that the employee has nothing to say about them, but is simply an instrument to realise them: from the size of the hamburger to the smiling at the customer, everything has

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been codiﬁed and systematised. There is no conﬂict of values because (1) the employee is not asked to identify with the values involved in the job, and (2) there is no room for interpretation, modiﬁcation or otherwise organic development of such values. In the old division of labour, the employee could be treated in the beginning of her career as an ignorant apprentice, but in the course of time she was able, and sometimes actively encouraged, to propose changes. Her development as a person paralleled her career and was an element in the development of the profession itself. That was a central aspect of what Durkheim had in mind when he thought so highly of the particular moral codes of the professions. In junk jobs all that is abolished (see Sennett 1998). Yet junk jobs can still be interpreted as a form of division of labour (even if degraded and degrading). What about good jobs?

From values to mandates, from conﬂict to duality (and multiplicity) Some examples of good jobs are: the nurse, the air traﬃc controller, the train driver. We could also include the academic and, perhaps even more acutely, the professional academic, in this category. These jobs are good because they employ and utilise the skills of qualiﬁed and well-trained people, they carry some status, are comparatively well paid and there is plenty of scope for discretion on the job. So far, so good. The problem starts when we see that it is in great part the challenging and creative aspect of these jobs that are increasingly accompanied by dual mandates. The concept of a dual mandate can be traced back to ideas developed in the 1950s by Everett Hughes in the sociology of professions (1959; see also 1958). In a nutshell, Hughes argues that social science has a dual mandate, in that it is supposed to deliver general knowledge of social processes as well as historical and contextual accounts of particular events. More relevant for our purposes, Hughes suggests that behind this hides another dual mandate: to help society cure its social evils as well as to deliver knowledge and truth. Such professionals are left coping with the dilemmas produced by such tensions and by a potentially irreconcilable inner conﬂict of values. We could provisionally characterise these hidden mandates as internalised value conﬂicts on the assumption that at best they are only partly in the jobholder’s awareness. There is a question of terminology here: a ‘mandate’ is more external, a ‘value’ more internal, yet (a bit paradoxically) the ‘duality’ is internal and the ‘conﬂict’ external. So we need to use both concepts to capture the complexity of the issues. The from-to in the title of our paper refers to the second fact, viz. that conﬂicts of value are more readily interpreted as taking place between diﬀerent parties (individuals or groups) and not within a person, whereas the expression ‘dual mandate’ implies that there is an internal conﬂict. (Dual mandates were

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originally assigned to social science, thus to a social role or institution, not to a person. However, the extension does not seem to be unjustiﬁed.) The distinction between good jobs and junk jobs can only be clariﬁed in terms of value conﬂicts: as we suggested before, junk jobs eﬀectively exclude their incumbents from participation in value conﬂicts, and thus, we could say, from healthy development as individuals. (The social communities that junk jobbers belong to may also be deprived of the creativity and skill which such people may otherwise have been able to develop in the workplace.) Now, in good jobs value conﬂicts may in principle be said to take place between individuals, and/or between groups of individuals in organisations (classically between labour and management groups). The complex modern labour market consequent on socalled ‘globalisation’ is, however, replacing overt value conﬂicts with hidden dual (or rather multiple) mandates, taking place within one individual at a time. The nature of value conﬂicts is completely changed by this displacement with the consequence that the relatively few remaining good jobs are becoming increasingly inhumane too. Conﬂict can be healthily dealt with if it is out in the open. If not, it can be stressful. In his discussion on the dual mandate of the social scientist Hughes concludes that trying to unite the two sides of the hidden conﬂict could land the professional in trouble. To illustrate from our own experience one has only to consider the role of the professional ergonomist who may be torn between meeting the interests of big business or protecting and promoting the welfare of the workforce. Look also at the roles of health care workers and managers in Britain’s contemporary welfare state and National Health Service. Whose interests are they truly serving? The 1990s was a decade of great change in the NHS when the traditional caring ethic of the service was challenged by the introduction by the government of a neo-liberal market philosophy of competition and managerialism. Paperwork, meetings and cost-cutting tactics intruded into care work and resulted in the alienation of many care workers who point to a plethora of ‘them and us’ dualisms: care vs. money, budgets vs. employees, working for patients or working for the hospital trust, administration vs. hands-on care. We could generalise this question to cover all the oﬃcials in state bureaucracies. How far are they agents of the state or public servants? Nurses are archetypes of caring professions. They are under stress because of the intrinsic nature of their emotionally draining work, which is ampliﬁed by extrinsic stressors derived from excessive bureaucratic rationality. Jocelyn Handy (1990) investigated the dual mandate element of the British mental health nurse. In particular, she was interested in the hidden conﬂict between the caring side of the job and the controlling custodial side. She found that nurses were reluctant to acknowledge the existence of the value tension. Indeed, as if in some kind of

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subconscious process of collusion they were hardly aware of it. In Ritzer’s (1998) terms you could say that the nurses regulated themselves in conformity with management’s expectations. Their defensive coping behaviours in fact resulted in reinforcing the very stressors from which they were trying to escape. Management can exploit the old public service ethic. The rhetoric, the ‘angel of mercy’ role, is promulgated in many ways. The female child is ‘born’ into the caring role and this belief has been reinforced in the nursing schools and on the job.5 Lest this example is taking us too far away from the ﬁeld of globalisation and the 21st century, we turn now to another good job, that of the air traﬃc controller, who in busy airports today with the aid of advanced technology is at peak times juggling high traﬃc loads. It is as if these people are at the edge of their skill in a world where technology, growth and rationality appear to have bumped up against the limits. It is a round-the-clock service, typical of the global modern economy. The obvious biological and psychological stress of this job is compounded by the stress from the subtle dual mandate — balancing the need for safety against the demands of the industry for growth and eﬃcient and speedy turn round of highly expensive aircraft.6 Similar arguments can be presented on the current predicament of train drivers (the infamous Paddington/Ladbroke Grove, London, rail disaster was less an accident than a result of speed and eﬃciency pressures, which in this case overrode the driver’s concern for passenger safety), teachers, university academics, and all sorts of professionals. A common feature of good jobs seems to be the encroaching of a limited set of values — formerly reserved for a particular group of people within the organisation — upon the incumbents of all groups. We can conceive an organisation under the old Durkheimian dispensation as a set of interacting groups, each one imbued with a particular ‘ethic’, charged with the preservation and promotion of particular values. Conﬂicts then used to emerge from the fact that the diﬀerent ‘ethics’ thus represented within any single organisation have to be fought out; they were part of some form of ‘political’ struggle. This is what in our view is coming to an end through the mechanism of multiple mandates.

On the knowledge of a practical Kantian The set of values being imposed on everyone else seems to fall all on one particular side — that of Weber’s rationality of ends, such as eﬃciency of output. We are certainly not against such values per se. We are as aware as the next guy that those values are necessary to the wellbeing and sheer survival of organisations. But it is a fact of life that those values sometimes enter into conﬂict with other values, such as the quality of the output. A case in point is the current predicament of academics.

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Under the old division of labour, all they had to care for was high standards in teaching, learning, and research. Under the new post-Durkheimian dispensation they increasingly, and sometimes oppressingly, have to worry about budgets, fundraising, student turnover, terminal eﬃciency of doctoral programmes, and so on. Why, even teachers of primary and secondary schools these days can be crushed by all the non-teaching (bureaucratic) duties they have to fulﬁl. Before we go any further, we would like to make an important disclaimer. People tend only to see the dark side of things — say, the division of labour as unmitigated evil. We are here in a sense making the opposite case that not everything is (or was) wrong with it. That does not mean everything is right, either (as should be clear from what we said about junk jobs). And again, in spite of the awful aspects of reduced division of labour, which this paper emphasises in relation to the good jobs, we do not think for a minute that everything is wrong with it. In fact, that is the main reason we still want to speak of certain jobs as good, even if they can be made better. The problem with good jobs is not just the intensive workload (the characteristically long hours and long weeks). The people we are talking about (nurses, teachers, etc.) are usually conscientious, so they go to enormous lengths to protect and promote the values endangered by the omnipresence of the gods of eﬃciency. They have to ﬁnd by themselves ways and means to achieve a forever-precarious balance between conﬂicting goals and ideals. In the process they can, and often do, get burnt out. In his discussion on the role of norms in bargaining and collective action Jon Elster (1989) caricatures ‘everyday Kantians’ (his expression) as people who always, or almost always, want to act on principle and more or less refuse to consider the consequences of their actions. This is a suggestive picture of what happens when, for instance, the Durkheimian process of developing an in-group ethic, and defending it against other groups, shapes collective action politically. But our post-Durkheimian Kantians are vastly diﬀerent. Yet they are there. For there is another side to the coin — we call it ordinary responsible behaviour or just ordinary goodness (see Oborne et al. 1993; Leal 1995). Without this quality (the responsible, caring commitment of the nurse, the train driver, the air traﬃc controller, the teacher, the academic: there are many examples from many walks of life) our systems would crash. If, according to the popular mechanical metaphor, the system (the organisation) is a machine, then the ‘everyday’ or ‘practical Kantians’ in it are like little greasers and oilers — there are many of them — and they are constantly monitoring and lubricating the wheels of the machine to guarantee its smooth functioning. They use their skill, know-how, their discretion, and will even rise to the occasion at times of stress and pressure on oﬀ days, prioritising the system above their own comfort needs. Management knows this and yet frequently fails to recognise it openly, and to support and reward such

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people properly. Instead, they may allow these ordinary responsibly-minded creative people to be exploited through means such as dual, or even multiple, mandates, covertly depending on the workforce’s sense of duty and capacity to cope with stress. What we refer to as this ‘ordinary goodness’ is a common phenomenon; but many workplace colleagues (easy-riders, if you like), who take advantage of its existence by not pulling their weight, also complicate the picture. So the system needs (and gets) these little dutiful oilers, who are forever running all over the place until they drop exhausted. Think of the dedicated nurse and her frantic eﬀorts at trying to properly care for her patient against all the odds, as opposed to lapsing helpless into ‘defensive’ and ‘collusive’ coping (Handy 1990). It is often only when these committed individuals rise up in protest, or ‘leave the ﬁeld’ — the job, the organisation — refusing to play the game anymore, where such protest is discouraged in the workplace in an anti-union climate, that managers sit up and take notice. We said before that these good people are there, millions of them. One question is, of course, for how long. Imprudent generals have been known to lose all their good soldiers in order to keep control over a strategically meaningless position (have you seen The Thin Red Line?). Even eﬃciency can be jeopardised by too single-minded attention to it. Anyway, the big question is here, again, one of knowledge — very important yet barely-understood knowledge — which is still crucial in a new machine age, in an electronic age of digital economies. What is it that these ordinary people know and what is it that other people know, or may think they know, about them? It is informal vital knowledge, closer perhaps to what Michael Polanyi referred to as ‘tacit knowledge’ (1958). It is under-researched and under-theorised knowledge. Why? For at least two reasons: Management might not openly value it, and even if they did it is diﬃcult to research and pin down because it is more than technical skill; it is a sophisticated knowledge which includes a special psychological, indeed moral, something as well as skill. Skill is notoriously diﬃcult to analyse, as any ergonomist will admit, even if seen from a merely instrumental point of view. It becomes even more diﬃcult to understand and appreciate once we realise that in practice skill is always combined with certain values. It embodies individual intentions — to maintain the status quo because things are going well or to seek to change if it is judged to be not up to standard. But we barely know how to express these in a formal way. The textbooks and management training manuals are replete with formal knowledge. The clerks help the bosses with their administration and the professionals help them, in their capacities as agents of the state or of business, by doing the research, writing it up, and presenting it for ‘consumption’. They code it.

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Once coded it is subject to rules and regulations, to routines and procedures. In general, the material rationality of ends works well, but, sometimes, the ‘man of action’ needs the help of these pundits, recruited from the professional world (originally priests, lawyers and doctors, later also engineers) but in the modern university-based world increasingly from the academic world (statisticians, economists, sociologists and psychologists are the most obvious cases). They all help the ‘man of action’ to encode the knowledge necessary for sophisticated instrumental rationality. Such codes (from laws and regulations to contracts and job descriptions, from industrial psychology and time-and-motion studies to decision and game theory, from cost-beneﬁts analysis and quality control to IQ testing, and so on) serve also the purpose of control. But the knowledge and rationality of ordinary goodness is very diﬀerent: it is deeply informal. You can’t code it. It eludes analysis. That’s why individual creativity and discretion is always needed on the job. At the centre of that informal uncodeable knowledge is ethics. But that knowledge is in the last instance inexpressible. Which is why instrumental rationality (Weber’s rationality of ends) always wins over axiological rationality (his rationality of values) — being amenable to exact, even quantitative expression. Bosses who fail to acknowledge and sustain this are actually ‘rational fools’. They operate complex systems which can, and in fact, do crash, despite their eﬀorts, systems which are always plagued with myriad unintended consequences — with stuﬀ the people ‘in charge’ are never really quite in charge of. Their employees may thus fail to ﬂourish in such systems and give of their best. However unintentionally, managers risk exploiting their staﬀ instead of treating them with respect.

And ﬁnally, the paradox We argue that these ordinary people act on the basis of a Weberian rationality of values. Now that rationality is diﬃcult to express for the actors. For the most part they rely on some form of Giddensian ‘practical consciousness’, although from time to time they actually manage to voice their concerns and complaints, either by themselves (Hirschman 1970) or with the help of another sort of ‘theoretician’ — social scientists prepared to listen to them in an appropriate manner. But it is painfully clear that we are much smarter and vastly more successful in verbalising and systematising rationality of ends in a quantitative manner than we are in doing the same kind of job with a qualitative rationality of values. The complex game played by the ‘man of action’ and his material rationality of ends aided by the ‘theoretician’ and his/her formal rationality of ends, constitute together the full picture of instrumental rationality at work. Anyway, the

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organisational malaise, together with the more general social (extra-organisational) malaise produced by the eﬀects of wild instrumental rationality on the public, sometimes create the supposed need for codes of ethics. So enter the pundits again to help by formulating written codes of practice. But do these ethical codes help? Can one put one’s values onto paper in such a way that it really solves the problems? We have our doubts. Durkheim’s hope of professional groups building up strong ethical codes, which would save society from ‘anomie’, was probably mistaken. They are no substitute for ordinary goodness. In fact, people in organisations seldom ﬁnd ethical codes helpful (Goodwin 2000). And that is because ethical knowledge — like that evinced by those little Kantian oilers we have just evoked — is clearly of the ‘wild’, ‘tacit’, embodied, intuitive, unconscious, implicit, not formalisable kind,7 and expressible mainly in narrative and metaphorical language.8 On the strength of such insights it has recently been claimed that all social science — and a fortiori all organisational studies — are fundamentally diﬀerent from the sciences of the physical and biological world.9 Although this particular claim goes beyond the scope of this paper, it is certainly worth thinking about. Anyway, the formalization of knowledge which is typical of late capitalism does not — and cannot — include ethics in the living real sense, but at most the kind of formal ethics that ﬁlls the ‘ethical codes’ and the ‘business ethics books’ — not the practical, ﬂesh-and-blood, real-time everyday ethical reasoning that so often saves the day in our increasingly complex organisations. It is certainly a paradox for management, if not indeed a paradox of management, that the more they try to formalise and codify ethical knowledge the less they succeed — unless, of course, the measure of success is a kind of ‘rational’ justiﬁcation to hide a surface window-dressing that paciﬁes a manager’s conscience or the public’s conscience. (This would have been exactly Pareto’s diagnosis.) The Tavistockers with their concept of the socio-technical system in which social and technical dimensions were to be perfectly balanced were also misconceived. (They probably wanted to appease the techno-freaks). What we have now in reality is the social swallowed up by the technical, an axiological rationality subservient to instrumental rationality, with ordinary goodness saving the day again and again. This is surely the case in good jobs. In the case of junk jobs it is not even that, as McJobbers frantically try to get a proper human life outside the organisations in which they work, sometimes in surprising, admirable ways (cf. Wuthnow 1991), or sometimes in horribly wrongheaded ones, such as through the drug scene. To escape from the iron cages of instrumental rationality — whether Weber’s or Ritzer’s — we need technique that is subservient to the social, that is, instrumental rationality under the control of axiological rationality. (Although we would not wish to deny there are problems here as well). For sure, technology is a good

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servant but a bad master. Our diagnosis seems bleak on the face of it. Is there a chance for ethical people, trying to do ethical jobs in ethical organisations? If so, we would have to organise knowledge economies and societies in an ethical way. Nay, we would have to organise ethical knowledge in ways that are not barrenly formal. Is that possible? We believe it is; we even believe that there are some hopeful signs that people are starting to go in that direction (see the references in footnotes 8 and 9), ie in the direction of aﬀording reasonable, responsibly-minded and skilled workers more not less discretion backed up with suitable organisational supports and structures so long as management retains overall systems accountability.10 Do organisations at the beginning of the 21st century perceive the ethical problem and the paradox it involves? Are they ﬂexible enough to device ways of coping with the ethical impasse? Shall we all have the wisdom and the practical intelligence to ﬁx the ethics of our systems and organisations before it is too late?

Notes * The present chapter is a revised version of a paper ﬁrst presented to the APROS conference that took place in Sydney in December 2000 under the general title “Organizing Knowledge Economies and Societies”. We want to express our thanks ﬁrst to Eduardo Ibarra for suggesting we take part in the conference and, also, the Society for the Furtherance of Critical Philosophy in London, for making our participation possible, by ﬁnancing our trip down under. Thanks are also due to the people who partiicipated in the workshop in which we presented the paper, for a stimulating discussion, and particularly to Jon Stokes, for a wonderful chairing job, and his many kindnesses. Stewart Clegg was not only a charming host at the time but also invited us to publish the paper here. He is the only one to bless or blame; we certainly bless him for the opportunity. 1. Durkheim’s approach suﬀers from an important defect, inherited via Comte. This is the evolutionary idea that humankind progresses from an original state of division by kin through an intermediate state of territorial division towards a ﬁnal state of division of labour. There is no such line of progress, but the three kinds of division coexist in human life and society. Each one has its own logic and no one is dispensable. In fact, they are interdependent variables. For an argument to the eﬀect that territorial division is still very much with us, see Stephan (1995), which summarises and orders a thirty-year life work. As for kin division, it is only to be hoped that the eﬀorts of sociobiologists and evolutionary psychologists will give us, someday, a similar view, once they renounce their misleading imperialism. In any case, a fuller picture of our ethical development should include our three basic human attachments: to kin, territory, and labour group. We really derive our values and thus become what we are, in the course of a life geared to being in these great three domains. Pareto’s analysis (1916) is, in this respect, more sophisticated. 2. The increasing numbers of unemployed complicate the picture. Having no jobs, they are forever beyond ethical development through division of labour. In terms of kin and territorial division (see note 2), we should also mention the homeless, the exiled, and emigrants. We mention all this just to insist that our paper tells only part of the story about the ethical impasse that we are being ushered into with the 21st century. See Leal (2001).

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3. Weber’s dystopian view envisaged the world as a complex of rational systems controlling our lives. For Ritzer the contemporary world is globalised through the spread of American ways of life, speciﬁcally American consumer habits. In fact, he sees the postmodern society in the West as based on consumption (whereas previously it was production), with McDonalds fast food chain being the champion exemplar. He also sees this form of consumerism as the paradigm of Weber’s rationalization, rather than the ‘iron cage’ of bureaucracy (the irrational side eﬀects of bureaucratic rationality) with its rational centralised planning, which Weber regarded as the paradigm of modernity. Borrowing from an idea of Mannheim’s on self-regulation, Ritzer pairs it with the phenomenon of McDonaldisation to imply an even more threatening and insidious process than was forecast by Weber. If consumers willingly regulate themselves by clearing up their dirty plates in McDonalds’ cafes, and the technology, (such as the food dispensers), automates jobs, who needs to employ expensive management to externally control and regulate? McDonalds’ patrons are unpaid workers and pliable, passive, participants. The eﬀect is the same in both the bureaucratic and McDonaldisation iron cages: an inability to think rationally for oneself and a habitual and widespread compulsiveness. The massive number of low-status, lowpaid service workers in the modern economy, working to tightly-controlled verbal scripts in dealings with customers, and the legions of customers trapped in self-controlling mind sets are, for Ritzer, a main threat to the notion of a civilised society. It is a subtle form of socialisation for conformity on a disconcertingly wide scale and is becoming increasingly standardised and global. Most of us are too busy consuming to protest against the threat of totalitarianism. Wrily, Ritzer sees no need for secret police. Such subtle control, in which ‘the enemy’ is less visible, less tangible, is harder to rebel against. It is Foucauldian in style. McDonalds, rather than merely being junk food, is junk through-and-through–for Ritzer, it is the symbol of what is wrong in the developed world. 4. This is the domain par excellence of Pareto’s ‘derivations’ (1916). On the other hand, it is clear that the frontiers in the above diagram are fuzzy and porous, much as all frontiers. Thus, psychologists sometimes play the role of pundits, say, for businessmen, but they can also set themselves up in business as gurus or at least as ghost-writers for gurus. Freud can be used for the selection of personnel or as a kind of secular theology. Similar shifts can be observed all around the diagram. Critical organisation theory, we suppose, is an attempt at moving from the formal rationality of ends to the formal rationality of values. 5. The fashionable use of the expression ‘identities’ in lieu of ‘values’ or ‘mandates’ only represents a comeback of the old sociological ‘roles’ — revamped to do justice to the conditions of modern life on three levels: simple ﬂexibility (people behave diﬀerently in diﬀerent circumstances or with diﬀerent people), dual mandates (our topic in the proper sense), and pathological schizophrenia (as illustrated in extremis by the Nazi concentration camp ‘managers’, the Maﬃa capi, ruthless businessmen, secret agents, hit-men, etcetera–people who seem to be able to combine ordinary decencies with gross criminal behaviour). 6. For the British sociologist Anthony Giddens (1999) we are in a ‘runaway world’. It is similar to a juggarnaut running out of control. A major feature of late modernity for Giddens is sophisticated ‘manufactured risk’. Industrial societies manufacture risk (which, incidentally, addds to natural risks) and then are left with the job of controlling those risks, an impossible task to do perfectly, in complex sociotechnical systems such as air traﬃc control and railways. We may have become too dependent on technology–a prime example of over-rationalisation. In an ever-tightening circle we look to technology to provide solutions to ﬁx a growing number of complex problems. The root metaphor of the age, that of the machine, creates an illusion of

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control; that what we manufacture we can always control. But these sociotechnical giants are fragmented, and it is no easy task, even with the best of intentions (and skills), to put Humpty Dumpty back together again. Like all technologies the digital revolution is a two-edged sword, only this time, like the weapons of war of the last century, the lethality and potential for environmental and social harm of the technology is much greater than anything known before. The recent railway disaster in London can stand for myriad examples. 7. The literature on this topic is immense. (For some highlights see Polanyi 1958; Lévi-Strauss 1962; Dreyfus 1972; Bourdieu 1972; Schön 1983; Benner 1984; Dreyfus & Dreyfus 1988; Varela, Thompson & Rosch 1991; Livet 1994; Claxton 1997; Klein 1998; Bloch 1998, and Atkinson & Claxton 2000. Particularly useful for ethical thinking and action from this point of view are Dreyfus & Dreyfus 1991; Pothast 1998, and Varela 1999.) 8. This is also a huge topic. The interested reader might want to have a look at least at the following recent ethics-related books: Johnson (1993); Lakoﬀ (1996); Fish (1999), and Amsterdam & Bruner (2000). The ‘rhetorical’ approach to economic methodology (McCloskey 1990, 1998) does not always refer directly to ethics, but ethical issues are never far behind. Although older, there is still a lot to be learnt from Perelman and Olbrechts-Tyteca (1969). 9. The claim is Flyvbjerg’s (2001), although it recapitulates over a hundred year old debate on the demarcation between the social and the natural sciences. Flyvbjerg’s particular contribution refers primarily to ‘soft’ social sciences, such as sociology and anthropology, but it could be easily extended to ‘hard’ ones like economics (cf. McCloskey 1990; 1998). We are not sure, however, that his argument can actually work for demarcation purposes, for it can be argued that exactly the same cognitive features claimed by Flyvbjerg for social sciences are present in biology, physics, or indeed mathematics itself (see e.g. Krieger 1992; Casti & Karlqvist 1999, and Lakoﬀ & Núñez 2000). 10. For earlier and fuller statements of this goal, see Oborne et al. (1993); Leal (1995), and Shipley (1998). Compare the related approaches of Cooley (1987); Norman (1989; 1993) Rosenbrock (1990), and Eason et al. (1995).

References Amsterdam, A. G. and Bruner, J. (2000). Minding the law: How courts rely on storytelling. Cambridge, MA: Harvard University Press. Atkinson, T. and Claxton, G. (2000) (Eds.). The intuitive practitioner: On the value of not always knowing what one is doing. Buckingham, UK: Open University Press. Benner, P. (1984). From novice to expert: Excellence and power in clinical nursing practice. Menlo Park, CA: Addison-Wesley. Bloch, M. E. F. (1998). How we think they think: Anthropological approaches to cognition, memory, and literacy. Boulder, CO: Westview Press. Boudon, R. (1986). L’idéologie, ou l’origine des idées reçues. Paris: Fayard. Boudon, R. (1990). L’art de se persuader des idées douteuses, fragiles ou fausses. Paris: Fayard. Boudon, R. (1995). Le juste et le vrai: Études sur l’objectivité des valeurs et de la connaissance. Paris: Fayard. Boudon, R. (1996a) De la rationalité instrumentale à la rationalité axiologique. In his Le sens des valeurs, 82–135. Paris: Presses Universitaires de France.

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Boudon, R. (1996b). La rationalité axiologique. In his Le sens des valeurs, 137–203. Paris: Presses Universitaires de France. Boudon, R. (2000) La ‘rationalité axiologique’ et la rationalisation de la vie morale. In his Études sur les sociologues classiques II, 201–246. Paris: Presses Universitaires de France. Bourdieu, P. (1972). Esquisse d’une théorie de la pratique, précédé de trois études d’ethnologie kabyle. Geneve: Droz. Casti, J. L. and Karlqvist, A. (1999) (Eds.). Mission to Abisko: stories and myths in the creation of scientiﬁc “truth”. Reading, MA: Perseus Books. Claxton, G. (1997). Hare brain, tortoise mind: how intelligence increases when you think less. Hopewell, NJ: The Ecco Press. Cooley, M. (1987). Architect or bee? The human price of technology. New edition. London: The Hogarth Press. Dreyfus, H. L. (1972). What computers can’t do: the limits of artiﬁcial intelligence. New York: Harper & Row. Dreyfus, H. L. and Dreyfus, S. E. (1988). Mind over machine: the power of human intuition and expertise in the era of the computer. Revised edition. New York: The Free Press. Dreyfus, H. L. and Dreyfus, S. E. (1991). Towards a phenomenology of ethical expertise. Human Studies, 14: 229–250. Durkheim, É. (1893). De la division du travail social. Paris: Félix Alcan. Eason, K. D., Harker, S. D. P. Raven, P. F., Brailsford, J. R. and Cross, A. D. (1995). Expert or assistant? Supporting power engineers in the management of electricity distribution. AI and Society: The Journal of Human-Centred Systems and Machine Intelligence, Special Issue on Ethics and the New Technology, P. Shipley and F. Leal (Eds.), 9: 83–96. Elster, J. (1989). The cement of society: A study of social order. New York: Cambridge University Press. Elster, J. (1999). Alchemies of the mind: Rationality and the emotions. New York: Cambridge University Press. Fish, S. (1999). The trouble with principle. Cambridge, MA: Harvard University Press. Flyvbjerg, B. (2001). Making social science matter: Why social inquiry fails and how it can succeed again. Cambridge, UK: Cambridge University Press. Garson, B. (1988). The electronic sweatshop: How computers are transforming the oﬃce of the future into the factory of the past. New York: Simon and Schuster. Giddens, A. (1990). The consequences of modernity. Cambridge, UK: Polity Press. Giddens, A. (1999). Runaway world: How globalisation is shaping our lives. London: Proﬁle Books. Goodwin, B. (2000). Ethics at work. Dordrecht: Kluwer. Handy, J. (1990). Occupational stress in a caring profession. Aldershot, UK: Avebury. Heilbronner, R. L. (1992). The worldly philosophers: The lives, times, and ideas of the great economic thinkers. 6th edition. New York: Simon & Schuster. Henderson, Lawrence J. (1935). Pareto’s general sociology: An introduction. Cambridge, MA: Harvard University Press. Hirschman, A. O. (1970). Exit, voice, and loyalty: Responses to decline in ﬁrms, organizations and states. Cambridge, MA: Harvard University Press. Hughes, E. (1958). Licence and mandate. In his Men and their work, 78–87. Glencoe, IL: The Free Press. Hughes, E. (1959). The dual mandate of social science: remarks on the academic division of labour. Canadian Journal of Economics and Political Science, 25: 401–410. Johnson, M. (1993). Moral imagination: implications of cognitive science for ethics. Chicago, IL: The University of Chicago Press.

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Klein, G. (1998). Sources of power: How people make decisions. Cambridge, MA: The MIT Press. Krieger, M. H. (1992). Doing physics: How physicists take hold of the world. Bloomington, IN: Indiana University Press. Lakoﬀ, G. (1996). Moral politics: What conservatives know that liberals don’t. Chicago, IL: The University of Chicago Press. Lakoﬀ, G. and Núñez, R. E. (2000). Where mathematics comes from: How the embodied mind brings mathematics into being. New York: Basic Books. Leal, F. (1995). Ethics is fragile, goodness is not. AI & society: The journal of human-centred systems and machine intelligence, Special Issue on Ethics and the New Technology, P. Shipley and F. Leal (Eds.), 9: 22–35. Leal, F. (1999). Antagonistic values or complementary value systems? The chances and limitations of dialogue in organizations. In Global management: Universal theories and local realities. S. R. Clegg, E. Ibarra-Colado and L. Bueno-Rodriguez (Eds.), 226–245. London: Sage. Leal, F. (2000). The relation between value conﬂicts and the Socratic dialogue. Occasional working papers on ethics and critical philosophy, 2: 35–50. Leal, F. (2001). Values and value conﬂicts in actual practice. Ethics in practice in the 21st century. In (Ed.) P. Shipley and D. Moir, 31–45. London: Society for the Furtherance of Critical Philosophy. Livet, P. (1994). La communauté virtuelle: action et communication. Paris: Éditions de l’Éclat. McCloskey, D. N. (1990). If you’re so smart: The narrative of economic expertise. Chicago, IL: Chicago University Press. McCloskey, D. N. (1998). The rhetoric of economics. 2nd edition. Madison, WI: The University of Wisconsin Press. Norman, D. A. (1989). The design of everyday things. New York: Doubleday. Norman, D. A. (1993). Things that make us smart: Defending human attributes in the age of the machine. Reading, MA: Addison-Wesley. Oborne, D. J., Branton, R., Leal, F., Shipley, P. and Stewart, T. (1993) (Eds.). Person-centred ergonomics: A Brantonian view of human factors. London: Taylor & Francis. Pareto, V. (1901–1902). Les systèmes socialistes. Paris: Giard et Brière. Pareto, V. (1916). Trattato di sociologia generale. Firenze: Barbèra. Perelman, C. and Olbrechts-Tyteca, L. (1969). The new rhetoric: A treatise on argumentation. Notre Dame, IN: University of Notre Dame Press. Polanyi, M. (1958). Personal knowledge: Towards a post-critical philosophy. London: Routledge. Pothast, U. (1998). Lebendige Vernünftigkeit: Zur Vorbereitung eines menschenangemessenen Konzepts. Frankfurt am Main: Suhrkamp. Rosenblueth, A., Wiener, N. and Bigelow, J. (1943). Behavior, purpose, and teleology. Philosophy of science, 10: 18–24. Rosenbrock, H. (1990). Machines with a purpose. New York: Oxford University Press. Ritzer, G. (1998). The McDonaldization thesis: Explorations and extensions. London: Sage. Schön, D. A. (1983). The reﬂective practitioner: How professionals think in action. New York: Basic Books. Sen, A. (1976–1977). Rational fools: a critique of the behavioural foundations of economic theory. Philosophy and public aﬀairs, 6: 317–344. Sennett, R. (1998). The corrosion of character: The personal consequences of work in the new capitalism. New York: Norton. Shipley, P. (1998). The ethical turn and the workplace.Ergonomics, 41: 1–19.

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Stephan, E. (1995). The territorial division of society. Available at: www.ac.wwu.edu/ ~stephan/Book. Varela, F. (1999). Ethical know-how: Action, wisdom, and cognition. Stanford, CA: Stanford University Press. Varela, F., Thompson, E. and Rosch, E. (1991). The embodied mind: Cognitive science and human experience. Cambridge, MA: The MIT Press. Weber, M. (1917). Wissenschaft als Beruf. Critical edition in: Max Weber Gesamtausgabe, part I, vol. 17 (Ed.) W. J. Mommsen and W. Schluchter (1992), 71–111. Tübingen: Mohr-Siebeck. Weber, M. (1920). Gesammelte Aufsätze zur Religionssoziologie. Tübingen: Mohr-Siebeck. Weber, M. (1922). Wirtschaft und Gesellschaft. Tübingen: Mohr-Siebeck. Wuthnow, R. (1991). Acts of compassion: Caring for others and helping ourselves. Princeton, NJ: Princeton University Press.

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Part II

Materialising Paradoxes

Chapter 8

Organizational paradoxes and business ethics In search of new modes of existence* Eduardo Ibarra-Colado

Introduction Organization theory in the 1980s experienced a paradigmatic rupture, as the impact of new post-modern recipes and tools was projected on to the business world (Clarke and Clegg 1998). Implications were drawn from both older-style critical scholars as well as new style guru thinkers, with both being critical of established management and organizations as they saw them. Guru’s of the new order began to question technical rationality in favour of a more human world in which the normalcy of organizational reality was to be achieved through permanent revolution, constituting dilemmas and contradictions as the stuﬀ of sensemaking (Peters and Waterman 1982; Peters 1991). New preoccupations emerged, such as the consideration of culture and emotions as decisive factors inﬂuencing both individual behaviour and enterprise results (Deal and Kennedy 1982; Ouchi 1981; Schein 1985). Political-cultural contextual factors also came into focus in the “new institutionalism” (Meyer and Rowan 1977; DiMaggio and Powell 1983), which were seen to produce and reproduce the structure of organizations and aﬀect the way things are done. An absence of organizational control over interconnected realities that were in permanent movement, thus reproducing their own instability, also became recognised as “normal” (Perrow 1984; Weick 1993). The managerial and organizational knowledge of most of the 20th century centred on the analysis of structures, the results of which were regarded as an expression of the universalism of bureaucracy. In contrast, new critical theories stressed the interpretation of organizational forms as locally constructed, where the subjective sense that individuals gave to their actions played a fundamental role. Traditional problems of structure were displaced by the consideration of processes and relations (Silverman 1974; Crozier and Friedberg 1980; Weick 1979). Other critical theories began to represent organizations as nodes of networks,

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articulated across volatile and highly competitive space, emerging as systems with blurred boundaries favouring the circulation of information and trade in real time. For these reasons, change became considered as centrally important to the new approaches, which linked it to diverse forms of organizational ﬂexibility and the use of new technologies in order to improve learning, adaptation and collaboration (Bartlett and Ghoshal 1989; Senge 1990; Castels 1996). In the 1980s and 1990s critical debates also reappeared, concerning the costs and eﬀects produced by transnational corporations. In a world characterized by great contrasts, critical thinking tried to understand new problems. Some were traditional issues, such as discrimination based on class, gender, race, religion, politics or some other condition that functioned as a key element of diﬀerentiation (Nkomo and Cox 1996; Prasad et al. 1997). Other foci included power, and structures of domination, and their relation to disciplinary regimes based on surveillance and control (Clegg 1989; Deetz 1992). These were not the only foci: others focussed on the eﬀects of bureaucratic administration, with its arsenal of management knowledge and tools (human resources, marketing, accounting, production) (Alvesson and Willmott 1992; Hopwood and Miller 1994; Townley 1994). A renewed appreciation of technical rationality and bureaucratisation as means for the alienation and de-humanization of work (Schwartz 1990; Sievers 1994) became evident. Organization growth and the concentration of wealth in periods of bonanza, the socialisation of losses in periods of crisis and recession (Clegg et al. 1983, 1986), and the role of the state in regulating economy and society, came into renewed focus (Laumann and Knoke 1987; Clarke and Newman 1997).1 The global dimension became evident, as the strength that huge corporations acquired during the last century meant great fortunes were accumulated and concentrated in what were relatively few capital-owning hands on a global scale, even with the spread of “pension-fund” capitalism. At the same time that the conceptualisation of poverty developed global dimensions (Bauman 1998) there also emerged a conception of this one world as being inherently at risk. Some risk was due to the scientiﬁc and technological advances with which science had previously sought to control the world, particularly a tendency to hyper-specialization that reduced and fragmented insuﬃciently understood realities. Consequently, scientiﬁc and technological development both increased risks and diminished control over complex systems that had become autonomous, producing unexpected and tragic eﬀects, instead of predictable results (Giddens 1990; Beck 1996). The destruction of the planet increasingly appeared irreversible, expressed in wars between nations as well as in the destruction of nature, demonstrating the great tragedy of “development” that confronts homo sapiens with homo demens (Morin and Kern 1998). For each step forward there seemed always to be a countervailing move in the opposite direction.

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The 1990s developed widespread paradoxical social science representations of the “real world”. Authors began, insistently, to point out the paradoxical character not only of social science reality at the macro and global level, but also at the level of management and organization, within work, economy and culture (see, for example, Peters 1991; Handy 1994). It appeared that managers and scholars ﬁnally understood the dynamics that govern organizations, in terms of the normalcy of the inconsistencies — rather than consistencies — of rationality. However, these apparently novel positions overlooked the fact that the paradoxical condition of the organizational world is not a post-modern condition: the 20th century was full of examples that showed modern society to be characterized by ambivalence. What we are observing may be the recuperation of a condition of modernity eliminated by rationalist thought during the last two centuries. As Marshall Berman (1988; see also Bauman 1996) commented, recuperation of a project for modernity implies the return to past modernisms, which clearly assumed the contradictory nature of reality, the importance of the self and history, and the necessary understanding of a historical epoch as a totality. To talk about “post-modern realities” implies recovering paradoxical aspects of the condition of modernity as it sought to escape, deﬁnitively, from the iron cage. The iron cage in question was as much a construct of ethics as it was of control.

Introducing ethics Recognising the ambivalence of modernity, in the following pages we will analyse the dilemmas and paradoxes of business ethics. Our reﬂection will centre on the following question: “Is it possible to talk about business ethics?” This apparently simple question encompasses the space of both discourse and practice. A satisfactory answer requires new ways of visualizing the topic. To fulﬁl this purpose, we will establish three scenarios with the intention of pointing out three diﬀerent ethical facets of organizational paradoxes.2 The ﬁrst scenario shows the paradoxes of the world of the corporation when discourses and practices are confronted: we will see that discourses and representations do not correspond to practices and actions, neither in the declared ends of the ﬁrm, nor in the results actually produced. The second scenario looks at the symbolic devices used by corporations to generate identiﬁcation and to build consensus. The discourse of excellence functions as an identity fabrication device, enabling the projection of an imaginary subject that displaces the real one. Individuals in the corporation become imaginary subjects permanently confronted and defeated by their actual shadow. Finally, the third scenario shows the sense of the “ethical explosion” of the last decade of the 20th century, revealing the paradoxes of

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the business of ethics. This dilemma opens urgent debate about what seems a “nonethical-ethics”, or to put it another way, consideration of ethical preoccupations in business reveal not only its unethical character but also the role of resistance in foreshadowing a new ethics, as practices of freedom. These three scenarios will allow us to delineate, in the ﬁnal part of the chapter, some key ideas for the construction of a diﬀerent organizational ethics. It is one that does not submit to the mandates of money but, essentially, to the exigencies of a society that requires spaces in which one may act through freely exercising will. From this substantive ethics it might be possible to transform corporations from structures of subjugation and domination to spaces of greater equity and plural coexistence and recreation.

Paradoxical corporations and business [and/or] ethics I have been a fool all my life as far as making money is concerned. (Cornelius Vanderbilt, March 23, 1878).

Recollect the history of United States industrialization, the cradle of the entrepreneurial culture that dominates the global world. The American empire was founded on mechanization, on the possibilities oﬀered ﬁrst by steel and then by oil, as well as on the new inventions that transformed business management and shop work, such as the telegraph, the telephone, the typewriting machine, and the calculator (Giedion 1975; Hughes 1989). The coldest, most algid moments of this savage industrialization, commanded by the Robber Barons (Josephson 1962), were featured in a recent book on the expansionary experience of the railroads, which by 1900, had already built 193,000 miles of track: The ﬁrst transcontinental railroad was built shedding blood and sweat, and at the cost of political manoeuvring and fraud. The Central Paciﬁc Railroad split the country in two, from the western to the eastern coast. In Washington, it spent 200,000 dollars in bribes to acquire 9 million acres of virgin land and 24 million dollars — 36 additional million over that calculated — to a construction company, which, in fact, was owned by it. Three thousand Irishmen and ten thousand Chinese were engaged four years in the construction, being paid one or two dollars per day. (Zinn 1995: 191, translated from the Spanish edition)

Almost one century later, at the beginning of the new millennium, things do not look much diﬀerent. Who can deny the relationship between the wealthiest of men and the newspaper headlines narrating the juiciest of scandals during the last century? The captains of industry, represented by Andrew Carnegie, John D. Rockefeller, Cornelius Vanderbilt, and J. P. Morgan, have yielded their place to the new yuppies of money. There are many examples from which we will select just a few:

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Robert I. Maxwell, a publishing businessman who illegally used the pension funds of his employees to assuage the ﬁnancial diﬃculties of his mass media empire; Michael Milken, the ﬁnancial speculator who became famous thanks to his “junk bond” invention of interest-yielding speculative bonds where high risk is oﬀset through diversiﬁcation; Ivan F. Boesky, who built a large ﬁnancial empire in Wall Street by purchasing conﬁdential information, which he eventually used for illegal advantage in his ﬁnancial transactions; Mario Conde, former Chairman of Banesto in Spain, accused of embezzling six hundred million pesetas and of trying to escape on false documents; and his fellow citizen Mariano Rubio, executive of Banco Ibercorp, accused of bribery, swindling, and misappropriation. And just to give some space to Mexico, my own country, let us mention Carlos Cabal-Peniche, known as King Midas, Angel Isidoro-Rodríguez, alias El Divino, and Jorge Lankenau-Rocha, whose work, according to widespread oﬃcial accounts, endangered the Mexican ﬁnancial system to its core. In this brief tour, Raúl Salinas-de-Gortari — known worldwide as the “uncomfortable brother” or the “ten percent man” — cannot be forgotten, any more than the new narcopolitical actors, led by Mario Villanueva-Madrid, former governor of the state of Quintana Roo, now resident in prison. One could go on, as it is an endless list. Taking such facts into account, is it possible to talk about business ethics amongst some of businesses most high-proﬁle practitioners — or are these the “rotten apples” in an otherwise excellent batch? Let us quote the opinion of a wellknown North American celebrity, who gave an early diagnosis of this situation. An illustrious businessman made the following public statement, still relevant to our times, on October 17, 1931.3 Today, people no longer respect anything. Before, we placed virtue, honour, truth, and the laws on a pedestal. Corruption is embedded in the American life of our times. Where no other law is observed, corruption becomes the only law. Corruption is weakening this country. Virtue, honour and the law have vanished from our lives. (Quoted in Galeano 1998: 1, translated from the Spanish edition)

Before this dark scenario, leaders of the business world — despite the fact that some of those most prone to ethical nostalgia for the good old days were increasingly associated with politics and drug traﬃcking — shared a presumed ethical vocation, translated into heroic philanthropic acts, showing clearly the public virtues, while concealing their private vices. Some of the names we have mentioned before now appear as the names of foundations that make contributions and donations to foster education and research; to ﬁght terrible diseases, such as cancer or AIDS; or to support the miserable and the helpless, who have received a marginal part of the beneﬁts produced by the wealth gathered by these gentlemen. No action has been spared to publish their altruism and kindness, by means of ad

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hoc advertising campaigns, ﬁlms, and heroic books that turn out to be best sellers. The device, as an arrangement of symbols and artefacts, can operate thanks to the logic of common sense: who could imagine that behind such exemplary behaviour lays the ethical absence so widely denied?

Corporate predators, from the centre to the periphery Let us shift from individuals to corporations. In this case, the scenario is little more encouraging. Suﬃce to refer to the classiﬁcation made every year by Multinational Monitor, the magazine that highlights the ten worst corporations of the year. Multinational Monitor’s 1997 and 1998 lists included well-known brands, such as Philip Morris, Nike, Chevron, Coca Cola, General Motors, Mobil, Monsanto, and Wal-Mart (Mokhiber and Weissman 1999: 83–85 and 115–118). The charges that were levelled for award of this distinction varied, ranging from the payment of miserly wages to employees to the lobbying of Congress, so that laws could be passed that did not hinder their speciﬁc business interests. Also, we must not neglect the charge of destabilizing governments opposed to their operations, or supporting dictatorships that smoothed their business with unrestricted beneﬁts and unlimited concessions. Environmental destruction, sales of proven harmful drugs, exploitation of child labour, and modiﬁcation of the feeding habits of children, are some of the other usual charges. Besides, what economists know as “externalities” — which release the guilty from blame — such as those caused by the indiscriminate use of commodities such as automobiles, alcohol and tobacco, (maybe even mobile phones), can also be added. Before these facts, is it possible to talk about business ethics? These stories are not alien to the Mexican entrepreneurial and governmental environments. Suﬃce to mention the scandals associated with the sale of radioactive milk in Mexico by a public enterprise (CONASUPO); the as yet undisclosed proﬁts made by businesses from the privatisation of state-owned corporations, such as the Telephone corporation (Telmex), thanks to the support of the “ten per cent man” (the already mentioned Raúl Salinas); or the huge frauds made under the umbrella of Banking Rescue, after the economic crisis of 1995 (Fobaproa). In the latter case, the cost that will be borne by the nation has been estimated at eighty ﬁve billion dollars, a sum equivalent to the external public debt of Mexico in the last one hundred and seventy years (Fernández-Vega 1999). While taxpayers underwrite these embezzlements, between one hundred and eighty thousand and two and a half million lawsuits have been ﬁled against the “defaulting” debtors of the banking system, depending on which sources are cited: oﬃcial data or the data provided by the debtors organization called El Barzón. Such a parade of malfeasant events indicates that the maxim of entrepreneurial behaviour remains “business is business” — meaning that, when dealing with businesses and money, the ends justify the means

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and no rule, whatsoever, exists in these cases, other than for purposes of convenience. It appears on this substantial evidence that the inherent opportunistic behaviour of the business world leaves no room for ethics, unless considered, basically, as a rhetorical complement to acting always in one’s own interest. A tension exists between entrepreneurial and/or political pragmatism and an ethical ideal based on individual freedom, which is illustrated whenever aid is not oﬀered to victims of natural accidents or contingencies. Mexico is full of such examples. The powder explosions in the city of Celaya in 2000; recent ﬂoods in diﬀerent states of the Republic; the severe consequences of earthquakes in cities such as Puebla and Oaxaca, and even the explosions which occurred several years ago in Guadalajara as well as in the district of San Juanico in the north of Mexico City. Many other examples exist in each of the countries of the world and I am sure the reader can provide their own cases. Generally, the neo-liberal argument is that the government, considered as a “liberal enterprise” and as having a human face, does not want to be disrespectful to the “dignity” and the “capacity” of the individuals aﬀected by tragedy. It will, instead, provide them ample opportunity to show their fortitude and initiative when they succeed in overcoming adversity. Nevertheless, while this is being argued in oﬃcial declarations, governments grant soft credits to corporations that face the very same events. Obviously, the convenience rule operates eﬃciently; however, is it ethical? Given such facts, one has to ask again: is the discourse of business ethics really possible?

Management devices and societal risks Let us change gear once more. What can we say regarding the implications of crucial decisions, which, through their eﬀects, place many people and families at risk? For instance, at the tail end of the early nineties recession, in January 1994, the most important American corporations laid oﬀ 108,000 workers (Rifkin 1994). However, it is not only recession but also proﬁts, which can destroy. Let us brieﬂy remember, using some illustrative data, the results of one of the most celebrated management tools applied during the last decade, re-engineering (Hammer and Champy 1993; Grint and Case 1998). The re-engineered General Motors closed down 21 factories in the United States, which meant that 20,000 workers and 10,000 employees were laid oﬀ, leaving a total of 30,000 families without the possibility of covering their most essential sustenance needs. IBM downsized by 20,000 jobs and Digital Equipment by 10,000. The industrial world, in its search for the “correct” size of its businesses and corporations, seems to consider ﬁrst and always, the pockets of their shareholders and the high salaries of their managers, despite causing increasing unemployment and paying low, if not starvation, wages to those sectors of the population actually employed.

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According to data submitted by the World Bank, in Latin America there are 196 million people who survive on 60 dollars per month, and 94 million people at extreme poverty levels, who struggle to survive on one dollar a day. And, if we analyse the situation in the countries of opportunity and justice, the cradle of reason, the situation is of no less concern: in Europe, there are, oﬃcially, more than 50 million poor people and 20 million unemployed people (Ramonet 1998; Forrester 1999). Among those who have a job, income diﬀerences are vast: in the United States, at the end of the 1980s, the CEO of a corporation earned an average of more than 2 million dollars annually, only 93 times the average wage of a worker of that same facility (Reich 1992). In terms of our modern global condition, this planet is inhabited by 800 million unemployed or underemployed people and 5 billion poor people, compared to the 500 million wealthy individuals who manage the economy, for their convenience, through 37,000 transnational corporations and their aﬃliates (Rifkin 1995; Ramonet 1998; Korten 1996). Expressed in diﬀerent terms, the total wealth of the top 358 “global multimillionaires” equals the incomes of the 2.3 billion poorest people, that is 45 per cent of the world population (Bauman 1998: 70). Before these facts, is it possible to talk about business ethics?

‘In search of excellence’: Artiﬁcial identities or the killing of the self In fact, so strong is the need to have meanings, that most of the people relinquish a reasonable degree of freedom to the institutions that can provide these to them. The outstanding corporations can be distinguished for their very intense culture; so much so that either their rules are accepted or one is free to leave. There is no middle ground. (Peters and Waterman, In search of excellence, 1982, translated from the Spanish edition).

Let us establish our second scenario. Entrepreneurial activity has always been supported in discursive games that exalt the highest values of the ideal businessman and manipulate the symbols of success. Businessmen, as prestigious entrepreneurs that personify the ethics of work and innovation, represent mythical ﬁgures installed in the social imaginary as exemplars to be followed. One of the most successful versions, seeing the eﬀects it has generated, is that of the so-called literature of excellence. It was born in 1982, when Peters and Waterman had a considerable impact on the business world, and on management, with the publication of their book In Search for Excellence (Peters and Waterman 1982). The book sold 122,000 copies within two months of publication and, at present, its world sales have surpassed ﬁve million copies (Clark and Salaman 1998:140). Its importance lies in the break it presents with the rationalistic paradigms that previously dominated management, replacing, in each of its pages, traditional rules of logic with practical recommendations consistent with the prevailing circumstances of the moment.

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In Search of Excellence exalted the indetermination, the heterogeneity, and the ambivalence characterising the business world at the turn of the century; it proposed new paths to collaboration to take advantage of the paradoxes and ambiguities of the post-modern world. The “excellence” proposal laid the basic foundations for governing the behaviour of individuals in organizations, by proposing to fabricate new identities for them. It suggested organizations must provide individuals with a ﬁgurative sense of themselves as subjects of excellence, making them directly accountable for the fate of the organization. The introjection of this image, founded on the exaltation of narcissistic perfection and entrepreneurial capacity, is supposed to enable organizations to take advantage of all the energies of individuals, who will thus work to the limit of their capabilities, with the only goal to be “simply the best”. With this approach we see the usefulness of language and symbols used as tools to shape behaviour, allowing us to acknowledge, once again, the importance that ethics discourses have for corporations. In fact, this type of discourse becomes a main component of a strategy that pursues the idealisation of the organization through the value of excellence. What is really important is the following: by projecting a representational system that does not have a speciﬁc reference point, strategic strength will originate in the operating capacity produced. Excellence is such a diﬀuse idea it is diﬃcult to be against it. Therefore, its translation into speciﬁc practices is protected from potential criticism. The value of the individual is exalted as a personiﬁcation of the ideal of the organization, as an employee of excellence (highly productive, disciplined, with initiative, always available, that is, literally committed to death). When this is the case, the re-engineering processes applied in organizations in the last two decades of the 20th century, are greatly facilitated. Successful corporations stress the need to create corporate cultures where individuals are involved, maintaining the organizationally built autonomy and initiative of a “champion”, supported by an informal environment that allows the unconscious exteriorisation of values, a type of behavioural code for reaching the highest levels of fulﬁlment. To attain its goals, the concern of the corporation should be to produce the individuals that lead it along the “appropriate way”, conducting their thoughts, beliefs, and values. In short, they must be responsible for ﬁnding the good way to excellence on behalf of the owners of money already alluded to. In accordance with these positions, eﬀective organizational control rests on the capacity the corporation has to build a scenario in which individuals acquire a ﬁgurative sense of themselves as free individuals able to govern their own destiny. This strategy is based on the results of some recent psychological studies about the need of self-determination, which have shown that: […] those who think that they have modest personal control of their fate persist in their tasks. They develop them better and engage in them with more zeal. […]

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The fact, once again, of believing that we have a little more free will makes much greater our commitment. (Peters and Waterman, In search of excellence, 1982 102–103, italics in the original translated from the Spanish edition).

The ﬁgurative sense is founded on the exaltation of individualism, the entrepreneurial capacity, initiative and leadership, which would represent the values desired by the champions of excellence, the “self-made men”, prepared always to do the maximum as their only task. In this way, when all the responsibility is laid on the conduct of individuals, the corporation is released from blame for their failure, even though it was responsible for deﬁning those rules that limit their actions and practices. In this context failures will be attributed to individuals, while successes belong to the organization. Nowadays, excellence is quietly disseminated through minute pores and social capillaries of action, for which “excellence” has been a blueprint, that outlines not only precise performance terms for individuals, in each of their vital spaces, but also the actions of corporations. In this case, power does not limit itself just to individuals and business corporations, but also aﬀects every other type of organization, including the performance of the so called “New Public Management” (Rose 1989; Ibarra 1996). Focusing on the discourse of excellence shows the strength of language as a tool to mould and comport conduct (Foucault 1971). In fact, such language operates as a discursive strategy associated with speciﬁc practices that pay tribute to the advantages oﬀered by individual performance to justify, with its ethical code at hand, the exclusion of large contingents. Merit acknowledgment makes it possible to ﬁnd some justiﬁcation to exclude those who are diﬀerent, who follow their particular mode of existence, always beyond this idealised image of the “outstanding individual”. The absence/exclusion from the selected groups of excellence is explained by the low individual performance of the excluded; the message conveyed indicates that those who have been excluded are to be blamed exclusively for their own exclusion. The permanent reinforcement of the modes of existence or life styles that excellence presuppose, lies in the reiterated exaltation of expertise and the total devotion of those few individuals who have been able to qualify, who are displayed as examples to follow. As already said, the term “excellence” has no speciﬁc deﬁnition. Therefore, it becomes a highly operative symbolic artefact whose concrete meaning is always given by the institutional contexts within which it operates. In these limited environments, it is powerful agents who permanently negotiate sense. Therefore, excellence is amorphous, self-shaping and extremely ﬂexible. It can be anything, because the sense it acquires is based on the speciﬁc devices with which it operates, in speciﬁc contexts. Nonetheless, the values projected as ethical values also produce their own costs and externalities. The consequences of these new ways of managing

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corporations have been very severe, as documented by several studies (Aubert and De Gaulejac 1993; Downs 1995, 1997; Kets de Vries 1994, 1995; O’Neil 1993). Executives have been subjected to social behaviour rules where everything is valid, so long as the maximum level is achieved, regardless of the sense that this goal entails. In these cases, stress and anguish operate as the force of fulﬁlment: these are individuals literally devoured by the organization, they are usually workaholics having the corporation as their only family, and whose only satisfaction is to go further on, although, frequently, the direction is not clearly known. Is it possible to talk about business ethics under rules of excellence?

‘The Business of ethics’: Is it ethical? […] the issue is not only to be ethical, but to look ethical. And it is diﬃcult to appear ethical in a culture where little public trust exists. (Tom Hurka, Calgary University)

The 1990s could be termed the phase of ethical eﬀervescence. Some data illustrate this escalation. For example, if we use an Internet browser and we ask it to detect the sites containing the terms business ethics, it will immediately start displaying hundreds of thousands of pages connected with this topic.4 On the other hand, according to a recent report, throughout 1999, in Canada only, 5,000 meetings on business ethics were organized. This ﬁgure gains importance if we compare it to the one hundred meetings held ﬁve years previously. Besides, since the publication of the best seller by Blanchard and Peale (1988), The Power of Ethical Management: Integrity Pays, which shows its (non)sense from the very title itself, more than 1,500 books dealing with similar topics, with very diﬀerent postures, have been published. The same thing happens with the articles found in specialized magazines, which are being constantly published, with no end in sight. The most important magazine on this topic, The Journal of Business Ethics, has already been in the market for 21 years. The circle is closed with the increasing incorporation of business ethics courses, as a part of the Management curriculum, and with the proliferation of workshops and executive courses on the same topic. But, what is the reason for this growing ethical concern? This explosion can be partly explained as a reaction to scandals occurred in business, politics, show business and the sports worlds. For example, form the US, the classic case of Watergate; the widely discussed murky businesses of Banco Ambrosiano; the Lewinsky case, and O. J. Simpson’s trial. In Mexico, there is the local soap opera featuring one of the most popular Latin singers, Gloria Trevi and Sergio Andrade, her manager, who are now imprisoned in Brazil accused of kidnap and rape of minors, waiting to be extradited to Mexico. All these acts, and many

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others, have awakened the interest in “ethical investment”, expressed in the adoption of behaviour codes speciﬁcally made to fulﬁl these purposes, designed with the advice of an increasing number of consultancy corporations. Some authors state that ethics meetings replace the function of religion (Heelas 1996), thus generating, as we have already mentioned, a strong feeling of community, group belonging and faith in the corporation. To express it in diﬀerent terms, this concern might seem a reaction to the sense of fragmentation and loss undergone by our current world; ethical representations operate as the glue that promises to restore this sense of community in a society governed by fragmentation, nonsense and individualism. If we took a more radical position, we could state that we are living in times when the “business” of ethics became a reality. In the quest for the “ethical one best way” to keep organizations away from scandal and disgrace, or at least can quieten it down when it occurs, organizations have placed normative prescriptions in their showcases which promise to orient “good” human behaviour. These formulae are highly quoted and increasingly demanded, and intended to reinforce the ethical proﬁle of businesses, projecting a corporate image that deals with the highest ideals of society. These ideals are deﬁned and defended by the enterprise under the formula of progress/consumption — indicating the rules that we should all observe when fulﬁlling our obligations in the corporation — obligations also deﬁned by the corporation. Thus, the sale of ethical prescriptions is a palpable reality, one which provides consultancy with a new face, to replace that exhausted by the decreasing eﬀectiveness of its ﬁnancial and strategic planning models. The new consultants for souls — soul merchants — make their own business by oﬀering ethical medicine and advice, promising to build strong corporate unitary cultures promoting coresponsibility and exemplary behaviour. And when this fails, it will always be possible to face contingencies and to reduce the costs a scandal would otherwise generate, with its pernicious inﬂuence on stock prices and options. This new discursive arsenal and its codes, formulae and practices, protect and cover what everyday behaviour in businesses cannot prevent: the battle for money at any cost. In this sense, the growing ethical concerns that feature in the business world nowadays escape all sense of ethical vocation. They are assumed because, as the subtitle of the book of Blanchard and Peale (1988) indicates, “integrity pays”. The movement that attempts to bring together the concepts of ethics and business clearly faces its ambivalence, redrafting the intellectual schizophrenia that for so long has characterised administrative and organizational knowledge. One may conclude that ethics, as business, with its store of values, codes and commandments for sale, its recipes and fashionable representations condensed in books, conference papers and web pages, with all its counselling — shows its role clearly as a device for hiding practices. The practices hidden respond only partly to

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the supposed universal values discursively assumed and exalted. Considering all this, could it be possible to talk about the business of ethics as an ethical activity?

Ethics in organizations: Towards new modes of existence Maybe the target nowadays is not to discover what we are but to refuse what we are. We have to imagine and to build up what we could be to get rid of this kind of political ‘double bind’, which is the simultaneous individualization and totalization of modern power structures. (Michel Foucault, ‘The Subject and Power’, 2000).

The three scenarios already discussed allow us to appreciate diverse faces of the paradoxical character of management and organization within work, economy and culture. These scenarios clearly show the ambivalence of modernity confronting discourses that glorify values rarely put into practice. Corporate accumulation imperatives have nothing to do with the presumption of universal values that guarantee the project of modernity, relating only to abstract concepts of progress invoked in discourses and representations of “the future.” On the contrary, the condition of modernity is one in which concepts and practices continue to represent antithetical projects. As already established, this paradoxical condition is represented in the confrontation between business and ethics: how can business and ethics coexist if they represent opposite projects in tension. Is the realization of the ﬁrst one inevitably an obstacle to the realization of the other?5 The solution of this dilemma demands the de-ethicisation of ethics. By this phrase is meant the detachment of ethical content, to enable its functioning as a device for the comportment of conduct in order to facilitate accumulation and discipline, while hoisting the petard of an always delayed promise of progress and social well-being. Ethics becomes converted into a lucrative investment, not only because of its contribution to the production of proﬁts by the imposition of a moral order on the corporation, but also because ethics itself become an independent enterprise. Ethics businesses accumulate dividends by selling symbols and values integrated in their ample catalogue for the interpellation of good conduct. What such a project required was a conception of ethics constituted as a will to truth, that is, as true knowledge capable of confronting the attacks of the critics, and of inventing an absolute identity as a synthesis of the nature of the subject in modernity. This “true self” — natural, coherent and transcendent — would clearly indicate the way in which one must conduct oneself, transforming individuals into moral agents that do exactly what the ethical code prescribes (Foucault 1985:26–27, Spanish edition).

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In this joint venture, corporations and ethics have assumed that the individual must ﬁnd ways to use its natural capabilities to the maximum, considering the universal values that everybody must obey, those values that support the human condition. The existence of a superior moral order, it is assumed, demands the commitment of the individuals to fulﬁl the given objectives of the corporation. This is the only viable option to reach progress and attain the well being of society. In this way, business ethics tries to conduct the behaviour of individuals through the imposition of rules and practices that reduces individual margins of freedom. It provides a set of rational rules of governance and governmentality to manage and restrict the individual freedom of choice in the organization, allowing some conducts and discouraging others. Additionally, the multiple and variable modes of subjection imposed by business ethics, projects an idea of the corporation as a natural order, disposed to realize the great promises of modernity. The concept of “organization” aids this conception because it conveniently glosses contrasting and diverse realities, making them appear as the same or equivalent. “Organization” is an empty concept that takes the place of less fortunate terms, such as those of “corporation” and “bureaucracy”. Its use eliminates substantive diﬀerences among organizations, giving almost exclusive attention to their structures and technical functioning, considered always as the only (one-best) way to organize. The purpose of “organizations” — it doesn’t matter if they are giant corporations, public agencies, hospitals, prisons or schools — is reduced to their eﬃcient performance, without consideration of the values that orient speciﬁc ends. In sum, it appears that, in terms of rationality, the technical defeats the substantive, and private accumulation defeats the free selfdetermination of the subject, through the triumphant logic of organization. In order to advance the search for a new ethics, it is necessary to think very diﬀerently. First, it is necessary to emphasize the impossibility of thinking of business ethics as if it appreciates a moral problem; generally, it is reduced to the capacity of individuals to discern between “good” and “bad”, as absolute values, to which there are no alternatives. Ethics cannot be seen as a set of universal values that regulate behaviours of passive individuals whose only option is to live by obeying the rules. On the contrary, ethics is the contingent outcome of the relations between active individuals and groups that maintain dialogues and conversations, inventing, in this way, life-styles that make possible renewed practices of freedom. The consideration of ethics as practices of freedom is sustained in the recognition of identity as an historical invention produced in accordance with speciﬁc conditions of possibility. It is neither determined beforehand, nor does it obey a supposed incremental perfectionist logic that results in “making better persons”. On the contrary, subjectivity is the result of relations between forces under conditions of life that haven’t been elected, but that can be transformed (Foucault

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1997a: 116–117). Through its reﬂexive acting, individuals can invent and transform their selves, always beyond any naturalised identity imposed by the organization. In this way, ethics is related to practices of freedom and the exercise of the reﬂexivity of the subject. It is a mode of objectiﬁcation that operates through practices that allow individuals to recognize themselves as subjects. Individuals constitute themselves as moral subjects having a self-ordered knowledge that allows them to discover themselves as responsible for their own actions. Consequently, they are free individuals who can displace the limits that mark them as subjects, modifying some conducts to transform themselves in a diﬀerent manner (Foucault 1985: 28, Spanish edition). If we consider ethics in this way, we are recognising the possibility of the transformation of subjectivity. Following Foucault, power relations are crossed by a multiplicity of mobile and transitory points of resistance, which displace unities and produce re-alignments, indicating the possibilities of the inversion of the situation. The operation of the transformation processes implies mobile, revertible and unstable relations between forces, precisely because there exists possibilities of combat and resist (Foucault 1987a: 116–117, 1990: 116–117, Spanish edition). To put it in other words, there exist active subjects who ﬁnd multiple possibilities of resistance and re-creation associated with practices of freedom and modes of existence of each with the others (Foucault 1997b). It is precisely this openness that allows us to think of individuals as conscious and free subjects, who are capable of acting in order to transform the organizational realities that subject them, and in which they participate. They will operate their capacities in association with others to impose limits on the “behaviour of the organization”, impelling some rules and practices, and discouraging others. In this sense, from their reﬂexive singularity, individuals can encourage new identities in order to transform their particular modes of existence, allowing them to abandon their conditions as subjects, in order to begin to be free (Ibarra 2001b). From this point of view, organizations could constitute themselves as relational spaces in which the actions of some of their participants will function as modes of regulation of the actions of others. These relations rely on the mediation of the reﬂexive dialogue that permits structure of the possible ﬁelds of action and, at the same time, determine the substantive ﬁnalities of the organization, going beyond the speciﬁc interests of each one of the participants. The idea is to reconsider organizations as spaces of government that articulate diﬀerent knowledge, powers, and modes of existence or ethical projects, operating under certain rules constantly negotiated (Clegg 1989: 209–211; 1994). It opens the possibility of fabricating new organizational realities liberated from any kind of moral codes and “appropriate behaviours” as new practices of freedom constituting individuals as ethical subjects acting in some contingent ﬁelds of actions.

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We search for new modes of existence and government practices based on dialogue and reﬂexivity. These imply the acceptance of plurality and diversity that constitute society and the recognition of diverse life-styles with their dilemmas and paradoxes. Further, they also presume the construction of new kinds of relations within and beyond organizations, based not on hierarchy, authority and control, but the potentialities and capacities of individuals and communities, achieved by eﬀectively exercising freedom and auto-determination. In synthesis, we must consider organizations, no longer as places of conﬁnement, but as spaces in which diverse groups produce a great variety of desires, with codes and practices that we need to understand. As Starkey and McKinlay established (1998: 239), organizations must be reconceived as a community-of-communities in which desires are expressed by forms of self-discipline that are willingly embraced. In this sense, analysis of organizational paradoxes entails modes of recognition of the possibilities of reconstruction of identities and their possible eﬀects (Ibarra 2001b). We need new knowledge and practices to invent a new ethics in organizations — far away from business ethics, as acts of creative destruction that allow us to recognize what we are and who we want to be. This is our opportunity to ﬁnd a life-style to confront dilemmas and paradoxes that function as the thermometer of a diverse society always permanently (re)producing its self and selves.

Notes * I would like to acknowledge helpful discussions with the colleagues that participated in the panel ‘Global Factors in Organizational Analysis’ at the VIII APROS International Colloquium ‘Organizing Knowledge Economies and Societies’, held in Sydney, Australia, December 2000. I want to thank, especially, the comments made by Peter Fleming, the rapporteur for the panel. His suggestions were invaluable aids to revision. In addition, I would like to thank Stewart Clegg for his acute comments and the editorial work he did in order to assist one whose native language is not English. 1. In order to appreciate the diversity and complexity of critical approaches in Organization Studies, see, for example, Alvesson and Deetz (1996), Calás and Smircich (1996), Ibarra (2001a: 201–216) and Reed (1996). 2. These and other scenarios that may be developed, demonstrate the quicksands within which business ethics has become trapped. Its current theoretical treatment is a very good example of what has been called the ‘intellectual schizophrenia’ (Reed 1985: 21) of management and organization theory. Traditionally, this kind of knowledge has gathered antithetical realities under diﬀerent theoretical formulations. For example, the dilemma of choosing between cooperation and authority in order to regulate conﬂicts, a dichotomy initially established by Barnard (1968: 167), is the kind of formulation that tries to conceal–without much success–the

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paradoxical condition of corporations, when manifestly economic functions conﬂict with less evident social functions. For a deeper discussion of this problem, see Ibarra (2001a: 171–172). 3. We are referring to Al Capone, who made this pronouncement some days before he was arrested and imprisoned. 4. Using the Yahoo! search engine one could ﬁnd, at the time the search was conducted, 493,000 web pages related in some way to business ethics; using Altavista the result was 1,292,837 web pages. The exercise was conducted in August 2001. 5. Other examples are represented by the paradoxical coexistence of private accumulation and general social well-being; the production of commodities and conservation of nature, and the control of work and individual freedom. In order to solve these, and other dilemmas, it was necessary to build a set of values and representations that projected these ‘maladjustments’ as temporal accidents to be solved in the near future. In this apparent process of [di-]solution of organizational paradoxes, ethics in business play a central role.

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Chapter 9

Beyond the ‘war for talent’ hype Occupational and organizational change in the business professions Timothy Morris and Ashly Pinnington

Introduction Dramatic phrases such as the “war for talent”, supposedly coined by one of its victims, McKinsey and Co., suggest that conditions in the markets for expert labour are radically aﬀecting the nature of the professional ﬁrm. But does this phrase reﬂect anything more than a temporary supply-side constraint? In this chapter, we argue that to understand the nature and direction of change in organizations of professionals, it is necessary to explore the links between occupational and organizational levels of change and to focus on occupational formation more explicitly than do contemporary accounts. Paradoxically, for the world of organization theory, it is the occupational level of formation that is determining organizational changes rather than the converse. We use the case of the business-based professions and their organizations to illustrate our argument. The purpose of this chapter is to develop a framework of analysis for understanding how ﬁrms of professionals are changing. In recent years, there have been rich descriptions of the way in which professional ﬁrms have been transformed and built around the concept of archetype change (Greenwood and Hinings 1993; Greenwood et al 1990) but nonetheless, we suggest these are theoretically limited. Primarily, this is because they operate at levels of analysis that do not properly take into account the inﬂuences of occupation or profession. Hence, we have little sense in which the formation or adaptation of professions may aﬀect, as well as be aﬀected by, organizational dynamics. Following Reed (1996), we have deﬁned professions broadly so that it includes occupations of those with expertise that is highly demanded and oﬀers privileges, such as task autonomy, as well as those that have been more traditionally recognised. We argue that these new professions of knowledge workers have suﬃcient solidarity and common interests to pursue collective strategies that enhance their status and labour market power, even if they

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do not all have the support of extensive institutional associations common to some longstanding professional occupations. Through formal and informal actions, professions inﬂuence the ways in which professional ﬁrms are evolving, and act as a constraint on the pursuit of organizational strategies. We concentrate in this chapter on the business-based professions, but similar tensions between occupation and organization can be observed elsewhere (e.g. Ferlie and Fitzgerald 2000). We elaborate how professional ﬁrms are being reformed, and sketch out the possible shapes that the new model of the professional ﬁrm may take, under the inﬂuence of profession-level change. In particular, we challenge existing arguments that the new professional ﬁrm archetype is more managed and bureaucratic. We argue that some professional ﬁrms actually display anti-managerial values, and that these values mimic the entrepreneurial innovation favoured by some of the “new economy” professions. These values are reinforced by the emergence of the entrepreneur as a heroic ﬁgure, replacing previously held professional aspirations (du Gay 1994; du Gay et al 1996; Guest 1990).

The formation of new entrepreneurial professions The growth and prosperity of elite ﬁrms in various professions has been a characteristic of the last half-century. It has been fuelled by buoyant demand for access to expertise, particularly in the area of corporate commercial activity. It constitutes, and is constitutive of, the more pronounced segmentation of professions in late modernity, noted by Freidson (1986). Typically, the large professional ﬁrm has developed a wider range of specialisations, leading to greater internal diﬀerentiation, and it has acquired a larger set of clients. It is likely to work for them on a more transactional basis than previously, where the professional played a more generalist role of valued advisor, or concilieri to his or her longstanding personal clients (Baker and Faulkner 1991). For the largest professional ﬁrms, now dealing exclusively with corporate clients rather than private individuals, the process of internationalisation is the latest stage in their expansion (Aharoni 1999; Galanter and Palay 1991). In the process, the professional ﬁrm is said to have become more business-like in management and values. The contemporary large professional ﬁrm has been conceptualised in archetype terms as the managed professional business (Brock et al 1999; Greenwood and Lachman 1996). Used in this context, archetypes are both ideal types in the Weberian sense, and empirically observable phenomena (Greenwood and Hinings 1993; Gray 1999). In contrast with the more traditional professional partnership, the new archetype is said to be less distinctive from other types of organization, in terms of internal structure, policy and goals (Cooper et al 1996).

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Change has been in the direction of conscious management. The notion of the ﬁrm as a business ﬁrst and foremost predominates, rather than as an organization with other competing professional goals. The most extreme cases of this archetype are the large accounting/business advisory ﬁrms. While notionally still organized as partnerships, they are to all intents and purposes similar in purpose and management to many of their multinational clients. Such archetypes may accurately describe much of what has happened to the modern professional ﬁrm, but they have limitations. While couched within a broader neo-institutionalist framework of change (Greenwood and Hinings 1996), they do not focus on the wider stimuli for change within and across professional jurisdictions. This is because institutional theories focus on the organizational ﬁeld as the unit of analysis and this may include more than one occupation, as well as clients, agencies of the state and other organizational phenomena. This also means that archetype analysis is not directly concerned with the diﬀerences between professions and their historical evolution. Nor does it deal with the possibility that occupations might have collective interests, although this proposition is at the heart of numerous theories of the professions. For example, the notion of professional mobilisation in order to secure occupational closure or jurisdictional control, which is central to many power based theories of the professions (Abbott 1988; Hanlon 1997; Larson 1977) is not incorporated into archetype ideas. What is ironic is that early interest in the professional ﬁrm was stimulated directly by theoretical problems identiﬁed in studies of the professions. For example, in the context of interest in the power of professionals in society, Smigel’s pioneering study of New York law ﬁrms was concerned with the role and powers of elite lawyers operating at the level of the ﬁrm (Smigel 1964; Nelson 1988). In addition, early work on the professional ﬁrm was centrally concerned with the interaction of bureaucratic and professional forms of control on professional behaviour and attitudes (Montagna 1968; Hall 1968). Thereafter, analysis at the level of the organization (professional service ﬁrm) became less concerned with the inﬂuence of professional norms or institutions, while analysis of the professions was not concerned with organizational inﬂuence (see for example, Abbott 1988; Johnson, 1972; Perkin 1996). In consequence, archetype concepts have developed independently of occupational analysis. One outcome is that in using archetypes to analyse the nature of professional ﬁrms, ideas have been transferred across professions, with little concern for the ways in which diﬀerent historical processes may aﬀect organizational forms and practices. Organizational goals have been understood by researchers as determined independently of the evolution of professions (Barley and Tolbert 1991).

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To bring the profession back into the picture, let us take two inter-related phenomena that particularly impact on the formation of the business-related professions. The ﬁrst is the emergence of what have been called the “new professions” (Reed 1996). These are a scarce resource to many of the large consulting ﬁrms - both in the strategy area and in the large business service/accounting ﬁrms. Many of these groups have developed out of computer-based technologies, and their power is derived from the potential that these technologies have for revolutionising modes of competition and industry structures. Despite this market power, they seem to be weak in terms of the status accorded to more traditional professions. Their fundamental scientiﬁc knowledge may well be built on formal education at high levels, but it is also likely to be strongly experiential and specialised around particular sub-systems or products. The constant updating of what is a rapidly obsolescent knowledge base and bets on where the best market opportunities are likely to lie in relation to this knowledge stimulate high occupational mobility. The ideology of the new professions is distinctly entrepreneurial. They are a heterogeneous set of occupations that have not sought to exercise “closure” through organization or control of a jurisdiction. Their power derives from their complex expertise and the market control this brings rather than the construction of the institutions of professional control. They display some contempt for both corporate employment and the institution-building characteristic of the professional project (Larson 1977), perhaps because many have tasted organizational employment and been victims of retrenchment. Akin to these technology professions are the educated elites that seek the credentials to enter business, most notably through the burgeoning global market for business degrees. What is important about this very large group is that most of them fund their own education, or human capital development, in a business school or a law school, to gain access to the professional ﬁrm. The law and business schools have prospered from this demand for institutionalised expertise. In return, individuals in this large group have expected labour market power and a healthy return on their investment. Collectively, the technology professions are weakly organized and lack the occupational identity of the established professions. Having made their own investment in education, they do not owe loyalty to employers, which would be paid back by working for them post-qualiﬁcation. Further, having studied as well as participated in the processes of corporate restructuring that have involved “downsizing” and the demise of the corporate career, they are understandably cynical about the notion of commitment to a single organization. Their ideology is market-oriented and individualistic; again, these values are distinctly entrepreneurial.

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The second area aﬀecting professional formation is change in the knowledge base of many occupations. For professions, claims to expertise form the basis of their privileged position and their assertion of jurisdictional rights (Abbott 1988; Freidson 1986). Hence, changes to knowledge that undermine the legitimacy of such claims are a serious challenge to professional status. Several diﬀerent types of problem in the arena of knowledge have emerged for professions. For one thing, as consumers of professional services have become more educated and conﬁdent, they have been prepared to challenge claims to expertise more openly and to question the eﬃcacy of outcomes from the application of expertise. Even in the most well entrenched professions, such as medicine and law, solutions have been seen to fall short of expectations and, in the process, competence challenged. In addition, new methods of knowledge distribution most recently via the Internet, for example, have furthered the power of consumers either to challenge professional expertise or to enact some of the solutions previously performed by professionals. Another characteristic has been the increased speed at which knowledge is generated and then diﬀused, particularly in the arena of business solutions. These knowledge products are the central service of consulting ﬁrms and have rapidly turned into commodities, which place pressure on ﬁrms to both exploit them as eﬃciently as possible and to produce new ones (Suddaby and Greenwood 1999). At the same time, a characteristic of all professions has been the greater fragmentation of expertise and resulting specialisation of professional groups. The overall consequence is more diversity within professions and the possibility of overlap with competing jurisdictions: claims to knowledge of corporate ﬁnance is one example, with accounting ﬁrms, investment banks, law ﬁrms and actuaries, all competing to oﬀer advice, and each containing diﬀerent occupations that seek dominance in the knowledge arena.

Entrepreneurial aspiration and the growth of the new professional ﬁrm Behind the growth of the business professions has been the notion of the professional advisor, be it lawyer, consultant or engineer, as the desired occupation of the young educated elite. The independent professional ideal may have long gone, as individual self-employment declined and was replaced by corporate professionalism and employment within a medium or large organizational setting (Johnson 1972), but the status trappings of professional occupations provided no less a substitute. In particular, within the business world the consultant won heroic status. As fashions for business innovations accelerated, it was the consultant who provided

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the latest elixir for clients anxious to swallow the medicine, if only to ensure that they were not missing out on any magic to which their competition might have access. Some have described this as the brokering of information across sectors (Hargadon and Sutton 1997). Others have suggested that consultants and other “knowledge entrepreneurs” were taking a more active role in the deliberate creation of fashions and fads (eg, Abrahamson and Fairchild 1999; McKenna 1998; Morris 1999). Both arguments assert the consultant’s inﬂuence on economic restructuring has been substantial. Consultants had the ears of CEOs; they were the power behind the throne. Their critics may have stereotyped them as young, inexperienced and arrogant business school graduates, peddlers of the latest jargon and concepts, with little understanding of, or concern for, the longer term consequences, but this did not deter those seeking the material and status beneﬁts the business professions provided (O’Shea and Madigan 1998). Such a system of “expertise” production and distribution, underpinned by professional status, thrived in conditions of economic growth and stagnation. In recessionary times we had restructuring, downsizing and re-engineering (Grint and Case 1998), the last being the brainchild of the now defunct CSC Index consulting ﬁrm. In the good times we were promised “reinvention of the industry”. Meanwhile, the alternative of the corporate career came under greater stress and only the largest corporations, particularly in the ﬁnance sector, could match the material rewards of these business-professional occupations.

The dotcom eﬀect Disruption to the traditional professional occupation and developments in the new professions, gathered pace during the e-commerce “revolution”. This was ﬁrst experienced on the West Coast of America, of course, where the technologically innovative ﬁrms were clustered near to Stanford University. Its impact is still greatest there, but its inﬂuence has spread globally in the last ﬁve years. How did this change aﬀect the professional ﬁrm? First, as new occupations emerged, they opened up for the ﬁrst time in many years serious competition for “talent”, that is, recruits of the appropriate quality. Not only did this aﬀect the consulting ﬁrms, it also aﬀected the law ﬁrms and large business advisory/accounting ﬁrms. Second, these new occupations became concentrated in their own technology based professional ﬁrms. These ﬁrms also attracted experienced staﬀ from within the established professional ﬁrms in law, accounting, management consulting and investment banking that had left to set up or join new ventures. These staﬀ included some of the most highly productive employees, typically with four or ﬁve

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years experience, and which could be generating up to ten times their employment cost in fee income, and might otherwise have made productive partners for the ﬁrm. In combination, the ﬁrst and second factors pushed up the price of labour, particularly at the point of entry to the internal labour market. Third, it aﬀected the promotion system. We discuss the longer-term implications below but, in the short term, the competition for expert labour meant that each promotion to partner, occurring in the absence of ability to hire a complement of lower paid junior employees, aﬀected the target leverage ratio of the ﬁrm. Leverage is the ratio of non-partner to partner fee earners and is generally seen as an important long run determinant of proﬁtability (Maister 1993). Ceteris paribus, a decline in leverage caused by promotion to partnerships not matched by nonpartner hires, will reduce the proﬁt-per-partner rate of the ﬁrm. On the other hand, to defer promotions of suitable candidates is likely to lead to defections, as well as generate a negative impact on the ability of the ﬁrm to make further hires at any level of seniority. Fourth, with a shortage of staﬀ, traditional professional service ﬁrms switch to maintaining existing operations and meeting their current capacity demands. This has knock-on eﬀects: the real utilisation rates (hours-worked on client work) rise, although staﬀ quite often are not fully rewarded for their extra eﬀorts in overtime payments. From the professional’s point of view, not only does work get harder (and longer), but also, the scope for project variety and developmental work may be sacriﬁced in order that the existing order book is fulﬁlled. Consequent decreases in professional satisfaction can provoke further quits. Another result of such unexpected capacity constraints is that partners become more actively involved in doing professional work on projects as well. To do this, they sacriﬁce other work, including the development of client contacts and business getting, as well as the development and coaching of their staﬀ. In short, present demands seem to drive out future development of the business and its productive assets. Fifth, there was an inadequate knowledge inside many of these consulting ﬁrms of the very process that was aﬀecting them. Clients wanted to learn about e-business and to develop strategies to manage it. Consulting ﬁrms found they did not have the expertise to meet this demand and therefore no high quality products to oﬀer the market. Moreover, the development of such products was inhibited because they were being “hollowed out” as those with expertise in this area in demand, went oﬀ to become competitors or to set-up dotcoms.

Implications for the professional ﬁrm and its archetype The eﬀects described above were mitigated to some extent by the dotcom crash and fall in stock market values; nevertheless there are longer-term consequences that we

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will elaborate below. In practice, many professional ﬁrms have made adjustments internally to adapt to the dotcom eﬀect and, in some cases, begun to exploit it. Most notably, this has occurred by the creation of claims to expertise in the application of e-business knowledge, accompanied by productisation of various “ebusiness solutions”. In this, their old allies the business schools have aided them in ideas for new product development and commoditisation. In terms of occupational analysis, this trend can be seen as the development of new occupational groups based on a hybrid of technology and business-based knowledge. In professional ﬁrms, the drying up of a ﬂow of available talent prompted a variety of responses. One was to ride out the storm on the basis that dotcom interest was a very temporary phenomenon, at least in terms of its impact on hiring and retention. A second was to make a short-term adjustment to wages on the basis that the problem was essentially one of a shift in the supply curve, to which it was necessary to adjust. For example, the major London law ﬁrms raised the starting rates for assistant lawyers by nearly £10,000 in 2000, on the basis that the attractiveness of Silicon Valley had trickled through to them. A third response was to acknowledge that longer-term changes were necessary: a permanent adjustment in the organization of the professional ﬁrm had been induced. The genie was out of the bottle and no return to the status quo ante was possible. The dimensions of this new institutional structure are still emerging but some of the central features are likely to include the following: –

–

–

–

Provision of equity in the ﬁrm to all employees as in the stereotypical high-tech ﬁrm. This would include support staﬀ and newly hired professionals. Clearly, to the extent that this dilutes the equity holdings of the existing partners, it is likely to be unwelcome to existing owners. Clients paying in the form of equity sharing or future-based gains in their market value. Such a move clearly increases the risk proﬁle of the professional provider and decreases the attractiveness of partnership, unless rewards increase as well, nonetheless some of the major business advisory ﬁrms and even law ﬁrms are said to have changed their policies to accommodate such payments. Hiring from the external market, at all levels, to meet the demand for new skills or client contacts, which the ﬁrms do not currently possess. Such “lateral hires” may be oﬀered equity immediately rather than go through the standard promotion process; or they may be oﬀered sign-on bonuses or buy-outs of existing bonuses. Formation of alliances with specialist ﬁrms, some of which are dotcom startups themselves, in order to gain access to valued skills and knowledge such as the establishment, organization and strategic positioning of e-businesses, or to sub-contract the delivery of specialist services through them.

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– –

Alternatively, the formation of their own start-up businesses or spinning-oﬀ of e-business specialist units. Closer links to universities, business schools, secondary schools and centres of innovation to co-fund knowledge development and new products, as well as to identify and attract staﬀ into the ﬁrm at early stages.

At this time, the above are emergent trends rather than an institutional reality in which these ﬁrms exist. The extent to which radical change actually occurs will depend on the degree of pressure the key actors in the sector actually perceive and the capability, internally, to carry change through (Greenwood and Hinings 1996). Yet, the fact that professional ﬁrms have to contemplate radical change indicates that the existing professional archetype has been challenged by the emergence of these new occupations. Most dramatically, it has challenged the incentive structure that lies at the heart of the professional ﬁrm and has been associated with production of the professional elite. The limited chances of equity participation, after a longish period of service and a repeated peer tournament process (Malos and Campion 1995), has been undermined by the e-business model that oﬀers — often worthless — options or stock to many and lower cash rewards. It is based on a diﬀerent sort of risk: entrants bet on the potential value of the ﬁrm being realised in the future rather than their own limited chances of entry to partnership; typically 10% of the cohort or less in a large ﬁrm. The new incentive structure has clear entrepreneurial overtones that are a signal of the direction of change to the professional archetype. They are echoed in business schools, where, increasingly, entrepreneurialism and innovation are displacing strategy courses as the key area of learning. The entrepreneurial ideal is expressed in extreme practicality, rather than abstract and static models of industry competition; it is evident in the shift towards interest in hyper-competition among strategy theorists (e.g. Brown and Eisenhardt 1998; Eisenhardt and Schoonhoven 1996). As Reed notes: The entrepreneurial professions or ‘knowledge workers’ depend on a highly esoteric and intangible knowledge base for mobilizing claims to expertise … They are less concerned with formal occupational or organizational credentialism and more focused on the extensively specialized cognitive and technical skills that will give them the political advantage in a wide variety of task domains…. This pushes knowledge workers towards an organic or network type of organizational form … away from the adminstrative structures typically associated with both the liberal and organizational professions (Reed 1996: 585–586).

In other words, it is a strategy of marketisation that these occupations pursue, aggressively exploiting opportunities arising through technical change and

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deregulation of services, in contrast to the strategy of monopolisation through market closure traditionally pursued by the liberal professions (Collins 1990). Entrepreneurialism oﬀers high risk and wealth for the successful, rather than lower risk over the long-term for income and status, which has been the implicit contract of the traditional professional ﬁrm. It emphasises self-employment rather than a career in a ﬁrm — corporate or professional. The entrepreneurial ideal is derived from a model of the entrepreneur not just as a risk taker but as heroic rule-maker, exploiting opportunities to re-invent the competitive framework (Townley 1997). This ideal may not be borne out in reality, but it constitutes an ideology that is increasingly central to the “talent” upon which professional ﬁrms are reliant. To adapt to the rhetoric of the new professional occupations, the established professional ﬁrm is changing its values and its system and structure. We argued above that the professional ﬁrm could not establish its original elite system without stable client demand and a ready supply of labour eager to pursue the aspiration of professional status. This is also the case with the emerging entrepreneurial archetype, which - in tune with the demands of its labour force and a client base that seeks to compete on innovation and “re-invention” - emphasises entrepreneurial values of risk sharing and innovation. Its values are closer to those of the new occupations in being more explicitly anti-managerial: managerialism implies bureaucratic slowness, top-heavy planning, lack of risk, careful denominator management techniques, such as downsizing, and “old” economy thinking. In eﬀect, the professional ﬁrm is at a crossroads. Some have argued that it is moving towards a more managerial, business-like form (see Brock et al 1999) in response to the greater structural complexity discussed above. At the same time, we propose that its values are also encompassing an archetype that is more explicitly entrepreneurial. This is expressed in tendencies towards organizational forms that mimic the new occupational values of the business-based professions. Such market forms emphasise loosely-coupled networks between diﬀerent parts of the ﬁrm (Jones et al 1998), a disinterest in hierarchy and formalised control, intensive eﬀort and extreme informality, down to dress codes and up-to-date fashionable daily discourse appropriated from the streets by many of the young professionals, and then mimicked by others (Casey 1996). They are also underpinned by radical changes to the hiring, incentive and ownership systems outlined above. It is likely that the preference of diﬀerent groups of employees for careers that do not conform to the assumptions and limitations of the up-or-out system will reinforce this sort of archetype. This may include those who seek to take breaks from regular employment for the purpose of child rearing and those who seek to build a portfolio of skills in diﬀerent ﬁrms and industries (Peiperl et al 2000). A more radical implication of the entrepreneurial archetype is the breaking-up of monolithic professional ﬁrms into much looser alliances of specialist talent, held

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together by the need to collaborate on client projects or to develop new, interdisciplinary services. Much will depend on the extent to which the entrepreneurial ideology of the new professions displaces the aspirations that underpinned the creation of the professional ﬁrm archetype.

Conclusion We have argued in this chapter that to analyse changes at the level of the professional organization, we have to re-introduce analysis of the professions and occupational formation. Ironically, work on the professional ﬁrm initially focused on the interaction of occupational and organizational systems of control, but more recently, analyses of professions and of professional ﬁrms have become disconnected. Rather, archetype concepts, used to focus on the process and outcomes of change, have been concerned, theoretically, with the organizational ﬁeld, and empirically, with change within speciﬁc ﬁrms. We have suggested that the development of the new technology and business based professions, what Reed calls “knowledge workers” and their strategies of reliance on constant skill development across ﬁrms, have had an important impact on the evolution of professional ﬁrms. Novel features include new forms of rewards and promotion, modes of interaction between professionals and their clients, and loosely coupled network-like structures. This archetype stands in contrast to the general thrust of most work on the professional ﬁrm today, with its assumption of a more explicitly managerial mode of organizing. The dotcom boom has helped to undermine these historical conditions and in recent years the professionalising aspiration has changed. We have a new vogue, entrepreneurialism, which aﬀects not only the potential labour force of the professional ﬁrms but the clients themselves. And because professional ﬁrms survive partly by mimicking the features of their client and labour market environment, they too are adapting to entrepreneurialism (Boxall and Steeneveld 1999). Ironically, such change may be accelerated because it revives the anti-managerial aspects of the original professional archetype, emphasising a concern with professional practice and a distrust of bureaucratic form and activity (Johnson 1972; Morris and Pinnington 1998; Serron 1992). If the thrust of this chapter is correct, we should continue to see the emergence of policies and practices that embody entrepreneurial ideals, as we have outlined above, and attempts to minimise those associated with the professional bureaucracy.

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Gilson, R. and Mnookin, R. H. (1989). Coming of age in a corporate law ﬁrm: The economics of associate career patterns. Stanford Law Review, 41: 567–595. Gray, J.T. (1999). Restructuring law ﬁrms: Reﬂexivity and emerging forms. In D. Brock, M Powell and C.R. Hinings. Restructuring the professional organization, 87–104. London: Routledge. Greenwood, R. and Hinings, C. R. (1993). Understanding strategic change: The contribution of archetypes. Academy of Management Journal, 36 (5): 1052–1081. Greenwood, R. and Hinings, C. R. (1996). Understanding radical organizational change: Bringing together the old and the new Institutionalism. Academy of Management Review, 21 (4): 1022–1054. Greenwood, R., Hinings, C. R. and Brown, J. (1990). P2 form strategic management: Corporate practices in professional partnerships. Academy of Management Journal, 33 (4): 725–755. Greenwood, R. and Lachman, R. (1996). Change as an underlying theme in professional service organizations: An introduction. Organization Studies, 17 (4): 563–572. Grint, K. and Case, P. (1998). The violent rhetoric of re-engineering: management consultancy on the oﬀensive. Journal of Management Studies, 6 (5): 557–577. Guest, D. E. (1990). Human resource management and the American dream. Journal of Management Studies, 27 (4): 378–397. Hall, R. H. (1968). Professionalization and bureaucratisation. American Sociological Review, 33: 92–104. Hanlon, G. (1997). Professionalism as enterprise: Service class politics and the redeﬁnition of professionalism. Sociology, 32 (1): 43–63. Hargadon, A. B. and Sutton, R. I. (1997). Technology brokering and innovation in a product development ﬁrm. Administrative Science Quarterly, 42: 716–749. Johnson, T. J. (1972). Professions and power. London: Macmillan. Jones, C., Hesterly, W. S., Fladmoe-Lindquist, K. and Borgatti, S. P. (1998). Professional service constellations: How strategies and capabilities inﬂuence collaborative stability and change. Organization Science, May-June 9 (3): 396–410. Landers, R. M., Rebitzer, J. B. and Taylor, L. J. (1996). Rat race redux: adverse selection in the determination of work hours in law ﬁrms. American Economic Review, 86: 329–348. Larson, M. S. (1977). The rise of professionalism: A sociological analysis. Berkeley: University of California Press. McKenna, C. (1998). Selling corporate culture: Codifying and commodifying professionalism at McKinsey and Company, 1940–1980. Paper presented at the American Studies Workshop, Pennsylvania State University, November. Malos, S. B. and Campion, M. A. (1995). An options-based model of career mobility in professional service ﬁrms. Academy of Management Review, 20: 611–645. Maister, D. H. (1993). Managing the professional service ﬁrm. New York: Free Press. Montagna, P. D. (1968). Professionalization and bureaucratisation in large professional organizations. American Journal of Sociology, September, 74: 138–145. Morris T. J. (1999). From advice to execution: Consulting ﬁrms and the implementation of strategic decisions. Managing strategy implementation. In P. C. Flood, S. Carroll and L. Gorman (Eds.), 125–137. Blackwell: Oxford. Morris, T. J. and Pinnington, A. H. (1998). Promotion to partner in professional service ﬁrms. Human Relations, 51 (1): 3–24. Nelson, R. L. (1988). Partners with power: The social transformation of the large law ﬁrm. Berkeley and Los Angeles: University of California Press.

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O’Shea, J. and Madigan, C. (1998). Dangerous company: Management consultants and the businesses they save and ruin. New York: Pelican books. Peiperl, M., Arthur, M., Goﬀee, R. and Morris, T. J. (2000) (Eds.), Career conversations. Oxford University Press Perkin, H. (1996). The third revolution — Professional elites in the modern world. London: Routledge. Reed, M. I. (1996). Expert power and control in late modernity: An empirical review and theoretical synthesis. Organization Studies, 17 (4): 573–597. Serron, C. (1992). Managing entrepreneurial legal services: The transformation of small-ﬁrm practice. In R. Nelson, D. Trubek and R. Solomon (Eds.). Lawyers ideals/lawyers practices, 63–92. New York: Cornell University Press. Siow, A. (1994). Hierarchical careers. Industrial Relations, 33: 83–105. Smigel, E. O. (1964). Wall Street lawyer: Professional organization man? New York: The Free Press. Starbuck, W. H. (1993). Keeping a butterﬂy and an elephant in a house of cards: The elements of exceptional success. Journal of Management Studies, November, 30 (6): 885–921. Suddaby, R. and Greenwood, R. (1999). Colonizing knowledge: Product commodiﬁcation as a dynamic of change in knowledge intensive ﬁrms. Workshop on Managing knowledge intensive ﬁrms, St Anne’s College, University of Oxford. Tolbert, P. and Stern, R. (1991). Organizations of professionals: governance structures in large law ﬁrms. Research in the sociology of organizations: Vol. 8 organizations and professions. In P. Tolbert and S. Barley (Eds.), 97–118. London: JAI Press. Townley, B. (1997). The institutional logic of performance appraisal. Organization Studies, 18 (2): 261–286.

Chapter 10

Expectations, emotions and money Finance organizations and futures Jocelyn Pixley

Introduction It is easy to dismiss the statement that all organizations must cope with an unknowable future as a mere truism. Easy, but risky - truisms not only express clichés but may also breed complacency. The danger is that uncertainty tends to vanish from view and then the truism becomes a paradox, where its encapsulated meaning evaporates — something that frequently happens in practice, whenever organizations minimise uncertainty, repress it, or redeﬁne it as probabilistic risk. Organizations most exposed to the paradoxes of uncertainty are in the ﬁnance sector. It is not an exaggeration to argue, further, that they are least able to manage uncertainty. Money is a particularly under-recognised source of uncertainty. This is partly because money’s various “functions” are contradictory and, in particular eras, the potential dangers in ﬁnance seem to ﬁnd little place in the public imagination. Gunnar Myrdal hit on this paradoxical source of uncertainty in money long ago. One of the great attractions of money, beyond the obvious passion for having lots of it, is that a suﬃcient discretionary amount allows organizations and individuals to defer making decisions. But a deferred decision, as Myrdal pointed out, cannot be known by anyone (cited in Shackle 1967: 91–2). The uncertainty of deferred decisions moves beyond the usual purview of formal organizational theory and economic sociology. In part this is because uncertainty has typically been factored into organization theory through the conception of “bounded rationality” (March 1978). A decision deferred is one not made and thus its rationality is bounded only by the inﬁnitude of its non-decision making potential (Clegg, 1989). Additionally, it is because economic sociology and organizational theory mainly focus on organizations involved in the production of goods and services, whereas in the production of money uncertainty is even more chronic. In some contrast, all contemporary economists focus on uncertainty. As a

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consequence of the objections raised by Keynes (and Frank Knight) against equating risk with uncertainty, economists admit that “the future” cannot be predicted; therefore, they accept that their object of study concerns expectations about the future. So, although orthodox economics denies the prevalence of “fundamental uncertainty”- the Keynesian and Post Keynesian view - many other disciplines are unaware of this shift in economics and, in assuming that economics remains hopelessly attached to prediction per se, tend to neglect the issue of future time. But economic actors, let alone the economics discipline, are obsessed with the future. However much we may criticise the futility of this future-oriented obsession, it drives economic actors. It may explain decision-makers’ preference for orthodox economics, in its use of atomised aggregates of expectations, which many economists believe provides some predictability via probability distributions. Economic actors usually prefer this to Keynes’s thesis of fundamental uncertainty. The practical context of the paradox that money is a defence against uncertainty, while it creates great uncertainty, is hardly insigniﬁcant. After more than 25 years of ﬁnancial deregulation and hence greater uncertainty in matters of money, only ten per cent of global capital movements involve trade and long-term investment. The vast bulk is speculative. This is the opposite to the situation before the 1970s (Eatwell 1995: 277) and, as the well-known hedge-fund manager, George Soros puts it, movements of international ﬁnance have been “the main ingredient” in numerous crises, such as that which occurred in 1997 in South East Asia. He thus disputes the orthodox notion that “ﬁnancial markets passively reﬂect the fundamentals” (Soros 1998: 136). Similarly, the argument of Henry Kaufman (the Dr Gloom of Wall Street) against orthodoxy’s attachment to deregulation is that ﬁnancial institutions are diﬀerent from other business ﬁrms, even “unique”. They have a far smaller capital base to total liabilities compared with other corporations; much greater, if not “extraordinary public responsibilities” in their ﬁduciary duties towards savings and insurance, and tighter, more interlocking, domestic and international relationships than ordinary ﬁrms. The result is that one failure, not unusual given huge liabilities and entrepreneurial demands, can cause “rippling repercussions” on many others (Kaufman 1986: 55; 77). As we know, ﬁnancial crises have been a recurring feature of the past 25 years and, had they been “predicted”, they may have been averted. Despite this context of hyper-uncertainty, where ﬁnancial organizations are concerned, decisions must be made constantly. How are they made? Finance ﬁrms do not merely employ non-decision coping strategies, because the denial of uncertainty, repression and redeﬁnition also may prompt them to take decisions. Equally, ﬁnancial institutions must gain vast quantities of information, but this is all data of the past, on the past, from the past — even that which occurred half an hour ago. And the past and the collective expectations about the future that it has

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nurtured socially condition this interpretation of data. Thus, the mathematical models employed at Long-Term Capital Management have been interpreted diﬀerently since its collapse and bailout in 1998 than when its Nobel Prize winners were making fabulous sums of money for LTCM. Finance organizations are necessarily obsessed with the future. Paradoxically, they demand reassurance that the future is “certain” or relatively predictable, but if it were, there would be no speculative opportunities. My thesis is that these ﬁrms’ decision-makers “manage” uncertainty about the future primarily by drawing on anticipatory emotions and imagining various future possibilities. While many actors commonly describe this as “consulting one’s gut feelings” (a rich phrase), very little study has been made of these processes. In my formulation, each emotionally shaped imagination is projected into the future, and brought back to the present to generate an expectation. Then, some sense of trust (as a gamble on those gut feelings) drives the actual decision. This description draws on PostKeynesian debates about conﬁdence and the convention of assuming the present will continue into the future. My argument is based on the sociology of the emotions, which has rarely applied the major anticipatory emotions of trust, conﬁdence, over-conﬁdence and fear to ﬁnancial decision-making (Pixley 1999a; 1999b; 2000). It accordingly disputes the rational actor model in economics, which holds that emotions are irrational and “get in the way” of rational decisions. Dramatic emotions may be irrational, but in the face of an unknowable future, organizations cannot avoid relying on emotions and imagination. It might be objected that behavioural ﬁnance deals with these phenomena. However, rather than address this socially generated process, it atomises these allegedly “irrational emotions”, thus avoiding organization and power. This is an extraordinary omission when the ﬁnance sector includes huge banking corporations, multinational investment banks, pension and superannuation fund management ﬁrms responsible for billions of small investments, globally inﬂuential credit rating agencies, multinational accountancy ﬁrms and, from a diﬀerent logic, the central banks. The peak of these is personiﬁed in Alan Greenspan, the author of that telling phrase concerning the markets — that they had been captured by “irrational exuberance”. Moreover, Greenspan never repeated the phrase after 1996 and, until the Nasdaq collapse, kept reiterating the widespread rationalisation of that asset inﬂation, namely that it signalled a “new economy”. How are ﬁnancial expectations generated? I would point to a serious underestimation of the role played by trust and conﬁdence at a collective social movement level and within organized ﬁnancial decision-making. These “low level” anticipatory emotions, which are played down in most specialist ﬁnance literature, are the means of counteracting the inevitable uncertainty of the future. At various times they foster institutional guarantees of “risk-free” money, which in turn,

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fosters over-conﬁdence until a kaleidoscopic shift in expectations occurs. This may result in fear, even panic. The paper also shows how the paradoxes of money heighten uncertainty, by suggesting that credit theories of money are more adequate than conventional wisdom about money as a neutral “veil” behind the “real” economy. This is because money comprises a complex series of promises to pay that ultimately depend on trust in impersonal, highly organized forms (bankcredit and state-credit). These social relations of trust and mistrust are not reducible to activities in the “real” economy, because they are credit-debt relations, which cannot mechanically “represent” proﬁt and loss balances in the production of goods and services. They are, rather, credit relations that are created from expectations of proﬁtability. I will deal with credit theories ﬁrst, then the concept of expectation. A discussion about the collective generation of anticipatory emotions in ﬁnancial ﬁrms follows. I conclude with a suggestion that social movement analysis can help explain the creation and maintenance of the “morale of expectation” (Shackle 1972) in our contemporary, highly ﬁnancialised era.

Money, ﬁnance and uncertainty Credit theories of money, from Schumpeter (1954) to the Post Keynesians (Shackle 1972; Davidson 1996; Smithin 1994), have a less-known heritage in sociology, primarily from Simmel (1978), which Geoﬀrey Ingham (1996; 1999) has developed recently. The view that credit relations create money in a situation of fundamental uncertainty is extended by Ingham’s sociological approach. His thesis is that money is a social relation of equal signiﬁcance to the social relations of production of goods and services. Post Keynesians like Hyman Minsky (1996), agree with this view. The credit thesis, in general, opposes contemporary post modern and orthodox economic views. Whereas orthodoxy accepts that money is now created from the debt structure (or credit), and post modern views hold that money is now virtual, credit theories hold that money has always been primarily credit and thus virtual. Orthodoxy remains attached to the idea that money has a minor role in the economy. Money is allegedly “objective”, or neutral, in merely reﬂecting (as a handy alternative to barter) the exchanges in “the real” economy “in the long run”.1 Credit theorists dispute both views with the far more disturbing thesis that money has always been based on its own social and virtual foundations. Contra popular views about “cashless” virtual money, today’s money is not fundamentally diﬀerent from, or more post modern than that of yesterday, since plastic or e-commerce are diﬀerences in form not in substance (Smithin 2000). Actors still

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aim to make money out of these new forms. Money is just as ﬁctitious, unstable and liable to crisis or collapse as in previous monetary orders (Minsky 1996; Desai 1988). Contra orthodoxy, a ﬁnancial crisis is not necessarily “short run” or without any impact on the economy “in the long run”. Rather, in the credit view, money consists of a complex web of promises to pay in the form of state-credit and bankcredit. These promises depend on abstract and impersonal trust and expectations (ex ante) that future monetary receipts ex post will match or exceed ﬁnancial resources expended (including its cost, namely the rate of interest) (Smithin 2000: 2; Shackle 1967). But the future does not always turn out that way. Therefore, money cannot be simply a neutral veil over “the real” and the theory is constantly found wanting in practice. On numerous occasions “when the veil ﬂutters, real output sputters” (as Minsky 1996: 74 argues). Money has great productive power. Schumpeter as well as Simmel stressed this view. Simmel suggested that societies that viewed the loaning of money with interest for consumption purposes as usury often could not see its immense power in loans for production (1978: 182). Owning money (hoarding) is not itself a source of proﬁt, as “the money yielded by money” only emerges from loaning it, which divides its “activity” into two, and greatly expands its “economic energy” (Simmel 1978: 169). Schumpeter puts credit at the heart of the whole “capitalist engine” and economic development (1954: 318). In his depiction of money, “loans create deposits”. This was his institutional argument against the orthodoxy of the 1920s, equally applicable today. Albeit diﬃcult to understand, his thesis, not surprisingly, is frightening for those subscribing to contemporary orthodoxy, where money is allegedly “safe”. Schumpeter’s description of banking practice shows why money is dangerous. Bankers are not merely neutral go-betweens, taking money from deposits and lending to others. Rather, bankers create deposits in the making of loans and, by ﬁnding many successive employments for the sums of money created, “they appear to manufacture money” (1954: 320). As Schumpeter says, no wonder economists cling “tenaciously” to the idea that depositors are savers, even when continually contradicted by depositors’ daily habits of spending and using their money (1954: 1114). This is because it gives a minor role to banks. If banks are mere go-betweens, there are few dangers, and little need for regulators. In the contrary view, the major role of the “deposit-creating bank” in “ﬁnancing investment without any previous saving up of the sums thus lent” (Schumpeter 1954: 1115–his emphasis) is what drives capitalist development. But it involves dangerous uncertainties as well. Schumpeter’s credit view gives far more emphasis to the unique nature of ﬁnancial institutions, as loosely suggested by Kaufman (1986). In Schumpeter’s more rigorous deﬁnition, bankers are not like other commodity producers, as no other commodity can be both a claim to a thing and

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“serve the same purpose as the thing itself: you cannot ride on a claim to a horse, but you can pay with a claim to money” (1954: 321). The credit theory means that banks create deposits by lending in the expectation and trust that future wealth will be generated and borrowing ﬁrms will prove credit-worthy and maintain their interest obligations. That is, debts issued by banks are claims on “real wealth”, except these claims are based on banks’ expectations of the borrowing ﬁrms” future ability to generate and sustain long run production and consumption (Parguez and Seccareccia 2000: 108). This creates money “costlessly”, but it is a relation not between two, but three parties. As Simmel explains, money transactions are a relationship that each party has “with the economic community that accepts the money”. In that sense, “money is only a claim upon society” (Simmel 1878: 177). Thus banks are not like any other business, as is frequently claimed in contemporary times. They have special privileges in being licensed to create money, which, if over-extended and/or if expectations are unfulﬁlled, causes a loss of trust and possible collapse. Because there is more money circulating than can ever be redeemed at the same time, a run on a bank is catastrophic to the point, as Kaufman points out about the US, that the deregulation prescription for the market to “run its course” is promptly abandoned. That is, central banks have bailed out most failures. Large (or incredibly indebted) ﬁnancial institutions have not been “permitted to fail” (1986: 56). Given the unique and future-oriented relations of money, the existence of a hierarchy of more and more reputable and trustworthy issuers of “promises to pay” is understandable (Smithin 1994: 84), and explains the development of the central banks. These inevitable power relations — the concentration of credit relations, the central banks’ roles in regulating banks and in acting as lender of last resort — face power relations elsewhere in the ﬁnancial sector and other economic sectors, as Ingham points out. There are no “technical” solutions, as the diverse outcomes depend on the various rebalancing struggles between the major actors (Ingham 1998: 13–14). Although money is least subject to democratic control, the occasions when ﬁnancial institutions create money at a “cost” to the generalised public - in bailouts for non-performing loans - are not infrequent (Davidson, 2000). These costs give rise to public distaste for ﬁnancial institutions and deregulation. Money relations are not neutral and they do not mechanically “reﬂect” activities in the “real” economy. In the “real” economy, decisions are dependent on “expectations of monetary receipts relative to money costs” (Smithin 2000: 2), including the rate of interest. Let us draw on Keynes’s own statement of the paradox of money in reference to the rate of interest: “The possession of actual money lulls our disquietude; and the premium which we require to make us part with money is the measure of the degree of our disquietude” (Keynes 1937: 216). Wealth owners, Keynes then goes on to say, still have two alternatives beyond

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deferring any decision (that is, hoarding). They can either lend money at the present interest rate or, buy a “capital asset”. Either decision depends on an expectation about the future “neither of which rests on an adequate or secure foundation” (1937: 218). Uncertainty is generated more through money production and the options available to wealth holders than in goods and services production. Money relations create the ﬂuctuations in “the volume of investment” (Keynes 1937: 218). As Minsky says, “an economy with a Wall Street cannot be static” (1985: 39). Expectations that rising proﬁts will allow obligations to be met in the future (the rise in over-conﬁdence described in Minsky’s (1985) paradox that ﬁnancial instability emerges from stability, involve massive social distance. They are dependent on vast networks of other organizations with further chains of obligations and money choices. Trust and conﬁdence in these relationships are unavoidable, given the range of uncertainties, but, equally, these expectations are often unfulﬁlled. This is not merely due to betrayal of trust and fraud (eg, Pressman 1998). Unpredicted new decisions must be taken. Banks may lend for Mergers and Acquisitions or new ﬁnancial “instruments”, but these may lead to rising debts, crises from other expectations proving unfounded, which are linked to price-swings in expanding and contracting bank credit.

Expectations All decision making relies on expectations, which in economic life primarily are about expected “proﬁtability” — itself not a ﬁxed neutral term — the likely future behaviour of borrowers and/or the future earning stream of a ﬁrm (which might be a borrower). In a deregulated environment, banks and investment banks are less distinct — in any case all expectations are “speculative”. Orthodoxy assumes a level playing ﬁeld of atomised actors who formulate expectations, and the decisions that follow are allegedly judged on “the market”. In economics, the main dispute is over whether expectations about the future can be rationally formed, and whether markets are “eﬃcient”. The general idea (put in numerous forms) is that an aggregate of pessimistic and optimistic expectations tends to “average out”; or that successful investors remove price-value discrepancies (in currencies, ﬁnancial and non-ﬁnancial corporations and commodities of all kinds, eg, pollution-credits in the USA). Others, in contrast, see considerable “interdependency” in the forming of expectations, which gives rise to systematic bias and instability. Thus, Post Keynesians dispute the rational expectations thesis, or “ratex” as Davidson calls it (1990) and behaviourists query the “eﬃcient markets hypothesis”, which alleges that markets are “eﬃcient”. This holds that because markets are not predictable

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(that is beat-able), “therefore” correct prices must continually emerge through arbitrage by those who foresee mis-priced assets. Paul Davidson argues that “ratex”, or the rational expectation thesis, is deterministic, as it sets up a model of a “robot decision-maker”. Such determinism makes a mockery of the concept of choice (Davidson 1990: 74). G. L. S. Shackle describes how the “unborn tomorrow” is an undetermined one of “limitless possibilities” (1972: xi). It is not possible to make a “rational” response at the moment of choosing because the time-world is asymmetrical: the past is unchoosable, and the future is unknowable, and can only be created by “the exercise of imaginative conjecture” (Shackle 1972: 155; xvii). In Davidson’s formulation, decision-makers tend to switch between “haven’t a clue” deferral of decisions, to making sudden decisions based on “animal spirits”, even in the midst of dangers. Choices made this way are invariably inconsistent (Davidson 1996: 61; 1991: 130). Yet this Keynesian concept of animal spirits does not explain how they are inspired or why they are volatile. Robert Shiller (2000), a specialist in behavioural ﬁnance, which does attempt to account for volatility, has criticised the “eﬃcient markets hypothesis” to the extent of disputing the “correctness” of late 1990s high Nasdaq valuations. The hypothesis assumes atomised, independent investors (as with ratex), indeed armies of active investors and traders, holding good to near-perfect information. They search constantly for mis-priced securities and successfully arbitrage any gaps between values and prices to reach — “therefore” - a correct market valuation (Haugen 1997: 642). The market is thus “eﬃcient” in incorporating all or most of the relevant information into any price, and it is not predictable in that one cannot beat the market. Changes are only due to unpredictable changes in “information relevant to future prospects” (Keen 2001: 227, my emphasis). Therefore, to follow the market, or even a monkey throwing darts, is a more reliable method of investing, certainly than listening to a stock market analyst (Haugen 1997: 642). Shiller challenges this thesis by viewing the Nasdaq inﬂation (during its course in 1998 to 2000) as a case of a massively incorrect valuation, or what he terms a bubble. He uses behaviourist debates on ﬁnancial fads and fashions for his explanation of market volatility. While market prices, he argues, can “eﬃciently” reﬂect “real” fundamentals in the “real” economy (Shiller 1989: 49), this does not occur whenever there is excessive interdependency. When too many millions of investors’ expectations are heavily “inﬂuenced” by fashionable ideas like the “new economy”, the result is an “irrational exuberance” (Shiller 2000) leading to overpriced Nasdaq prices (which declined rapidly after April 2000). Shiller tries to draw a distinction between “smart money” investors, and “diﬀusion” investors who must be dumb, as they rely on “news”, gossip, emotion and the ﬁnancial media, rather than on “real” ﬁgures and trends. To correct this problem, there

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should be a world market. Shiller alleges this global diversity would smooth out, through arbitrage, the nationalistic “biases” he detects in the US stock market (2000: 228–232). Shiller’s dispute only highlights the inadequacy of all these approaches, as human beings are always interdependent and “biased”, thus aggregates of expectations or arbitraging have no relation to anything else at all but these interdependent expectations. Of course, the sudden collapse of Nasdaq values totally undermines (yet again) the eﬃcient market hypothesis (EMH). Extensive information of extreme P/E ratios available for the inﬂated years only became “relevant” after that collapse. But, in his prescription of a “world market” to smooth out “biases”, Shiller ultimately avoids the nature of speculation. For him there are smart money and/or fad-inﬂuenced investors but neither “beat” the market; therefore, it remains fairly unpredictable — this is the core of the EMH — but it would be “eﬃcient” if there were no fads or other inﬂuences (Shiller 1989: 8). Prescribing the use of “real” trends by “smart money” investors still suggests that only a “bubble” is incorrect, but that speculative markets are not necessarily incorrect in principle or “in fact”. Shiller’s own massive surveys of investors led him to admit (in a revealing aside) that his distinction between “smart money” and “diﬀusion” or “emotional” investors did not stand up (1989: 50). Thus, Shiller is no further towards explaining volatility and the nature of expectations than previous, Keynesian inspired explanations (to which he fails to refer). In contrast with orthodoxy, these are critical of speculation. Expectation is the notion that attempts to “unite” the present and the future, as Antonio Negri puts it (1988: 24). Shackle, who is best remembered in the economics discipline as a post-war “translator” of Keynes, also drew on Gunnar Myrdal (Shackle 1967). Myrdal’s key point was to show the vast diﬀerence between decisions made ex ante, and any later result, ex post. This gulf is thinly papered over with expectation, which, for Shackle, is the concept of economics. Although Shackle is a subjectivist, he is not concerned with the subjectivism of “preferences”, too often assumed as ﬁxed (and therefore readily converted into probability distributions). Shackle, on the other hand, looks at the expectations one might assume for the concept of a person with an “active mind” (Lachmann 1990: 5), whether that person is an investor, entrepreneur or speculator. These decision makers’ expectations are mainly, if not exclusively, made up of “imagination and hope” (Shackle 1972: 66). Although his is an individualist approach, he is aware of collective concerns. He describes the process of forming decisions as a fraught one of choosing from a limitless vista of “rival and incompatible hypotheses” (1972: 447) most of which, whether bullish or bearish, will prove “expensively wrong” (1972:165). His ultimate question from this is how “the morale of expectation” can be sustained (1972: 447 his emphasis), which implicitly, alludes to a more collective emotional

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phenomenon involved in generating expectations, and thus the possibility of giving a sociological emphasis to its organized form. Shackle’s respect for Keynes rests on his “nihilistic view” that “business conﬁdence” and the “willingness” to make investment decisions can suddenly collapse into inactivity and “depression”, as they did in the 1930s. Crucially, such collapses are not irrational and they are no more predictable than the conﬁdence leading to investment activity (Shackle 1972: 429). Wherever choice can be deferred, which it can in a money-using economy, unpredictability is endemic, as present data is always insuﬃcient. “Better information” will not accrue through time passing, but delay allows the buyer time to postpone any decision of when or what to purchase (Shackle 1972: 160). This is the “fundamental uncertainty”, which, as stressed by Davidson (1990), following Keynes and Myrdal, must be “nonprobabilistic”. So, what is expectation? Shackle says it primarily consists of indeterminacy, because the “expected”, imagined or hoped-for price ex ante, may easily not eventuate in the recorded “real” price ex post. But, in the endless practice of generating expectations, which every time must logically involve indeterminacy, there are three “practical” limitations, namely poverty, urgency and convention (1972: 157). Shackle does not deﬁne these limitations sociologically, but they are readily analysed as such. Those who are poor, who have no options other than to buy or sell today, cannot wait for a better price tomorrow or some other future time. Poverty or, as we would call it today, a lack of discretionary income, gives no possibilities for delay and the attendant luxury of forming an expectation. Urgency of a diﬀerent sort arises from certain resources that cannot be held for long, such as empty houses that earn no rent or perishable goods. The only means of setting the prices limited by these practical aspects of life is to turn to convention. Exchanges that “must take place in this day or this hour” arrive at a value by hitting on yesterday’s price. “Poverty and urgency demand a price, and convention supplies it” (Shackle 1972: 157). Simple data like this, which is relatively predictable, led to early economic beliefs in rationality — that expectations could be rationally formed about the “immediacy” of tastes, needs and skills in fairly “hand-to-mouth economies” (Shackle 1972: 158). Speaking sociologically, these limitations of poverty and urgency also provide decision-makers with a motive and basis for attempting to control the future, in the sense that these limitations reduce the uncertainty and indeterminacy of the future. They provide forms of control over opportunities for the few to gain some regions of certainty. Attempts to control the future are far from over, to put it mildly, although economics can no longer claim that the discipline is founded on rationality. This is because, as Shackle points out, there is no predictability where wealth or asset holding is concerned (1972: 158). Thus, the history of the past hundred years and more has seen the extension of greater

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“permanency”, or reduction of urgency, and, consequently, the possibility of delay. The forms of security available for many millions more today in superannuation and pension funds signify that vast numbers in the more wealthy countries can formulate expectations. They have suﬃcient discretionary income to delay their ﬁnancial decisions, whether to buy goods and services or shares, or to lend money or — if there is “disquietude” — to stuﬀ it under the bed (hoarding). Thus, there is fundamental uncertainty. This was Keynes’s major ﬁnding. With the liquidity preference as a potential option, “mere” expectation directly inﬂuences all prices (Shackle 1972: 226) and, “as revealed” in the ﬁnancial markets, governs most investment (Keynes 1964: 151). Incidentally, the rise of asset-holding accounts for the growth of surveys not only of the state of business conﬁdence, but now, of the state of consumer conﬁdence as well: another futile drive to ﬁnd any clues to the undetermined future. What, then, are the inﬂuences on “mere expectation”? Keynes argues for two main inﬂuences: convention and emotion. It is worth quoting in full the conventional techniques that Keynes says tend to “save our faces as rational economic men”: 1. We assume that the present is a much more serviceable guide to the future than a candid examination of past experience would show it to have been hitherto. In other words we largely ignore the prospect of future changes about the prospect of which we know nothing. 2. We assume that the existing state of opinion as expressed in prices and the character of existing output is based on a correct summing up of future prospects, so that we can accept it as such unless and until something new and relevant comes into the picture. 3. Knowing that our own individual judgment is worthless, we endeavor to fall back on the judgment of the rest of the world which is perhaps better informed. That is, we endeavour to conform with the behavior of the majority or the average. The psychology of a society of individuals each of whom is endeavoring to copy the others leads to what we may strictly term a conventional judgment. (Keynes 1937: 214, his emphasis) The principle is thus to search for the opinion or expectations of the majority where any ﬂuctuation in the value of assets is, as Shackle puts it, “the apex of a pyramid of guesses about guesses” about the majority’s guesses, the majority those with more wealth or power (Shackle 1972: 223–5). This convention is hard to deﬁne as few demarcations exist between “today’s opinion of what will be tomorrow’s opinion, and the actual prevailing opinion which has anticipated tomorrow by being generally adopted today” (Shackle 1972: 225). “The news” is the only inﬂuence on expectation that Keynes accepted. Financial news is all that counts, mainly revenue earned in the immediate past; however,

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this “news” is unguessable and its inﬂuence is magniﬁed: “We assume that news shows the direction of things” (Shackle 1972: 180), it disrupts expectations of threat or opportunity. Shackle introduces an ingenious metaphor to describe the extraordinary oscillations in investment decisions. If expectations are simply a future imagined picture of a myriad of investment possibilities, it is like looking through a kaleidoscope (1972: 183). The whole picture can change utterly, merely through a twist to this evidence in the expectation-former’s mind, just as one twists a kaleidoscope. A sharp shock, even a mere counter-expected or unheralded piece of data from “the news” could changes the picture radically. Consequences are equally formidable, as the relations between data are merely “ﬁctional elaboration” about “the conjectures being made by others” (Shackle 1972: 185). Thus a change leads to ﬁctional justiﬁcations (back-ﬂips) and poor “policy” responses, as seen in the IMF over the Southeast Asian crisis of 1997 (Pixley 1999a). Restlessness characterises the way expectations are formulated. Thus prices depend on self-generated movements from the last price, on various “superstitions” or conventional interpretation of particular events held to be omens of impending price movements, such as the idea of an upper and lower limit (Shackle 1972: 192). Basically the price of a share rises when many share buyers believe it will rise and, as they are all trying to guess the majority’s view just before the majority ﬁnds it, they have no concern with whether there is any “objective” reason for a rise in the shares. Such conventional evaluations are “liable to collapse through a sudden acknowledgment of their objective baselessness” (Shackle 1972: 225–6); however these kaleidic values inﬂuence decisions which order the whole economy.

Future-oriented emotions: Collectively generated Although I share Shiller’s concern with understanding ﬁnancial volatility, Keynes has a far more convincing version of the problem, which Shiller ignores. There are no “smart money” investors — they are all emotional diﬀusion investors. In my view, behavioural psychology alone is inadequate. A superior explanation arises from economic sociology. Unlike the “embeddedness” thesis, which generates rich case studies of interpersonal networks within and between ﬁrms from the “bottom up” (eg, Uzzi 1999; Carruthers and Uzzi 2000), economic sociological insights are here directed to the top-down. This means that the macroeconomic, highly abstract (or reiﬁed) levels of “booms” and “recessions”, characterizing “market volatility”, are brought as far as possible down to the meso level of ﬁnance organizations, where one can empirically investigate the social origins of expectations. This is an improvement on both implausible individualist, as well as aggregative explanations of global

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ﬁnancial crises and volatility. So, Shiller’s argument that the Nasdaq’s asset inﬂation was due to a “naturally occurring Ponzi” (2000: 67), as a result of the incredible growth in indirect shareholding of pension and superannuation funds, is only partially correct. His use of the term “natural”, and his hope to abstract from “interdependency”, neglects the hierarchical, organized context of ﬁnance organizations, which necessarily promote a collective conﬁdence in money and inter-organizational relations of trust. Scholarly work on social structural approaches to money is thus important (Arrighi 1994; Baker 1987; Carruthers and Stinchcombe 1999; Ingham 1996; 1998; 1999; Smithin 2000; Wray 1990). Drawing on the sociology of emotions immeasurably enhances its importance (Barbalet 1998; Collins 1975; Flam 1993; Heimer 2001; Kemper 1978; Shapiro 1987). Oscillations in ﬁnancial decision-making are undoubtedly a serious global problem but, given that they occur with grim regularity, an important question concerns how the process continues. In the face of continual disappointments and crises, Shackle’s concern with how the “morale of expectation” is maintained is entirely relevant. Clearly, the modelling of aggregates of individual investors does not adequately account for the modern economy of corporate entities and ﬁnancial institutions in a huge, semi-systematic hierarchy of interest conﬂicts and competitive struggles, involved as well in complex networks of impersonal trust relations. In my view, the morale of expectations is maintained through these networks of trust — which can vary. Thus the US Federal Reserve has been at the peak of the impersonal trust hierarchy for the past decade (but this could change), and other Central Banks have also, at times, fostered the morale of expectation, as well as the IMF, the World Bank and Treasuries of the G7. There are further relations of trust and mistrust between commercial and investment banks, creditrating agencies, accountancy ﬁrms and the huge pension funds, as well as the main ﬁnance news agencies. Impersonal trust is the main concept. While interpersonal (primary and secondary) relations are not always separable from impersonal relations, it is important not to conﬂate impersonal inter-organization relations with personal business networks (Pixley 1999a). The ﬁnance world of banks, corporations and central bureaucracies has diﬀerent, competing or conﬂicting logics. These are meso-level relations, where the diﬀerent sectors enable or constrain other sectors, and generate various kinds of emotions in these inter-organizational relations. Emotions are not only personal, as many collective emotions are generated through impersonal technical mediation, often involving massive social distance. Public mourning for the death of a media ﬁgure, anger about a distant war, fear about money, are all commonly induced by “monological quasi-mediated interactions” with communications media and, behind them, bureaucracies and corporations (Thompson 1995; Calhoun 1992).

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The typical emotions in ﬁnance entail “trust problems”. The hierarchy is structured along a number of lines of uncertainty and vulnerability. Uncertainty is the key, as previously argued, yet it is magniﬁed since organizations are always vulnerable to future losses (while aiming obviously for gains). Carol Heimer points out (2001) that while trust plays an important role in reducing uncertainty, distrust is a key method of reducing vulnerability. So, hedging techniques, insurance, reinsurance, spreading or externalising losses may reduce vulnerability, but the actual dangers are not removed in this way, but passed elsewhere. Thus dangers can still emerge, and there are other dangers of organizational loss of reputation and credibility for ﬁnancial competence, for correct forecasting, or for prudential supervision. Uncertainty is reduced by trust and by eﬀorts to gain control over the various regions of uncertainty in the environment. Even here, there is an element of trust that various factors may indeed reduce uncertainty. Contemporary oﬃcial rethinking of the “fundamentals” would support this idea. Thus, in Australia the Current Account Deﬁcit in 2001 is allegedly less the “fundamental” that it was previously. Zero inﬂation is decreasingly a fundamental aim (indeed its real danger is a debt-deﬂation spiral). Rising unemployment is less the cause for congratulations in ﬁnancial circles than it has been for the past twenty years. Even that stalwart, a low budget deﬁcit, has recently been questioned.2 In “the news”, ﬁnance journalists take emotions seriously, particularly trust. If their motive is primarily for media corporations to gain audiences, the descriptions of investors “caught between greed and fear” are not, however, always exaggerations. In 1998, Business Week ran this headline: “Who can you Trust? — When companies fudge their numbers — When accountants turn a blind eye — When analysts have a conﬂict of interest”. In 2001, even Fortune ran “Can We Ever Trust Wall Street Again?” with a picture of Morgan Stanley analyst Mary Meeker on the cover.3 Of course the same question could be asked of Fortune. Self-styled “sceptics”, as my interviews with journalists demonstrate, engage in meso-level analyses of inter-organizational relations of trust and mistrust. News agencies function as institutionalised trust organizations, assessing the claims and data of companies, banks, accountants and analysts, on behalf of the trusting investing public, corporations and bureaucracies. When the present is stable and positive, the various kinds of impersonal trust are often implicit or below the threshold of consciousness. Even when other trust organizations raise doubts (eg. the original legal assessment of Amazon.com was highly critical; various ﬁnancial journalists queried the credibility of “new economy” claims for some years), they are dismissed as passé or irrelevant.4 If, as Luhmann argues, “trust depends on the lack of contrary evidence”, it seems that “new” evidence reveals how the original decision relied on trust (now shattered) that the relevant organizations would prove to be trustworthy. What constitutes the

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“clinching” contrary evidence? Shackle’s concept of the kaleidoscopic picture of expectation ﬁlled with various conventions — yesterday’s prices, movements of “opinion” and superstitions, for example, that nuclear power countries, such as Russia, would not be allowed to default — help to answer this question. There is also the problem of explaining how an expectation turns into the making of an actual decision. The Keynesian concept of conﬁdence is one approach to the process, whereby the conventional assumption that the present will continue indeﬁnitely is imported into the imagined future. This imported conﬁdence is then, in a reverse projection, taken back to the present so that the decision is made, as Barbalet suggests, via a two-way projection (1996: 82–5). Expectation also requires a capacity to imagine the future and preparedness to make that decision is also fostered by anticipatory emotions that have, as Damasio points out (1994), a “physicalness” in stimulating the imagination. This is not only “consulting one’s gut feelings” but also that experiences of “sweaty palms” and “rapid pulse” reported in Shiller’s surveys of investors (1989: 388). Yet, I include trust as the over-riding impetus to the taking of the decision, and employ the concept of conﬁdence in a diﬀerent way to standard usage. In systematising these paradoxical processes of trust and the role of emotions in generating expectations towards a decision, I have adapted Kemper’s model on anticipatory emotions (1978: 74–5). I use Post Keynesian views on conﬁdence, including Shackle, Lekachman (1957), and Dequech (1999), as well as sociological work by Barbalet (1998), Luhmann (1979) and Collins (1990). Kemper divides the “anticipatory emotions” into those generated by the past and present. Past experiences and conditions give rise to optimism and pessimism about the future. Positive and negative indicators of the present generate the emotions of conﬁdence or lack of conﬁdence, however following Dequech’s point (1999), a lack of conﬁdence is not present pessimism or a character ﬂaw (such as lack of chutzpah). Rather, it is a greater recognition of uncertainty, an anxiety perhaps. In contrast, conﬁdence could be felt about an almost certain grim present projected into the future. A whole “kaleidoscope” of anticipatory emotions is then derived from these various combinations. This model is illustrated below in Table 1; in Table 2, following, examples are presented. In the ﬁrst example in Table 2, an organization may be very conﬁdent of a poor current set of data, and experience pessimism about the past. These combined emotions are projected and inspire a bleak outlook. The second example in Table 2 is more low level, because it is more mixed. There are numerous permutations, as interpretation of data, reputations and claims is dependent on the social and economic position and state of competition and conﬂict between organizations. Thus, the anticipatory emotions of optimism about past successes and of extreme conﬁdence about a rosy present may give a sense of arrogance about the future.

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Table 1.Role of emotions in expectations and decision-making

Feelings about the future comprise at least six diﬀerent combinations of anticipations about past and present

Projection of PAST

Projection of PRESENT

Into the FUTURE RESULT ex post ex ante = ‘expectation’

Optimism/ Pessimism: of past decisions, experiences etc

Conﬁdence/ Lack of Conﬁdence: about positive or poor opinion, situations, data

Sum of feelings of past and present: Convention + Imagination = Expectation Æ DECISION + TRUST/FEAR

New situation Æ New emotional states; new interpretation of past and present data

Table 2.Two examples of role of emotions in expectations and decision-making PAST

PRESENT

FUTURE ex ante RESULT ex post expectation

1. Grim data of Pessimism past, certain poor present decisions

Conﬁdence about poor situation

Very Bleak

If good, amazement

2. Excellent Optimism past data, but unclear, ambiguous present opinion

Lack of Conﬁdence unsure whether positive or poor situation

Hope

If bad, mild dissatisfaction

SUM OF FEELINGS ABOUT PAST AND PRESENT DECISION + Convention + Imagination = FORMULATION Æ TRUSTÆ

New emotional states; New interpretations

Fortiﬁed with these positive expectations, an organization’s corporate decisionmakers will trust in making a decision, by imagining and projecting these present expectations into a rosy future. The trust in taking a decision also requires a capacity to imagine a future, and an interpretation of whatever knowledge or data can be obtained of the past and present. However, if events turn out quite diﬀerently (whether from an outside “event” or from excessive trust in the “data” and careless arrogance itself), the result of that projected arrogance can be fear, panic or humiliation. While more systematised this hypothesis is similar to Shackle’s ingenious metaphor of “kaleidic” values (1972:183) depicting the way that ﬁnancial expectations

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can change dramatically. The table also includes the transition from expectation to an actual decision, where I draw on Luhmann’s sophisticated comparison of trust with conﬁdence (1988: 100). Trust “presupposes” risk but not probabilistically, as Luhmann’s concept is similar to that of Heimer (2001). That is, trust is needed for making a decision to act about an uncertain future: this entails vulnerability to loss, yet has the possibility of gain. A decision to trust, given uncertainty and vulnerability, is a “gamble” that can be avoided, unlike danger. Conﬁdence is the armoury against present dangers, whether perceived or not, and which cannot be avoided. It is a sense of certainty that a future unavoidable situation will prove to be either grim or perfectly ﬁne. Lack of conﬁdence is similar to anxiety about an explicitly perceived uncertain future. Luhmann’s crucial point from this is that if trust turns out to be misplaced, blame is attributed to the active decision-makers taking “avoidable” risks. If conﬁdence proves to be unfounded, blame or relief is directed at the sources of “unavoidable” danger. That is, the organization, deciding to trust in taking the risk, may become the cause of either danger or a lucky escape to other organizations, maybe to the general public. In the ﬁnance world, multi-directional attributions of blame and praise ﬂuctuate and simmer continually. For example, a bank lends to a corporation that they trust will prove credit-worthy, not naively, but from trusting accountancy checks, a credit-rating agency’s double-A “score”, and probity analyses. But, the interest rate or the currency value changes, the corporation falters (or defaults), the accountancy ﬁrm was found wanting, and the bank is overextended, placing other organizations in danger. Who was to blame? This process regenerates in the ﬁnancial world daily. New conﬁgurations of pessimism, anxiety or conﬁdence, and trust for the decision (or fear which leads to inactivity — still a decision), are the outcomes from which the next set of expectations is generated. The argument is that the role played by the social generation of pessimism /optimism, conﬁdence, trust and, sometimes, fear of the future, can help explain ﬁnancial decision processes and reveal a contradictory role of trust. If economics acknowledges trust in ﬁnancial exchanges at any point in time, it neglects that its value can change over time, where risk becomes critical. The inevitable problem of trust, where one has to depend on the lack of contrary evidence, is that expectations may alter and, in turn, generate organizational fear of risk and failure. Which types of risk, vulnerability and dangers are being faced (e.g. intrinsic risks of the unknown, vulnerability from mismanagement, risk of incompetent ﬁnancial regulation, risk or danger for peripheral shareholders) will obviously be important in understanding the combinations of emotions.

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A utopia of present-ness Corporate ﬁnance decision-making is based on gaining information about all those uncertainties that are faced daily in attempts to guess the future. The corporate structure develops towards the areas of most relevant knowledge — in the process creating branches with “distinct social locations” (Stinchcombe 1990: 2; 342). Financial institutions have considerable indirect control at a global level, and the most powerful are at the peak of the hierarchy because of their control over the environment, information, and “the news”. This is no exaggeration when considering the extent that governments’ powers have been qualiﬁed by activities in ﬁnancial markets over the past decades (Pauly 1997). In the organizational form, information is “anything that deﬁnes reality” and those organizations that control information about regions of uncertainty gain control over other organizations (Collins 1975: 310). Thus many ﬁrms and governments are fearful of a Moody’s credit rating, even if it is unfair and inevitably based on past trends (Pixley 1999a; Sinclair 1994). A more alarming example concerns Long-Term Capital Management, with their prestigious staﬀ and board, incredible secrecy, and dogmatism or faith in the mathematical model. (Nobel awards in economics are now of more dubious reputation.) Until its collapse in October 1998, major investment banks did not dare ask the extent of LTCM’s leverage, while ﬁrms including not just Goldman Sachs and the “thundering herd” (Merrill Lynch) but Chase Manhattan and the Union Bank of Switzerland, lent billions more. LTCM considered such questioning of its decisions impertinent, despite an exposure of over US$1 trillion (Lowenstein 2000). Although, as I have argued, if trust is required for the actual decision, volumes of personal and impersonal communication invariably back it, whether these comprise complex spread sheets or informal gossip. (For example, Chase Manhattan was presumably armed with a mass of information on LTCM, except the most relevant.) This information is hierarchically controlled and it may or may not prove trustworthy. In this process, I believe that the role of trust and fear becomes apparent. Assessments about each risk that might be taken or avoided, and about credit-worthy or more dubious organizations, are routine operations of speciﬁc branches of ﬁrms, and they continually respond and react to other assessments in the wider ﬁnancial system. The hierarchy shifts, so that, for example hedge funds are no longer the shining stars. Thus contra Shiller, every organization must rely on “diﬀusion” of impersonal mediated communication and personal information in the formulating of expectations, however systematic. Given fundamental uncertainty, those formally obliged to take decisions within ﬁrms cannot avoid drawing on emotions. Only insider trading provides certainty and its prevalence and illegality proves the point. Indeed, research on emotions demonstrates that

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anticipatory emotions are not irrational in facing uncertainty, but essential in the formulating of expectations, and thus can improve the rationality of decisions. The danger is not necessarily from the unavoidable emotional experiences, but can arise from the denial of emotions, the denial of uncertainty or the insistence that emotions are irrational. So, where money is concerned, public debate about emotions could help to reconﬁgure the implicit, but excessive trust in money over the past decades, by considering procedural reforms at the organizational level. These could also help avert the disasters of genuine fear (such as a run on the banks). This is to say that the thesis of “irrational exuberance” or fear, levelled in a patronising way at “Mum and Dad” investors, entirely misses the formal, ritualised generation of trust and fear among those who “deﬁne” money in their board rooms, oﬃces and global forums. In Barbalet’s words (1998: 8–9), “emotion is a social phenomenon”, as emotions not only have social eﬀects but also a role in constituting social relations and institutions For Barbalet, emotions are best seen as a source of agency: however, it is not only the conscious manipulation and cognitive use of emotions that is socially eﬃcacious because many emotions are felt “below the threshold of awareness” (1998: 23–5). In social structural relations, emotions may be elicited unselfconsciously: such arguments make sense of the anxieties that fester below the surface in money relations, and the lack of awareness of “pleasant” low level emotions such as optimism and trust. Their opposites can emerge with force and great awareness, whenever the ﬁction of money’s neutrality explodes, with, for instance, the collapse of an insurance ﬁrm or a hedge fund. Within ﬁnancial institutions, much has been written on the rituals of derivative salesmen who go on clay-shooting expeditions so they can hone their “killing instincts” to ﬁnd new victims after sustaining unimaginable ﬁnancial losses (e.g. Partnoy 1997). Collins suggests a range of rituals is deployed by organizations to foster social interactions that will arouse emotions and create social solidarity. Finance ﬁrms are enormously susceptible to implicit emotional production, often used more explicitly in conﬂict struggles at a later time. The ritual nature of “focusing attention on a common object” (Collins 1975: 58) is barely considered when traders and investors magnify every aspect of “the news”. In doing so, they feverishly attempt to give “objective”, and invariably conﬂicting, accounts of the inexplicable (such as exchange rates in 2001, trading in which is primarily speculation), and promptly forget the latest disaster in their eﬀorts to respond to the next exciting “news”. Similarly, Ingham documents more pleasant, implicit trust in the nineteenth century Bank of England, even though it operated with “amazingly small” gold reserves. It was “instinctive conﬁdence” said Bagehot, noting that “English people and foreigners too trust it implicitly” (cited in Ingham 1994: 34). A fascinating account of a major US pension fund CEO’s view of his fund

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managers is provided in my interviews. When asked how he would manage things, or what organizational changes he would make if a crash occurred, he claimed that he would sack ninety per cent of his fund managers. The reason is that his former workforce would be too frightened after a crash. Instead, he would hire “a whole new breed who’ve got no fear” so that they can take rapid decisions.5 What this CEO realised, in my view, is that whereas he could manipulate and explicitly utilise the emotions of the workforce, his staﬀ could not simply “unlearn” their newly generated fear of the process of taking split-second decisions. That is, although debates about PostTraumatic Shock may be too determinist (Damasio 1994), the time taken for fund managers to unlearn their fear is too costly for a big pension fund. The “morale of expectation” is not only maintained inside organizations. I would suggest that the past few decades’ widespread public acceptance of ﬁnancial “risk” taking, or trust in money, be best seen in social movement terms. But rather than attribute a “herd” mentality to failed “mum and dad” investors, the social movement literature would help explicate the re-emergence of policy-makers’ beliefs in the neutrality of money, a position which denies that ﬁnancial crises can happen. It could further help to explain how the “morale of expectation” has been maintained for the past twenty years in the face of persistent and catastrophic ﬁnancial crises across the world. Each new ﬁnance “theory” has been found wanting, each new bailout has been criticised, each indebted country has faced further disasters, yet expectations (from conﬁdence to arrogance) in the main ﬁnance centres keep being revived. How is this possible? The idea that social movements are swayed by panics and fads is subject to many objections in the relevant literature (McPhail 1991). Thus, Shiller’s argument that ﬁnancial volatility is due to an aggregate of simple-minded “mum and dad” investors, swayed by the media is totally inadequate. In the social movement literature, major responses to the functionalist “collective behaviour” approach were resource mobilisation and identity theories. They deployed cognitivist understandings of how social movements construct collective beliefs and shared identities (Pixley 1998). Resource mobilisation approaches also stressed the rational choice aspects of social movement action, partly to counter the dismissal of 1960s civil rights activists (as crazed malcontents) by conservatives. Recently a “return of the repressed” suggests that collective emotions nevertheless do play a role in social movement activism, in inspiring them to face uncertain outcomes (eg Goodwin et al 2000; also Barbalet 1998). It is high time that theorists of ﬁnance admitted this admixture in the face of fundamental uncertainty as well. While rational strategic aspects and cognitivist approaches are always the overt aims — and making money has always seemed the supremely rational strategy — the future can only be dealt with by emotions.

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Thus, how was the Post War “sentiment” about ﬁnance, which was so cautious about the uncertainties entailed in money, so concerned about excessive debt, transformed into a libertarian approach, where anyone was allegedly able to make money out of money? Moreover, how did policy-makers agree that ﬁnancial markets could be safely left on their own, free of regulations and then, in the face of collapses (from the Savings and Loans and Mexican debacles to LTCM), accede to most bailouts? Russia (1998) and Barings Bank (1994) are the major exceptions here but the later rise and fall of the Nasdaq suggests that little is learned from each mistake. In the former period “Wall Street” was considered a mere casino of greed in the public imagination, whereas, since 1980, a far more sanguine view has prevailed, possibly, as ﬁnancial journalists suggest, because the crash of 1929 was so long ago.6 Of course, there have been criticisms during each ﬁnancial crisis. But Michael Lewis (author of Liar’s Poker) made a prescient remark back in 1990, after the collapse of Drexel Burnham Lambert, and after the 1987 stock market crash. The editorials then in Time, Business Week and other newspapers, predicting the end of “greed, excess and bravado” were plain wrong, he said. There was “no sign that anyone on Wall Street was chastened by Drexel’s ordeal”. Indeed, Tom Wolfe’s book Bonﬁre of the Vanities, the movie Wall Street and the critical play Other People’s Money were being taken by Wall Street as forms of ﬂattery, rather than criticism (Lewis 1991: 58–9). Of greater importance, of course, authorities have been prompt to save the ﬁnance sector. Bailouts are not the only mechanism. The morning after Black Monday October 19, 1987, the Federal Reserve, with Greenspan as the new chair, purchased large amounts of government securities, thus creating about US$12 billion in new bank reserves, which had the eﬀect of “ﬂooding the Street with money” (Gordon, 1999: 290). And so, to ward oﬀ “systemic risk”, the so-called “system” has been saved, time and again, at great public cost, but with no move — beyond occasional inquiries (e.g. the Brady report on the 1987 crash) or calls for “new ﬁnancial architecture” (after the South East Asian crisis in 1997) — to place it under democratic control.7 How can this shift be accounted for in social movement terms? I would argue that the current dominance of ﬁnance and the endless regeneration of the “morale of expectation” are best seen as a utopian mentality in Mannheim’s sense. It arises from a deﬁned social base and in a distinct social location. As the ascendancy of the “New Right” — in general — was analysed in social movement terms (eg, Levitas 1986), one can also single out ﬁnancial dominance in its particularity. As a “mentality”, it is extraordinarily similar to Mannheim’s depiction of the Chiliast utopian mentality. Of course, Chiliasm was the utopia of the poor and oppressed. In complete and farcical contrast, the present mentality has a conspicuously wealthy social base in “global” ﬁnance centres and among rentiers and economists, with their “fanatic faith” in the market. As Mannheim argues, the way an active

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utopian function is inspired is not explained by a history of ideas, but rather from “deeper-lying” levels of the psyche. He is also not concerned with a speciﬁc history, say of Chiliasm, but whether this mentality or attitude is “actually present in the forms of thought and experience” in any particular social movement (Mannheim 1936: 192–3). For example, he ﬁnds a similar attitude in anarchism to the historically quite diﬀerent Chiliasm. In my view it is certainly not far-fetched to ﬁnd an anarchist and libertarian attitude in the contemporary ﬁnance sector’s dominance. I will brieﬂy consider the similarities. As we have seen, the ﬁnance sector is driven or obsessed with the immediate future but this is fraught with continual disappointments and “unbearable”, if not intolerable, problems of fundamental uncertainty. Such consistent experiences mean that all hopes seem to be placed on every “present”. In such a story, which started in the 1970s, increasing numbers of ﬁnancial “instruments” escaped the conﬁnes of domestic regulation. At the same time, each economic theory revived the conﬁdence-inspiring thesis of money’s neutrality in the long run. Thus, monetarism, “ratex” and the “eﬃcient market hypothesis” all took this position until subsequently discredited. These theories imply that the future does not matter! Deregulation and liberalisation of capital movements became the fundamental aim, which captured key national, and international policy makers, despite the continual emotional ﬂuctuations between euphoria, disappointment and the more low level, less recognised, forms of emotional energy. All the disappointments of debt crises, ﬁnancial collapses, bailouts and volatility, must be avoided as “history”. Likewise, “the short run” (which looks bleak for many millions) must also be avoided. Let us return to Mannheim. The utopian mentality that he ﬁnds in anarchism is unlike the socialist, conservative or liberal utopian mentalities. Instead there is “absolute presentness” which is a psychic “ecstatic substance” continually whipped up in the here and now (Mannheim 1936: 194). This mentality — applied to the ﬁnance sector — is not in the least concerned with the distant future (in contrast to environmental movements), neither does it bother to be nostalgic about any previous golden age (such as the old Keynesian regulationists with their passé attachment to full employment). It will not care to remember the bleak history of the Great Crash. There is no relationship to “historical existence” such as ﬁnancial history, however relevant, because history might introduce fear. Instead, the attitude is one of “tense expectation” for a “propitious moment” in the here and now (Mannheim 1936: 195). The mythology of the “God of Opportunity” is one that forever searches for “the genius of the decisive moment” (p 198), as is seen in the search for each new ﬁnancial guru who has triumphed over “the market”. Once that guru, or economic “theory” fails, a new one is found. (The opportunism is, from my interviews, what most disgusts those ﬁnancial journalists, bankers and

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analysts who have seen the recurrence of the same script far too often.) As with anarchism, which is very close to the libertarianism of the market, there is a dismissal of “constitutions and laws”, and a great attachment to “storm and vitality”, even a “new lawless and consequently free world” (Bakunin, cited in Mannheim 1936: 196). As Mannheim suggests, the only creative principle is “ecstatic presentness”. Tellingly, when this “spirit ebbs”, the result is “a naked mass-frenzy and a despiritualised fury” (1936: 196). This is not so diﬀerent from the months immediately following the US Savings and Loans crisis, the Mexican debt crises, the South East Asian ﬁnancial crisis, the collapse of LTCM and the host of more localised banking, insurance and mining scandals. When trust collapses, fear of failure gives rise to hypocritical blame. This cannot be characterised as the panic of a crazy crowd but is, rather, a panic generated at inter-organizational levels of huge and powerful organizations which, when the disaster occurs, does give rise to panic. Thus, having become convinced that a nuclear power country like Russia would not be permitted to default, the ﬁnance sector held grimly to this view until the last minute. Then the Central Bank forced the “bankers” to save not Russia, but the darling of the US hedge funds. The founder of LTCM, John Meriwether, has recently re-established a new ﬁrm on Wall Street.

Conclusion The paradoxes in ﬁnance are therefore the following. Rational action appears to be the most prevalent element in a world of making money, even though passion and lust for gold, or greed, used to be regarded in more emotional terms, as Albert Hirschman recounts (1977). Yet, in the ﬁnance sector, tension and insecurity also prevail, as many must lose for some or even many to win. The fundamental uncertainty of ﬁnance has to be rendered manageable and the various strategies shape the structure of ﬁnancial organizations and give the impetus for growth of ﬁnancial gathering, “information oriented” services. (Finance information is the meaning of the “information society” thesis.) These corporate entities are routinely competing against their counterparts, and engaged in interest conﬂicts, while continually making investment decisions and assessments of other ﬁrms’ earnings streams and credit-worthiness. The business of making money with money cannot avoid relying on emotions of conﬁdence and trust, as this is the only “reasonable” action to take. Vast quantities of data are not only unassimilable, but past information is also unable to “predict”. The actual decisions that are made are simply not possible without the imaginative projection fuelled and inspired by these emotions, or “gut feelings”, and collectively created through organizational rituals and constant preoccupation with “the news”.

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The further paradox is that many millions more people have some money to hold in the form of “wealth” as a defence against uncertainty, but as this paper has argued, the possibility of deferring decisions between investment and the liquidity option creates further uncertainty. Uncertainty is magniﬁed with the growing numbers of indirect wealth holders yet, while the uncertainties become ever greater, so does the search for certainty, or any clues to the future, become more obsessive. The growth of consumer conﬁdence surveys is a case in point, as what could be the meaning of an aggregate of those surveyed? On what basis does their “conﬁdence” rest? Similarly, after the Nasdaq crash, a growing number of ﬁnance academics are examining “psychological factors” involved in changes in ﬁnancial returns. One study, possibly the more ludicrous, found that sunshine puts investors in a “good mood”, such that they “wrongly attribute their optimism” to positive economic data.8 Does this mean that average opinion will then hope that it can guess average opinion by the greater predictability of the weather? Such questions as these highlight the contradictory role of emotions in ﬁnance that this paper has emphasised. If expectations are the key concept in economics, organization theory and economic sociology have far more to oﬀer in trying to understand the collective generation of anticipatory emotions in ﬁnancial organizations. There is a real danger in populist “solutions” to the crises of ﬁnance, but, equally, the recent turn to behavioural ﬁnance in the economics profession is just as dangerous. It is not adequate to deal in aggregates when the world is hanging on the next move by the most trusted, reputable Central Bank, as personiﬁed by Alan Greenspan. Some fear, for example like Paul Krugman, that the US Federal Reserve has already lost its “credibility”. How that may turn out, we can only guess.

Notes 1. John Smithin (1994) and Geoﬀrey Ingham (1998) state the dispute about money as merely a handy substitute for barter most accessibly. Also I am grateful to Louis Haddad and Flora Gill, School of Economics, University of Sydney, for making important points about orthodox economics’ contemporary position on money and expectations. 2. A range of articles in the ﬁnancial press is evidence of these changes. B. Hale, Wall Street correspondent for the Sydney Morning Herald cites US employment rates as cause in 2001 for investment concerns. Ross Gittins, Sydney Morning Herald (July 2001) reports the RBA shift on the current account deﬁcit. Also see S. Keen (2000) on Fisher’s and Minsky’s paradox of debt deﬂation. 3. Front Page, Business Week, October 5, 1998; Front Page Fortune, May 21, 2001 4. A frequent argument of senior ﬁnance journalists in my interviews, in sharp contrast to the illicit practice of “pump and dump” of some analysts. 5. Interview with Brian Hale, Wall Street correspondent, Sydney Morning Herald and Age, 13 September 2000.

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6. This is particularly the argument of US journalists whom I interviewed in September 2000, such as Alan Abelson, former editor of Barrons. The 1973–4 crash was also salutary, many consider, yet it gave rise to the demands for de-regulation implemented ﬁrst by Reagan and Thatcher, then emulated everywhere else. The social movement perspective, I should also note, has greater explanatory weight in explaining the rise of ﬁnancial liberalisation, as once millions more people are locked into pension funds, and once ﬁnance markets are able to exit rapidly, authorities seem necessarily caught. 7. The Tobin initiative (a Currency Transaction Tax) is resisted the most strenuously in the USA, where Congress has directed that US payments to the UN be conditional on the UN not proposing any tax on American citizens. The payment of UN dues is not meant to be conditional. 8. L. Lester, “Returns shine on sunny days” Australian Financial Review, July 6, 2001: 18.

References Arrighi, G. (1994). The long twentieth century. London: Verso. Baker, W. (1987). What is Money. Intercorporate relations. In M. S. Mizruchi and M. Schwartz. New York: Cambridge University Press. Barbalet, J. M. (1996). Social emotions: Conﬁdence, trust and loyalty. International Journal of Sociology and Social Policy, 16 (9/10): 75–96. Barbalet, J. M. (1998). Emotion, social theory and social structure. Cambridge: Cambridge University Press. Calhoun, C. (1992). The infrastructure of modernity: indirect social relationships, information technology, and social integration. Social Change and Modernity. In H. Haferkamp and N. Smelser (Eds.). Berkeley: UC Press. Carruthers, B. and Stinchcombe, A. L. (1999). The social structure of liquidity. Theory and Society 28 (3): 353–82. Carruthers, B. and Uzzi, B. (2000). Economic sociology in the New millennium. Contemporary Sociology, 29 (3): 486–94. Clegg, S. R. (1989). Frameworks of power. London: Sage. Collins, R. (1990). Stratiﬁcation, emotional energy, and the transient emotions. Research agendas in the sociology of emotions. In T. D. Kemper (Ed.). Albany, NY: SUNY Press. Collins, R. (1975). Conﬂict sociology. New York: Academic Press. Damasio, A. R. (1994). Descartes’ error: Emotions, reason, and the human brain. New York: G. P. Putnam”s Sons. Davidson, K. (2000). Taming the banks. Dissent, 2: 2–5. Davidson, P. (1990). Shackle and Keynes vs. rational expectations theory and the role of time. Unknowledge and choice in economic. In Frowen, S. F. (Ed.). London: Macmillan. Davidson, P. (1991). Is probability theory relevant for uncertainty? A post Keynesian perspective. The Journal of Economic Perspectives, 5 (1): 129–143. Davidson, P. (1996). What are the essential elements of post Keynesian monetary theory? Money in Motion. In G. Deleplace and E. Nell (Eds.). London: Macmillan. Davidson, P. (1998). Eﬃciency and fragile speculative ﬁnancial markets: Against the Tobin tax and for a creditable market maker. American Journal of Economics and Sociology, 57 (4): 639–662. Dequech, D. (1999). Expectations and conﬁdence under uncertainty. Journal of Post Keynesian Economics, 21 (3) 415–30.

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Desai, M. (1988). Foreword to A. Cencini, Money, income and time. London: Pinter Publishers. Eatwell, J. (1995). The international origins of unemployment. Managing the global economy. In Michie, J and Grieve Smith, J. Oxford: Oxford University Press. Fineman, S. (Ed.) (1993). Emotion in organizations. London: Sage. Flam, H. (1993). Fear, loyalty and greedy organizations. Emotion in organizations. In Fineman, S. (Ed.). London: Sage. Goodwin, J., Jasper, J. M. and Polletta, F. (2000). Return of the repressed: The fall and rise of emotions in social movement theory. Mobilization 5 (1): 65–82. Gordon, J. S. (1999). The great game: The emergence of Wall Street as a world power 1653–2000. New York: Touchstone. Haugen, R.A. (1997). Modern investment theory, 4th Edition. Upper Saddle River, NJ: Prentice-Hall. Heimer, C. A. (2001). Solving the problem of trust. Trust in society. In Karen S. Cook (Ed.). New York: Russell Sage Foundation. Hirschman, A. O. (1977). The passions and the interests: Political arguments for capitalism before its triumph. Princeton NJ: Princeton University Press. Ingham, G. (1996). Money is a social relation. Review of Social Economy, 54 (4): 507–529. Ingham, G. (1998). On the underdevelopment of the “sociology of money” Acta Sociologica, 41: 3–18. Ingham, G. (1999). Capitalism, money and banking: A critique of recent historical sociology. British Journal of Sociology, 50 (1): 76–96. Kaufman, H. (1986). Interest rates, the market and the new ﬁnancial world. New York: Times Books. Keen, S. (2000). The nonlinear economics of debt deﬂation. Commerce, complexity and evolution. In Barnett, W. A., Chiarella C. et al. (Eds.). Cambridge: Cambridge University Press. Keen, S. (2001). Debunking economics. Sydney: Pluto. Kemper, T. D. (1978). A social interactional theory of emotions. New York: John Wiley & Sons. Keynes, J. M. (1937). The general theory of employment. Quarterly Journal of Economics, Vol 51, February, 209–33. Keynes, J. M. (1964). The general theory of employment, interest, and money. New York: Harbinger Books. Lachmann, L. M. (1990). G. L. S. Shackle’s place in the history of subjectivist thought. Unknowledge and choice in economic. In Frowen, S. F. (Ed.). London: Macmillan. Lekachman, R. (1957). The non-economic assumptions of John Maynard Keynes. Common frontiers of the social sciences. In M. Komarovsky (Ed.). Glencoe: The Free Press. Levitas, R. (1986) (Ed.). The Ideology of the new right. Cambridge: Polity Press. Lewis, M. (1991). The money culture. New York: Penguin. Lowenstein, R. (2000). When genius failed: The rise and fall of Long-Term Capital Management. New York: Random House. Luhmann, N. (1988). Familiarity, conﬁdence, trust. Trust: Making and breaking cooperative relations. In D. Gambetta (Ed.). Oxford: Basil Blackwell. Luhmann, N. (1979). Trust and power. Chichester: John Wiley & Sons. Negri, A. (1988). Revolution retrieved: Writings on Marx, Keynes, capitalist crisis and new social subjects. London: Red Notes. Mannheim, K. (1936). Ideology and utopia. London: Routledge & Kegan Paul. March, J. G. (1978). Bounded rationality, ambiguity and the engineering of choice. The Bell Journal of Economics, 9, 2. McPhail, C. (1991). The myth of the madding crowd. New York: De Gruyter.

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Minsky, H. P. (1985). The ﬁnancial instability hypothesis: A restatement. Post Keynesian economic theory. In P. Arestis and T. Skouras (Eds.). Sussex: Wheatsheaf Books. Minsky, H. P. (1996). The essential characteristics of post Keynesian economics. Money in motion. In G. Deleplace and E. Nell (Eds.). London: Macmillan. Parguez, A. and Seccareccia, M. (2000). The credit theory of money: The monetary circuit approach. What is money? In Smithin J. (Ed.). London: Routledge. Partnoy, F. (1998). F. I. A. S. C. O. London: Proﬁle Books. Pauly, L. W. (1997). Who elected the bankers? Ithaca: Cornell University Press. Pixley, J. F. (1998). Social movements, democracy and conﬂicts over institutional reform. In B. Cass and P. Smyth (Eds.). Contesting the Australian way: States, markets and civil society. Melbourne: Cambridge University Press. Pixley, J. F. (1999a). Impersonal trust in global mediating organizations. Sociological Perspectives, 42 (4): 647–71. Pixley, J. F. (1999b). Beyond twin deﬁcits: Emotions of the future in the organizations of money. American Journal of Economics and Sociology, 58 (4): 1091–1118. Pixley, J. F. (2000). Welfare, poverty and social inequality: The economic fundamentals of social policy. The politics of Australian society: Political issues for the new century. In P. Boreham, G. Stokes and R. Hall (Eds.). Melbourne: Longman, Pearson Education. Pressman, S. (1998). On ﬁnancial frauds and their causes: Investment overconﬁdence. American Journal of Economics and Sociology, 57 (4): 405–422. Schumpeter, J. (1954). History of economic analysis. New York: Oxford University Press. Shackle, G. L. S. (1967). The years of high theory: Invention and tradition in economic thought 1926–1939. Cambridge: Cambridge University Press. Shackle, G. L. S. (1972). Epistemics and economics. Cambridge: Cambridge University Press. Shapiro, S. (1987). The social control of impersonal trust. American Journal of Sociology, 93 (3): 623–658. Shiller, R. J. (1989). Market volatility. Cambridge MA: MIT Press. Shiller, R. J. (2000). Irrational exuberance. Princeton, NJ: Princeton University Press. Simmel, G. (1978). The philosophy of money. Translated by T. Bottomore and D. Frisby. London: Routledge & Kegan Paul. Sinclair, T. (1994). Passing judgement: Credit rating processes as regulatory mechanisms of governance. Review of International Political Economy, I (1): 133–58. Smithin, J. (2000). What is money? Introduction in Smithin J. (Ed.). London: Routledge. Smithin, J. N. (1994). Controversies in monetary economics. Aldershot: Edward Elgar. Soros, G. (1998). The crisis of global capitalism. London: Little, Brown and Company. Stinchcombe, A L. (1990). Information and organizations. Berkeley: University of California Press. Thompson, J. (1995). The media and modernity. Stanford: Stanford University Press. Uzzi, B. (1999). Embeddedness in the making of ﬁnancial capital: How social relations and networks beneﬁt ﬁrms seeking ﬁnancing. American Sociological Review, Vol 64, 481–505. Wray, L. R. (1990). Money and credit in capitalist economies. Aldershot: Elgar.

Chapter 11

Psychoanalysis and auditing David Crowther

Introduction The auditing process of an organization tends to be relatively unimportant for most of its members. Conventionally, such auditing tended to be done mostly in ﬁnancial terms for shareholders, the legal owners of the business, for whom the managers are merely stewards (in accordance with agency theory). Also, it was something carried out in arrears (Crowther 2000). Indeed, for most stakeholders of an organization, the only mechanism for that audit was the annual report, which was published some period of time after the activity it recorded had taken place. Thus auditing, like accounting, was an activity conducted after the action occurred, which merely conﬁrmed acceptability. Thus, in the past, such an audit was a often a token veriﬁcation, which, at the same time, provided validation of the eﬀorts of the management of the ﬁrm. In this respect auditing serves both a legitimating purpose for managerial activity as well as a focus upon that activity. This chapter explores this focus upon managerial activity through a consideration of psychoanalytic theory in relation to managerial activity. Recently, the activities of ﬁrms and their managers have become the concern of a wider range of stakeholders, particularly with respect to social and environmental issues (Crowther 2002a). In this way, the auditing of a ﬁrm’s activities has been extended both in terms of their scope, and in terms of the number of stakeholders demanding accountability (Cooper, Crowther, Davies and Davis 2001). Thus, auditing has been considerably extended.1 Other aspects of a changing reality have extended the audit focus as well. The development of the internet, and increasing access to it by individuals, makes ﬁrms more accountable, providing individuals with increasing power to make their voices heard, as well as making auditing a more current activity rather than an examination of the past (Crowther 2000). Thus, auditing has changed not just in its scope but also in the range of stakeholders as well as having become more temporally immediate. It has been argued (Crowther 2002a) that the authors of the annual report of an organization have created a dialectic between the internal perspective on

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corporate performance, as epitomised by traditional ﬁnancial reporting of performance, and the external perspective on corporate reporting, as epitomised by social and environmental reporting. It has also been argued that the dialectic created through this reporting does not exist in reality, but is merely a construct created for their own purposes by the authors of the reporting script, the managers of the organizations concerned. These issues are explored through psychoanalytic theory.

The search for meaning In order to frame the analysis, it is necessary to consider the purposes which corporate reporting fulﬁl, and to draw some important conclusions. One issue relates to the role of the dominant coalition of managers of any organization in the determination and reporting of performance. Agency theory argues that managers merely act as custodians of the organization and its operational activities (Emmanuel, Otley and Merchant 1985), and places upon them the burden of managing in the best interest of the owners of that business. According to agency theory, all other stakeholders of the business are largely irrelevant, and if they beneﬁt from the business, then this is coincidental to the activities of management in running the business to serve shareholders. The focus upon shareholders alone as the intended beneﬁciaries of a business has been questioned considerably, from many perspectives, arguing that it is either not the way in which a business is actually run or that it is a view which does not meet the needs of society in general. Conversely, stakeholder theory argues that there are a whole variety of stakeholders involved in the organization and each deserves some return for their involvement. According to stakeholder theory, therefore, value (and hence beneﬁt to all) is maximised if management operates the business on behalf of all stakeholders and returns are divided amongst those stakeholders in some way that they ﬁnd acceptable. Unfortunately, a mechanism for dividing returns amongst all stakeholders with universal acceptance does not exist, and stakeholder theory is signiﬁcantly lacking in suggestions in this respect. Nonetheless this theory has some acceptance and is based upon the premise that operating a business in this manner achieves the maximisation of returns to shareholders, as part of the process of maximising returns to all other stakeholders. This maximisation of returns is achieved in the long run, through the optimisation of performance, for the business to achieve maximal returns to all stakeholders (see for example, Rappaport 1986; 1992). Consequently, the role of management is to optimise the long-term performance of the business in order to achieve this end and, thereby, reward all stakeholders appropriately, including themselves as one stakeholder community.

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These two theories can be regarded as competing explanations of the operations of a ﬁrm, which lead to diﬀerent operational foci, and to diﬀerent implications for the measurement and reporting of performance. It is signiﬁcant, however, that both theories have one feature in common. This is that the management of the ﬁrm is believed to be acting on behalf of others, either shareholders or stakeholders more generally. They do so, not because they are the kind of people who behave altruistically, but because they are rewarded appropriately, and much eﬀort is therefore devoted to the creation of reward schemes to motivate these managers to achieve the desired ends. Similarly, much literature is devoted to the consideration of the eﬀects of reward schemes on managerial behaviour (see for example Briers and Hirst 1990; Child 1974; 1975; Fitzgerald et al 1991) and suggestions made for its for improvement. A diﬀerent approach is taken here, to argue that the role of management in shaping the organization, determining its performance, and reporting upon that performance, will be more central to an understanding of organizational behaviour than is the study of managerial reward schemes. Furthermore, the reasons why this might be so will be considered, along with their implications for understanding organizational behaviour. Psychoanalytic theory2 will be used to address these issues.

The motivation of managers It has been argued (Crowther 1999) that one of the aims of corporate reporting is to bring about a segregation of the audience for such reports, in order to systematically raise the importance of various poles in the binary oppositions contained in such reports, and, as a corollary, lower the importance of the opposite poles. Thus, for example, focusing upon environmental and ﬁnancial performance separately, in separate parts of the script, the annual report and the environmental report, is such a mechanism. These diﬀerent parts of the script seem intended by the authors to interact semiotically with diﬀerent sections of the audience, and to create an image of the organization appealing to the diﬀerent audiences. In other words, this requires the creation of multiple images of the organization within the same text, such that each person can construct from the text the most appealing image of the organization for his/her needs and perspective (Habermas 1971). One can regard this as part of the myth-creation role of organizational reporting, which will be returned to later. This approach will only work, of course, if it is possible to segregate the script so that diﬀerent parts of the script are read by diﬀerent parts of the audience. Moreover, it is also necessary to segregate the audience appropriately, so that the right part of the script is read by the right part of the audience. Both

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requirements are problematic, but managers often attempt to apply segregation in the production of the corporate report. The dialectic of corporate reporting creates the binary oppositions of ﬁnancial versus environmental performance, and shareholders versus stakeholders. A dialectical construction is inherent in annual reports and is created and maintained through the semiotic of these reports, to such an extent, that the perception of the dialectic as extant is generally accepted within the discourses of corporate reporting and accounting theory. Thus, the dialectic appears in a form believed in so absolutely, that an alternative becomes inconceivable; it therefore assumes the mantle of a myth (Cassirer 1946, Miller 1992). Indeed, the proponents of environmental accounting and reporting base their analysis and critique upon the existence of this dialectic. If this dialectic does not in fact exist, but is created through the semiotic of the corporate annual reporting mechanism, then, one needs to consider why. If the dialectic does not exist in corporate performance, then its creation in the annual report must be undertaken either by the authors or the readers of that script. Although the semiotic is created by the reader of the report, based upon his or her understanding of the contents of that report, the implication of this is that each person produces an individual interpretation (Habermas 1971), based upon the linguistic, social and environmental experiences, which underpin any speciﬁc understanding, while, moreover, seeking to create a semiotic understanding based upon the intentions of the group which holds power (Lakoﬀ 1975). That group is, of course, the authors of the script, who are, at the same time, the managers of the organization. For that semiotic to be created, however, in such a way that the dialectic between the internal (or traditional accounting) and the external (or social accounting) perspectives upon corporate performance is understood to exist, it is necessary that suﬃcient signals are created within the text for the semiotic to be extracted as a general interpretation. It is in this method that the author’s meaning is reinstated in the text (Gadamer 1975). The only people with the power to achieve this, of course, are the authors of the text. Hence, it must be concluded that the dialectic of corporate reporting is both created and maintained by the managers of the organization. It is, therefore, necessary to consider why this might be so. The management of an organization is often treated as a discrete entity but it is important to remember that this entity actually comprises a set of individuals with individual drives, motivations, and desires. Thus, every individual has a desire to fulﬁl his /her needs, and one of these has been identiﬁed as self-actualisation (Maslow 1954). This need is at the top of Maslow’s hierarchy of needs and consequently, perhaps the one most considered in terms of motivation. The next two most important needs — the need for esteem (as reﬂected in self respect and the respect of others) and the need for love and belonging (as reﬂected in the need

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for being an integral part of a community) — are, however, more important for the understanding of the behaviour of the members of the dominant coalition of management within an organization. These two needs help explain why managers, in common with other individuals, need to feel important, skilled and essential to organizational performance. In considering the way in which corporate reporting meets the needs of managers, it is essential to take into account the reasons such needs exist. The chapter considers the motivations of managers in terms of psychoanalytic theory.3 This theory is examined from the Freudian, Lacanian, and Jungian perspectives to consider the implications of managerial needs for individuation. It is argued that this drive for individuation leads to the managerial motivation for the usurpation of primacy and, more speciﬁcally, to the need for myth creation in corporate reporting.

A Freudian analysis — the drive for individuation In his psychoanalytic theory Freud (1984) argues that the real motivation for any act undertaken by a person may be disguised and not apparent even to the person who performs that act. Thus, for Freud, the underlying basis for identity, and therefore for an explanation of individual behaviour, was based in the unconscious. He argued that an individual’s identity was based upon largely unconscious past experiences, and that their behaviour was mainly dependent upon attempts to resolve the conﬂicts and motivations inherent in the unconscious (Freud 1975). Furthermore, he stated (1976, 1977) that most aspects of identity are laid down in early childhood, and that it is an attempt to integrate the various facets of childhood experience which leads a person to act in particular ways. Part of this conﬂict is based upon parental inﬂuence, which leads to the development within the child of the concept of the ideal self, as the perfect being one strives to become in order to win parental approval. This ideal self is, of course, unattainable but adult life and the actions undertaken by adults are based upon an unconscious motivation to achieve this ideal of selfhood and thereby secure respect. This motivation has been expressed by psychoanalysts as the drive towards individuation and explains the continual need for reassurance and the gaining of both self-respect and the respect of others.4 For managers this respect is based upon the assumption of personal responsibility for the actions of the organization. For example: Since I became Chairman on 23 April 1996, I have initiated a review of our corporate strategy. This is taking place against the following ﬁve aims: earning the trust of customers through quality, reliability and fair price of our services; being innovative in identifying customer needs and devising business solutions; making full use of the talents of our people; contributing to the protection of the environment;

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delivering value to shareholders through the eﬀectiveness of our operations and ﬁnancial structures. The vital services which the group provides to its domestic and commercial customers are all subject to major change. We will respond positively to these changes and, at the same time, deliver value to our shareholders, who are the ultimate providers of the capital needed to ﬁnance and support our development (Yorkshire Water plc Annual Report and Accounts 1996)

The drive for individuation is manifested in diﬀerent ways by diﬀerent individuals; and in diﬀerent ways, at diﬀerent times by the same individual. This has been interpreted by Bettelheim (1976) as part of the search for meaning to life, through the reintegration of the conscious and the unconscious (Bettelheim 1984). Fromm (1974) described it as a battle between the opposing instincts of life and death or between the idealist and materialist strivings of the individual (Fromm 1980). For some people this can be reﬂected in a drive towards conformity, as a means of escaping from the isolation of the self (Fromm 1957). In extreme circumstances this can result in a person resorting to madness by attempting to hold what Laing (1961) describes as an untenable position. It can also result in paranoid behaviour, through the dominance of feelings of guilt (Klein 1932) or in psychosis (Lawrence 1995). All these arguments naturally have consequences for an individual, which aﬀect his/her behaviour. When these individuals are managers of an organization these psychoanalytic arguments also have implications for the organization as well, and Sievers (1994) has described this as leading to organizationally psychotic behaviour. These interpretations of individual behaviour naturally apply to all people. As far as individual managers are concerned, however, the implication of these Freudian arguments is that managers are motivated by unconscious conﬂicts and desires, which they seek to reconcile through acting out these conﬂicts as part of their desire for individuation. They can act out this desire in a way that diﬀers from other people through their role within the organization.5 Furthermore, these arguments imply that all individuals are anxious and insecure, and seek to reduce anxiety and increase security through their actions. Thus, the drive to reduce anxiety is manifest in the desire to seek conﬁrmation of worth from others in order to increase self-esteem. Managers of large organizations are in a particularly powerful position to achieve this end through their actions, as they are in a position to inﬂuence a large number of people. Managers can directly inﬂuence employees of the organization, and at the same time, they can also gain self-esteem from the respect of peers as well as subordinates. Thus, the respect of other managers in comparable positions in other organizations is particularly desirable as a means of reinforcing self-esteem. An inevitable consequence of the insecurities surrounding the sense of one’s worth, is that others in comparable positions may be deemed to be worthier. Consequently, it can be argued that each manager deems other managers in other

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organizations to be worthier of respect than they are. Thus, all managers are therefore seeking to compare themselves favourably with other managers in other organizations, who will always be deemed worthier. One way to gain respect is to surround oneself with the material trappings of success. As far as the manager is concerned this can be interpreted in terms of things such as salaries and bonuses, share options, cars, chauﬀeurs and company planes. Another way to achieve this favourable comparison, however, is to earn the respect of the owners of the business, in other words, the shareholders — or more speciﬁcally, the respect of the major shareholders — City analysts and investors. The annual report provides a mechanism for earning the respect of others through the creation of the appropriate semiotic. This semiotic is of course one of success — but, more particularly, of success at an extremely diﬃcult task. A dichotomy in managing performance on two incompatible dimensions, enhances the perceived diﬃculty of the job of managing the organization, and hence, provides a reason for the creation of the dialectic of corporate performance.

The Lacanian view - the ressertion of the individual Since the development of psychoanalysis by Freud, critiques of this theory have been prevalent in the discourse of social theory. The intertwining of Marxist and Freudian theory as a means of understanding organizational behaviour and the distribution of power within society is a recurrent theme. Marcuse (1956) argues that, rather than the foundations of civilisation being built upon the subjugation of human instincts in the assuagement of guilt, it is instead built upon the way in which power is distributed and the consequent suppression of labour. Similarly, Habermas (1971) argues that Freudian psychoanalysis is based upon the voluntary self-deception of individuals as part of their anxiety reducing mechanisms; moreover he argues that corporate organizations are also involved in this deception. Baudrillard (1993, 1999) is equally critical of psychoanalysis. Possibly the most signiﬁcant critique of psychoanalysis has been undertaken by Lacan who developed an alternative interpretation of Freudian theory, which has permeated popular culture, while at the same time providing a basis for an understanding of the role of managers as individuals in the development of the semiology of corporate reporting. Lacanian interpretations incorporate both structuralist and post-structuralist arguments to extend the value of Freudian theory. Its limitations from this perspective can be encapsulated in the work of Harris (1979) who stated that the Freudian attempts to understand pan-human psychodynamic processes were suﬃcient to understand and explain the similarities but not the diﬀerences in such processes.

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Lacan argues that the formation of the ego is concerned with a fascination with one’s own image. For him, the external world merely represents a mirror upon which the self is displayed, and the concern of the individual is to create a reﬂection in this mirror. This reﬂection must, of course, support that person’s desire to see the most ﬂattering reﬂection but in such a way that it appears as reality. This is brought about by every person’s inherent insecurity and seeking for the ideal self (Lacan 1977; 1988; 1991), and thus every action a person undertakes is derived from this motivation. It is accepted, however, that this motivation may not be overt, and may not even be recognised by the individual. Like Freud therefore, Lacan accepts that an individual’s motivation may not be transparent even to him/herself but nevertheless that motivation becomes inseparable from the actions undertaken, and those actions have a motivation, which is based upon seeking personal individuation. Such motivation applies to every individual but some, almost inevitably, have more scope for playing out their individuation drive upon the mirror of the world. In this respect, the managers of any organization have a large mirror to act upon, this mirror being the organization, which they can shape, either consciously or unconsciously, to their needs. The argument returns us to the statement made earlier that it is impossible to separate the individual from the semiotic created by that individual, thus partially negating the Derridan argument concerning the irrelevance of the author in the interpretation of the semiotic. Consequently, one reinstates the author in the semiotic, and thus, the author of the corporate reporting script is attempting, through the creation of that script, to represent him/herself to the external world and to make that representation reﬂect him/herself as (s)he would wish to appear. For example: If we are to become truly customer focused we will have to reduce our costs so that we can minimise price increases while maintaining a value added services. The service our customers receive must not only be the best but also be seen to be the best. We aim to make Anglian Water a benchmark company against which others will be judged. The rationale of the strategic systems review is therefore to focus ourselves on out customers, streamline decision making by reducing bureaucracy, and reduce costs by removing duplication and unnecessary activities in order to encourage an approach that is ﬂexible and responsive to changing demands…. The process will involve a substantial change in company culture as well as in its structure…. There have to be job losses over the next two to three years but we will endeavour to achieve this on a voluntary basis (Anglian Water Annual Report 1994).

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The wish is to appear as a highly competent and capable person, and the more diﬃcult the activity in which (s)he is perceived to be engaged, the closer that image relates to the ideal self. Thus, the creation of the dialectic in the management of corporate aﬀairs, between managing ﬁnancial performance and managing environmental performance, leads to an enhanced image of the author as a competent and capable person. If the readers of the script accept this image then, because the author determines and perceives his/her identity from viewing it upon the mirror of the world, the author can also accept this image. Thus, the creation of an appropriate semiotic is essential to the individuation process and to the creation of the desired self-image. This therefore provides an explanation of the desire to create such dialectics in corporate reporting and a motivation for the creation of the semiotic in the manner suggested in this analysis.

The archetypes of the Jungian perspectives Further understanding of the psychoanalytic motivation of managerial behaviour in the context of the creation of the dialectic inherent to corporate reporting can be derived from a consideration of the Jungian interpretation of behaviour. Although initially based upon the work of Freud, Jung deviated from his interpretation signiﬁcantly, by focusing on individual behaviour, through an understanding of societal behaviour, and through the development of his concept of the collective unconscious (Jung 1972). This determines the way in which all people act and, according to Jung, provides a way of acting that is inherited by all individuals and is thus universal in nature. This way of behaving has existed from time immemorial and can be seen equally in the myths of primitive society (Cambell 1949; 1972; 1993) and in the behaviour of individuals in present society. An essential part of the motivation provided by the collective unconscious is concerned with the drive to belong to a society or group within that society. One ﬁnds this manifest in such features of society as tribalism, the concept of the nation state, and the existence of a multitude of diverse groups, such as local football supporters clubs, the Mothers Union, or the Sealed Knot. It also explains the need for identiﬁcation with, and belonging to the organization by which one is employed, and this applies to all employees but, in particular, to the managers of an organization, who are not only employees but also, to a large extent, lead and control that organization. Thus, these managers are not just members, but rather leaders of the tribe, and hence, have a more powerful role to play in forging the successful identity of the tribe. For example: Our circumstances have demanded a changed approach and the ﬁrst pages of this annual report outline the actions we have taken. The ﬁrst signs are encouraging….

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I am grateful for the time, support and involvement they (the non-executive directors) have committed and I share their unequivocal backing for the management team and the new way forward (United Biscuits Annual Report 1995).

Belonging (to whatever group or groups one chooses to identify with) is an essential part of the constitution of an individual’s sense of identity and is vital in an individual’s search for meaning in life. This sense of belonging through identiﬁcation is naturally enhanced if one can have a signiﬁcant, and, preferably, an essential, role in the group to which one belongs. This essential role exists for the managers of an organization as far as their need for being needed is concerned. Moreover such managers are in a position, through their ability to shape that organization and its perception, to enhance their perception of need. One way to achieve this is through the creation of the semiotic of corporate reporting. This search for belonging and being needed is a part of every person’s search for meaning in life. A need for meaning and belonging is manifest in the mythopoeic imagination (Jung 1953, 1954), and one manifestation of this need leads to the creation of myth (May 1991), and the constitution of self as hero (or saviour) within the group to which one belongs (Jung 1953, Campbell 1949). Again, the managers of an organization are in a unique position to shape myth to satisfy their need in this respect. In its extreme manifestation within a group situation, this need for myth creation and the constitution of oneself as hero, leads to a situation of groupthink (Janis 1972), and the notion of invulnerability. At a lesser level of intensity, it can lead the managers of an organization both to portray themselves to the outside world as essential to the well being of the organization and to believe this portrayal themselves. For example: The beneﬁts of the improvements we have delivered and planned for the future are now becoming apparent (South West Water plc Annual Report and Accounts 1994)

The managers of an organization are not unique in having these unconscious motivations driving their behaviour (Bettelheim 1976). They are present in all of us, and consequently, form one of the underlying themes of both individual existence and organizational behaviour (Mitroﬀ 1983). The managers of an organization are, however, unique in that their position within the organization gives them the power to act out these motivations through the creation of the myth of their necessity. The creation of the corporate reporting script, for which they are also the authors, provides one mechanism for the creation and reinforcement of this myth of their necessity as individuals to the future of that organization. This then is the real and underlying myth of corporate existence, one that explains corporate reporting procedures and practices, as well as the corporate technologies of control and performance measurement. It can be explored through a consideration

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of the semiotic of corporate reporting, in terms of the contrast of its mythical and ritual role of such reporting.

Myth and ritual in corporate reporting The myth creation role of corporate reporting has been referred in the preceding analysis and has several aspects. However, one of the aspects is the creation of the myth of the uniﬁed whole. As Nietzsche (1956: 156) states: “Only a horizon ringed about by myth can unify a culture.” One of the purposes of the corporate report, therefore, is the creation of the myth of the uniﬁed culture of the actors on the semiotic stage — in other words, the common cultural bond of identity between the authors of the script and the audience (Crowther, Cooper and Carter 2001). Such unity is achieved by the creation of a symbolic order that is an autonomous order of reality independent of the things symbolised (Jenkins 1979). The myth itself is a symbolic form (Brandist 1997), which assumes a life of its own. As Cassirer (1955: 5–6) states, the speciﬁcity of myth lies not in its content but rather in “the intensity with which it is experienced, with which it is believed — as only something endowed with objective reality can be believed.” Thus, myth has the power to present a single viewpoint as directly expressive of the existence of the organization, which consequently exists in the form presented in the annual report. The corporate report as myth therefore provides an authoritative discourse about the organization, as Bakhtin (1981: 342) states: The authoritative word demands that we acknowledge it, that we make it our own; it binds us, quite independent of any power it might have to persuade us internally; we encounter it with its authority already fused into it. The authoritative word is located in the distanced zone, organically connected with a past that is felt to be hierarchically higher.

The corporate report replaces the organization itself as the real through the power assumed in the myth creation role, and the organization becomes, in the minds of both the readers and the authors (through the reﬂective quality of the readership), which is presented through the corporate reporting mechanism. The concept of the corporate report can therefore be considered to have attained a life of its own through the resurrection of the myth of its origin and authenticity. It can therefore be considered to have attained hyperreality by becoming more real than reality (Baudrillard 1981). In addition to the myth creation role of corporate reporting for the individual organization, Campbell (1949) argues that all myths have an underlying commonality, which transcends the individual myth. Thus, as far as corporate

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reporting is concerned, the common elements can be seen in the common format of such reporting, the common style and the use of common language — natural, accounting and non-linguistic — to provide a uniﬁed myth concerning corporate reporting as the authoritative discourse of organizational existence and activity.6 Thus, the history of organizations unfolds through this corporate reporting (Campbell 1976) but unfolds in a manner common to all organizations, and therefore, can be depicted as universal and immutable. This unfolding of history can be seen from the development of corporate reports over time (McKinstry 1996), but the mythical role of such reports ensures that, although the image of the organization changes with the development of these corporate reports (Preston, Wright and Young 1996), the image of the organization remains immutably ﬁxed in the present. The creation of the myth of organizational existence is an essential step along the road to the creation of the religion that binds the organization together (Malinowski 1962), and this religion becomes manifested in the rituals of organizational behaviour, which can be explored as the other pole of this binary. The creation of this religion is important to managers because its acceptance also implies an acceptance of the managers of the organization as the priesthood. Thus, it provides a mechanism whereby the organization managers become such priesthood, the ultimate in individuation, as the meaning of life becomes selfevident through the reﬂection of the godhead upon the priesthood in the mirror of existence. One further purpose of myth creation in this context is the reinforcement of organization boundaries and hence the restatement of organizational existence. Corporate reporting is essentially designed for external consumption and the accounting of organizations, together with all the other information systems, is subverted within the text to this end. Corporate reporting for external consumption can be considered as a myth creation mechanism for the redeﬁnition and reinforcement of organizational boundaries, which are, in reality, obsolete for performance determining purposes. External reporting serves the function of providing a statement to the external world that the organization exists as a discrete entity, and the production of the annual report actually is designed to fulﬁl this role. Moreover, the design of the report is carefully considered to make a statement, not just that the organization exists but also, to create an image of that organization. Thus, over time, corporate reports have become more and more full of information, statements from the chairman and others, with pictures of organizational activities. These corporate reports have therefore become more of a symbolic representation of the organization designed to give to the (by implication) “discerning” reader the impression that this is an organization to be interested in, with a dynamic present and an even more interesting future. The legal

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purpose of reporting past performance is relegated in importance, as the focus is upon the prospects for the future. These prospects are always suggested to be an improvement upon the present, and this provides a means of signalling the importance of the organization, and of its existence. Language creates reality, despite the assertions of Norris (1990), which then becomes truth. Thus, as Barthes (1988) claims, meaning resides not in the linguistic structure of a message but in the image created by the recipient of the message. Accounting, by its nature, creates an image of the organization, its decisionmaking, and the future of that organization, achieved despite the use of the language of accounting and the perceived certainty attached to that language. One of the purposes of such external reporting is to continually recreate the myth of organizational existence as a source of certainty in an uncertain world. This certainty is, of course, a myth, and thus, one important function of accounting therefore to act as a myth creation mechanism for the organization, creating a statement of organizational existence as immutable. One of the purposes of myth making is to remove temporality from the perception of the onlooker (Levi Strauss 1966) who, in this case, is an external consumer of the information supplied by the organization. Removing temporality has the eﬀect of conﬂating the past and present into the present and to make this present contiguous with the future. In doing so, the uncertainty of images made through accounting, from one period to the next is disguised within the omnipresent organizational myth based upon the eternal present. Rationality and predictability, by using accounting information within the meta-narrative myth of organizational immutability, therefore seems reasonable in the discourse of organizational reporting. Removal of temporality has the concomitant eﬀect of focusing upon spatiality. As far as spatiality is concerned, the organization seeks to create the myth of itself as omnipresent, through the attention given to both the local, and the global, aspects of organizational existence, achieved through the use of appropriate text and image. For example, Severn Trent plc is, by deﬁnition, territorially bounded to the central part of the UK, but signals its global presence through text such as: In addition Severn Trent water international is working with the appropriate authorities to deliver water and waste services in Swaziland, Puerto Rico, Mauritius and India (Severn Trent 1994/5)

Similarly United Biscuits conﬂates its operations throughout the world in stating: In 1995 we became the ﬁrst UK multinational to convene a Europe — wide employee consultative council. We broke new ground in Eastern China, where we started construction of a new factory and extended distribution and sales. We invested in major factory upgrades in Poland and Australia (United Biscuits 1995).

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Thus, the myth of organizational existence is created by this means and this existence is continually recreated as atemporal and omnipresent, but also extremely local. In this manner synchronicity and diachronicity are conﬂated and subsumed within the myth. Likewise, the past is removed in favour of the eternal present and better future, as the organization signals its existence and importance through this mythical role of corporate reporting. The myth of organization importance is naturally of concern to the authors of the text. If the organization is important then, by implication, those managing the organization must also be important. The form of corporate reports is designed, almost inevitably, to create an image of the importance and permanence of the organization and hence of those managing that organization. This therefore explains the increased dominance, not of accounting information but of messages from members of the dominant coalition managing the organization, and particularly the chairman, managing director, and increasingly, other powerful members of the management team. The message is designed to indicate the need for the organization to exist as a discrete entity, deﬁned through the reinforcement of the organizational boundary, and reinforced through the production of appropriately constructed corporate reports. At the same time, such reports demonstrate just how necessary those members of the dominant coalition are to maintenance of the organization and to its future. The language of the statements from these people tends, therefore, to be used as a device for corrupting thought (Orwell 1970), being used as an instrument to prevent the various alternative realities of the organization’s existence, in terms of the multiple representations of the organization apparent through the use of the technology of accounting. These realities imply that, in a postmodern environment, if the organizational boundary is irrelevant, or even deleterious, to organization performance, then so too are the managing team of that organization. Therefore, reporting to the external environment must be made to appear the most important function of accounting information, with other purposes made subservient in order to demonstrate the need for the dominant coalition of senior managers. Thus, the myth of the organization is extended to the authors of the script, and their essential contribution to the success of the organization (as indicated by the expensive product of that success, the corporate report), is made into reality (Barthes 1973). Accounting information therefore becomes a defensive instrument, not for the organization but for the senior management, and a means to retain power using accounting to symbolise the necessity of their continued existence, with the whole control and use of accounting information and systems directed towards this end. The myth creation aspect becomes particularly powerful when the organization is in a position of diﬃculty.7 The following are extracted from the annual reports of United Biscuits:

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As we face the challenges of the 1990s, we will continue to operate with strategic and ﬁnancial discipline and a determination to maximise shareholder value. We will ensure that we have the skills, creativity, ﬂexibility and management strength to achieve and sustain excellent performance (1992: — when turnover was up 5% but operating proﬁt down 14%) The UB of today has a well focused strategy, a number of market — leading positions, exceptional brands and an outstanding management team across all parts of the business. With these strengths, despite the probable continuation of challenging trading conditions, I am conﬁdent of future success (1993: — when turnover was up 10% and operating proﬁt up 5%) I would like to take this opportunity to reiterate my belief in the prospects for UB. The business is strong, with an impressive brand portfolio and with a balance of leading positions in developed markets and an expanding presence in emerging markets. In addition, we have a talented and highly committed team and a clear strategy which has been consistently applied. I am conﬁdent that this combination will deliver good returns to shareholders in the years ahead (1994–when turnover was static but operating proﬁt down 3%) The targets we have set for improvement are challenging — as they must be for us to resume proﬁt growth and cash generation as soon as possible. Throughout the group there is a mood of realism and absolute determination. We appreciate the patience that shareholders have shown and, in answer to the questions I asked at the beginning of this statement (can United Biscuits turn the tide and deliver the value that shareholders require?), shareholders can expect to see improvement in UB’s performance in 1996 and beyond (1995: — when turnover was static but operating proﬁt down 27%)

It is possible to see from this company that the promises of a better future can continue to be made year by year without regard to the fact that the same promise, made in the previous year, has not been met, and the improvements forecasted have not materialised. In binary opposition to myth, as far as corporate reporting is concerned, is ritual. For an individual, ritual is an essential part of personality integration — a process of becoming whole (Perls 1975). Rituals, therefore, are steps along the way to completion of the whole (Beit-Hallahmi and Argyle 1997). Similarly, for organizations rituals are steps to be completed along the way to wholeness. In the case of the organization the integration needed is not that of parts of the organization but the creation of a uniﬁed whole formed from the various people involved in the organization, based upon the rituals of organizational religion. Such a religion, of necessity, becomes institutionalised into the organization and its culture and forms part of the way in which the organization conducts itself, both internally, and in relation to its external environment.

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It is naturally not in the interests of the managers, who seek to constitute themselves as the priesthood of the organization, to allow ritual organizational actions to lead to demands for changes. Therefore it is imperative that the ritual role of corporate activity becomes subsumed within the myth creation role, and this can be achieved through the institutionalisation of such ritual activity within the organizational religion. One of the purposes of such ritual behaviour is to remove spatiality from the discourse of organizational activity and to focus attention upon the temporal dimension. Organizational existence is legitimated in this manner as a temporal sequence proceeding from one rite of organizational existence to the next, in a smooth ﬂow of routine ritual activity. The use of accounting information in such a ritual way serves the purpose of organizational religion and is essentially inward looking, designed for internal consumption. The rituals, for maximal eﬀectiveness also need to encompass external stakeholders. The reporting ritual serves to both include external stakeholders within the rituals of organizational religion as an audience for the script, as worshippers of the organizational deity and its priesthood, and simultaneously serves to distance this priesthood from its acolytes, both internal — the employees — as well as external. In corporate reports the authors both signal that the organization is moving forwards to better times but also signal themselves as the priesthood and the audience as acolytes. This is achieved through the language of the report clearly sending the message that the authors of the report are the decision makers for the organization. At the same time, it signals that their knowledge enables them to make the best decisions on behalf of the other stakeholders, who merely worship from afar and accept the received wisdom of the priesthood. Thus, for example, the following statements are made: I am pleased to report another successful year for the Group, with our water and sewerage business making excellent progress and our other subsidiaries operating well (South West Water plc Annual Report and Accounts 1994)

and This has been a diﬃcult year in many of our markets, but a year in which we have made considerable progress in repositioning the group. As we anticipated, the over-supply of fresh produce, which was a key inﬂuence on our performance last year, persisted throughout the ﬁnancial year. Recession and increasing competition in our major markets also made trading diﬃcult for our European food processing businesses. Whilst our results reﬂect these problems, there has been a strong underlying improvement in the position of the group, based on our programme of strengthening management, reducing costs, acquiring complementary businesses and disposing of operations which do not fall within the areas covered by our long

Psychoanalysis and auditing 243

term strategic goals (The Albert Fisher Group plc, Annual Report and Financial Statements 1993)

The role of the audience is merely that of worship from afar, through approval of the actions taken by the priesthood, and to anticipate salvation in the future. The shareholder community, however, have one additional rite to perform, which is to approve the actions of the priesthood and reaﬃrm their worship. For this additional rite they are rewarded by the priesthood, acting on behalf of the deity, in a manner determined by that priesthood — that is by the receipt of their annual dividend.

Conclusion It has been argued on the basis of a consideration of psychoanalytic theory that the managers of an organization have the motivation (which may well be unconscious) to create a dialectic of corporate performance inherent within the semiotics represented through corporate reporting. In Freudian terms, this is based upon their insecurity and their need to continually seek reaﬃrmation of their value, in their constant drive towards individuation. In Lacanian terms this is manifest in their need to see their own worth as individuals through their representation in the mirror of organizational existence. It has been further argued, from a Jungian perspective (Mitroﬀ 1983), that organizational coalitions, together with individual behaviour patterns, produce a tendency towards institutionalised behaviour, and this is evident in the organization rituals outlined. These organizational routines and rituals provide a validation of the present through its connection to the past and sanctify that past. Thus, the institutional and Jungian perspectives coincide in their interpretation of an individual’s drive to interpret and legitimate the present through reference to the past. In both perspectives the symbolic functions associated with the actions provide a validating purpose for those involved and, in this context, accounting routines fulﬁl a quasi-religious purpose within organizations for its members, either as authors or readers of the text of corporate performance. A psychoanalytic perspective upon corporate reporting, particularly within the context of the motivations of the authors of the script, is of considerable value in developing an understanding of such reporting. It provides a motivational account for that managerial behaviour manifested in the authorship of corporate reporting scripts. Moreover, it provides an explanation for the representational centrality of relatively mundane activity in organization reporting. One of the outcomes of the motivation and behaviour behind such reporting is the establishment of something akin to an organizational religion, in which the managers of the organization are depicted and instituted as the priesthood. Hence, we have the relegation of all other

244 David Crowther

stakeholders to lesser importance, in order to promote, the importance of the managers of the organization.

Notes 1. It is acknowledged that the role of auditing in and its relationship with accountability, of both organizations and the managers of those organizations, has been extensively critiqued in academic circles (see for example Law 1996; Power 1997; Crowther 2000) but the argument here is concerned with the way in which stakeholders are using auditing as a vehicle for asserting their need for organizational accountability. 2. It is recognised that some would dispute the label of theory being associated with psychoanalysis, on the basis that the insights it provides are not testable. Nevertheless, theoretical validity is ascribed to the propositions derived from these discourses in this paper because of the explanatory power that psychoanalysis is demonstrated to oﬀer, as the chapter develops. 3. Psychoanalytic theory was created initially by Freud but has been widely adapted by others. In a general sense such theory can be considered to be a theory of human emotional behaviour. 4. Self-respect is, of course, merely a mirror of the respect of others — see Lacan (1988). 5. This is because they have, through their positions within organizations, power to aﬀect the behaviour of others, which is not available to the average person. This power is what makes possible the psychotic behaviour described by Sievers (1994). 6. It is recognised, of course, that legislation and GAAP requires a considerable element of this commonality but it is argued that this is subsumed within the image creation requirements of corporate reporting. 7. It has been argued, however, that the advent of the new technology and associated transparency surrounding the www will place a limit on this ability to create the desired myth (see Crowther 2002a, 2002b).

References Bakhtin, M. M (1981). The dialogic imagination. Trans. M. Holquist and C. Emerson. Austin: University of Texas Press. Barthes, R. (1973). Mythologies. Trans. A. Lavers. London: HarperCollins. Barthes, R. (1988). The semiotic challenge. Oxford: Basil Blackwell. Baudrillard, J. (1981). For a critique of the political economy of signs. St Louis: Telos. Baudrillard, J. (1993). Symbolic exchange and death. Trans. I. H. Grant. London: Sage. Baudrillard, J. (1999). Fatals strategies. Trans. P. Beitchman and W. G. J. Niesluchowski. London: Pluto Press. Beit-Hallahmi, B. and Argyle, M. (1997). The psychology of religious behaviour, belief and experience. London: Routledge. Bettelheim, B. (1976). The uses of enchantment. London: Penguin. Bettelheim, B. (1984). Freud and man’s soul. New York: Vintage.

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Bourdieu , P. (1984). Distinction: A social critique of the judgement of taste. Trans R. Nice. London: Routledge and Kegan Paul. Brandist, C. (1997). Bakhtin, cassirer and symbolic forms. Radical Philosophy, 85, 20–27. Briers, M. and Hirst, M. (1990). The role of budgetary information in performance evaluation. Accounting, Organizations & Society, 15 (4): 373–398. Campbell, J. (1949). The hero with a thousand faces. Princeton, N J: Princeton University Press. Campbell, J. (1972). Myths to live by. London: Souvenir Press. Campbell, J. (1976). Creative mythology Vol 4: The masks of god. London: Penguin. Campbell, J. (1993). The Mythic dimension: Selected Essays 1959–198. New York: HarperCollins. Cassirer, E. (1946). Language and myth. Trans. S. K. Langer. New York: Dover Publications. Cassirer, E. (1955). The philosophy of symbolic forms Vol 2: Myth. Trans. R. Manheim. New Haven, Connecticut: Yale University Press. Child, J. (1974). Managerial and organizational factors associated with company performance — Part 1. Journal of Management Studies, 11, 73–189. Child, J. (1975). Managerial and organizational factors associated with company performance — Part 2. Journal of Management Studies, 12, 12–27. Cooper, S, Crowther, D, Davies, M. and Davis, E. (2001). Shareholder or stakeholder value? London: CIMA. Crowther, D. (2000). Corporate reporting, stakeholders and the Internet: mapping the new corporate landscape. Urban Studies, 37 (10): 1837–1848. Crowther, D. (2002a). A social critique of corporate reporting. Aldershot: Ashgate (forthcoming). Crowther, D. (2002b). The psychoanalysis of on-line auditing. Journal of Managerial Psychology (forthcoming). Crowther, D., Cooper, S. and Carter, C. (2001). Regulation — The movie: a semiotic study of the periodic review of UK regulated industry. Journal of Organizational Change Management, 14 (3): 225–238. Emmanuel, C. R., Otley, D. T. and Merchant, K. (1985). Accounting for management control. London: Chapman & Hall. Fitzgerald, L., Johnston, R, Brignall, S., Silvestro, R. & Voss, C. (1991). Performance measurement in service businesses. London: CIMA. Freud, S. (1975). The psychopathology of everday life. Trans. A. Tyson. Harmondsworth: Pelican. Freud, S. (1976). Jokes and their relation to the unconscious. Trans A. Richards. Harmondsworth: Pelican. Freud, S. (1977). On sexuality. Trans A Richards. Harmondsworth: Pelican. Freud, S. (1984). On metapsychology. Trans. A. Richards. Harmondsworth: Penguin. Fromm, E. (1957). The art of loving. London: Unwin. Fromm, E. (1974). The anatomy of human destructiveness. London: Penguin Fromm, E. (1980). Beyond the chains of illusion. London: Abacus. Gadamer, H.G. (1975). Truth and method. Trans. G. Bardent and J. Cumming. London: Sheed & Ward. Habermas, J. (1971). Knowledge and human interests. Trans J.J. Shapiro. Boston, Mass: Beacon Press. Harris, M. (1979). Cultural materialism. New York: Random House. Janis, I. L. (1972). Victims of groupthink. Boston: Houghton Miﬃn. Jenkins, A. (1979). The social theory of Claude Levi-Strauss. London: Macmillan. Jung, C. G. (1953). Psychology and alchemy. Trans. R. F. C. Hull. London: Routledge. Jung, C. G. (1954). The development of personality. Trans. R. F. C. Hull. London: Routledge. Jung, C. G. (1972). Four archetypes. Trans. C. F. Baynes. London: Routledge.

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Klein, M. (1932). The psychoanalysis of children. London: Hogarth. Lacan, J. (1977). Écrits: A selection. Trans A. Sheridan. London: Tavistock. Lacan, J. (1988). The seminars of Jacques Lacan book II: The ego in Freud’s theory and in the technique of psychoanalysis 1954–1955. Trans. S. Tomaselli. New York: Cambridge University Press. Lacan, J. (1991). The seminars of Jacques Lacan book I: Freud’s papers in the technique of psychoanalysis 1953–1954. Trans. J. Forrester. New York: W W Norton & Co. Laing, R. D. (1961). Self and others. London: Tavistock. Lakoﬀ, R. (1975). Language and woman’s place. Cambridge: Harper & Row. Law, J. (1996). Organizing accountabilities: ontology and the modes of accounting. In R. Munro and J. Mouritsen (Eds.). Accountability: power, ethos and the technologies of meaning. London: International Thomson, 283–306. Lawrence, W. G. (1995). The seductiveness of totalitarian states of mind. Journal of Health Care Chaplaincy; October, 11–22. Levi Strauss, C. (1966). The savage mind. London: Weidenfeld & Nicolson. Malinowski, B. (1962). Myth as a dramatic development of dogma. In I. Strenski (Ed.) (1992). Malinowski and the work of myth. Princeton, N J: Princeton University Press. Marcuse, H. (1956). Eros and civilisation. London: Routledge & Kegan Paul. Maslow, A. H. (1954). Motivation and personality. New York: Harper & Row. May, R. (1991). The cry for myth. New York: W W Norton & Co. McKinstry, S. (1996). Designing the annual reports of Burton plc from 1930 to 1994. Accounting, Organizations and Society, 21 (1): 89–111. Miller, D. F. (1992). The reason of metaphor. London: Sage. Mitroﬀ, I. I. (1983). Stakeholders of the organizational mind. San Francisco: Jossey-Bass. Nietzsche, F. (1956). The birth of tragedy. New York: Doubleday. Norris, C. (1990). Lost in the funhouse: Baudrillard and the politics of postmodernism. In R. Boyne and A. Rattansi (Eds.). Postmodernism and society. Basingstoke: Macmillan, 19–153. Orwell, G. (1970). Collected essays, journalism and letters Vol 4. Harmondsworth: Penguin. Perls, F. S. (1975). Theory and technique of personality integration. In J. O. Stevens (Ed.). Gestalt is. Moab, Utah: Real People Press. Power, M. (1997). The audit society: rituals of veriﬁcation. London: OUP. Preston, A. M., Wright, C. and Young, J. J. (1996). Imag[in]ing annual reports. Accounting, Organizations and Society, 21 (1): 113–137. Rappaport, A. (1986). Creating shareholder value. New York: The Free Press. Rappaport, A. (1992). CFO’s and strategists: Forging a common framework. Harvard Business Review, May/Jun, 84–91. Sievers, B. (1994). Work death and life itself. Essays on management and organization. Berlin: de Gruyter. Veblen, T. (1899). The theory of the leisure classes. New York: New American Library.

Chapter 12

A paradox of governance Convergent policy and divergent practice in corporate governance in Asia Thomas Clarke

Introduction The present global concern regarding standards of corporate governance represents a contest between two systems, which have been characterized as outsider systems and insider systems of governance (OECD 1999). The outsider system is a manifestation of Berle and Means (1932) image of the separation of ownership and control, with widely dispersed ownership, and the potential for agency conﬂict with strongly entrenched managers. In the US and UK the eﬀort to constrain the behaviour of managers by shareholders led to a narrow focus on ﬁnancial performance indicators, short term horizons, and a relative neglect of other stakeholders in the enterprise. In contrast, the insider system pre-dates Berle and Means and involves controlling shareholders, with companies in close relationships with banks rather than equity markets. In Europe and Asia this has traditionally encouraged a wider conception of the purpose of the company, with longer investment horizons and an orientation towards the interests of a broader group of stakeholders (Clarke 1998). The origins of the growing international interest in corporate governance was in the well-publicized failure of a number of US and UK companies, when the sharp recessions of the early 1980s and 1990s caused the collapse of indebted companies that had earlier received reassuring audit reports, but were poorly or fraudulently managed. That is, the weaknesses in corporate governance recognized at the time were largely an Anglo-Saxon phenomenon. As US and UK manufacturing industry seemed incapable of meeting the competitive challenge of Japanese and German industry, Michael Porter (1992) wrote a paper on America’s failing capital investment system for the US Council on Competitiveness, in which he contrasted the liquid, but volatile investment markets of the US, with the dedicated and stable investment markets of Germany and Japan. At the time it appeared there

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was a structural weakness in the US and UK economies, while neither of the apparently more robust economies of Japan and Germany had a developed equity market, and were based on diﬀerent and resilient cultural systems. However, the 1990s revealed weaknesses in the Germany economy, with rigidities in the labour market, and the continuing emphasis on engineering and chemicals, without adequate investment in the new economy. German companies searching for new sources of investment experienced diﬃculty listing on the New York Stock Exchange, despite being eager to begin to internationalise, albeit some time after their European or American counterparts. Finally, the expense of the integration with East Germany left the German economy, at least temporarily, in a much weaker state. Meanwhile, there occurred a more spectacular failure of the Japanese economy, with the bursting of the speculative bubble caused by years of surpluses in the balance of payments, and the accompanying sense of over-conﬁdence. The collapse of the Japanese banking sector, political paralysis, and a general disorientation in Japanese society, exposed profound weaknesses in Japanese corporate governance, with nominal boards, protective cross-holdings, lack of transparency and accountability, and resistance to foreign investors. The exposure of the weaknesses in the German and Japanese economies coincided with a renaissance in the US economy, with the longest bull market in history, the reassertion of a global technological ascendancy in information and communication technologies and an accompanying ﬁnancial ascendancy. This new miracle economy impressed the world, and even touched Britain, as the industrial basket case of the 1960s-1980s became the new economy of the 1990s, apparently based on high technology, media and dot.coms. The aggressive acquisition of Mannesman by Vodaphone seemed to typify the end of one industrial era and the beginning of another. The globalization of capital markets exerted a pressure upon companies worldwide to adopt international standards of corporate governance. Capital markets demand transparency and accountability, oﬀering, in return, companies’ access to greater amounts of cheaper investment capital. Since US and UK based international institutional investors dominate the provision of global capital, the pressure is to converge on Anglo-Saxon corporate governance standards. International agencies, including the OECD, World Bank, and Asian Development Bank, have compounded this trend with the publication of international codes of best governance practice. The Asian ﬁnancial crisis in 1997/98, and its reverberations throughout much of the developing world, appeared to illustrate the dangerous consequences of building economies upon weak governance foundations. In the last two years there has been the rapid adoption of OECD inspired corporate governance codes in the East Asian region and many other countries.

A paradox of governance 249

However, those arguing for the inevitability of convergence have underestimated the inﬂuences of enduring cultural, legal and institutional diﬀerences (Guillen 1999). The present ascendancy of one model of global governance is historically questionable, empirically contestable, and, to the extent that it presently exists, is unlikely to be permanent (La Porta, Lopez-de-Silanes, and Shleifer 1998). Whilst higher standards of accountability and transparency may be required in all governance systems, and OECD proposals concerning independent directors, independent chairs, audit committees and adequate ﬁnancial controls in the running of companies may prove helpful, what is contestable is the accompanying institutional emphasis upon the centrality of equity markets, and the overwhelming ideology of a single focus upon shareholder value. When combined with the profound instability and lack of any acceptable governance of global capital markets, the OECD recipe may result in more vulnerable, rather than more robust, governance systems.

Crisis and reform in corporate governance in Asia Collapsing currencies, equity and property markets in East Asia in 1997–98 exposed underlying vulnerabilities in corporate governance structures and values. Financial liberalization, and large current account deﬁcits ﬁnanced by short-term foreign loans, left these economies open to large international movements of capital. However, an international conﬁdence crisis was fuelled by a growing realisation of the structural weaknesses of economies often governed by crony capitalism, characterised by opaque accounting and auditing systems, and too close relations between business and the state. Unprecedented growth over three decades brought over-conﬁdence, with savings not always applied to productive investments, currency appreciations, mismanaged ﬁrms and misaligned strategies. “Speculative bubbles involve the mass delusion that asset prices will rise relentlessly” (Lingle 1997: 88). In many senses the Tiger economies are victims of their success, with burgeoning prosperity encouraging excessive borrowing and the wasteful use of resources, inadequate supervision of the ﬁnancial sector and lack of transparency in business. Complacency during the time of seemingly endless economic growth was replaced by inability to act decisively at a time of crisis. The recovery process will require attention to regulatory systems and compliance, together with reforms of corporate governance and disclosure standards. As Rohwer (1996: 18) presciently argued, “The biggest ﬂaw in the success stories of modern Asia — including Japan — has been their failure to develop the transparent and objective public institutions needed to run the more sophisticated societies and economies that their fabulous economic growth is producing.”

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The critical element in restructuring, reﬁnancing and acquisition of distressed companies is the reliability and accuracy of ﬁnancial statements. However, to assume what is necessary is directly an adoption of Anglo-Saxon inspired international governance and regulatory systems, underestimates the distinctive cultural foundations of governance systems. More critically, the original assumption of Alan Greenspan of the US Federal Reserve and others, that the Asian ﬁnancial crisis could be conﬁned, neglected the global integration of ﬁnancial markets accelerated by computer and communication technologies and de-regulation. As the contagion spread to other emerging economies, most spectacularly in the case of Russia and Brazil, it was not only the weaknesses in corporate governance systems that were exposed, but the overwhelming volatility and irresponsibility of the operation of international ﬁnancial markets (Soros, 1998; IMF 1998; Cohen 1997).

Miracle economies? “From 1965 to 1990 the twenty-three economies of East Asia grew faster than all other regions of the world. Most of this achievement is attributable to seemingly miraculous growth in just eight economies. ” (World Bank 1993: 1) The World Bank research report, The East Asian Miracle, deﬁned the High Performing Asian Economies (HPAEs) as led by Japan, and encompassing the four Tiger economies of Hong Kong, Republic of Korea, Singapore and Taiwan, joined later by the newly industrialising economies (NIEs) of Indonesia, Malaysia, and Thailand. What caused East Asia’s success? The World Bank (1993: 5) oﬀered the following explanation: In large measure the HPAEs achieved high growth by getting the basics right. Private domestic investment and rapidly growing human capital were the principal engines of growth. High levels of domestic ﬁnancial savings sustained the HPAE’s high investment levels. Agriculture, while declining in relative important, experienced rapid growth and productivity improvements. Population growth rates declined more rapidly in the HPAEs than in other parts of the developing world. And some of these economies also got a head start because they had a bettereducated labour force and a more eﬀective system of public administration. In this case there is little that is “miraculous” about the HPAEs’ superior record of growth; it is largely due to superior accumulation of physical and human capital.

Such sustained economic growth ranked with the “economic miracles’ of post-war Germany and the period of fastest growth (1960s) of the Japanese economy. The IMF in its annual reports endorsed this path to rapid economic expansion, and other commentators added their approval (Gereﬃ and Wyman 1992; Kim 1995; Overholt 1993). Of course, as the World Bank argued in its 1996 report, From Plan

A paradox of governance

to Market, high investment alone does not guarantee fast growth. It is the composition and quality of investment, as well as human capital and technological knowhow that is critical. A further diﬃculty that the World Bank and the IMF did have with these economies was the extent of policy intervention by the state (in fact the 1993 World Bank research on the East Asia economies was funded by the Government of Japan). Policy intervention took many forms (World Bank 1993: 6): i. Targeting and subsidising credit to selected industries; ii. Protecting domestic import substitutes; iii. Subsidising declining industries; iv. Establishing and ﬁnancially supporting government banks; v. Making public investments in applied research; vi. Establishing ﬁrm and industry speciﬁc export targets; vii. Developing export marketing institutions; viii. Sharing information widely between public and private sectors. In addressing the question of whether such selective interventions were good for growth, the World Bank oﬀered two possible explanations. A neo-classical view that stressed the importance of getting the macroeconomic basics right, grudgingly accepted that “interventions did not signiﬁcantly inhibit growth.” However, it suggested that, if in some instances in Northeast Asia (Japan, Korea, Taiwan, and China), government interventions resulted in higher and more equal growth, the prerequisites for success were clear performance criteria, and prudent control of costs. Second, a revisionist school argued that East Asian governments “led the market” in critical ways. In contrast to the neo-classical view, which acknowledged relatively few cases of market failure, revisionists contended that markets consistently fail to guide investment to industries that might generate the highest growth for the overall economy. In East Asia, it is argued governments remedied this by deliberately “getting the prices wrong” — altering the incentive structure — to boost industries that would not otherwise have thrived (Amsden 1989; World Bank 1993; 6–9). A question the World Bank did not address in their 1993 report was, whatever its causes, how sustainable was this rapid rate of growth in the East Asian economies? Alwyn Young (1994) and Paul Krugman (1994) dismissed East Asia’s economic growth as the inevitable result of a dramatic rise in the quantity of inputs in the economic system at an early stage of industrialisation. Gains from inputdriven growth cannot continue indeﬁnitely, unless there are accompanying increases in eﬃciency. East Asia’s economic success can be attributed to a great mobilisation of resources, combined with a self-sacriﬁcing level of personal savings. Lingle (1997: 79) contends:

251

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Dynamic, and thus sustainable economic growth relies upon gains in total productivity. Increased labour participation rates, employment expansion, as well as increased investments in education, health, and physical capital are blunt, oneshot methods for generating economic growth. The perpetuation of high growth rates demands that qualitative improvements must coincide with quantitative increases in outputs.

The World Bank (1996: 41) report supported this view, insisting that as savings and investment rates reach a high plateau, then productivity gains become increasingly important in years to come. With shrinking scope for achieving eﬃciency through further shifts in resources, achieving gains will depend increasingly on broadening enterprise and ﬁnancial sector reforms that boost eﬃciency at the ﬁrm and industry level. An apparent lack of innovativeness and creativity in the East Asian economies was damaging to the eﬀort to achieve qualitative economic improvements. East Asian economies have been following rather than leading the rest of the developed world, by replying upon ready access to Western technology and open markets. As the “age of mass industrialisation” passes, the competitive advantage of many East Asian economies will be challenged. Without producing their own domestic entrepreneurial talent and self-generated technological advance, these countries will continue to lag the developed economies in what could prove a perpetually dependent relationship (Lingle 1997: 85).

For example, Asian countries have specialised in the production of semi-conductors; South Korea is a world leader in the production of memory chips, with silicon wafer production concentrated in Taiwan and Singapore. Malaysia has had great success in developing assembly plants servicing major computer hardware corporations such as Motorola, Intel and Texas. But what is the future in this business? “Prices are plummeting as the glut hits the market, but there is no sign of a slackening of the pace” (Gough 1998: 107). For instance, Malaysia and Singapore are building a large number of new silicon wafer plants, while major companies in Taiwan (Formosa Plastic) are keen to enter the industry, building 12 silicon wafer factories, at an estimated average cost of US$1 billion each. These production strategies could not have helped, but deeper social and structural ﬂaws in the East Asian economies were soon to be revealed. As Lingle (1997: 83) suggests, “the more inclusive and transparent … political relationships necessitated by a modern economy … challenge … the ability of East Asian economies to remain on a high growth path.”

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The dimensions of the East Asian ﬁnancial crisis It is diﬃcult to over estimate the extent of the speculative euphoria, which seized the East Asian economies in the early 1990s. Philip Pillai (1998: 2), a Singaporean lawyer described this: The elements of a conventional bubble were everywhere to be seen wherein seemingly inexhaustible capital pursued seemingly inexhaustible projects, which were premised on a never ending growth curve and a fear amongst lenders of being left out of the Asian miracle. As in all bubbles, it burst in the wake of events which do not appear to justify the magnitude of the crash.

Manifold evidence of excessive speculative activity included greatly inﬂated stock, land, and housing prices, as well as the highest hotel room costs in the world. In turn, this provoked a massive building boom throughout East Asia in oﬃce and apartment blocks, luxury hotels, and shopping centres. The ﬁnancial crisis, when it came was brought on by an over-reliance on credit, both domestic and foreign borrowing. Phil Parton of the ANZ bank, Shanghai, suggests three inter-related immediate causes of the crisis: a build-up of short term external debt; concern over East Asia domestic banks, and mounting national current account deﬁcits. East Asian economies accumulated debt in the 1990s, to the extent that debt-to-GDP ratios had risen across the board. Much of the build-up of debt was by domestic banks, raising cash for domestic funding purposes. Businesses also borrowed directly from foreign banks, with managed exchange rates playing a crucial role in minimising borrowers’ perceptions of currency risk. The ﬁxed exchange rate bands supported markets characterised by high domestic interest rates and low US dollar short term interest rates, which induced domestic borrowers to seek US dollar funding, often on a short term basis for long term needs. Concurrently, foreign banks, particularly European and Japanese banks looking for increased market share were aggressive in Asian lending. Short-term debt soared in East Asia, for example Indonesia’s short-term debt increased from US$17.1 billion at the end of 1994, to US$34.2 billion by December 1996. The currency crisis had an immediate impact on domestic banks. In emerging economies, capital markets are often under-developed, and because of the lack of alternatives, banks become the most important channels for access to foreign capital. In Asian countries, therefore, bank credit, as a percentage of GDP, is higher than in Western economies. Unfortunately, at this point the international creditworthiness of Asian banks was called into question because of their exposure to highly geared corporate borrowers (South Korea and Indonesia) to the property sector (Thailand, Malaysia, Indonesia and the Philippines) and to out-of-money share investors (Malaysia). Asian banks were critically undermined by the collapse in asset prices, the property oversupply, and

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the distress in the business sector generally. As a result, Asian banks were downgraded by rating agencies, and, consequently, foreign banks reduced their exposure to Asian banks by refusing to roll over maturing loans and suspending unutilised lines of credit (Parton 1998: 2) Table 1.Dimensions of the East Asian crisis 1997–1998*

Indonesia Thailand Malaysia Philippines South Korea Singapore Hong Kong

Currencies

Stock Index

Market Fall

−83.2% –40.2% –39.4% −36.1% −34.1% −16.5% Nil

−35.0% −48.0% −56.0% −33.8% −58.7% −43.5% −43.2%

−$96bn (−88%) −$40bn (−66%) −$217bn (−76%) −$43bn (−58%) −$111bn (−71%) −91bn (−53%) −$223 (−42%)

*Fall in currency exchange rate for US$ between 30 June 1997 and 3 July 1998. Percentage decline in stock market index between 30 June 1997 and 3 July 1998. Fall in stock market capitalisation in US$ billions, between 30 June 1997 and 3 July 1998 Sources: Bank of International Settlements; IMF; World Bank; Asia Week 17 July 1998; Jones Lang Wootton; Dataquest.

However, the ﬁnancial systems of East Asia trembled from the moment the Thai government announced a “managed ﬂoat” of the baht, conﬁrming warnings indicated by the bankruptcy of Hanbo Steel Korea at the beginning of the year, and the collapse of Finance One, Thailand’s largest ﬁnance company in May 1997. Interventions by successive governments, and repeated attempts by the International Monetary Fund could not prevent a contagion of currency depreciation, accompanied by collapsing stock markets, tumbling asset prices, and increasing corporate failures and ﬁnancial insolvencies. A self-reinforcing process intensiﬁed as domestic credit dried up and foreign investors ﬂed, with a loss of total stock market capitalisation in dollar terms ranging from 42% (Hong Kong) to 88% (Indonesia) in the period 30 June 1997 to 3 July 1998 (Table 1). This was no ordinary ﬁnancial crisis because the scale of the disaster for the countries concerned was similar to the great Wall Street crash, in which there was an 86 per cent loss in market capitalisation between 1929 and 1933 (Soros 1998: 145)

The weaknesses of Asian modes of governance The question remains how could all this have happened in economies that were formerly celebrated for their robustness and eﬃciency? In a modern economy, companies are disciplined by a combination of internal and external controls.

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Internally, it is the company directors’ duty to ensure adequate ﬁnancial controls are exercised, and this is reinforced by independent audit of the annual accounts. Externally, there is a legal framework of corporate law, policed by regulatory authorities. Finally, there is the capital market, which exercises a commercial discipline upon companies. Though this institutional structure was broadly in place in the East Asian economies, the problem is that is did not work properly. Surveying the institutional structures of Korea, Malaysia and Thailand, Prowse (1998: 4) concludes: Market and regulatory institutions that play an important role in ensuring market disciplines are relatively undeveloped in the East Asian economies. In a less evolved regulatory, legal and institutional environment, information asymmetries are more severe, contracting costs are higher because standard practices have not developed enforcement of contracts is more severe, contracting costs are higher because standard practices have not developed enforcement of contracts is more problematic because of weak courts, market participants and regulators are less experienced, and the economy itself is likely to be undergoing more rapid change than in developed countries. In addition to having a weak judicial system, developing countries are unlikely to have administrative agencies that can handle issues that beneﬁt from detailed rule making and non-legal administrative enforcement such as accounting standards, ﬁnancial disclosures and stock market listing rules.

First, East Asian economies are typiﬁed by a considerable concentration of ownership, most public companies having either a majority shareholder, or small group of dominant shareholders, or the company is part of a corporate network, which in turn has majority shareholders. “The most frequent organizational form in East Asia is the diversiﬁed conglomerate, closely held, controlled and managed by a family” (Prowse 1997). Companies with widely dispersed ownership are quite rare. In this context, the rights of minority shareholders are diﬃcult to protect, and in spite of laws and penalties against insider trading that are often strict, and provisions on related party transaction, substantial transactions, and on takeovers, there are questions about how rigorously and frequently these are enforced. On the boards of companies there is often no clearly deﬁned role for non-executive directors, and lack of knowledge of the obligations and functions of company oﬃcers is widespread. Decision-making bodies are often not eﬀective in carrying out their formal roles, sometimes unable to exercise their rights, and boards are coopted by the dominant shareholders. Disclosure and transparency tend to be kept to a bare minimum, with the result that it is much more diﬃcult for the legal and regulatory authorities to take action when inclined to do so. Similarly, there is an under-development of institutional investors and fund managers, which diminishes the likelihood of informed monitoring by powerful external agencies.

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In the West, banks and other ﬁnancial institutions play an important role in ensuring that companies operate along sound governance principles, and there are incentives to follow prudent policies. In East Asia, government intervention in the banking sector to rescue depositors when banks have got into trouble has provided an incentive for relaxing risk controls. Such guarantees reduce risk associated with commercial operations and eliminate the incentive for prudent management. In this ﬁnancial environment the economy can become vulnerable to over-investment, with the resulting boom and bust cycles of the property and share markets. In East Asia, banks more typically dominate corporate ﬁnance. Malaysian banks, for example, in a country with one of the more developed corporate securities markets in the region provided in 1997, over 85% of the funds raised in the private sector compared to under 15% from the capital market. The tendency of East Asian governments to bail out many insolvent businesses diminishes the disciplining eﬀect of debt by reducing the fear of bankruptcy, and encourages ﬁrms to increase leverage. Corporate leverage increased signiﬁcantly in recent years, and Krugman (1998) argues that this is based on the incentives allowed by rising asset prices and a belief that the government is operating a “too-big-to-fail” policy, enabling ﬁrms to borrow as much as they can invest in ﬁxed assets. Running like a thread through many of the ﬂaws of the governance systems of East Asia is an inclination towards secrecy, obedience, and incestuousness, which is deeply damaging to the eﬀort to promote a dynamic open economy. The oﬃcial proponents of “Asian values” have often abused the values they claim to uphold. The deeply held commitment to hard work, sense of thriftiness, and concern for the family, belief in education, desire for consensus and respect for authority is the bedrock of the value system that has served Asia in the early decades of its industrialisation. However, dynastic rules and paternalistic industrialists have often translated these values into nepotism, cronyism and corruption. Such a system of patronage crowds out a spirit of initiative and independent entrepreneurship. As Lingle (1997: 19) argues, “Many Asian economies are uniquely distinguished by an institutional bias against individualism. Asian cultures that inculcate conformity at the expense of initiative restrain the enterprising spirit that underpins the innovative process necessary for sustained economic growth.” Signs of economic recovery in some of the East Asian economies, as the painful processes of restructuring and recapitalisation proceeds, cannot disguise the severe dislocation and substantial output cost of this crisis, with the sacriﬁce of several years of economic growth (Table 2). Throughout the slowdown, exports in key sectors have continued, but this should not deﬂect from the urgent programme of institutional reform, which is inescapable if sustained recovery is to be achieved. At this point the position of China is important. China’s determination to maintain economic stability during the East Asian ﬁnancial crisis, and refusal to

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Table 2.Economic growth in the East Asian economies 1997–2000

China Indonesia Thailand Malaysia Philippines Chinese Taipei Singapore Hong Kong, China

1997

1998

1999

2000

8.8 4.7 −0.4 7.8 5.1 6.8 7.5 5.2

7.6 −15.5 −7.0 −4.7 −0.5 4.5 0.0 −4.5

7.7 −3.0 2.0 −0.5 2.0 4.0 0.5 1.5

7.2 3.0 4.5 3.5 4.5 5.5 3.2 5.5

Source: OECD, Economic Outlook, December 1998

devalue, was a steadying force in the region for which the international agencies were deeply grateful. To prevent a damaging recession the Chinese government launched a public spending package of US$12 billion, with a similar amount provided by the state banks, investing in infrastructural projects and postponing the privatisation of small state enterprises. However, this may add to problems of over-capacity, excess inventories, and non-performing loans, and could direct resources away from other sectors of the economy. Though China has contained both political and economic tensions, they are still there. As the OECD (1998: 23) concludes, “While China has weathered the regional crisis quite well, the ﬁnancial crisis of other Asian countries which shared similar structural problems with China have raised concerns that its current strains could develop into something considerably worse.”

Reform of Asian corporate governance Given the systematic nature of the problems of corporate governance in East Asia, only a fundamental programme of reform of institutions and practices, conducted in an energetic and committed manner over a considerable period of time, is likely to produce results. There is much evidence of a profound inclination towards reform in the countries concerned, but should this dissipate as the East Asian economies move towards recovery, there is an array of external agencies with an interest in ensuring the process of reform is adhered to. The IMF, World Bank, and Asian Development Bank have all launched signiﬁcant initiatives to encourage and facilitate the reform process. International investors are unlikely to be sympathetic towards countries and companies that are not signiﬁcantly improving their corporate governance standards. Progress towards reform will follow diﬀerent paths in the diﬀerent countries concerned, but some general principles may be outlined. The important objectives for the development of more robust modes of governance include:

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i. Clarifying and strengthening internal control structures within ﬁrms; ii. Strengthening external monitoring and control through improvements in the legal framework, enhanced by regulatory agencies and greater disclosure of information; iii. Developing training and information programmes to improve the understanding of corporate governance procedures and issues. To clarify and make internal control structures more eﬀective reform of the Companies Acts may well be required in the countries concerned. In addition, developing a code of best practice in corporate governance is now essential. With the widespread failure of any system of voluntary standards of corporate governance in East Asia, a more prescriptive approach appears to be necessary. Though companies can participate in the drafting of the code, it is probably necessary to ensure that a powerful regulatory body in the form of a Securities Commission ensures compliance. Important elements of any code would be provision for: i.

A clear and legally enforceable structure of decision-making bodies and individuals within the ﬁrm to ensure that the internal mechanisms of corporate governance are in place including roles for remuneration committees and nonexecutive directors; ii. Clearly deﬁned rights and responsibilities of each constituent body, and clearly deﬁned procedures for exercising these rights; iii. Monitoring and reporting requirements to ensure the transparency of the management’s actions and the company’s performance. To enhance the enforcement of corporate governance standards, a disclosure-based regulatory regime is necessary. This will require ﬁrms to disclose all material information at the time of new listings and thereafter, on a periodic and continual basis. In countries with developed capital markets, ﬁrms rely on market practice and due diligence obligations to ensure the disclosure of all material information. In East Asia, the capital markets are less well developed and regulators will need to play a more active role in deﬁning and enforcing speciﬁc accounting, ﬁnancial reporting and disclosure standards. Codes of best practice can be reinforced by inducing companies at the entry points to market listing, credit rating, and government contracts to demonstrate their compliance with best governance practice. Other procedures to encourage good practice include the legal requirement for interested parties to abstain from voting on connected party transactions, and ensuring the prior approval of shareholders to both substantial and interested party transactions. Improving the quality of legal enforcement against insider trading as well as the rigour of take-over codes will help. Improving accounting, auditing, ﬁnancial reporting and disclosure standards, enforcing due diligence and ﬁduciary

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obligations of both ﬁnancial intermediaries and company oﬃcers and directors, will allow minority shareholders to protect themselves against abuse by majority shareholders. Similarly, more timely and continuous disclosure will contribute to more accurate assessment of credit and market risk. Finally, enhancing and developing the knowledge and capacity of shareholders, company oﬃcials and other stakeholders in their rights and responsibilities can form a vital part of institution building that will help the implementation and enforcement of corporate governance standards. This will allow self-enforcement by a more active role in governance, or through legal actions to force compliance in cases of violations. In conclusion, corporate governance reform in East Asia requires action on three fronts: strengthening the mechanisms in ﬁrms for more accountable and transparent operations; providing more eﬀective control and regulation of ﬁrms by external agencies, and education and training to develop understanding of sound corporate governance practices. Together, these reforms will permit investors to make more intelligent and critical judgements as to which companies to entrust with their money. However, as important as reform of corporate governance may be in the national context, there is a worrying sense that such reforms could be vitiated by the destabilising impact of future incursions of the international capital market.

Economic recovery and progress towards corporate governance reform 1998–2001 As export-led economic growth has returned to the East Asian region, with improving GDP growth rates each quarter, the revival of consumption, and indications of some recovery in investment, the critical question is whether this recovery and growth is occurring on ﬁrmer economic and institutional foundations than the rapid speculative growth that precipitated the Asian crisis. Will Asia develop a more stable model of industrial development, or will another spurt or reckless growth lead inevitably to another cycle of crisis and forced restructuring? In their survey of recovery in the region, Segal and Goodman (2000) highlight the disproportionate role of Japan, which alone accounts for two-thirds of all Asian GDP. The recent economic failures of Japan originally sparked the crisis in Asia, and the failure of Japan to remedy in any convincing way its enveloping economic malaise, has sustained the economic weaknesses of East Asia. Powerful Japanese economic growth from the 1960s increased the inter-dependence of the region, and when the Japanese speculative bubble economy burst in 1990, it was just a matter of time before this had an impact on neighbouring economies. Segal and Goodman (2000: 5) conclude that in terms of global stability and regional

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economic success, undoubtedly the most important factor will be the return to health of the Japanese economy. In addressing the elements of recovery in the region Segal and Goodman stress three interrelated themes: political reform, economic reform, and the role of international institutions. Though ﬁercely contested in the Asia Paciﬁc they insist the weight of evidence indicates that achieving sustainable economic reforms requires deeper political and social change … Financial transparency requires a political system which allows, indeed orchestrates ﬁerce questioning of oﬃcials in public debate. It also requires the rule of law, in which civil servants and citizens are subject to impartial justice, not the rule of man, as well as a system structurally committed to pluralism. While China’s behaviour shows that lack of political reform and openness can provide some short-term protection, in the longer terms sustaining economic growth in post-industrial economies requires change (Segal and Goodman 2000: 5).

With regard to economic reform in the essential search to restore sources of domestic and international investment, with the guide of corporate governance codes developed by the OECD, World Bank and Asian Development Bank, all of the East Asian economies have been persuaded to look at their standards of corporate governance, and Singapore, Malaysia and Korea have made the greatest eﬀorts to improve existing standards. Malaysia’s National Economic Recovery Plan gives high priority to improving transparency and regulatory environments and urges the Kuala Lumpur Stock Exchange and Securities Commission to enforce regulations vigorously and consistently. In 1999 Malaysia tightened its company listing rules, requiring the issue of quarterly ﬁnancial statements and preventing individuals sitting on too many company boards (EAAUa 1999: 63). The results in Malaysia, as indeed in all the East Asian economies, are mixed. A Dresdner Kleinwort Benson report lists ten major Malaysian companies with good corporate governance records, including fair treatment of minority investors (1999). However, audit and company restructuring reports also point to insider dealings and manoeuvring at the expense of minority shareholders. For example, Arthur Andersen’s 30 June 1998 audited accounts of the Malaysian company Ekran were qualiﬁed because of large sums paid to parties related to one of its directors, without the relevant approval from the Securities Commission, and possibly in breach of the companies law. Continuing the eﬀort to reform, in February 1999 Malaysia produced a corporate governance report with a 70 point program to improve transparency and board accountability to shareholders and to protect minority shareholders. Malaysia intends to use this study to lead corporate governance reform discussions in APEC. The recommendations in the report fall into three categories:

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i. Developing a Malaysian Code of Corporate Governance; ii. Reforming laws, regulations and rules to strengthen the regulatory framework for publicly listed companies; iii. Providing training and education to expand the pool of qualiﬁed directors and managers. The best practice code recommends that independent or outside directors constitute at least one third of corporate boards; directors’ attendance and remuneration details be released; that each board establish committees of non-executive directors and nominate a lead non-executive director. Other proposed changes include anti-cronyism rules, restricting controlling shareholders from voting when they have a conﬂict of interest and requiring companies to oﬀer mailed proxy votes. The report argues for greater policing of breaches of minority investor rights. These proposed changes, to be fully implemented by December 2000, although voluntary under proposed new stock exchange listing rules, means that companies would have to disclose compliance with the code or reasons for noncompliance (EAAUa 1999: 64). Singapore, which weathered the crisis better than any other East Asian country, and which takes pride in the stability of its banking and corporate sector, has sought to further strengthen its banking system by improved corporate governance. Since 1996, Singapore has been working to develop and reﬁne corporate governance rules and principles for listed companies. The Monetary Authority of Singapore will require all banks to appoint nominating committees to handle appointments and reappointments to the board and key management positions. Members of nominating committees must be chosen from the board and approved by the Monetary Authority. The listing rules require companies to establish audit committees and their annual reports must state whether and how companies have complied with the best practice guide. This focuses more on the substance of governance rather than the form. Korea has passed legislation to improve minority shareholder rights, increase independent membership of boards and introduce international accountancy standards. Korean conglomerates now must release consolidated company accounts for the activities of all subsidiaries (EAAUb 1999). However, as the East Asia Analytical Unit of the Australian Department of Foreign Aﬀairs and Trade concludes, “Improving corporate governance requires a signiﬁcant shift in corporate culture and ethics; this cannot be achieved just by passing legislation. Strict enforcement and some highly publicized convictions can assist this process” (EAAUa 1999: 65) The case of Thailand, where the Asian crisis erupted, is instructive of the determination to reform, the residual problems, and the likely results. Prasarn

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Trairatvorakul the Secretary General of the Securities and Exchange Commission of Thailand has indicated the lingering problems among the signs of economic recovery, which threaten the sustainability of economic growth. Thailand still has the problem of non-performing loans, estimated in mid-2000 to be about 37% of the outstanding loans in the total banking system. An additional complication was the problem of corporate debt restructuring still awaited cure. The Thai government has promoted the establishment of a private asset management corporation (AMC) to buy the problem loans out of ﬁnancial institutions, and established a task force, the Corporate Debt Restructuring Advisory Committee, to encourage market based corporate debt restructuring. Policy initiatives to eliminate impediments and broaden the incentive framework for debt restructuring are aimed at achieving a dramatic reduction in non-performing loans. However, the devastated Thai securities market may prove more diﬃcult to revive in the aftermath of Thailand’s ﬁnancial crisis in the last quarter of 1997 “no new public company has been able to list in the Stock Exchange of Thailand and raise funds from the public. The old listed companies could only raise 5.3% of their total new funds by public oﬀerings of securities in 1999” (Trairatvorakul 2000: 3). Investors had lost conﬁdence in the Thai stock market, fewer and fewer good products were perceived, and the market itself was becoming too small for investment funds. The Thai Securities and Exchange Commission at this point, like the SEC’s in other emerging markets, departed from its traditional brief to keep the stock market fair, transparent, and eﬃcient, to attempt to restore the market. As Trairatvorakul (2000: 5) suggests, “How can we have a fair, transparent and eﬃcient market if the market does not even exist … when there is no demand and no supply, there is no market?” The Securities and Exchange Commission launched a campaign to bring back investors focusing on three strategies: – – –

Inducing a good supply of securities Creating a good market system Empowering and protecting investors

To induce a better supply of securities the SEC proposed to accommodate a broader spectrum of companies by making the listing requirements more ﬂexible on minimum registered capital, track record and proﬁtability, while keeping in place the tightening rules on good corporate governance; second, encouraging state enterprises under the government’s privatisation program to list on the stock exchange; third, facilitating small and medium sized Thai enterprises to list, with better access to venture capital funds and credit guarantees. Finally, they recommended developing the bond market as an alternative investment vehicle with the establishment of a Debt Management Oﬃce to coordinate debt management to ensure the consistent issuance of government bonds creating an interest rate

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benchmark for the market. To create a better market system, two policy measures were implemented; ﬁrst, enhancing good corporate governance practices by improving the accountability of boards, and requiring all listed companies to establish an audit committee. A code of best practice in corporate governance was developed and improvements in the Thai accounting standards to conform with international accounting standards introduced. Second, the SEC sought to enhance the integrity of the clearing and settlement system by instituting proper mechanisms for internal control, risk management and customer protection. The ﬁnal SEC strategy to empower and protect investors comprised four policy measures to: –

– – –

Improve the legal infrastructure oﬀering protection for shareholder rights, amending the Public Company Act to strengthen the responsibilities of corporate oﬃcers, to make legal proceedings by shareholders less cumbersome, and tightening auditing requirements; Reduce the transaction costs of the market by liberalizing brokerage fees, and utilizing internet technology; Promote investor education, beginning in secondary schools; Promote institutional investors including mutual funds and provident funds, to provide more professional investment services.

This would all be very reassuring if taken at face value, but Jamie Allen (2000: 13), the Secretary of the Asian Corporate Governance Association, dispels any unfounded optimism, While I believe that a global set of corporate governance principles is emerging, and are applicable to Asia, if you simply transplant them to Asia without modiﬁcation they will, in most cases wither in barren soil…More than 90 per cent of companies do not want to hear the corporate governance message. Inertia and stubbornness are powerful forces … Most companies, whether family owned or not, do not like having change imposed on them. Changing entrenched practices and mindsets is hard and it carries a cost. But it also carries signiﬁcant beneﬁts for those who bother.

It appears that while Asian countries may have adopted aspects of the OECD code of corporate governance, and this has certainly inﬂuenced the thinking of company regulators, and that, while company and securities laws oﬀer rights to shareholders, equitable treatment, disclosure and transparency, the point is whether the spirit of these laws is being followed, and if not, what sanctions have been applied. “The answer in most cases is, respectively “No” and “Very Few.” But this is because the market has not demanded more from companies. In the end, investors get the corporate governance they demand.” (Governance, September 2000) Comfortingly, Allen suggests that there was a similar reluctance to commit to the spirit rather than

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the letter of corporate governance reforms in Western companies when these were ﬁrst introduced. However, if spectacular corporate failures occur from time to time in most Western countries, the problem is they are more endemic in East Asia. In contemplating the chances for a sustained recovery in Asia, it is important to examine the progress of China, the other superpower in the region. China stabilized the Asian crisis at some cost to itself, but as a consequence, the reform process appears to have become stalled. A startling report from the Shanghai Stock Exchange (SSE), following a three-year corporate governance survey of managers in more than 1,000 companies, presents grim reading. The SSE insists that over 99% of key business decisions, including board appointments and pay, have to be ratiﬁed by Communist Party oﬃcials within the company. More than two thirds of listed companies remain under the direct supervision of government ministries or other agencies. “Due to government interference dramatic ﬂuctuations in corporate performance, frequent asset restructurings, window dressing of ﬁnancial statements, stock market manipulation and insider trading, there is no signiﬁcant correlation between the market value of a company and its intrinsic value.” The report goes on to suggest that boards of directors are no more than rubber stamps for the executive management and controlling shareholders, that independent directors make up just 0.3% of the 3,000 directors covered in the survey, and that “Directors pursue their own interests instead of maximizing shareholder value, and they cannot fulﬁl their ﬁduciary duty” (Governance, November 2000). When it is realized these observations concern the supposedly reformed sector of Chinese industry, that the reform of state owned enterprises has slowed considerably, and reforming and recapitalising the banks is also proceeding slowly, then the possibility of the crisis in the Chinese economy and society deepening becomes very real. An unreformed China, combined with political instability in Indonesia and Malaysia, suggests at least that the political element of recovery in the region is fragile, and economic success hardly assured (Segal and Goodman 1999: 7). Once again, with the end of the long boom in the United States, the essential dependence of East Asian economies, specialised in manufacturing computer component commodities, is beginning to emerge and their tentative grasp upon developed status highlighted, as orders from California based high technology companies reduced dramatically. This instability was built into the rapid economic development of the Tiger economies, which were always dependent. But whilst the implications of this instability are threatening for the Asian countries themselves, and for the economic well being of their people, to suggest this is potentially a cause of instability in global markets is somewhat wide of the mark. Global ﬁnancial markets are currently more than capable of compounding their own instability.

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The instability of international ﬁnancial markets Regulating a global ﬁnancial system in which hedge funds can leverage themselves geometrically and with little supervision, and in which money ﬂows are instantaneous and electronic is, as the US Treasury Secretary put it, “exceedingly complicated.” Mr. Rubin noted that, “over the last 30 years global capital ﬂows have increased exponentially.” He emphasised the markets herd mentality, insisting that just as capital once ﬂowed into emerging market economies without due regard for proper risk analysis, “it is now ﬂowing out in a non-discriminatory, overly negative reaction” (International Herald Tribune 3–4 October 1998). The IMF (1998: 23) puts the responsibility on national governments of emerging economies to discourage speculation through more extensive disclosure: The solution is to provide better information to the markets on government policies and the conditions of domestic ﬁnancial institutions in order to encourage investors to trade on fundamental rather than to run with the herd. This means releasing full information about current government policies and about contingencies that might aﬀect future government policies, as well as using interest rates and other ﬁnancial variables under the government’s control to clearly signal policy priorities. It means not presenting hedge funds and other private investors whose combined resources constitute a market vastly larger than the assets of central banks and governments with an incentive to take large positions against a currency by oﬀering them the irresistible combination of inconsistent policies and unsustainable currency pegs.

Roger C. Altman, the investment banker who served in the US Treasury for both the Carter and Clinton administration, has argued “The world-wide elimination of barriers to trade and capital … have created the global ﬁnancial marketplace, which informed observers hailed for bringing private capital to the developing world, encouraging growth and democracy” (New York Times Magazine, 1 March 1998). However, Jagdash Bhagwati has questioned the wisdom of conﬂating the free movement of trade and the free movement of the vast capital ﬂows, which greatly exceed anything happening in the non-ﬁnancial economy. Bhagwati records how in 1996 the total capital inﬂows to Indonesia, Malaysia, South Korea, Thailand, and the Philippines were US$93 billion, up from US$41 billion in 1994. In 1997 this suddenly changed to an outﬂow of US$12 billion. “Hence it has become apparent that crises attendant on capital mobility cannot be ignored” (Bhagwati 1998: 8). Charles Kindleberger, of MIT, has noted that capital ﬂows, unlike trade in most commodities are characterised by panics and manias. Eﬀorts to restore the conﬁdence of those responsible for capital ﬂight, typically involve dramatic increases in domestic interest rates for the countries concerned, and “across Asia

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this has decimated ﬁrms with large amounts of debt” (Bhagwati 1998: 9). The case for free trade has been: hijacked by the proponents of capital mobility… to bamboozle us into celebrating the new world of trillions of dollars moving about in a borderless world, creating gigantic economic gains, rewarding virtue and punishing proﬂigacy. But interests have also played a central role. Wall Street’s ﬁnancial ﬁrms have obvious selfinterest in a world of free capital mobility since it only enlarges the arena in which to make money (Bhagwati 1998: 11).

That the logic which beneﬁts Wall Street is not necessarily a logic which will beneﬁt emerging economies, is argued by Xiang Bing, who emphasises the fundamental “vulnerability of an emerging economy with ﬁnancial liberalisation: both the country’s stock market and the currency market, characterised by thin trading, are too insigniﬁcant in scale to withstand rational trading activities of large international capital” (Hong Kong Economic Journal, 15 February 1998). Exactly how the East Asian economies felt they were being overwhelmed by a tsunami wave of capital movement is illustrated by comparing the total market capitalisation in July 1998 of the New York Stock Exchange at US$10,465 billion, with the stock market capitalisation of Jakarta, Bangkok, Manila, Seoul, and Kuala Lumpur, which together mustered US$ 178 billion. The ﬂuttering of a few eyebrows in Wall Street really can cause ﬁnancial havoc in emerging economies on the other side of the world in a system with this kind of imbalance. A further irony is that a major beneﬁciary of the capital ﬂight out of East Asia was the United States, as the world’s largest capital market and the holder of the leading currency. It was not a coincidence that as the markets drained in East Asia, Wall Street enjoyed a revival of its prolonged bull market (Hale 1998: 11). There was a sharp divergence in the fortunes of Asian stock markets and the rest of the world. The stock exchanges of East Asia lost more than half their capital, with the emerging markets of Latin America following behind, the markets of Western Europe and North America continued to increase in value. Many authorities, including the IMF, encouraged the sense that world growth could continue, despite the Asian collapse. There was an air of unreality about all this as the US stock market became increasingly unhinged from economic fundamentals, despite Alan Greenspan’s occasional warnings against “irrational exuberance.” Some commentators were happy to throw caution to the wind: “The Dow Jones Industrial Average is more than four times as high as it was six years ago. The New York and Nasdaq stock exchanges have added over $4 trillion in value in the last four years alone — the largest single accumulation of wealth in the history of the United States” (Zuckerman 1998: 18). (A scenario similar the Japanese speculative bubble seemed to be developing as a growing proportion of US households were persuaded to part with

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their savings — and go into debt — to plunge into stocks through mutual funds, despite only modest productivity growth in the US economy and slow GDP growth. For a time, at least, this created a self-fulﬁlling prophecy of substantial growth in the US market, even, the “end of history” (Henwood 1998; Krugman 1998; Martin Wolf, Financial Times December 1998). However, as J. K. Galbraith (1998) recently commented, “In the United States we now have more mutual funds than there is intelligence, perhaps integrity, to handle them. They are a bridge between the innocent and eventual loss.”

The architecture of the new world economic order An eﬀective default on its payments on foreign loans by Russia at the end of August 1998, and continuing worries for the ﬁnancial stability of Thailand, Malaysia, Indonesia, South Korea, Brazil and Venezuela, provoked the fear that emerging markets might be shut out of international ﬁnancial markets for some time, with severe reverberations upon the rest of the global ﬁnancial system (Financial Times, 2 September 1998). The G7 ﬁnance ministers responded by promising co-ordinated action to promote growth and lower interest rates, and measures to alleviate the eﬀects of the crisis on the poorest countries with augmented ﬁnancial assistance. Concern was expressed about the general withdrawal of funds from emerging markets without respect for the diversity of their prospects, and signiﬁcant progress being made in countries carrying out macroeconomic policies and structural reforms. Later in the autumn of 1998, building on a series of three reports by the G22 group of economies on crisis prevention and management, a series of ﬁnancial reform proposals by the G7 were heralded as promising a new “architecture of the world economic order.” The ﬁnance ministers and central bankers of the leading industrial countries agreed a plan for a new safety net of the IMF to bail out troubled countries, with greater co-ordination and regulation of cross-border capital ﬂows. Support was expressed for a code of conduct for all open economies, requiring rules for disclosure of ﬁnancial information with an agreed approach on corporate governance. The policies are designed to increase the transparency of the international ﬁnancial system; enhance stability, particularly through more eﬀective regulation; and improve ways to respond to crises, through orderly arrangements and better insolvency regimes. However, as Martin Wolf argues among the matters not fully considered in the policy statement was the critical question of exchange rate regimes, and whether in emerging economies these should be regulatory, prudential or market based. This determines whether countries adopt ﬁxed or ﬂoating exchange rates, and the extent of intervention and regulation of the ﬁnancial system and capital movements, which is quite fundamental (Financial Times 4 November 1998).

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In terms of practical proposals for preventing similar crises occurring on a periodic basis, two sets of measures received increasing support, the introduction of capital controls, and bolstering the IMF as an international lender of last resort. To lessen the surges of short-term hot money, Joseph Stiglitz argued that it was time to consider “some form of taxes, regulations, or restraints on international capital ﬂows” (Business Week 12 October 1998). The IMF acknowledges that prudential controls on inward capital ﬂows could be a useful tool before a crisis hits, but are not a substitute for ﬁnancial reform, and are of little use in preventing investor ﬂight. In support of prudential controls, Jagdish Bhagwati has insisted I am against full-scale capital-account convertibility for nearly all developing countries. It is premature, given their political and economic fragility, to allow total freedom to take any amount of capital out of or into these countries. I also believe there should be close monitoring and review of short-term borrowings, keeping them in line with fundamentals, reserves, ability to borrow in need (Far Eastern Economic Review 15 October 1998).

Enhancing the capacity of the IMF to act as an international lender of last resort encountered the objection that this might simply increase the moral hazard of countries and speculators taking risks, knowing they will be bailed out if things go badly wrong. (Though the severity of the impact of IMF rescue policies upon the economies of countries experiencing diﬃculties is unlikely to inﬂuence them to willingly subject themselves to similar IMF interventions in future). Perversely, when IMF rescues have occurred, the people who have beneﬁted ﬁrst are the shortterm foreign lenders who helped to cause the problem. The IMF’s response to this dilemma is to propose that private lenders should be forced into participating in IMF rescue operations. This would provide an incentive to investors to pay closer attention to the quality of their investments. Emerson (1998: 49) has highlighted the inconsistency between free market ideology and the available remedies when disaster occur, “The IMF’s members are not corporations but states. But the crisis has been driven not by public debts but private ones, incurred by Asian banks and ﬁrms.” Hale (1998: 7)outlines the diﬀerent roles of the IMF during market stress: to oﬀer macroeconomic policy advice that national politicians can sell to their voters as their own; to act as a global lender of last resort in a liquidity crunch, similar to the role played by national central banks during domestic crises; to promote economic reforms that might otherwise be unacceptable. However, the impact of IMF policies in the Asian crisis has not proved exactly benign: To date the IMF-led rescue plans for these nations do not appear to have worked. Unemployment and interest rates have soared, the value of their currencies has plummeted, and prosperity has turned into dislocation and riots. The ﬂow of

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private funds into these countries has screeched to a halt (Business Week 12 October 1998).

In their review of the impact of IMF programs in Indonesia, Thailand, and Korea, executive directors of the IMF admitted that they had over-reacted. In attempting to break the vicious circle of capital outﬂows and currency depreciation, while dealing with its immediate ﬁnancial and social fallout, the IMF had imposed a monetary tightening, that helped propel these economies into a much deeper recession than envisaged. Capital continued to exit even after the programmes were implemented, and a greater ﬁscal stimulus could have been delivered more promptly as the extent of the slowdown became apparent (IMF1999). In holding up Clinton’s commitment to supplement IMF funds by US$18 billion to help deal with the crisis (bringing the IMF’s total capital to US$280 billion), Republican congressmen claimed the IMF was simply encouraging recklessness in the management of countries’ ﬁnances. Perhaps nearer to the truth is Hale’s (1998: 13) assertion that the IMF has served as a proxy agency for US foreign policy since the Cold War. “Great economic crises do not occur in political vacuums. In the 1930s, depression led to global war and cost millions of lives. In Indonesia today, the streets of Jakarta have already seen bloodshed and attacks on ethnic Chinese … The IMF interventions should be classiﬁed as ﬁnancial peacekeeping, not just economic assistance.” If not the IMF, then some form of international lender of last resort is clearly essential to maintain political as well as ﬁnancial stability in the world. Otherwise, this would mean the rich industrial countries “standing idly by while currencies plummet, countries run out of foreign exchange, trade and investment comes to a halt, and crises in one region spread to others (Haas and Litan 1998: 3). Emerson (1998: 47) has drawn attention to the importance of the search for “alternatives to unregulated markets and the vulnerability and instability that comes with them.” The G7, IMF and World Bank, together with the national Treasuries and central banks of most of the countries of the world have been struggling for the last two years with this dilemma, what could be described as the governance of markets. As Jack Boorman, the director of the IMF’s Policy Development and Review Department concluded: “The crisis quickly turned into a vicious circle. Capital outﬂows pushed the value of currencies downwards, creating risks of insolvency for companies that were indebted in foreign currencies and adding momentum to capital outﬂows. In a global ﬁnancial market linked by almost instantaneous communications, money moves with a speed that leaves policymakers little room for hesitation” (International Herald Tribune, 20 January 1999). The hope of those engaged in developing a new architecture of international ﬁnancial governance is that in future crises such as that in East Asia in 1997/98 may be prevented, and that if they do occur they can be managed more eﬀectively. The OECD (1998: 32) oﬀers a less sanguine view:

270 Thomas Clarke

No amount of strengthening of the international architecture can be expected to prevent diﬃculties from emerging in countries that do not address their domestic problems. And no institutional framework or regulatory environment is likely to insulate the world from excesses by ﬁnancial markets unless the major participants are obliged to face more of the negative consequences of their own decisions with greater frequency than has often been the case at present.

Conclusions The Asian ﬁnancial crisis proved a severe shock to the conﬁdence of the region previously celebrated as miracle economies. It revealed that a quarter of a century of rapid economic growth was based on rather ramshackle foundations of corporate governance. In the promising eﬀort to rebuild the East Asian economies, it is clear that lessons have been learnt concerning the importance of disclosure, transparency, and accountability, and at least national regulators have willingly adopted international codes of corporate governance conduct. However the worry is that these reforms do not run deep enough in terms of company practice and director behaviour, and will be quickly forgotten if the present restructuring gives way to another economic boom. In any case the domestic reforms proposed will hardly alter the dependent status of those economies that have become based on the branch production of technology commodities for the Western multinationals. More seriously, the Asian crisis was a symptom, not a cause, of a much more profound instability in the operation of international ﬁnancial markets. The paradox of the introduction of global standards of corporate governance is that it may unwittingly contribute to making all economies, and particularly those of the developing world, more exposed to unanticipated and overwhelming pressures from ﬁnancial markets. Unregulated international ﬁnancial markets have demonstrated the power to bring prosperous countries to their knees, and to lead the world perilously close to complete ﬁnancial collapse.

References Allen, J. (2000). Corproate governance reform in Asia. Governance, September 12–14. Amsden, A. H. (1989). Asia’s next giant: South Korea and late industrialisation. New York: Oxford University Press. Backman, M. (1999). Asian eclipse: Exposing the dark side of business in Asia. Singapore: John Wiley. Bagwati, J. (1998). The capital myth. Foreign Aﬀairs, Vol 77, No 3, 7–12. Berger, S. and Lester, R. (1997). Made by Hong Kong. Hong Kong: Oxford University Press. Berle, A. and Means, G. (1932). The modern corporation and private property. New York: Macmillan.

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Cauﬁeld, C. (1997). Masters of illusion: The World Bank and the poverty of nations. London: Pan Books. Chen, M. (1995). Asian management systems. London: Routledge. Child, J. (1994). Management in China during the age of reform. Cambridge: Cambridge University Press. Clarke, T. (1998). The stakeholder corporation: A business philosophy for the information age. Long Range Planning, 31 (2): 182–194. Clarke, T. and Duxing, D. (1998). Corporate governance in China: explosive growth and new patterns of ownership. Long Range Planning, Vol 31, No 2, 239–251. Clegg, S. R., and Redding, S. G. (1992). Capitalism in contrasting cultures. Berlin: Walter de Gruyter. Clegg, S. R., Colado, E. I. and Bueno, L. (1998). Global management — universal theories and local realities. London: Sage. Cliﬀord, M. (1997). Troubled tiger: The unauthorised biography of Korea Inc. Singapore: Butterworth Heinemann Asia. Cohen, B. (1997). The edge of chaos: Financial booms, bubbles, and chaos. London: Wiley. Daly, M. T. and Logan, M. I. (1998). Reconstructing Asia — The economic miracle that never was, the future that is. Melbourne: RMIT Press. Delhaise, P. F. (1998). Asia in crisis — the implosion of the banking and ﬁnance systems. Singapore: John Wiley. Department of Foreign Aﬀairs and Trade (1999). Asia’s ﬁnancial markets — capitalising on reform. Canberra: Australian Government Publishing Service. de Trenck, C., Cartledge, S., Daswani, A., Katz, C. and Sakmar, D. (1998). Red chips — and the globalisation of China’s enterprises. Hong Kong: Asia 2000 Limited. Dresdner Kleinwort Benson (1999). Malaysian corporate governance: better than you thought. Singapore: Malaysian Research Team. East Asia Analytical Unit (EAAUa) (1999). Asia’s ﬁnancial markets: capitalizing on reform. Commonwealth of Australia, Canberra: Department of Foreign Aﬀairs and Trade. East Asia Analytical Unit (EAAUb) (1999). Korea rebuilds: from crisis to opportunity. Commonwealth of Australia, Canberra: Department of Foreign Aﬀairs and Trade. Emerson, D. (1998). Americanizing Asia? Foreign Aﬀairs, Vol 77, No 3, 46- 56. Enright, M., Scott, E. and Dodwell, D. (1997). The Hong Kong advantage. Hong Kong: Oxford University Press. Fruin, W. M. (1992). The Japanese enterprise system — competitive and cooperative structures. Oxford: Oxford University Press. Galbraith, J. K. (1998). Address to Harvard University Club. London, June 1998. Gereﬃ, G. and Wyman, D. (Eds.) (1992). Manufacturing miracles: Paths of industrialisation in Latin America and East Asia. Princeton: Princeton University Press. Goldstein, M. and Folkerts-Landau, D. (1994). International capital markets: Developments, prospects and policy issues. Washington: International Monetary Fund. Goodman, D. S. and Sega, L. G. (1997). China rising — nationalism and interdependence. London: Routledge. Gough, L. (1998). Asia meltdown — The end of the miracle? Oxford: Capstone. Guillen, M. F. (1999). Corporate governance and globalisation: Arguments and evidence against convergence, Reginald H. Jones Center for Management Policy, Strategy and Organization, University of Pennsylvania, PA.

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La Porta, R., Lopez-de-Silanes, F. and Shleifer, A. A. (1998). Corporate ownership around the world. National bureau of economic research. Working Paper 6625. Hale, D. (1998). The IMF, Now more than ever: The case for ﬁnancial peacekeeping. Foreign Aﬀairs, Vol 77, No 6, 7–13. Hass, R. and Litan. R. (1998). Globalisation and its discontents. Foreign Aﬀairs, Vol 77, No3, 2–6. Henderson, C. (1998). Asia falling? Making sense of the Asian currency crisis and its aftermath. Singapore: McGraw Hill. Henwood, D. (1997). Wall Street, London: Verso. IMF (1998). Hedge Funds and Financial Market Dynamics. Washington: International Monetary Fund. IMF (1999). IMF supported programs in Indonesia, Thailand, and Korea: A preliminary assessment. Washington: International Monetary Fund. Kim, Y. C. (Ed.) (1995). The South-East Asian economic miracle. New Brunswick, N.J: Transaction Publishers. Kono, T. (1992). Long-range planning of Japanese corporations. Berlin: Walter de Gruyter. Krugman, P. (1998). America the boastful. Foreign Aﬀairs, Vol 77, No3, 32–45. Krugman, P. (1996). Pop internationalism. London: IMF Press. Krugman, P. (1994). The myth of Asia’s miracle. Foreign Aﬀairs, Vol 73, No 6, 62–78. Lasserre, P. and Schutte, H. (1995). Strategies for the Asia Paciﬁc. London: Macmillan. Lincoln, E. (1998). Japan’s Financial Mess, Foreign Aﬀairs, Vol 77, No 3, 57–60. Lingle, C. (1997). The rise and decline of the Asian century. Hong Kong: Asia 2000. Marceau, J. (1992). Reworking the world: Organizations, technologies and cultures in comparative perspective. Berlin: Walter de Gruyter. McLeod, R. H. and Garnaut, R. 1998). East Asia in crisis — from being a miracle to needing one. London: Routledge. Niederhoﬀer, V. (1997). The education of a speculator. New York: Wiley. Noble, G. W. and Ravenhill, J. (2000). The Asian ﬁnancial crisis and the architecture of global ﬁnance. Cambridge: Cambridge University Press. OECD (1998). Economic outlook, Number 64, Paris: OECD. OECD (1999). Corporate governance: Eﬀects on ﬁrm performance and growth. Paris: OECD. Overholt, W. (1993). China: The next economic superpower. London: Weidenfeld & Nicholson. Parton, P. (1998). Causes of the Asian ﬁnancial crisis. ANZ Bank Economic Review. Shanghai: ANZ Bank. Pilai, P. (1998). Corporate governance and transparency. Revitalising Asian Tiger Economies. ROC international conference on corporate governance: Responsibilities, risks and reform, July. Kualar Lumpur: Malaysia. Porter, M. (1992). Capital choices: Changing the way America invests in industry. US Council on Competitiveness/Harvard Business School. Prowse, S. (1998). Corporate governance in East Asia: A framework for analysis, Managing capital ﬂows: National and international dimensions conference, June 1998. Bangkok: Thailand. Rohwer, J. 1996). Asia rising. London: Nicholas Brealey. Segal, G. and Goodman, D. S. G. (2000). Towards recovery in Paciﬁc Asia. London: Routledge. Sheridan, G. (1999). Asian values Western dreams — understanding the new Asia. St. Leonards: Allen & Unwin. Soros, G. (1998). The crisis of global capitalism. London: Little Brown and Company.

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Trairatvorakul, P. (2000). Challenges of restoring investor conﬁdence following a ﬁnancial crisis. Sydney: 25th Annual Conference IOSCO. Young, A. (1994) Lesson’s from the East Asian NIE’s: A Contrarian View, European Economic Review, Vol 38, 964–73. World Bank (1993). The East Asian miracle — economic growth and public policy. Oxford: Oxford University Press. World Bank (1996). From plan to market. World development report 1996. Oxford: Oxford University Press. World Bank (1997). The state in a changing world, world development Report 1997. Oxford: Oxford University Press. Zuckerman, M. (1998). A second American century. Foreign Aﬀairs, Vol 77, No 3, 18–31.

Chapter 13

Multinationals, corporate governance and ﬁnancial internationalisation Glenn Morgan

Introduction The goal of this chapter is to consider the impact of ﬁnancial internationalisation on multinational companies from diﬀerent contexts. The literature on multinationals has a lot to say about the factors inﬂuencing international location decisions; these range from leveraging existing ownership advantages in new contexts, through to accessing new product markets, and cheap labour markets, and, more recently, considering how multinationals can learn from diﬀerentially accumulated skills and knowledge in particular regions and local districts. There is also a substantial amount of discussion of the impact of these skills and knowledge on human resource management practices as well as the organizational structures and management processes appropriate for diﬀerent forms of international strategy (Bartlett and Ghoshal 1989). What has been less considered is the issue of the internationalisation of ownership and corporate governance in multinationals. On the other hand, this absence goes alongside an increasing interest in how corporate governance, especially the discursive signiﬁcance of shareholder value, has had an impact on the ways in which ﬁrms are organized. This debate, in turn, has been strongly inﬂuenced by arguments concerning the internationalisation of ﬁnancial markets, particularly the increasing importance of investment banks and institutional investors from the USA and the UK in the markets of countries such as France, Germany and Japan. This is a strange disjuncture between two areas of literature that potentially can learn a lot from each other. In this chapter, therefore, these two phenomena are put together to consider the following questions. Are multinationals becoming more international in the ﬁnancial sense? If so, what diﬀerence is this likely to make to how the multinational develops? Traditionally, it has been argued that within national contexts, corporate governance structures reﬂected distinctive historical patterns of ownership that, in turn, have determined the rights and responsibilities of shareholders, senior managers, other ﬁnancial interests as well as, in certain contexts, wider social

276 Glenn Morgan

expectations of stakeholder rights. In turn, a large literature on diﬀering patterns of corporate governance within “divergent capitalisms” has developed. The range is by now widespread, springing from Berle and Means’ original US contribution (Berle and Means 1932) through to Zysman’s (1983) comparative account of the diﬀerent relationships between banks and manufacturing companies in various countries. More recently, there have been comparative studies of the relationship between these systems of corporate governance, ﬁrm strategy and structure, and innovation processes (Whitley 2000; Whitley 2001; O’Sullivan 2000; Hall and Soskice 2001). Doremus et al. have used this literature to emphasise that American, German and Japanese MNCs continue to diﬀer systematically in the relative priorities they assign to the maximization of shareholder value, the satisfaction of customer needs and the stabilization of employer-employee relations. Unique patterns of corporate ownership and associated diﬀerences in patterns of corporate control appear crucial (Doremus et al. 52).

Doremus et al. are representative of a broader stream of research within the institutionalist approach in which the so-called “home country” eﬀect is reproduced in multinationals (see Hu 1992). Thus, home country institutions (such as corporate governance), are assumed to reproduce themselves unproblematically in the multinational, which is conceptualised as fundamentally no diﬀerent from a “national ﬁrm with international operations” (Hu 1992). While Hu’s critical argument is important and necessary, it is not suﬃcient because it does not deal with two key aspects of the inter-relationship between corporate governance structures and MNCs. The ﬁrst is described in a rather exaggerated (if basically correct) statement of Hassel and colleagues that “no study has so far looked at the extent to which a company internationalises its ﬁnancing or ownership structure by approaching international capital markets” (Hassel et al. 2001a: 5). For example, even in the second edition of their book, Hirst and Thompson, in a book generally packed with data on multinationals and their activities, present very little data indicating foreign ownership of ﬁrms. Where they do so it is usually in terms of very aggregate levels of measures of foreign holdings in the economy as a whole (Hirst and Thompson 1999: 42–48; similar comments could be made of Held et al. 1999 and Dicken 1998). In other words, there is an assumption that the corporate governance structures of multinationals drawn from diﬀerent contexts remain fundamentally the same across cases. To say the least, recent research about shareholder value and its impact in various countries, and on various types of multinational ﬁrms, puts this assumption in doubt. The second point is that the model of the multinational utilised by authors such as Doremus et al. is very limited. These limits are most evident in the model’s assumption of a high degree of homogeneity in multinationals, where problems of

Multinationals, corporate governance and ﬁnancial internationalisation 277

coordinating across diﬀerent national and institutional divides are overcome by strong central control. More recent work (Birkinshaw 2000; Morgan et al. 2001) has revealed the complexity of these processes of control and coordination. The new work increasingly emphasises the “strategising” activity undertaken by actors within particular sites, an activity shaped by the overall context of the multinational itself, within which central powers of control and coordination diﬀer. The idea that the multinational constitutes a “transnational social space” in which actors have diﬀerent powers and capacities for strategising opens up a more dynamic notion of the ﬁrm (Morgan 2001a). As will be argued in this chapter, one of the main factors inﬂuencing that central power is the nature of the ownership structure and its impact on corporate governance and company goals. As this becomes “internationalised”, it can be expected to change the conditions and rules of the game under which actors interact and strategise within transnational social spaces created by multinationals. What changes come from the ﬁnancial internationalisation of the multinational? The chapter proceeds in three stages. First, it considers the meaning of ﬁnancial internationalisation, asking what are the dimensions of this phenomenon? Second, the chapter explores the degree to which ﬁnancial internationalisation is occurring in multinationals from the UK, the USA, Germany and Japan. Third the chapter analyses the impact of these changes on coordination issues within multinationals.

The meaning of ﬁnancial internationalisation The starting point for this discussion is the national context of corporate governance in most of the post-war period. Until the liberalisation of capital movements beginning in the 1970s and growing more rapidly in the 1980s, the export of capital per se was limited. Capital export takes a number of forms. Foreign direct investment in the setting up of businesses does not necessarily impact on the ﬁnancial structure of an internationalising ﬁrm. What is of direct importance in this context is the growth of foreign investors purchasing shares or bonds in a company. It is the latter process and the institutional preconditions for and consequences of such purchases for multinationals (as opposed to home-based companies) that are of major concern in this chapter. Hassel et al. (2001a) suggest that there are a number of dimensions to ﬁnancial internationalisation. First, there is the degree of foreign ownership, its source, the objectives of the foreign owners and how this inﬂuence is brought to bear on the managers of the multinational. The implication of this dimension is that foreign owners may bring new expectations about corporate governance to the ﬁrm. Thus, settled procedures for gaining consensus on corporate objectives and the distribution

278 Glenn Morgan

of surpluses between shareholders, managers, employees, banks and suppliers can be put under threat by foreign shareholders holding to diﬀerent procedures or expectations. In general, most foreign ownership comes from the opening up of home stock markets to foreign investors. Generally speaking, this opening up of home stock markets has emerged from the broader changes in the regulation and deregulation of global ﬁnancial markets, pressed at various governmental and business levels. The ﬁrm itself is relatively passive in this broader institutional change, though it may become active, both in lobbying for the opening up of the home stock market and in following through the consequences, for instance, by advertising itself to foreign institutional investors as a “good investment”. Second, however, Hassel et al. argue that it is important to consider the number of stock market quotations a company has. In this context, the ﬁrm itself has gone outside of its home capital market to raise funds. It has, in eﬀect, invited foreign owners into the corporate governance structure in a very direct way, though it may seek to constrain this by limiting the number of shares or their equivalent traded on foreign markets. As already stated, it appears that foreign listings generally remain of limited signiﬁcance in terms of the number of shares traded on foreign exchanges compared to the home exchange. Listing on a foreign exchange may be more about the reputational consequences of the action, that is, that the ﬁrm is open to foreign investors, than it is about the real consequences. Foreign owners seeking to build up a signiﬁcant stake in a company are likely to have to go to the home exchange as liquidity and trading on foreign markets will generally be thin. The reputational consequences of foreign listings relate more to their impact on the perceptions of credit rating agencies and bond issuers and purchasers in foreign markets, rather than the market for stocks. Foreign listing means meeting the standards of the foreign exchange in terms of transparency and related issues. The stringent rules in the US markets, and also on the London Stock Exchange in this respect, reassure institutional investors based in those countries about the corporate governance of foreign ﬁrms that have gone through the listing process there. Hassel et al’s third dimension of internationalisation — the degree to which company accounts are presented purely according to home country requirements or by reference to international standards — either the US GAAP rules or the IAS conventions — is related to the preceding point. At a minimum, the objective of foreign listings and reporting in international standards is a way of convincing capital markets, and the actors within them (such as institutional investors and analysts), that the company is a “ﬁt and proper person” for entering into economic transactions. In cross-border contexts, actors cannot rely on a clearly deﬁned “international” set of rules to sanction unacceptable behaviour in the way in which they can inside national settings (Whitley 2001). Instead, they have to ﬁnd alternative

Multinationals, corporate governance and ﬁnancial internationalisation 279

signals that the ﬁrm with which they are transacting (e.g. buying shares or bonds) is willing to play by the rules established in private or semi-public international contexts; in other words, is a “ﬁt and proper person” (Morgan 2001; also Sassen 1996). Seeking foreign listings or shifting to international accounting standards are signs of that process.

Financial Internationalisation in German, Japanese, US and UK multinationals In this section, data is presented concerning the degree to which multinationals in Germany, Japan, the US and the UK have internationalised along the dimensions discussed. The data drawn upon is both quantitative and qualitative, reﬂecting publicly available sources. In relation to German companies, both Lane (1999; 2001) and Hassel et al. (2001b) indicate that the largest German multinationals are increasingly moving towards an internationalised ﬁnancial structure, though at diﬀerent rates, depending on sector and ﬁrm strategy. Lane’s study of “seven German ﬂagship” multinationals identiﬁes that each of them, in slightly diﬀerent ways, has made steps towards a higher level of ﬁnancial internationalisation. At one extreme is the pharmaceutical company Hoechst, which adopted international accounting standards, quarterly reporting, and the active pursuit of shareholder value as part of its shift away from its German base (further consolidated in the merger with the French company Rhone Poulenc, which resulted in the creation of Aventis). At the other end are companies like BASF and Siemens, which are gradually opening up to international ﬁnancial inﬂuences. Hassel et al’s study of the 100 largest German companies provides more systematic evidence for this process by dealing with foreign ownership, foreign listings and accounting standards. Their study ranks the top 25 from this group in terms of a composite measure of ﬁnancial internationalisation. Eight of this twenty-ﬁve use US-GAAP accounting standards. Approximately one third of the sample was quoted on at least one exchange outside Germany. Bayer was quoted on thirteen foreign exchanges; Volkswagen on eleven; Hoechst on ten, and Deutsche Bank on nine. Five out of twenty ﬁve have 10% or more foreign owners. Jurgens and Rupp state that according to the Bundesbank, foreigners purchased 16% of German shares traded in 1999 (Jurgens and Rupp 2001: 23); ten of Hassel et al’s top twenty ﬁve ﬁnancially internationalised companies have more than 16% of foreign owners. These changes in ownership structure are part of wider trends in Germany. They reﬂect a growing separation of the largest ﬁrms from their previous main shareholders, which were other manufacturing companies and the banks. Industrial

280 Glenn Morgan

companies, though still the main shareholders in each other, have reduced cross shareholdings from 41.6% in 1990 to 30.5% in 1998 (Jurgens et al. 2000: 58). Recent changes in the taxation system mean that it will soon be easier for German banks and insurance companies to sell their holdings in other ﬁrms without incurring high liabilities for capital gains tax (Jurgens and Rupp 2001). As these companies liquidate their shareholdings, they are being purchased both by German insurance and investment funds and by US pension funds. US pension funds “now dominate the foreign holdings which now account for 15 per cent of all German shares” (Jurgens et al. 2000: 58) whilst “the major bank and insurance companies have …strategically (re)deﬁned share ownership as an asset management and investment fund business. This constitutes a major shift from ‘patient capital’ to shareholder value orientation in the German banking sector” (Jurgens et al. 2000: 69). This is further reﬂected in a commitment on the part of the largest companies to International Accounting Standards (43% of the Dax top 30 companies in Jurgens et al’s survey) and a shift to quarterly reporting of earnings (66.7% of the Dax 30). It is worth noting, in the German context, the increased importance of overseas mergers and acquisitions. The following Figure 1 indicates that the bulk of the growth of employment in German multinationals derived from the acquisition of or merger with other ﬁrms. Such acquisitions can have strong eﬀects on the ﬁnancial structure of the ﬁrm. Take, for example, the Daimler-Chrysler merger, which meant that the company would be quoted on Wall Street as well as European exchanges, and that its accounts would meet those set by International Accounting Standards. The merger was facilitated by a share swap across the two companies, which initially left 43% of the shares of the new entity in the hands of US shareholders. However, according to a report in Business Week, “US investors ﬂed from the stock after Standard and Poor’s Corp. banished it (DaimlerChrysler) from the S&P 500 index because the company wasn’t incorporated in America. By late March (1999), the percentage of US shareholders had fallen from 43% on Day One to 25%” (Business Week, June 5, 2000: 60). From a diﬀerent perspective, the fate of Mannesmann also reveals these complexities. Mannesmann diluted its German ownership drastically when it purchased the mobile telephone operator, Orange, from Hutchinson Telecom through share issues. The former owners of Orange, predominantly from outside Germany, became shareholders in Mannesmann such that around 65% of its shares were now held outside Germany. Thus, for a short period of time (certainly in terms of its own long history as a ﬁrm deeply embedded in the German system with strong ties to its bank and its suppliers cemented in the share ownership structure of the company), Mannesmann was a highly internationalised German company in terms of its ownership. When Vodaphone bid for Mannesmann, its main goal

Multinationals, corporate governance and ﬁnancial internationalisation 281

275 250 total growth external growth internal growth

225 200 175 150 125 100 75 50 25 0 -25

Western Europe

North America

Japan

Africa

Latin America LDCs in Asia

Notes: Data concerning external and internal growth is approximate Source: Wortmann/Dörrenbächer 1997

Figure 1.Growth of Employment — total, external and internal — of German multinational companies in manufacturing industries abroad (not including Eastern Europe) from 1984 to 1994 (in thousands)

was to persuade institutional investors in London and New York to support it; its success depended more on its eﬀorts in these markets than persuading German investors. After the takeover, Mannesmann has become part of a UK multinational (for a detailed analysis see Hopner and Gregory 2001). If the deals are constructed around share swaps, they may lead to an increasing international ownership of the ﬁrm. If they are ﬁnanced through bond issues, the impact is less clear as trading in bonds after the initial sale is not systematically tracked in terms of the national origins of bondholders. However, in most bond issues, the syndicates are international with major US investment banks playing an important role in constructing the deal and selling it to their international client lists. Thus, the proportion of a German multinational’s debt held by its German bankers is likely to decrease the more that it becomes involved in cross-border mergers and acquisitions. As this is an increasingly common pattern of growth for German companies (see Lane 2001; Wortmann 2001), it is likely that the ﬁnancial

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obligations of the ﬁrm (to shareholders and bond-holders) are becoming increasingly internationalised and less dependent on the German banks and stock markets. This argument is supported by a recent study of 100 top non-US multinationals operating with major subsidiaries in the USA found the following data on US ownership of the German ﬁrms in the sample (Glassman 2001). Table 1.US ownership of selected German ﬁrms with major subsidiaries in US (adapted from Glassman 2001: 11) Rank

Company name

%US Stock ownership

1 2 3 4 5 6 7 8 9 10

Henkel KGaA SAP Daimler-Chrysler E.ON AG Siemens BASF Bayer Deutsche Bank Thyssen Krupp Allianz

31.38 18 17 13.5 13 9.39 9.1 8.6 6.1 5.46

In comparison, even the largest Japanese international ﬁrms are still predominantly owned within Japan. In Glassman’s survey (2001), thirteen Japanese companies were included. One interesting diﬀerence is the range of variation; thus some Japanese companies (mainly ﬁnancial) had less than 1% US owners, whilst amongst the manufacturing companies, there were a number in the 15–20% range (including Sony, Canon, Matsushita Electrical and Fuji Heavy Industries). Moves to seek stock market listings or bond issues outside Japan are limited. Toyota, for example, only listed on the New York and London Stock Exchanges in September 1999, announcing at the same time that it had adopted new accounting practices which would provide investors with more transparency about its ﬁnances. By the time of Glassman’s survey, it was 10% owned by US investors. In more general terms of foreign ownership of Japanese ﬁrms a recently published report indicated that, in 1998, foreigners (companies and individuals) owned 10% of companies quoted on Japanese stock markets, a gradual, if steady, increase from 5.5% in 1992 (National Conference of Stock Exchanges, Japan 1999: 5). However, from another perspective, foreign owners are becoming increasingly important because, as Table 2 shows, by 1997, foreigners were undertaking 29.1% of transactions on the Tokyo Stock Exchange. In Japan, the debate about reforming corporate governance is still developing. Banks that have been locked in to poorly performing loans and shares as a result of

Multinationals, corporate governance and ﬁnancial internationalisation 283

Table 2.Shareholder structure based on transaction amounts in securities broker accounts

Individuals Financial Institutions Industrial Companies Foreigners Dealing Account

1989 %

1990 %

1991 %

1992 %

1996 %

1997 %

24.4 32.4 11.9 8.8 22.4

23.6 31.4 10.0 10.7 24.3

23.6 29.2 8.2 15.1 23.8

20.8 26.5 6.3 20.3 26.1

15.7 23.2 4.0 24.5 32.6

11.6 23.4 3.4 29.1 32.5

keiretsu obligations are being pressured to restructure their balance sheets in order to meet international standards of capital adequacy. This is leading to increasing mergers in the sector as well as increasing pressure on manufacturing companies to restructure in order to meet their loan obligations. Under these circumstances, it is more diﬃcult for banks and manufacturing companies to maintain low performing loan or share portfolios with other companies in their keiretsu. They are similarly being pressured to reduce their shareholdings in other ﬁrms in order to increase their return on capital (see Figures 2 and 3 from Morgan and Takahashi 2002). 17 16.5 16 15.5 15 14.5

%

shareholding ratio

14 13.5

98

96

94

92

90

19

88

13

year

Figure 2.Average ratio of stakes of banks in industrial corporations

Renault’s participation in Nissan has led to a reduction in the cross-shareholdings of this company in order to release capital for what are seen as more productive activities. Therefore, reﬂected in the increasing presence of foreign ﬁnancial institutions as investors, Japanese ﬁnancial markets are becoming more liquid. However, Japanese ﬁnancial institutions can still predominantly rely on their huge, passive depositor base to provide them with funds to continue lending and supporting their cross-shareholdings. The presence of foreign investors is still

46 45 44 43 42 41 40 39 38 37 98

96

94

92

90

shareholding ratio

19

88

%

284 Glenn Morgan

year

Figure 3.Average ratio of stakes of industrial corporations in banks

relatively limited compared to the role the Japanese ﬁnancial institutions continue to play. In Japan, multiple stock exchange quotations and the use of international accounting standards remain limited to a handful of the very largest companies. In a recent survey of 100 top Japanese companies examining the oﬃcial report, known as the Japanese securities report (Yukashoken Hokukushko) that is presented by the companies to the Ministry of Finance, it was found that only eighteen of the 100 conformed to international accounting standards. However, one other company, Toyota, publishes its results in US GAAP format for its shareholders although it submits its report to the MOF in a Japanese format (Morgan and Takahashi 2002). All of these nineteen companies are issuing ADR or listing stock at the New York Stock Exchange, which requires the companies to ﬁle ﬁnancial statements based on the US GAAP or the International Accounting Standards. They have therefore taken on the US GAAP only to meet the requirement from foreign stock exchanges; no companies have voluntarily introduced it in the absence of such a requirement. This is not surprising in as much as the ﬁling of ﬁnancial statements based on the US GAAP or International Accounting Standards is not allowed in Japan. Because of this it costs much more for Japanese companies to take on accounting and disclosure policies other than the Japan GAAP, though recent reforms have brought Japanese GAAP standards closer to US GAAP and IASC than previously. Major US and UK multinationals, on the other hand, are likely to be quoted on both the New York and the London Stock Exchanges and to use international accounting standards (a requirement for quotation on the main markets). This reﬂects both the close inter-relationship of Wall Street and the City of London historically, but also the central role these institutions took in providing a framework for the development of global ﬁnancial markets over various phases of history.

Multinationals, corporate governance and ﬁnancial internationalisation 285

In the 1960s, London established itself as the centre for what was termed the Eurodollar market. This involved using the surplus dollars the US was spending overseas to fund both its economic and political activities to construct loans to companies in Europe at a time when capital markets were otherwise closed and national. As these markets were deregulated, the exchanges in London and New York pressed for forms of international regulation that ensured not just “ﬁt and proper person standards”, but also what was termed “the level playing ﬁeld” (Morgan 2001b). This involved an acceptance not just of international accounting standards, but also of an international system that forbade national authorities from setting up rules in capital markets (about entry, etc.) that discriminated against outsiders. American and British companies had, therefore, from early on operated in systems relatively open to outside capital and had structured their rules to allow this to happen. In this respect, change is more pronounced in Japan and Germany where the systems have had to undergo systematic restructuring in order to become more open to outsiders. Thus, whilst by some measures, Japanese and German multinationals are not as internationalised in ﬁnancial terms as US and UK companies, the journey that they have had to make to get where they are now, has been further and more diﬃcult, than that made in the Anglo-Saxon context. The British and US cases do, however, reveal some diﬀerences as well as similarities. In particular, because of the diﬀerences in size, the impact of foreign ownership varies between the US and the UK. Portfolio investments in the UK belonging to foreign investors were £414.3 billion, up from £109.6 billion in 1990, whilst UK investments in overseas portfolios were even higher; £574.3 billion in 1997, up from £189.6 in 1990 (Hobson 1999: 1063). As a proportion of the market, overseas investors have been of increasing signiﬁcance though even here the total ﬁgure is not much diﬀerent than the German one. Table 3.Share ownership in the UK

Persons Banks Insurance Co. Pension Funds Other Financials Public sector Overseas Other

1957(%)

1975 (%)

1993 (%)

65.8 0.9 8.8 3.4 8.2 3.9 4.4 4.6

37.5 0.7 15.9 16.8 14.6 3.6 5.6 5.3

17.7 0.6 17.3 34.2 9.7 1.3 16.3 3.1

Adapted from Scott (1997) p.86

In the US, there has also been a rapid growth in monetary terms of foreign ownership of US corporate equities, up from $183 billion in 1987 to $882 billion

286 Glenn Morgan

in 1997. However, as a proportion of US corporate equity as a whole, this constitutes only 6.3% in 1997, the same ﬁgure as in 1989 (Prock 1999). Thus, in ownership terms, US ﬁrms are less internationalised than their counterparts in not only the UK, but also Germany and perhaps most surprisingly, Japan. On the other hand, U. S. investors own $1.8 trillion of non-U. S. stocks, up from just $198 billion in 1990. In a study which looked at the 100 largest non-US multinationals with signiﬁcant subsidiaries in the USA, it was shown that on average, Americans held 20 percent of the shares in these companies. In fact, Americans owned at least 30 percent of the stock of twenty-two of the 100 companies, including 55 percent of Nokia Oyj of Finland (up from 15 percent in 1994), 39 percent of News Corp. of Australia (the global media company that owns the Fox Network and The Times of London), 37 percent of the Jeﬀerson Smurﬁt Group of Ireland and the Netherlands (paper and packaging), and 40 percent of Invensys PLC of Britain (construction, controls)(Glassman 2001). The US is characterised by an asymmetrical pattern. US investors predominantly own its multinationals, whilst also having overseas stocks. The following table summarises these patterns: Table 4.Financial internationalization in diﬀerent countries Germany

Japan

USA

Foreign ownership of companies

Increasingly important

Minor importance

Minor impor- Importance of tance US investors

Investment in overseas companies

Limited

Limited

High

High

Limited shift to IAS and US GAAP

US GAAP

IAS and US GAAP

Limited

Low

Low

Transparency standards Some shift to IAS and US GAAP Degree of overall change in system compared to 10 years ago.

High

UK

The Implications of ﬁnancial internationalisation It is clear from these discussions that the rate of change towards ﬁnancial internationalisation varies across national contexts. What are the implications of these changes so far? In this chapter, the focus is particularly on the system of corporate governance and its degree of coherence and consistency. The starting

Multinationals, corporate governance and ﬁnancial internationalisation 287

point, as has been indicated, is that national systems of corporate governance have developed consistent and coherent mechanisms for resolving the so-called principal-agent problem (between managers and shareholders/stakeholders), and issues of the distribution of surpluses between diﬀerent stakeholders in the ﬁrm. The German model has been based on the tight oversight of managers exercised by the supervisory board on which the representatives of shareholders and employees were equally represented. The German system was based on a high wages policy for the core workers, which in turn, was sustained by the system of “diversiﬁed quality production” (Streeck 1991). Shareholders were predominantly other industrial companies or banks, which held shares for long-term growth. The Japanese model provided greater freedom for managers, but within a context where these freedoms were to be exercised in ways that sustained the “community of the ﬁrm”, deﬁned ﬁrst, as employees, second, as suppliers and other business partners, and only third, as shareholders. Since shareholders were often also business partners, overt conﬂict rarely emerged. The US model has evolved from one in which large Chandlerian ﬁrms used retained earnings or the bond market to fund their investment and shelter them from the vagaries of the stock market, to one in which managers have to be continually aware of share price movements. In the last 20 years, the market for corporate control in the US has extended massively, reducing the discretion of senior managers and increasing the active role that institutional investors play in the systm (O’Sullivan 2000). Lazonick and O’Sullivan describe this as a shift from “invest and retain” to “downsize and distribute” (Lazonick and O’Sullivan 2000). US ﬁrms survive by meeting demanding shareholder value requirements. The UK never had the full model of the Chandlerian ﬁrm. Few British ﬁrms reached the size of the giant US ﬁrms in industries such as cars, electronics, or chemicals. Their growth strategies were less consistent and depended more on external ﬁnancing. Therefore, they have generally been more dependent on the stock market than their American counterparts. The formalisation of this relationship into “shareholder value discourse” and the extended market for corporate control has, in that sense, been less disruptive of ﬁrm structure than has been the case in the US. Here, the philosophy of “downsize and distribute” has led to some dramatic changes, as, for example, in AT&T. To describe national systems as relatively consistent and coherent, is not to imply that there is stasis, or that there have not, at times, been severe tensions and conﬂicts. These have occurred in Germany, for instance, between employers and trade unions, or in a rather diﬀerent way, in the conﬂicts in the UK between these groups. Rather, this idea of coherence and consistency acts as a heuristic device against which to consider the impact of ﬁnancial internationalisation on these processes. For example, where there is a high level of consensus amongst ﬁnancial stakeholders, one could argue that there would be no tendency to conﬂict within

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the corporate governance system. This has the somewhat paradoxical outcome that both highly internationalised ﬁrms and ﬁrms with low levels of internationalisation will show little tendency to conﬂict, whereas partially internationalised ﬁrms may be more liable to these tendencies. The reason for this is that partial ﬁnancial internationalisation can lead to the ﬁrm being simultaneously located in diﬀerent contexts, with distinct expectations of corporate governance. Thus, the more inbetween two diﬀerent systems a ﬁrm is, because of international ﬁnancialisation, the more incoherent will become its system of corporate governance. The most obvious example of this in the countries discussed here is Germany. Thus, we can expect that German ﬁrms which are undergoing partial ﬁnancial internationalisation, face bigger problems of managing their governance systems than do US or British ﬁrms, which are more highly internationalised, or Japanese ﬁrms which are less ﬁnancially internationalised. This indeed, seems on the surface to be the case. German ﬁrms have been notably expansive in recent years, making many large purchases, particularly in the US, which have been ﬁnanced by share swaps. As discussed, these share swaps dilute the inﬂuence of German investors and provide access for new types of investors from the USA. In a number of high proﬁle cases such as Daimler and Mannesmann, the tensions brought into the highest level of the company have been extremely diﬃcult to deal with. In Mannesmann, it led to the disappearance of the company through a hostile bid; in the Daimler case, it has led to a range of senior resignations and further complicated negotiations amongst the various stakeholder groups. This is exacerbated by the fact that, even amongst the category of “German investor”, there is the beginning of change. Banks and industrial companies are beginning to sell oﬀ their portfolio of longestablished shares in industrial companies, a move that is being enhanced by legal changes. Instead, the banks and insurance companies are beginning to move into either asset management or dealing on their own account. In both cases, they are shifting to US models of appraising the performance of their portfolios by reference to shareholder value criteria, rather than “patient capital” criteria. These pressures on German multinationals are reinforced by accounting requirements, which force them to segment their organization into distinct units, each of which can be monitored to achieve speciﬁc returns on assets. In German multinational companies, used to complex forms of cross-subsidy between areas of the business as part of the price of building for the long-term, this leads to further tensions. Siemens, for example, has adopted the discourse of “core competence” and promised the markets that it will seek buyers for a number of its more disparate businesses, which have previously been sheltered within the broader corporate body. Jurgens et al. (2000) interpret these changes in terms of a “marginal” impact on the German system as a whole because they are limited to the relatively small number of large, publicly quoted multinationals (see, for example, Morin’s analysis

Multinationals, corporate governance and ﬁnancial internationalisation 289

of the impact of US investment and pension funds on the French context: Morin 2000). On the other hand, for these multinationals, there is a growing tension between their previous experience of “patient capital” and their new requirement for funds from shareholder-value driven institutional investors. This may reveal itself at various points in the organization. For example, where German multinationals have purchased ﬁrms from the US, US subsidiaries may be more shareholder driven than German plants, which may lead to processes of “coercive comparison” between plants (and between managers). Thus the German multinational is becoming a less coherent organization. Its shareholders are more diverse in their orientations and this is reﬂected in the diﬃculties senior managers have in balancing the expectations of home-based stakeholders (employees, suppliers and some shareholders) with those overseas investors who demand better shareholder value. This reﬂects a potential bifurcation between German insiders and foreign outsiders, (often supported by the most senior managers who want their company to move towards the shareholder value driven model), as the main source of tension in corporate governance. In the US and UK cases, there is an increasing coherence and consistency of shareholder objectives around maximising shareholder value. It is clear that there remain disagreements about how to measure this and also about the time scale on which it is measured. For example, there seems to be some agreement that the largest pension fund investors in the US and to some extent, the UK, have more complex portfolio requirements than can be subsumed under the traditional model of Anglo-Saxon “short-termism”, though systematic research in this area has yet to be undertaken. Thus, at the corporate governance level, there is more or less a single message being communicated to ﬁrms about what their goals should be. An essential part of this process is a systematic compartmentalisation of the ﬁrm in accounting terms, so that investors can “read” which areas are the most proﬁtable. This has profound implications on how ﬁrms operate. In particular, highly aggregated ﬁnancial data enables managers to conceal areas either failing in proﬁt terms or being built up for some long-term goal. In other words, it leaves a high level of discretion in the hands of the managers to determine the internal allocation of funds. Active institutional investors, on the other hand, require the ability to make those decisions for themselves. This leads to a series of changes. First, ﬁrms are pressurised to break their activities down into more clearly demarcated divisions, which produce their own proﬁt and loss ﬁgures. Second, ﬁrms are pressurised towards achieving a common level of return on assets across divisions. Failure to achieve the expected level of return is seen as leading to a restructuring or a divestment of parts or the whole of the division. Third, ﬁrms have to justify their range of businesses in terms of focused activities linked systematically together. Institutional investors want to manage their portfolio of diﬀerent types of

290 Glenn Morgan

activities themselves and not to leave managers in diversiﬁed conglomerates to do this. Therefore, the more powerful institutional investors have become, and the more they have enforced shareholder value driven norms on companies, the more they are insisting on “focus” and acting to force diversiﬁed ﬁrms to split into separate units. In order to maximise returns in this context, ﬁrms will engage in high levels of buying and selling of the ﬁrm’s component parts. Therefore, in the case of UK and US multinationals, this leads to the tendency for elements of the organization moving in and out of speciﬁc ﬁrm-based concentrations of capital. These ﬁrms are subject to continuous pressure for organizational restructuring in order to meet capital market expectations. As Kristensen and Zeitlin argue (2001), this leads to high levels of expertise in headquarters about how to manage the ﬁrm’s position within these ﬁnancial markets, but it may also prompt subsidiaries to develop strategic survival skills, potentially resulting in centripetal tendencies. Subsidiaries become highly competitive against each other in the struggle for survival within the multinational and/or beyond it (by, for instance, becoming attractive to another multinational or to venture capitalists willing to fund a management buy-out) (see Birkinshaw 2001; Belanger et al. 2000 for further examples of this process). Consensus amongst ﬁnancial stakeholders is consistent with the development of multiple centres of inﬂuence (in Hedlund’s terms, a heterarchical structure: Hedlund 1986), and a highly unstable internal structure. Thus, whereas in the German case of ﬁnancial internationalisation, one sees an increasing bifurcation, in the US and UK ﬁrms, one sees a single dominant logic leading to multiple processes of competition and conﬂict within the ﬁrm as diﬀerent business units strategise for survival. Japanese multinationals at this stage remain the most stable in terms of their corporate governance system and its impact on the organization more broadly. The degree of ﬁnancial internationalisation remains limited. Some restructuring of company boards has taken place to bring them closer to the US model by reducing their size and clarifying responsibilities. This reﬂects some limited pressure from US institutional investors, but their stake remains small and relatively insigniﬁcant in the broader Japanese context. The continued vast ﬂow of individual savings into the Japanese banking system means that only either the most troubled ﬁrms, such as Nissan, or the most internationally respected ﬁrms, such as Toyota, need to consider going beyond Japan for funds (Morgan and Takahashi 2002). This coherence is reﬂected in the structure of multinationals, where strong central control remains the dominant model of organization and subsidiaries are generally tightly integrated into the head oﬃce strategy (Whitley et al. 2001).

Multinationals, corporate governance and ﬁnancial internationalisation 291

Conclusions The chapter has considered the degree of ﬁnancial internationalisation of multinationals from the US, the UK, Germany and Japan. It is clear from the data presented that the nature of this ﬁnancial internationalisation varies considerably. By most measures, Japan is the least internationalised, though by the foreign ownership measure, it is the US multinationals that are least international. Germany reﬂects the clearest intermediate position, whilst the US and the UK are changing least because it is their rules that set the standards for internationalisation. As ﬁrms internationalise their ﬁnancial structure, a range of potential impacts on their corporate governance structures arise. These impacts vary according to the existing structure of the ﬁrm. Summarising these tensions, one can diﬀerentiate according to the centripetal, fragmenting forces unleashed in the process of ﬁnancial internationalisation. Japanese ﬁrms are least aﬀected by changes to corporate governance; they therefore retain a consensus at the corporate governance level. This consensus remains within the “patient capital” discourse. Managers retain high levels of freedom to cross-subsidise activities, to build businesses slowly, to restructure failing units without extensive external monitoring. An increasing number of German multinationals are stuck between competing modes of corporate governance, which opens up the possibility of major bifurcations within the ﬁrm at senior management level. UK and US ﬁrms are likely to have a range of potentially distinct centres of power, but they retain the corporate ability to deal with this through processes of acquisition and divestment; in other words, they combine a strong hierarchy in terms of ﬁnancial control with strong heterarchical tendencies. These ﬁndings remain tentative and subject to further research. Nevertheless, they point to the need to examine more carefully the impact of ﬁnancial internationalisation on the transnational social space that is created by the multinational.

References Bartlett, C. A. and Ghoshal, S. (1989). Managing across borders: The transnational solution. London: Century Business. Belanger, J., Berggren, C., Bjorkman, T. and Kohler, C. (1999). Being local and worldwide: ABB and the challenge of global Management. Ithaca, IRR: Cornell University Press. Berle, A. A. and Means, G. C. (1932) The modern corporation and private property. New York: Macmillan. Birkenshaw, J. (2000). Entrepreneurship in the global ﬁrm. London: Sage. Dicken, P. (1998). Global shift. (3rd edition) London: Paul Chapman Publishing.

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Doremus, P. N., Keller, W., Pauley, L. and Reich, S. (1998). The myth of the global corporation. Princeton, New Jersey: Princeton University Press. Froud, J., Haslam, C. Johal, S. and Williams, K. (2000). Shareholder value and ﬁnancialization: consultancy promises, management moves. Economy and Society, 29(1): 80–111. Glassman J. K. (2001). America’s reciprocal stock portfolio: How US investors invest in ‘foreign’ companies that invest in the US (Report for the Organization for International Investment: accessed from http://www.oﬁi.org on 27/09/01). Hall, P. and Soskice, D. (2001) (Eds.). Varieties of capitalism. Oxford: Oxford University Press. Hassel, A.; Hoepner, M.; Kurdelbusch, A.; Rehder, B. and Zugehoer, R. (2001a). Two dimensions of the internationalization of ﬁrms. Working Paper 01/3: Max Planck Institute for the Study of Societies, Cologne. Hassel, A. and Beyer, J. (2001b). The market for corporate control and the ﬁnancial internationalization of German ﬁrms. Paper presented to ESRC Conference on Multinational Enterprises, September. Warwick. Hedlund, G. (1986) The hypermodern MNC — A heterarchy?’ Human Resource Management, 25 (1): 9–35. Held, D., McGrew, A., Goldblatt, D. and Perraton, J. (1999). Global transformations. Oxford: Polity Press. Hirst, P. and Thompson, G. (1999). Globalization in question. 2nd edition. Oxford: Polity Press. Hobson, D. (1999). The national wealth. London: Harper Collins. Hopner, M. and Jackson, G. (2001). An emerging market for corporate control: The Mannesmann takeover and German corporate governance. Working Paper 01/4: Max-PlanckInstitute for the Study of Societies. Hu, Y-S. (1992). Global or stateless ﬁrms Are national corporations with international operations. California Management Review, 4 (2): 07–26. Jurgens, U., Naumann, K. and Rupp, J. (2000). Shareholder value in an adverse environment: the German case. Economy and Society, 29 (1): 54–79. Jurgens, U. and Rupp, J. (2001). The German system of corporate governance: Characteristics and changes. Paper for EU TSER Project on Corporate Governance, Innovation and Economic Performance in the EU. Kristensen, P. H. and Zeitlin, J. (2001). The making of a global ﬁrm: Local pathways to multinational enterprise. In Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press. Lane, C. (2001). The emergence of German transnational companies and their impact on the domestic business system. In Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press. Lane, C. (1998). European companies between globalization and localization: a comparison of the internationalization strategies of British and German MNCs. Economy and Society, 27 (4): 462–485. Lazonick, W. and O’Sullivan, M. (2000). Maxmimizing shareholder value: A new ideology for corporate governance. Economy and Society, 29 (1): 13–35. Morgan, G. (2001a). The multinational ﬁrm: Organizing across institutional and national divides. In Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press. Morgan, G. (2001b). The development of transnational regulations and standards. In Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press.

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Morgan, G. and Takahashi, Y. (2002). Shareholder value in the Japanese context. Competition and Change 6(1). Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press. Morin, F. (2000). A transformation in the French model of shareholding and management. Economy and Society, 29 (1): 36–53. National Conference of Stock Exchanges, Japan. (1999). 1998 Shareownership Survey. Tokyo: Tokyo Stock Exchange. O’Sullivan, M. (2000). Contests for corporate control: Corporate governance and economic performance in the United States and Germany. Oxford: Oxford University Press. Prock, J. (1999). ‘Patterns of foreign ownership of US securities and their implications’ (accessed from http://www.sbaer.uca.edu/Research/1999/SRIBR on 27/09/01). Sassen, S. (1996). Losing control? — Sovereignty in an age of globalization. New York: Columbia University Press. Scott, J. (1997). Corporate business and capitalist classes. Oxford: Oxford University Press. Streeck, W. (1991). On the institutional conditions of diversiﬁed quality production. In Matzner, E. and Streeck, W. (Eds.). Beyond Keynesianism: The socio-economics of production and full employment, 21–61. Aldershot: Elgar. Whitley, R. (1999) Divergent Capitalisms. Oxford: Oxford University Press. Whitley, R. (2001). How and why are international ﬁrms diﬀerent? In Morgan, G., Kristensen, P. H. and Whitley, R. (2001) (Eds.). The multinational ﬁrm. Oxford: Oxford University Press. Whitley, R., Morgan, G., Kelly, W. and Sharpe, D. (2001). The changing Japanese multinational: Application, adaptation and retrenchment in manufacturing and ﬁnancial services. Paper presented to ESRC Conference on Multinational Enterprises, September. Warwick. Williams, K. (2000). From shareholder value to present-day capitalism. Economy and Society, 29 (1): 1–12. Wortmann, M. (2001). The impact of external growth on MNCs’ conﬁguration and coordination structures. Paper presented to ESRC Conference on Multinational Enterprises, September. Warwick. Wortmann, M. and Dörrenbächer, C. (1997). Multinationale konzerne und der standort Deutschland. In: W. Fricke (Ed.). Jahrbuch arbeit und technik 1997 Globalisierung und institutionelle reform, 28–41. Bonn. Zysman, J. (1983). Governments, markets and growth. London: Cornell University Press.

Chapter 14

Managing the interconnected organization An internal tension perspective Antoine Hermens

Introduction The use of alliances as a strategic mechanism has signiﬁcantly increased over the past decade (Harbison and Pekar 1998). Characterised by many competing forces, the dynamics of which may easily jeopardise the equilibrium of alliances, this chapter develops a synthesis of the “dialectic tension” and “collaborative action” frameworks to put into context the paradoxical and dynamics forces that act on alliances, including the implications of competing forces for outcomes, using a case study drawn from the airline industry. The increase in collaborative structures signals a signiﬁcant shift in the way business is being conducted in the global business environment. Alliances are an increasingly important contemporary vehicle for value creation (Hagedoorn 1993), and some researchers claim that it will become one of the most important organizational forms of the 21st century (Koza and Lewin 1998). Research suggests, however, that alliances are less stable and successful than formal organizations because they are more prone to dissolution (Bleeke and Ernst 1991, Gomes-Casseres 1987; Yamawaki 1997), although little consensus exists as to the reasons why. Strategic alliances can be seen as systems in which the degree of stability is determined by the balance of multiple internal tensions. A focus on “alliance tensions” enables one to develop propositions about these conﬂicting forces and their implications for alliance outcomes. An appreciation of alliance tensions facilitates the design of organizational and strategic processes for more stable outcomes.

Alliances and global strategy The speed with which knowledge can be transferred and converted into new products and services, facilitates the global growth of strategic alliances (Badarocco

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1991; Davenport and Prusak 1998), for which empirical data illustrates its signiﬁcance: – –

– –

More than 20,000 alliances have been created since 1997 in the United States alone; Alliances now account for ﬁfteen percent of revenue in the top 1000 public US corporations. The top twenty-ﬁve “Fortune 500 ” ﬁrms most actively involved in alliances reported an average 17.2 percent return on equity, contrasted with just 12.2 percent for the entire list of Fortune 500 companies (Harbison and Pekar 1998); Alliances between US ﬁrms and partners in Europe, Asia and Latin America are growing at the rate of 25% annually (Mockler 1999); Alliance activity is not just conﬁned to publicly listed organizations in the US, as many companies in Europe and Asia generate 50 to 60% of their sales from alliances (Buchanan 1992);

In some countries, such as Australia, where many industry sectors are dominated by oligopolies, alliances between companies in the same national economy are often constrained by anti-trust and competition laws. Collaborative relationships between larger players run the risk of breaching the Trade Practices Act, and this may explain why Lendrum (1999) estimates that only 3–5% of Australian companies engage in alliance relationships. There are fewer constraints on international alliances and thus, many companies form alliances in foreign markets, especially in the international airlines industry. The alliance strategy has been the airline industry response to “strong customer preference for a single carrier service; economies of scope, density, and scale available from multi-hub operating systems; and restrictions placed by domestic laws on cross border ownership of airlines the forces of globalisation, technology and legislation” (Holloway 1998: 125). The transition from arenas of national regulation to those of more liberal international competition has seen the consolidation of airline carriers through strategic alliances forged across global arenas (Mockler 1999). These collaborative relationships incorporate multiple, wide-ranging linkages, and can either be equity or nonequity based. Collaboration, both multilateral and bilateral, facilitates the movement of passengers and cargo between respective networks. The majority of airline operators, for example, American Airlines, British Airways, Lufthansa, Singapore Airline and Qantas, are involved in diverse cooperative partnerships. A senior executive of Air New Zealand described the twin pressure of globalisation and alliance formation in the airline industry in terms of airlines having “to club or be clubbed” (The Economist 1998). The forces are eﬀective - in the period between 1990 and 1996, airlines entered into 389 new airline alliances, increasing to more than 500 by 1998 (The Economist 1998).

Managing the interconnected organization 297

Two perspectives explain the popularity of strategic alliances within the airline industry, and one of the arguments is that alliances promote technical and operational eﬃciencies for those with larger networks and more passengers (Youssef 1994). Production costs can be spread across a larger base, decreasing overall unit costs; maintenance bases, for example, can be consolidated between partners. Alliance partners may also attract more passengers, due to the merging of frequent ﬂyer schemes. A second perspective proposes that alliance formation is a strategy to limit competition with other airlines (Youssef 1994), and in a more realistic view, suggests that globalization and technology change the rules of the game (Hamel 1991). Hence, the global airline industry is moving towards consolidation and competition between alliance networks - the Star and OneWorld alliance networks, for instance, accounted for 80.3% of international passengers entering the Australian market in the ﬁnancial year 1997–98 (Sandilands 1999). Implementing collaborative strategies often present alliance partners with organizational instabilities and strategic challenges. Collaboration may increase one partner’s competitive edge over the other(s) (International Aviation 1994). A Boston Consulting Group study (Mahoney; 1998) reported that less than 30% of alliance relationships in the airline industry have survived. Critical strategic issues threatening survival range from conﬂicting objectives to failure to align service and ﬂight standards. Complementary objectives and learning are vital to the success of alliances; equally, when both partners are equally intent on internalising the other’s skills, distrust and conﬂict may spoil the alliance and threaten its very survival (Hamel 1991). Equity is an eﬀective antidote to dissolution because non-equity airline alliances have a substantially lower survival rate than those with equity shares (Gunasekera 1997).

Scanning the literature and building theory The increase of strategic alliances between ﬁrms signals a signiﬁcant shift in the organizational practices of companies, according to Noteboom (1999). These views are reﬂected in recent research on alliances, where the focus has changed from examining issues associated with alliance formation to a focus on exploring the dynamics of interﬁrm collaboration (Harrigan 1988; Teece 1992; Kogut 1988a; Williamson 1985). Interﬁrm diﬀerences (knowledge, skills, technologies, core competencies, resources, etc.) form the underlying strategic motivations for entering into and maintaining an alliance. Conversely, diﬀerences in characteristics can have a negative impact on the longevity and eﬀectiveness of collaboration (Parkhe 1993). It is the erosion or convergence of such partner diﬀerences that destabilise alliance relationships.

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The Collaborative Action framework (Rura-Polley and Palmer, 1997) acknowledges the dualities and interdependence of the collaborative process (see Figure 1). The model recognises both the overt and covert nature of the collaboration. In the model, collaborative action is inﬂuenced by, and in turn inﬂuences, a series of processes. Consequently, contextual, structuring, organizational, and discursive processes shape the eﬀective implementation of an alliance strategy. Contextual processes refer to the dynamics of the environment, while structuring refers to the practices used to coordinate and control collaborative action. Organizational cognition refers to the modes of rationality or logics of action that structure alliance member’s perspectives on collaboration, while discursive processes refer to the linguistic and other frames used to construct collaboration. While each alliance is unique, there will often be analytic similarities between them, in terms of a foundation of dualities that may be both: – – – –

Temporary mechanisms and long lasting relationships Cooperative and competitive weapons Strategically determined and emergent Intended in their purposes and unanticipated in their beneﬁts

Kogut (1989) extends the dualism perspective on alliances by deﬁning them as dialectical systems, in which stability is determined by the balance of multiple conﬂicting forces. He joins forces with what, in the social sciences, particularly in management research, has become an important basis for theorising: the development of contradiction based paradigms, which stress dialectics, tensions, dilemmas, and paradoxes (see Das 1984; Poole and Van de Ven 1989; Quinn and Cameron 1988; Cunha, Clegg and Cunha, this volume). In any organization there are dialectical forces and values that contradict, collide, and struggle with each other for domination and control (Van de Ven 1992). Cameron and Quin (1988) identify various paradoxes that inﬂuence the process of organizational change while Handy (1995) and Peters (1992) discuss the management of paradoxes in relation to management skills; Volberda (1998) explores the signiﬁcance of paradoxes for evolving organizational structures; Mintzberg (1996), Miles and Snow (1991), Doz (1996) consider the implication of paradoxes for the collaboration process. There is, however, little consensus on the ways and under which circumstances each tension, individually or collectively, translates into collaborative eﬀectiveness for alliance performance. The literature identiﬁes many conﬂicting and paradoxical forces. While this list is not meant to be exhaustive, for there are many variants, the following dichotomies represented in Table 1 are characteristic: Alliances change in terms of the shifting dynamic tensions of the various competing forces that constitute them. The internal tension framework (represented in

Managing the interconnected organization 299

CONTEXTUAL PROCESSES

•

HYPERCOMPETITIVE ENVIRONMENT SOCIO-POLITICAL ENVIRONMENT INSTITUTIONAL ENVIRONMENT

•

• DISCURSIVE PROCESSES

• • •

COLLABORATIVE

TALK IDENTITIES INTEREST

ACTION

·

STRUCTURING PROCESSES

• • •

IT HRM ACCOUNTING

ORGANIZATIONAL COGNITIVE PROCESSES

• • •

REFRAMING SENSEMAKING TRUST

Figure 1.Collaborative action model Table 1.Representing dichotomies Dichotomies

Authors

Market vs Hierarchy

Williamson 1983; Gomes-Cassere, 1987

Cooperation vs Competition

Teece 1992; Oye & Ungson 1997

Embeddedness vs Flexibility

Fichman & Goodman 1997

Short term vs Long term

Das and Teng 1997; Yoshino and Rangan 1995.

Private beneﬁts vs Common beneﬁts

Gulati, Khanna and Nohria 1994

Internal vs External focus

Quinn and Rohrbaugh 1983

Flexibility vs Control

Volberda 1998

Process-oriented vs Outcome-focused

Koza and Lewin 1998

Figure 2) provides insights into what happens when the balance between the diﬀerent competing forces shifts toward the dominance of one or the other. The framework suggests that signiﬁcant imbalance will result in alliance dissolution (organizational integration or segregation), and provides insights into the process through which balance may be restored, or deteriorate further. The objective

300 Antoine Hermens

MARKET

ALLIANCE

HIERARCHY

DISSOLUTION

STABILITY

ACQUISITION / MERGER

HIGH

HIGH

RIGIDITY

• FLEXIBILITY

•

• COMPETITION

•COOPERATION

• SHORT TERM

• LONG TERM

OREINTATION

OREINTATION

Figure 2.Internal tension framework

in a strategic alliance is usually to maintain the collaborative relationship within the original rules of engagement, and prevent unplanned alliance dissolution (Das and Teng 1999). Factors inﬂuencing internal tensions and alliance stability include availability of resources; diﬀerential bargaining power; type of alliance; alliance goals; stage of industry life cycle, and changing market conditions. To maintain the collaborative relationship, alliance partners should balance these dialectical forces. They must manage the paradox of a “permanent dialectic” as Cunha, Clegg and Cunha propose in the second chapter of this volume.

Behavioural tension: Cooperation versus competition Competition can be described as one alliance partner pursuing its own interest at the expense of others. Cooperation ensures the smooth working relationship needed to meet the objectives of the alliance through the pursuit of mutual

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interests and common beneﬁts, and both are essential for a sustainable and successful outcome. A lack of understanding of a partner’s operations, culture, strategic intent, and ideology can lead to resistance and conﬂict. For example, one carrier in an alliance might be more concerned about network synergies and improved access to distribution channels, whereas another might expect capital injection. If cooperation is lacking, opportunistic behaviour will become the norm. Competition protects a partner from losing its ﬁrm-speciﬁc advantage through inattention, but where competitive economic rationalisation pressures lead to alliance partners downsizing and consequently, the loss of its core competencies, these advantages are put at risk. The most desirable alliance arrangements seem to be with partners that are approximately equivalent, in terms of size, proﬁtability, status and possess complementary know-how and resources (Brouthers, Brouthers and Wilkinson 1995). Thus, one may propose that: Proposition 1 The stability of an airline alliance will be related to the level of balance between cooperation and competition.

Structural tension: Flexibility versus rigidity Flexibility refers to the degree to which partners are able to modify structural arrangements in the alliance in order to adapt to changing economic and market conditions. In the airline industry, these might be the duration and availability of aircraft leases, sharing codes and routes, as well as joint-marketing arrangements. Crises encourage ﬂexibility, as for instance, when many Asian airlines dramatically reduced their capacity after the 1997 economic crisis and transferred aircraft to markets serving North America and Europe. The forecast is that the Asia Paciﬁc will witness the highest growth in airline passenger traﬃc rates by 2016, with a likely expansion of 7.7 per cent annually (Flint 1999), but of course, all predictions are highly contingent, and this was made before the decline in travel experienced after the events of September 11, 2001. Flexible arrangements enhance the capacity of partners to capitalise on market trends with greater speed and eﬃciency through increased frequency of ﬂights and a larger route network. An alliance also creates heightened market power for airline members and enables them to exercise combined and collective strength and increase competitive leverage over other airlines. Structurally, more ﬂexible alliances are those that are non-equity, or which have no equity change or creation between partners. However, some airline alliances have been criticised for being too ﬂexible, where individual airline

302 Antoine Hermens

partnerships lack suﬃcient detail, have little irreversible commitment, unclear property rights and a weak authority structure. Consequently, the bond between the collaborative airline partners can weaken, encouraging partners to join competing alliance groups. One telling example was Air France’s oﬀer to make Bangkok Airport its Asian hub, on condition that Thai break away from Star Alliance and join SkyTeam, which includes Korean Air, Delta and AeroMexico (Sandilands 1999). Airline equity alliances, including joint ventures and minority equity investments, often sacriﬁce ﬂexibility. The advantages of a high level of rigidity, especially through equity investment, are that it can generate increasing incentives and commitment, align the partners’ interests, and deter opportunistic behaviour (Parkhe 1993b; Williamson 1983). Gunasekera (1997) observed that where there is greater coordination of activities, services and facilities between alliance partners, higher volumes of traﬃc would be generated. A balance between being ﬂexible and rigid is essential for a sustainable alliance (Das and Teng 1996), therefore the proposition: Proposition 2 The stability of an airline alliance will be related to the level of balance between rigidity and ﬂexibility.

Psychological tension: Short term versus long term A constant tension in formulating and implementing alliance strategy is between a short-term and long-term orientation (Joskow 1985). A short-term orientation emphasises quick and tangible outcomes, highly focused and aimed at immediate results (Newman 1992). Alliance duration is often uncertain (Kogut 1991); consequently, a short-term orientation may limit the capital, resource and time exposure of individual partners to a collaborative relationship. Airline alliance agreements with a short-term orientation often involve non-equity arrangements and tend to be more exploitative in nature. In a long-term orientation the alliance is regarded more as a semi-permanent structure, concerned with relationship building. Long-term airline alliance agreements often involve equity arrangements and tend to discourage opportunistic behaviour among the strategic alliance partners. Nevertheless, a long-term orientation may tend to ignore short-term tangible performance, a neglect that can make the alliance more vulnerable. An example is provided by KLM, the Dutch airline, which abruptly called oﬀ partnership talks with Alitalia, after nearly two years of negotiation. The collapse was blamed on continuing uncertainty about Malpensa’s future, because the airport

Managing the interconnected organization 303

had been, and continues to be, plagued with problems, including a poor on-time record and long waits for baggage. KLM had entered negotiation with Alitalia aiming to use Malpensa as a second hub in Europe. Therefore: Proposition 3 The stability of an airline alliance will be related to the level of balance between shortterm and long-term orientation.

New organizational forms: Mergers, acquisitions and dissolution Termination of an airline alliance can occur through acquisition of one partner by another, representing a move toward a hierarchical relationship. Alternatively, alliance termination can occur through the dissolution of the collaboration, representing a shift towards a market type transaction (Das and Teng 1999). Hypothetically, one may propose that dissolution will follow a process of accelerating imbalance amongst the internal competing forces, and that alliances characterised by initial imbalances are more likely to be unstable in duration. A shift in balance towards domination by collaboration, rigidity and long-term orientation may result in partners losing their ﬁrm speciﬁc resources, making them vulnerable to merger or acquisition. An airline alliance dominated by competition between the partners, and characterised by loose, ﬂexible structural arrangements, governed by a short-term time orientation, resembles a traditional market relation that can severely limit or negate beneﬁts, resulting in the termination of the collaborative relationship. Proposition 4a An airline alliance is more likely to move towards a merger or acquisition when there is a dominance of cooperation, rigidity and long-term orientation. Proposition 4b An-airline alliance is more likely to move towards dissolution when there is a dominance of competition, ﬂexibility and a short-term orientation.

Methodology Four airline companies from two competing alliances were researched to test the propositions. Respondents were the companies’ senior executives and alliance managers. The multi-respondent approach was adopted as it allowed for a check on the overall reliability of the data. For the interviews both close- and open-ended

304 Antoine Hermens

questions were used (see Uzzi 1997). For the study to be comprehensive, interviews were conducted longitudinally. The research sought information on various levels of tension at various points in the alliance life cycle. The primary data was gathered through several rounds of face-to-face interviews, involving visits to multiple sites, during various stages of alliance operation. Several questions measured each tension, and the value of each measure is the average of these items. Scales for the independent variable measure each tension, and the gap between each of the variables indicates the level of alliance stability

Operationalizing the frameworks construct Doz’s (1996) study of open-ended interviews as a basis for inductive analysis of alliance cases was used to design the speciﬁc questions, which were pre-tested with a group of alliance managers, drawn from various organizations in several industries, to ensure acceptable validity and reliability. Several questions were developed for each measure, and the value assigned each measure was the average for the items. The scales of the independent variables measured the level of the competing forces at the time of alliance formation. Cooperation was operationalised in terms of the degree to which ﬁrms seek mutual interests rather than self-interests in alliances, using the following items: – –

To what extent do the partner ﬁrms exercise mutual patience in their dealings with each other? (Buckley and Casson 1988) Neither partner makes demands that might be damaging to the other partner (Inkpen and Currall 1997).

Competition was operationalised in terms of the degree to which a ﬁrm pursues self-interest rather than mutual interest: –

How often did you and your partner ﬁrm disagree on who should have control over the key decisions in the alliance? (Cullen, Johnson and Sakano 1995)

Rigidity was conceptualised as the degree of structural formality and connectedness that prevents modiﬁcation of alliance arrangements: –

To what extent are the partners precluded from making changes in the alliance relationship?

Flexibility was operationalised in terms of the degree of adaptability, responsiveness, and agility. –

In this relationship, our ﬁrm and our partner ﬁrm expect, to be able to make adjustments in the ongoing relationship to cope with changing circumstances (Aulakh, Kotabe and Sahay 1997: 189).

Managing the interconnected organization 305

Short-term orientation was operationalised in terms of the degree to which partners focused on quick and tangible results: –

To what extent does the criteria for resource allocation generally reﬂect shortterm considerations (Venkatraman 1989: 959).

Long-term orientation was operationalised in terms of the degree to which partners focused on developing the alliance rather than concentrating on achieving short-term goals: –

The extent to which the partners focus on long-term goals in this relationship (Ganesan 1994: 15).

Empirically testing the propositions Existing studies provide the foundation for developing survey measures (Das and Teng, 1999). A discriminate analysis tested propositions 1–3 and predicted the dependent variable of “alliance stability.” The independent variables will be the discrepancy within each pairs; therefore, the higher the diﬀerences, the greater the likelihood of alliance dissolution. Negative relationships between alliance stability and the diﬀerence cooperation minus competition will support propositions 1 to 3. Propositions 4a and 4b are tested by a discriminant analysis, where the dependent variable is “alliance outcome” with two values — dissolution and merger/acquisition. These two propositions will be supported by positive relationships, after subtracting the scores for cooperation minus competition, rigidity minus ﬂexibility, and long-term orientation minus short-term orientation.

Results and discussion Preliminary results show that the structure and the purpose of an airline alliance inﬂuence the partnership to emphasise certain tensions rather than others. For instance, the airline alliance KBD1 is equity based, characterised by cooperation, rigidity, and a long-term orientation. During the four years of the study, evidence emerged of an evolving process of accelerating imbalance amongst the internal competing forces in the alliance. In the early stages of the study the gap in the tension scores was low. Individual scores for cooperation, ﬂexibility, and long-term orientation rated slightly higher. In the third year of the study the diﬀerence in the tension scores had increased signiﬁcantly. Individual scores for cooperation, longterm orientation, and rigidity rated signiﬁcantly higher. The majority of respondents

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expressed the view that, were it not for legislative constraints, the alliance would evolve into an acquisition. The airline alliance KGL1 is a marketing, code-share and non-equity-based agreement. This collaboration is characterised by cooperation, ﬂexibility and a long-term orientation. The initial gap in the tension scores was low. Individual scores for competition, ﬂexibility, and long-term orientation rated slightly higher. In the third year of the study the diﬀerence in the tensions scores had not increased signiﬁcantly. The individual score in ﬂexibility did increase. The respondents expressed the view that “competitive industry forces demand that we employ a marketing alliance strategy and this partnership is currently the best strategic ﬁt.” The high levels of ﬂexibility and low levels of rigidity suggest that instability is emerging, and it is probable that dissolution will be the end result of this alliance. The airline alliance NCK3 is equity based and characterised by cooperation, rigidity, and a short-term orientation. During the three years of the alliance there was evidence that a process of accelerating imbalance amongst the internal competing forces in the alliance had developed. In the early stages of the alliance, the gap in the tension scores was high. Individual scores for cooperation, rigidity, and short-term orientation rated slightly higher. In the second year of the study, the gap in the tension scores had increased signiﬁcantly. Individual scores for cooperation, short-term orientation, and rigidity, rated signiﬁcantly higher. During the third year of the study the alliance was terminated, because of the acquisition of one of the alliance partners. The airline alliance NKR4 is a marketing, code share and non-equity-based agreement. This collaboration is characterised by cooperation, ﬂexibility, and a short-term orientation. Initially, the variance in the tension scores was low. Individual scores for competition, ﬂexibility, and short-term orientation rated slightly higher. In the third year of the study the variance in the tension scores had increased, as did the individual scores for rigidity and long-term orientation. The respondents expressed the view that the NKR4 alliance was an integral part of the companies’ global growth strategy.

Conclusions The chapter represents longitudinal work in progress, limited to one global industry, and presents preliminary analyses of interview data from four airline companies engaged in global horizontal alliance partnerships. While the chapter limits itself to the analysis of the six dominant internal competing forces, this is not to suggest that there are no other internal competing forces. Moreover, the process by which the various internal tensions develop or can be restored to equilibrium

Managing the interconnected organization 307

need to be investigated further as do the interrelationships between external forces and internal forces. Several innovative contributions to strategy research should be noted. First, strategic alliances have been conceptualised, as dialectical systems comprised of a mix of contradictory forces of ﬁrm-characteristics — embeddedness, cooperation and long-term orientation — and market-characteristics — ﬂexibility, competition and short-term orientation. Second, the theory that alliance stability is determined by balancing multiple conﬂicting forces of ﬁrms and markets is supported. Third, alliance outcomes have been linked to imbalances in dialectical forces. In conclusion, we may note that a strategic alliance is located somewhere between a market and hierarchy as an organizational form. Arguably, it is only viable when neither market nor hierarchy structures predominate. When market and hierarchy forces are in equilibrium, and cost/beneﬁt trade-oﬀs are equal, one can propose that alliances will be more stable and eﬀective.

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About the contributors

Thomas Clarke is Professor of Management and Head of the School of Management at the University of Technology, Sydney. He was previously DBM Professor of Corporate Governance at the Leeds Business School, UK, and Visiting Professor at the China Europe International Business School, Shanghai; Fundação Getúlio Vargas Business School, Sao Paulo, Brazil and UAM Business School, Mexico City. Stewart Clegg is Professor of Management at UTS. He is researching projects and collaborative work at present, and is well known for his past work on topics such as power, politics and knowledge. He is an editorial board member for a number of journals, including Human Relations, Organization, Organization Studies, and Administrative Theory and Praxis and has published a large number of contributions to the literature, including over thirty books, one of which is the award-winning Handbook of Organization Studies (London: Sage, 1996), which he edited with Cynthia Hardy and Walter Nord. Eduardo Ibarra-Colado is Professor of Organizational Studies at the Autonomous Metropolitan University, Campus Iztapalapa (UAM-I). He is also a National Researcher of the Mexican National System of Researchers, and coordinates the Permanent Seminar on Studies about the University at the National Autonomous University of Mexico (UNAM). As a result of the Sixth APROS Colloquium, he edited with S. R. Clegg and L. Bueno, Global Management: Universal Theories and Local Realities (Sage 1999). His latest book is La universidad en México hoy: gubernamentalidad y modernización [The Mexican University Today: Governmentality and Modernization] (UNAM 2000), which was recognized as the best 1999 Ph.D. thesis of the National Autonomous University of Mexico. Paul Couchman is Associate Professor and Head of the Department of Marketing at University of Wollongong. He has extensive industry experience as well as being a Project Leader for two CRC projects and a reviewer for a number of journals. He is on the editorial board of Prometheus and works with numerous international groups on R&D issues. David Crowther is Reader in Marketing at the University of North London. He is a qualiﬁed accountant, whose research interests are in the areas of social marketing, stakeholder accountability and corporate performance management. He has published widely using a variety of theoretical perspectives including the use of psychoanalytic theory. João Vieira da Cunha is a PhD student in Organization Studies at the MIT Sloan School of Management. His research focuses on the role of IT in organizational change. Miguel Pina e Cunha is an assistant professor at the Faculdade de Economia, Universidade Nova de Lisboa, in Lisbon, Portugal. He gained his PhD from Tilburg University and his research focuses on the emergent side of organizing.

312

About the contributors

Peter Fleming researches contemporary organisations in the Department of Management at Melbourne University, Australia. He is currently studying subjectivity and resistance in corporations that attempt to manage the culture of workers. An important aspect of this project involves deﬁning what we mean by resistance and identifying the diﬀerent modalities in which it is expressed. Although these new work patterns are of primary concern, he is also interested in workplace democracy, ideology critique and the philosophy of science. Liz Fulop is Professor of Management and Head of School, Marketing and Management at Griﬃth University, Australia. Her research focuses on government funded business networks and more recently, on university-industry partnerships. Dr Fulop has co-authored several major texts in the area of critical management and has held a number of fellowships, consultancy positions and international committee membership. Antoine Hermens directs the Executive MBA at the University of Technology, Sydney and is a visiting lecturer in Strategic and Alliance Management at Universities in France, Canada, Singapore Malaysia and Hong Kong. He draws on extensive commercial experience in his role as an academic and advises a number of national and international clients on Strategy and Alliance Management. Fernando Leal is Professor at the University of Guadalajara in Mexico. His professional background is in philosophy and linguistics. His past and current work (on a uniﬁed theory of value, action, knowledge and belief) are interdisciplinary in kind with an emphasis on the cognitive and social sciences. Glenn Morgan is Reader in Organizational Behaviour at Warwick Business School, University of Warwick in the UK. He previously worked at Manchester Business School and recent book publications include ‘The Multinational Firm: Organizing across National and Institutional Divides (edited with P. H.Kristensen and R.Whitley: Oxford University Press, 2001) and Beyond Organizational Change: Structure, Discourse and Power in UK Financial Services (with A.Sturdy: Macmillan 2000). Timothy Morris is Professor of Organisational Behaviour at Imperial College Management School, London University. Timothy Morris’ work focuses on the management of knowledge intensive ﬁrms. He has published widely in scholarly journals on promotion policies, rewards, the management of knowledge and the nature of change in these ﬁrms, and his current research examines internationalisation processes and governance systems. Jocelyn Pixley is a Senior Lecturer at the School of Sociology, the University of New South Wales, specializing in economic sociology. Her recent principal articles explore impersonal trust and fear in ﬁnance - the social origins of expectations. Major publications include Citizenship and Employment: Investigating Post-Industrial Options (Cambridge University Press, 1993) and The Double Life of the Family with Michael Bittman (Allen & Unwin, 1997), as well as chapters in The Politics of Australian Society (2000), Rethinking Australian Citizenship (2000), European Citizenship and Social Exclusion (1997) and The Australian Welfare State (1997). Ashly Pinnington is a Senior Lecturer in Management, University of Queensland. His research interests include the management of professional ﬁrms, internationalisation of knowledge intensive businesses and employee development. He has published two books and articles in a number of journals including Organization Studies and Human Relations. Ashly is a member of the editorial board of Reason in Practice: The journal of Philosophy of Management.

About the contributors

Carl Rhodes has worked as a consultant, manager and academic in organisation development, change management and human resource development. His academic research focuses on employing narrative and literary theory to understanding organisations. Currently, he is attached to the ORCA (Organizational Researchers on Collaboration and Alliances) Research Group at UTS. He has published articles in journals such as Organization, Journal of Organization Change Management, Journal of Management Inquiry and Qualitative Inquiry and is co-editor (with John Garrick) of Research and Knowledge at Work (Routledge 2000), and his most recent book, Writing Organization: (Re)presentation and Control in Narratives at Work (Amsterdam: Benjamins), was published in 2001. Patricia Shipley is a Chartered Psychologist and Fellow of the British Psychological Society, and Honorary Fellow of the Society for the Furtherance of Critical Philosophy. She had four years industrial management experience with a multinational company before taking up an academic career lasting over 25 years at London University as an organisational psychologist. Dr Shipley has wide-ranging practical ﬁeldwork and research project experience with many variety of organisations, specialising in work stress, health and safety issues. Currently, she is engaged in organisational and policy development work within the UK voluntary sector. John W. Selsky is a Senior Lecturer in Management at the University of Melbourne. He has researched various social dynamics at seaports in New Zealand and Australia for the past seven years. His other research interests include collaborative strategies and intercultural processes between organisations, especially in turbulent environments. André Spicer’s research interests focus on the relationship between the ‘material’ and ‘discursive’ in a variety of organized situations. Current research projects include investigating discourses of globalization in state broadcasting, the discursive aspects of industrial relations disputes, resistance and cynicism in organization, and employing theories drawn from Jacques Lacan to extend concepts of subjectivity. He is currently writing a PhD thesis at the University of Melbourne, Australia. Julian Teicher is Associate Professor and Deputy Head of the Department of Management at Monash University, Melbourne Australia. His research and publications have included employee participation, workplace bargaining, trade unions, industrial relations legislation, occupational health and safety, equal opportunity, skill formation, privatisation and outsourcing. Julian has worked as an industrial relations practitioner and consultant gaining experience in the health, maritime, and power industries.

313

Index

A Abbot, A., 187, 189 Abelson, A., 223 Abrahamson, E., 45, 190 Accord, the, 95 Achilles, 11 Ackroyd, S., 65, 68, 69, 73–74, 88, 92 AeroMexico, 302 Age, The, 97, 222 agency theory, 227, 228 Aharoni, Y., 186 Ainsworth, S., 113 Air France, 302 Air New Zealand, 296 airline industry, 295–307 Albert Fisher Group plc, The, 243 Alitalia, 303 Allen, J., 263 Allianz, 282 Altman, R. C., 265 Alvesson, M., 76, 166, 180 Amabile, T. M., 21 Amazon.com, 212 American Airlines, 296 Amsden, A., 251 Amsterdam, A. G., 158 Anderson, J. R., 21, 32 Anderson, L., 72 Andrade, S., 175 Anglian Water, 234 Anglo-Saxon, 247, 248, 250, 285, 289 annual reports, 232, 234, 235–6 Ansoﬀ, H. I., 17 ANZ Bank, 253 APEC (Asia Paciﬁc Economic Cooperation), 260 APROS (Asia Paciﬁc Researchers in Organization Studies), 8, 156, 180

Archetypes, 5, 185–95 Argyle, M., 241 Argyris, C., 23, 25 Armstrong, D., 24 Arrighi, G., 211 Arthur Andersen, 260 Arthur, M., 194 articulation, 109, 111 Asia Paciﬁc, 260, 301 Asia Week, 254 Asia, 6, 296 Asian Banks, 253–4 Asian Corporate Governance Association, 263 Asian Development Bank, 248, 257, 260 Asian Financial Crisis, 6, 248, 249–50, 253–4 Asian governance, 249, 254–264 AT&T, 287 Atkinson, T., 158 Aubert, N., 175 auditing, 6, 227–244, 249, 258–9 Aulakh, P. S., 305 Austin, J. L., 2, 90 Austin, J., 72 Australia, 87–114, 212, 285, 296, 297 Australian Bureau of Statistics, 96 Australian Council of Trades Unions (ACTU), 95, 98 Australian Department of Foreign Aﬀairs and Trade, 261 Australian Financial Review, 223 Aventis, 279 Avner, J., 17 B Backoﬀ, R. H., 41, 42 Bagehot, W., 217 Baker, D., 98

316 Index

Baker, W. E., 186 Baker, W., 211 Bakhtin, M., 4, 87, 89, 92, 120, 121, 122–3, 127, 136, 237 Bakunin, M., 221 Banco Ambrosiano, 175 Banco Ibercorp, 169 Banesto, 169 Bangkok, 266, 302 Bank of England, 217 Bank of International Settlements, 254 banks, 255–6 Bannerjee, B., 49 Badarocco, J., 295 Barbalet, J. M., 211, 213, 217 Barings Bank, 219 Barker, J. R., 24 Barley, S., 20, 187 Barnard, C., 12, 23, 180 Barrett, F. J., 18 Barrons, 223 Barthes, R., 239, 240 Bartlett, C. A., 166, 275 BASF, 279, 282 Baskin, J. B., 44 Bassof, P., 17, 31 Bastien, D. T., 18, 27, 28, 31 Baudrillard, J., 233, 237 Bauman Z., 166, 167, 172 Bayer, 279, 280 Beck, U., 47, 166 behavioural ﬁnance, 201 behavioural tension: cooperation versus competition, 301 Beit-Hallahmi, B., 241 Belanger, J., 290 Benner, P., 158 Benning, A. L., 12, 16, 28 Bennis, W., 31 Benshoﬀ, H. M., 126 Benson, J. K., 14, 15, 16, 27–8, 32 Berger, P., 17, 72 Berggren, C., 290 Berle, A., 247, 276 Berliner, P. F., 18 Berman, M., 167 Bernard, C., 145

Berry, J. W., 28 Bettelheim, B., 232, 236 Bettis, R. A., 13, 23, 30 Bhagwati, J., 265–6, 268 Bigelow, J., 141 Bihamini, A., 76 Billig, Y. D., 76 Bing, X., 266 Birkinshaw, J., 277, 290 Bjorkman, T., 290 Blanchard, K. H., 175, 176 Blau, P. M., 15, 16 Bleeke, J., 295 Bloch, M. E. F., 158 Boesky, I. F., 169 Bonﬁre of the Vanities, 219 Boorman, J., 269 Boreham, P., 114, 166 Borgatti, S. P., 194 Borodovsky, L., 45 Boston Consulting Group, 297 Boudon, R., 142 Bourdieu, P., 82, 158 Boxall, P., 195 Bradney, P., 68 Brady report, 219 Brailsford, J. R., 158 Brandenburg, R. G., 17 Brandes, P., 72 Brandist, C., 237 Branton, R., 158 Brazil, 69, 175, 267 Brews, P. J., 16 Briers, M., 229 Brignal, S., 229 British Airways, 296 Brock, D., 186, 193 Brookes, J. L., 126. Brouthers, K. D., 301 Brouthers, L. E., 301 Brown, J. S., 27 Brown, J., 186 Brown, R. H., 70 Brown, S. L., 13, 16, 20, 21, 26, 32, 193 Browne, M., 49 Bruner, J., 158 Buckley, P. J., 304

Index

bull system, 95 Bundesbank, 279 Burawoy, M., 3, 68, 69 bureaucracy, 165, 166 Burns, M. C., 120, 127–33, 134 Burns, T., 12, 14 Burrell, G., 12, 16 Burton, F., 41 Business Week, 212, 219, 222, 268 Butler, J., 91 C Cabal-Peniche, C., 169 Calas, M., 180 Calhoun, C., 211 California, 264 Cameron, K. S., 298 Camillus, J. C., 16 Campbell, J., 235, 236, 237–8 Campion, M. A., 193 Canon, 282 capital markets, 248 capitalism, 75, 79–80, 119, 155, 247–70 capitulation, 72 Cardinal, L. B., 17 Carlen, P., 41 Carnegie, A., 168 carnivalesque, 121, 123–36 Carrithers, B., 12 Carruthers, M., 210, 211 Carter, C., 237 Carter, J., 265 cartoons, 69 Case, P., 190 Casey, C., 65, 68, 72, 194 Cassirer, E., 230, 237 Castels, M., 166 Cattle Council of Australia, 100 Celaya, 171 Central Bank, 221, 222 Champy, J., 171 Chan, A., 43, 48, 49, 50, 53 Chandlerian ﬁrms, 287 Chanin, N. M., 16 Chase Manhattan, 216 Chevron, 170 Child, J., 229

Chiliasm, 219–20 China, People’s Republic of, 251, 256–7, 264 Church, M., 16 Cicourel, A., 113 circuits of power, 76 City (of London), 284 Clark, J., 166, 172 Clarke, R. J., 43, 48, 49, 50 Clarke, T., 6, 7, 165, 247 class, 88–113, 124–5, 166 Claxton, G., 158 Clegg, S. R., 2, 7, 48, 49, 50, 53, 75, 76, 80, 88, 114, 156, 165, 166, 179, 180, 199, 298, 300 Clinton, W. J., 265 Coca Cola, 170 Coﬀman, A., 129, 136 cognitive distancing, 71 Cohen, B., 250 Cohen, K. F., 121 Cold War, 268 Cole, P., 25 collaboration, 2, 42–61, 296 collaborative action framework, 295, 298 Collins, R., 193, 211, 213, 216, 217 Collinson, D. L., 66, 69, 72, 74, 79, 80, 92 Combet, G., 98 community of the ﬁrm, 287 Companies Acts, 258 CONASUPO, 170 Conciliation and Arbitration Act, 95 Conde, M., 169 conﬂict, 143–6 Conrow, E. H., 45 contingency theory, 12, 30 contradiction, 3, 9, 15, 28, 167 control, 19–20, 65, 166 Cool alternation, 72 Cooley, M., 158 Cooper, D, 186 Cooper, R. G., 17 Cooper, S., 227, 237 Cooperative Research Centres (CRCs), 42–61, 51–61 corporate colonisation, 67–8 Corporate Debt Restructuring Advisory Committee (Thailand), 262

317

318

Index

corporate governance, 6, 247–70, 275–91 corporate reporting, 237–43, 258–9 corporations, 168, 173, 177–8, 186, 189 Corrigan, C., 97, 100, 102, 107 Coser, R. L., 68 Couchman, P., 2 Covaleski, M. A., 28, 31, 32 Craig, A., 19 credit theory, 204 credit, 202–5 critical discourse analysis, 89–114, 119–136 critical theories, 165, 180 Cross, A. D., 158 Crossan, M. M., 16, 19, 22, 28, 30 Crowther, D., 6, 227, 237, 244 Crozier, M., 165 Crumlin, P., 105, 107 CSIRO (Commonwealth Scientiﬁc Research Organization), 53 CSW (Computer Supported Work), 54 Cullen, J. B., 304 culture engineering, 67–81 cultures, organizational, 18–20, 25–6, 67–81, 165, 173–5 Cunha, da J. V., 2, 7, 16, 298, 300 Cunha, e M. P., 2, 7, 16, 298, 300 Currall, S. C., 304 Current Account Deﬁcit, 212 Cusson, M., 304 Casti, J. L., 158 cynicism, 71–4, 78–9, 92 Czarniawska, B., 20 D Daimler-Chrysler, 280, 282, 288 Damasio, A. R., 213, 218 Das, T. K., 47, 298, 299, 300, 302, 303, 305 dataquest, 254 D’Aveni, R. A., 12 Davenport, T. H., 296 Davidson, P., 202, 204–5, 208 Davies, A., 87, 99, 102 Davies, I., 125 Davies, M., 227 Davis, E., 227 Dax, 280 de Certeau, M., 68

de Gaulejac, V., 175 de Vries, K., 71, 175 Deal, T. E., 165 Dean, J., 72 Debt Management Oﬃce (Thailand), 262 deconstruction, 41–2 Deeks, J., 69 Deetz, S. A., 166, 180 Deleuze, G., 48, 76 Delta, 302 Department of Employment, Workplace Relations and Small Business (DEWRSB), 97, 99 Dequech, D., 213 Derrida, J., 234 Dess, G. G., 19 Deutsche Bank, 279, 282 Dharwadkar, R., 72 Dialectics of Nature, 15 dialectics, 2, 7, 9- 34, 70, 227–8, 230, 235, 295–307 dialogue, 87, 91–3 Dicken, P., 276 diﬀerentiation, 10–12 Digital Equipment, 171 Diogenes, 74 Dirsmith, M. W., 28 disciplinary regimes 166 discourse, 2, 42–3, 47, 48–9, 53–7, 87–114 discursive struggle, 87–114 disorganization, 16 divergent capitalisms, 276 diversiﬁed quality production, 287 division of labour, 4, 145–6 Docker, J., 122, 125, 135, 136 Dog Collar Act, 95 Doremus, P. N., 276 dotcoms, 190–1, 248 Dougherty, D., 20 Douglas, M., 47 Dow Jones Industrial Average, 266 Dow, G., 114, 166 Downing, S. J., 49 Downs, A., 175 Doz, Y. L., 304 Dr Gloom, 200 Dresdner Kleinwort Benson, 260

Index 319

Drexel Burnham Lambert, 219 Dreyfus, H. L., 158 Dreyfus, S. E., 158 drive for individuation, 231–3 Drucker, P., 13, 23 du Gay, P., 58, 66, 73, 75, 76, 91, 186 Dubai, 97, 105, 107 Dugdale, A., 111 Duguid, P., 27 Dunkerly, D., 76 Dunlop, J. T., 113 Durant, W., 15, 16 Durkheim, E., 4, 145–6, 155, 56 Dwyer, P., 107 E E.ON AG, 282 Eagleton, T., 82 Eason, K. D., 158 East Asia, 6, 248, 249–64 East Asian Analytical Unit (EAAU), 260, 261 East Asian Miracle, The, 250 Eatwell, J., 200 e-business, 190–3 Eco, U., 125, 133–4 Economist, The, 296 Edelman, L. F., 12, 16 Edwards, P., 67 eﬃcient markets hypothesis (EFM), 207 Ehlrich, S., 68 Eisenberg, E., 19, 27, 28 Eisenhardt, K., 1, 2, 13, 16, 17, 20, 21, 26, 31, 32, 193 Eiser, J. R., 25 El Barzón, 170 Elmes, M., 166 Elster, J., 152 embeddedness, 7 Emerson, D., 268 Emery, F., 23, 24, 26, 30 Emmanuel, C. R., 228 emotions, 6, 165, 19–222 Engels, F. 15 entrepreneurship, 5, 172–5, 186, 188, 189–90, 192 Erickson, F., 22

Ernst, D., 295 ethics, 4, 5, 140, 145, 146, 167–80 Eurodollar market, 285 Europe, 172, 280, 285, 296, 303 excellence, 172–5 expectations, 5–6 exploitation, 16 exploration, 16 Ezzamel, M., 29, 32 F Fairchild, G., 190 Fairclough, N. 43, 49, 91, 93 Fairhurst, G. T., 89 Far Eastern Economic Review, 268 Fayol, H., 12 Ferguson, A., 105 Ferlie, E., 186 Fernández-Vega, C., 170 Filby, I., 69 Finance One, 254 ﬁnancial internationalisation, 247–270, 275–91 ﬁnancial markets, 5–6, 199–223, 247–270, 275–91 ﬁnancial organizations, 199–223, 247–270, 275–91 Financial Times, 267 Finland, 286 Fisher, S., 222 Fish, S., 158 Fiske, J., 125–6 ﬁt and proper person, 278 Fitzgerald, F. S., 33–4 Fitzgerald, L., 186, 229 Fladmoe-Lindquist, K., 194 Flam, H., 211 Fleming, P., 3, 65, 66, 70, 74, 92, 180 Flint, P., 301 Floyd, S. W., 17 Flyvbjerg, B., 158 Fobaproa, 170 Follett, M. P. 16, 23–4, 26, 28, 30, 31 Ford, H., 147 Ford, J. D., 41, 42 Ford, W. J., 114 Fordism, 65

320 Index

Formosa Plastic, 252 fortune, 212, 222 Foucault, M., 43, 48, 58, 76, 77, 90, 91, 157, 173, 177, 178 -9 Fournier, V., 91 Fox network, 286 Frame, J. D., 46, 57 France, 275 Frances, J., 25 Fraser, N., 82, 88 Freeman, J., 22 Freidson, E., 186, 187 Freud, S., 6, 157, 231–3, 244 Freudian, 231–3 Friedberg, E., 165 From Plan to Market, 250–1 Fromm, E., 232 Fuji Heavy Industries, 282 Fulop, L., 2, 43, 48, 49, 50, 56, 114 Fynwest, 97, 99, 105 G G22, 267 G7, 211, 267 Gabriel, Y., 82, 92 Gadamer, H. G., 230 Galanter, M., 186 Galeano, E., 169 Garsten, C., 91 gender, 76, 77, 80, 166 General Motors, 170, 171 General Strike, 94, 95 generality, 29, 31 genres, 49–51 Georgiou, P., 16 Gephart, R., 93, 113 Gereﬃ, G., 250 Germany, 6, 7, 247–8, 275, 277, 279–282, 286, 287, 288, 289, 290, 291 Ghoshal, S., 14, 166, 275 Gibson-Graham, J. K., 82 Giddens, A., 44, 55, 139, 154, 157, 166 Giedion, S., 168 Gill, F., 222 Gittins, R., 222 Glassman, J. K., 282, 286 Glidewell, J. C., 15, 16

global strategy, 295–307 globalization, 166 Goebbels Gazette, 72 Goﬀee, R., 194 Goldblatt, D., 276 Goldman Sachs, 216 Goldman, P., 16 Gomes-Casseres, B., 295, 298 Goodman, D., 259–60, 264 Goodwin, B., 155 Goodwin, J., 218 Gordon, J. S., 219 Gough, L., 252 Governance, 263, 264 Granovetter, M., 46 Grant, D., 89, 90, 92 Gray, B., 46 Gray, J. T., 186 Great Crash (1929), 220, 254 Greenspan, A., 201, 221, 250, 266 Greenwood, R. 185, 186, 187, 189, 193 Greiner, L. E., 15, 16, 23 Grey, C., 91 Griﬃn, G., 87, 96, 98, 99 Griﬃn, R. W., 21 Grint, K., 190 groupthink, 32, 236 Guattari, F., 76 Guillen, M. F., 249 Gulati, R., 299 Gunasekera, D., 297 Guru’s, Management and Financial, 12, 13, 67, 165, 220–1 H Haas, R., 269 Habermas, J., 229, 230, 233 Hacking, I., 90 Haddad, L., 222 Hagedoorn, J., 295 Hale, B., 222, 266, 268 Hall, P., 276 Hall, R. H., 187 Hall, S., 50, 109 Hamel, G., 17, 297 Hammer, M., 171 Hanbo Steel Korea, 254

Index

Handy, C., 9, 13, 23, 167, 298 Handy, J., 150, 153 Hannan, M. T., 22 Hanson, J. R., 28 Harbison, J. R., 295, 296 Hardy, C., 47, 50, 76, 90, 91, 93, 109, 114 Hargadon, A. B., 190 Harker, S. D. P., 158 Harrigan, K. R., 297 Harris, M., 233 Hart, S., 19 Harvey, J. B., 25 Hasek, J., 70–71 Hassard, J., 41, 42, 120, 126 Hassel, A., 276, 277, 279 Hatch, M. J., 12, 20, 22, 27, 28, 68, 70 Haugen, R. A., 206 Hawke, H., 106 Hay, C., 90 Hedberg, B., 26 Hedlund, G., 290 Heelas, P., 176 Hegel, G. F. W., 15 Heian, J. B., 28 Heilbronner, R. L., 139 Heimer, C., 211, 213, 215 Held, D., 276 Henderson, L. J., 143 Hendry, J., 90 Henkel KgaA, 282 Heracleous, L., 90 Heraclitus, 15 Hermens, A., 7 Herod, A., 89 Hesterly, W. S., 194 High Performing Asian Economies (HPAEs), 250 Hills, T., 94, 104 Hinings, C. R., 185, 186, 187, 193, 194 Hirschman, A. O., 154, 221 Hirst, M., 229 Hirst, P., 276 Hitt, M. A., 13, 23, 30 Hobson, D., 285 Hodge, B., 126, 132 Hoechst, 279 Hoepner, M., 276, 277, 278, 279

Hofman, J. D., 13 Holliday, R., 120, 126 Holloway, S., 296 home country eﬀect, 276 Hong Kong Economic Journal, 266 Hong Kong, 250, 254 Hopner, M, 281 Hopwood, A. G., 166 Hostager, T. J., 18, 27, 28, 31 Howard, J. W., 99, 100, 102, 106, 107 Hu, Y-S., 276 Hughes, T. P., 168 humour, 68–70, 78–9, 92, 119–36 Hunt, M. R., 16 Hurka, T., 175 Hutchins, E., 27 Hutchinson Telecom, 280 Hyman, R., 113 I IAS (International Accounting Standards), 279, 280, 285, 286 IASC (International Accounting Standards Committee), 284 Ibarra-Colado, E., 5, 156, 173, 179, 180 IBM, 171 identity, 65, 68, 88, 93, 157 ideology, 72, 80, 188 IMF Policy Development and Review Department, 269 improvisation, 17 In Search of Excellence, 13, 172 incrementalism, 16 India, 98 Indonesia, 250, 253, 265, 267, 268 Industrial Relations Commission, 87 Ingham, G., 202, 211, 217, 222 Inkpen, A. C., 304 institutional theory/neo-institutional theory, 165, 187 integration, 10–12 Intel, 252 International Aviation, 297 International Herald Tribune, 265, 270 International Monetary Fund (IMF), 211, 252, 254, 257, 265, 266, 267, 268–9

321

322 Index

International Transport Federation (ITF), 97, 98 Internet, 227 Ireland, 286 irony, 70–1, 78–9, 92, 127–8 irrational exuberance, 201 Irvine, S. H., 28 Isidoro-Rodríguez, Á., 169 Ivensys, 286 J Jackson, G., 281 Jacques, R., 43, 48, 88 Jakarta, 266, 268 Janis, I. L., 32, 236 Japan, 6, 7, 98, 247–8, 249, 250, 251, 259, 266, 275, 277, 279, 282–4, 286, 287, 288, 290, 291 Japanese GAAP (Generally Accepted Accounting Principles), 284, 286 Jarvenpaa, S. L., 25 Jasper, J. M., 218 jazz, 18, 20 Jeﬀcutt, P., 41, 49, 50 Jeﬀerson Smurﬁt Group, 286 Jenkins, A., 237 Jermier, J., 67 jobs, 147–54 Joerges, B., 20 Johansson, U., 70, 82 Johnson, B. M., 13, 31 Johnson, J. L., 304 Johnson, M., 158 Johnson, T., 187, 189, 195 Johnston, R., 229 joking, 65–81 Jones Lang Wootton, 254 Jones, C., 82, 194 Josephson, M., 168 Joskow, P., 302 Jung, C. G., 231, 235–7 Jung, H. Y., 124 Jungian, 235–7 Jurgens, U., 279, 280, 288 K Kafner, S., 121

kaleidoscope, 212–3, 214 Kamoche, K., 16 Kant, I., 151–2, 155 Kanter, R. M., 71, 72 Karlqvist, A., 158 Kaufman, H., 200, 203 Keen, S., 206, 222 Keenoy, T., 89, 90, 92 keiretsu, 283 Keller, W., 276 Kelly, W., 290 Kemper, T. D., 211, 213 Kennedy, A. A., 165 Kern, A. B., 166 Keynes, J. M., 200, 204–5, 209 Keynesian, 200, 205, 207, 213, 220 Khanna, T., 299 Kierkegaard, S., 70 Kim, Y. C., 250 Kindleberger, C., 265 Kitay, J. 96 Klein, G., 158 Klein, M, 232 KLM, 303 Knight, F., 200 Knights, D., 67, 76, 80, 88 Knoke, D., 166 knowledge entrepreneurs, 190 knowledge workers, 185, 195 knowledge, 139–56, 189 Kogut, B., 297, 298, 302 Kohler, C., 290 Kondo, D., 67 Korea, Republic of (South), 250, 251, 252, 255, 260, 261, 265, 267 Korean Air, 302 Korte, D., 126 Korten, D. C., 172 Kotabe, M., 305 Koza, M., 295, 299 Krackhardt, D., 28 Krieger, M. H., 158 Kristensen, P. H., 277, 290 Krönig, J., 122 Krugman, P., 222, 251, 256 Kuala Lumpur, 266 Kunda, G., 20, 65, 68, 71, 72, 91

Index 323

Kurdelbusch, A., 276, 277, 278, 279 L Lacan, J., 6, 231, 233–5, 244 Lacanian, 233–5 Lachman, R., 186 Lachmann, L. M., 207 Laclau, E., 111 Lakoﬀ R., 230 Lakoﬀ, G., 158 Lane, C., 279, 282 Lane, D., 30, 31 Lang Corporation, 97 language games, 47, 48–9, 50, 53, 55–61, 239 Lankenau-Rocha, J., 169 Larson, M. S., 188 Lasch, S., 71 lateral hires, 192 Latin America, 172, 266, 296 Laumann, E. O., 166 Law, J., 244 Lawrence, P. R., 30 Lawrence, T., 91 Lawrence, W. G., 232 Lazonick, W., 287 Leal, F., 4, 156, 158 learning school, 17 Lee, M., 113 Lekachman, R., 213 Lendrum, T., 296 Levacic, R., 25 level playing ﬁeld, 285 Levi-Strauss, C., 32, 158, 239 Levitas, R., 219 Lewin, A. Y., 295, 299 Lewinsky, M., 175 Lewis, M., 2, 41, 42, 219 Liar’s Poker, 219 Liker, J. K., 32 Lilley, S., 48, 50 Lindblom C. E., 17 Lindvall, T. R., 126 Lingle, C., 249, 251–2 Linstead, S., 41, 42, 43, 48, 49, 50, 69 Litan, R., 269 Livet, P., 158 locality, 29, 30–1

London Stock Exchange, 278, 281, 284 London, 281, 284, 285 Long-Term Capital Management (LTCM), 201, 216, 221 Lore, M, 45 Lorsch, J. W., 30 Lourenço, S. V., 15, 16 Lowenstein W., 94, 104 Lowenstein, R., 216 Luckmann, T., 17, 72 Lufthansa, 296 Luhmann, N., 44, 212, 213 Lupton, D., 44–5 M MacCallum, R. C., 96, 97 Machiavelli, N., 141 Machin, D, 12 MacIntyre, S., 104 Madigan, C., 190 Malaysia, 250, 252, 253, 255, 260, 265, 267 Malaysian Code of Corporate Governance, 261 Malinowski, B., 238 Malone, P. B., 68 Malos, S. B., 193 Malpensa, 303 Managed Professional Business, 186 managerial reward schemes, 227–8 managerialism, 129 mandates 149–51 Mannheim, K., 157, 219–21 Manilla, 266 Mannesman, 248, 280, 281, 288 Maquiladora, 77 Marc, D., 121 March, J. G., 199 Marcuse, H., 77, 233 Maritime Union of Australia, 3, 94, 96–114 Marx, K., 15 Marxist, 233 Mason R. O., 16 Massachusetts Institute of Technology (MIT), 265 Matsushita Electrical, 282 Maxﬁeld, R., 30, 31 Maxwell, R. I., 169

324 Index

May, R., 236 McAllister, D. J., 24 McCabe, D., 67 McCloskey, D. N., 158 McDonald, J., 114 McDonaldisation, 147, 155, 157 McDonalds, 147, 157 McGregor, D., 31 McGrew, A., 276 McHugh, A., 13, 16, 28, 30 McKinlay, A., 67, 180 McKinsey and Co., 185 McKinstry, S., 238 McPhail, C., 218 meaning, 89–91, 228–9 Means, G., 247, 276 Meeker, M., 212 Melton, J. M., 126 memory, organizational, 20–1 Merchant, K., 228 Merrill Lynch, 216 Meriwether, J., 221 Mexico City, 171 Mexico, 77, 170, 175, 219, 221 Micklethwait J., 13 Miles, R. E., 298 milestones, 20 Milken, M., 169 Miller, C. C., 17 Miller, D. F., 230 Miller, D., 13 Miller, P., 166 Mills, A. J., 41, 166 Mills, C. W. 15 Miner, A., 16, 17, 21, 30, 31 minimality, 29, 31 Ministry of Finance (MOF), Japan, 284 Minsky, H. P., 202, 203, 205, 222 Mintzberg, H., 13, 16, 17, 20, 21, 23, 28, 30, 298 Miranti, P., 44 Mirvis, P., 71, 72 Mitchell, J., 25 Mitroﬀ, I., 89, 236 Mobil, 170 Mockler, R. J., 296 modernity, 167, 176

Mokhiber, R., 170 Monash University, 114 Monetary Authority of Singapore, 261 money, 5–6, 199–222 Monsanto, 170 Montagna, P. D., 187 Moody’s, 216 Moorman, C., 16, 17, 21, 30, 31 Morgan Stanley, 212 Morgan, G., 6, 7, 43, 277, 279, 283, 285, 290 Morgan, J. P., 168 Morin, E., 166, 195 Morin, F., 288 Morris, T. J., 195 Morris, T., 5 Morrison, J., 94 Mothers Union, 235 Motorola, 252 Mouﬀe, C., 111 multinationals/transnationals, 7, 13, 77, 166, 270, 276–91, 295–307 Mumby, D., 92, 109 Murray, E., 94 Myrdal, G., 199, 207 myth, 229, 230, 235–43 N Nasdaq, 206, 210, 219, 222, 266 National Conference of Stock Exchanges, Japan, 282 National Economic Recovery Plan (Malaysia), 260 National Farmers Federation (NFF), 96, 97, 99 National Health Service, 150 Naumann, K., 280 Negri, A., 207 Nelson, B., 94 Nelson, R. L., 187 Neo-classicism, 251 Neo-liberalism, 95, 100, 103, 109–10, 150, 171 Netherlands, 286 networks, 27, 93–4, 99–107, 165–6, 194 new organizational forms, 303 new professions, 188 new public management, 173

Index 325

new right, 106, 219 new world economic order, 267–70 New York Stock Exchange, 266, 281, 284 New York Times Magazine, 265 New York, 187, 248, 266, 281, 285 Newly Industrializing Economies (NIEs), 250 Newman, J., 166 Newman, W. H., 302 News Corp, 286 Newton, T., 92 Nielsen, R. P., 16 Nietzsche, F., 237 Nike, 170 Nissan, 283, 290 Nkomo, S. M., 166 Nohria, N., 299 Nokia Oyj, 286 Norman, D. A., 158 normative control, 65 Norris, C., 42, 239 North America, 266 Northeast Asia, 251 Nooteboom, B. 47, 297 Núñez, R. E., 158 Nystrom, P. C., 26 O O’Neil, J. R., 175 O’Shea, J., 190 O’Sullivan, M., 276, 287 Oborne, D, J., 158 occupational closure, 188 occupational mobility, 188 occupations, 185–195 OECD, 247, 248, 249, 257, 260, 263, 270 Olbrechts-Tyteca, L., 158 Olson, G. M., 54 Olson, J. S., 54 On the Waterfront, 94 OneWorld Alliance, 297 Orange, 280 Orlikowski, W., 12, 13, 16, 31, 32 Orr, J., 27, 30 Orwell, G., 240 Oswick, C., 89, 90, 92 Other People’s Money, 219

Otley, D. T., 228 Overholt, W., 250 Oye, K. A., 299 P P&C Stevedores, 97, 99 P&O Ports, 97 Pascale, R. T., 31 Palay, T., 186 Palmer, I., 90, 298 panics, 202 paradox, 1–8, 8–34, 41–2, 60–1, 66–81, 87–113, 119, 140, 154–6, 168, 173, 177, 185, 199, 201–2, 205, 221–2, 288, 298 Pareto, V., 143, 155, 156, 157 Parguez, A., 204 Parker, M., 68, 111 Parsons, T., 147 Partnoy, E, 217 Parton, P., 253 patient capital, 289 Patrick Stevedores, 3, 94, 96–114 Pauley, L., 276 Pauly, L. W., 216 Peale, N. V., 175, 179 Peetz, L., 113 Peiperl, M., 194 Pekar, Jr., P., 295, 296 Pena, D., 77 Pentland, B. T., 21, 27 Perelman, C., 158 Perkin, H., 187 Perls, F. S., 241 Perraton, J., 276 Perrow, C., 19, 20 Perry, L. T., 19, 31, 32 Peters, T., 9, 12, 13, 14, 31, 67, 165, 167, 172, 173–4 Pfeﬀer, J., 76 Philip Morris, 170 Philippines, 253, 265 Phillips, N., 47, 49, 90, 91, 93, 109 Picken, J. C., 19 Pillai, P., 253 Pinnington, A., 5, 195 Pixley, J., 5–6, 201, 210, 211

326 Index

planning school, 17 planning, 16–18 plateaux, 66, 74–8 PMBOK (Project Management Body of Knowledge), 45–6 Polanyi, M., 23, 153, 158 politics of recognition, 88 politics of redistribution, 88 Polletta, F., 218 Pondy, L., 89 Poole, M. S., 16, 298 popular culture, 119–136 Port of Brisbane, 102 Port of Fremantle, 102 Port of Melbourne, 93, 96, 97, 100–1, 102, 106 Port of Sydney, 96, 98, 100–1, 102 Porter, M., 17, 247 Portner, R. E., 17 Post Keynesian, 200, 202, 205, 213 post-industrial workers, 104–5 Postman, N., 121–2 postmodernity, 70, 167, 173, 202 Pothast, U., 158 Potter, J., 90, 93 Powe, R., 96 Powell, M., 186, 194 Powell, W. W., 26, 46 power, 2, 65–81, 166, 187, 188, 189, 190, 201, 230, 233, 244 Power, M., 244 Prahalad, C. K., 17 Prasad, A., 166 praxis, 28 Pressman, S., 205 Preston, A. M., 238 Prigogine, I., 31 Prock, J., 286 Productivity Commission, 95, 96 professional ﬁrms, 185–95 professions, 5, 185, 187 Prowse, S., 255 Prusak, L., 296 psychoanalysis, 6, 227–244 Puebla, 171 Putnam, L.L., 89 punctuated equilibrium, 16

Q Qantas, 296 Quin, R. E., 298 Quinn, J. B., 14 Quinn, R. E., 299 Quintana Roo, 169 R Rabelais, 122 Radosevich, R., 17 Ramonet, I., 172 Rangan, U. S., 299 Rappaport, A., 228 rational expectations, 205–10, 216–22 rationality, 4, 5, 6, 45, 48, 140–4, 147–9, 154, 156, 166, 167, 172–3, 199, 201 Raven, P. F., 158 Reagan, R., 223 Reed, M., 111, 180, 185, 188, 193, 195 Rees, B., 58 refugees, 93 Rehder, B., 276, 277, 278, 279 Reichers, A., 72 Reich, S., 276 Reith, P., 99, 100, 105, 106, 107 Renault, 283 Rescher, N., 44 resistance, 3, 65–81, 91–93 rhizome, 76 Rhodes, C., 4, 82 Rhone Poulenc, 279 Rice, R. E., 13, 31 Richmond, R., 129, 136 Rifkin, J., 171 Rifkin, W., 49 Ring, P. S., 47 risk, 43, 44–8, 166 rituals, 70, 217–8, 241–2 Ritzer, G., 151, 155, 157 Robber Barons, 168 Roberts, I., 65 Rockefeller, J. D., 168 Rodrigues, S., 69, 74, 79 Rohrbaugh, J., 299 Rohwer, J., 249 Romme, G., 31 Rorty, R., 70, 82

Index 327

Rosch, E., 158 Rose, N., 174 Rosenblueth, A., 141 Rosenbrock, H., 158 Rosenthal, P., 67 Rowe, D., 122 Roy, D., 68 Rubin, R., E., 265 Rubio, M., 169 Rueter, H. H. 21, 27 Rumley, C., 106 Rupp, J., 279, 280 Rura-Polley, T., 298 Russia, 219, 221, 267 S safety-valve eﬀects, 66, 68, 72, 135 Sahay, A., 304 Sakanao, T., 304 Salaman, G., 58, 66, 73, 75, 172 Salancik, G. R., 25 Salinas-de-Gortari, R., 169, 170 Samuel, S., 28 San Juanico, 171 Sandilands, B., 297, 302 SAP, 282 Sassen, S., 279 satire, 65–81, 126–7 Savings and Loans Crisis, 221 Sawyer, J. E., 21 Sayles, L., 28 Schön, D., 23, 158 Schoonhoven, C. B., 193 Schumpeter, J. A., 16, 202–3 Schwartz, H. S., 166 scientiﬁc management, 12 Scott, W. R., 15, 16 Scribner, S., 18 Sealed Knot, 235 Seamen’s Union of Australia, 96 Seccareccia, M., 204 Securities and Exchange Commission (Thailand), 262, 263 Securities Commission, 258 Segal, G., 259–60, 264 self, 67 Selsky, J., 3, 4, 90

semiotics, 229–30 Sen, A., 142 Senge, P., 14, 23, 27 Sennet, R., 149 sense making, 2, 41, 60, 98–91 Seoul, 266 Serron, C., 195 Seven Trent plc, 239 Sewell, G., 20, 31, 32, 65, 70, 74, 76, 82, 91, 92 Shackle, G. L. S., 199, 202, 205, 206, 207–10, 212, 213, 214 Shanghai Stock Exchange, 264 Shanghai, 253 Shapiro, D., 53 Shapiro, E., 12, 13 Shapiro, H. J., 16 Shapiro, S., 211 shareholder value, 275 Sharpe, D., 290 Shaw, T. B., 25 Shell, 18 Shergold, P., 99 Shiller, R. J., 206–7, 210–11, 213, 218 Shipley, P., 4, 158 Shishido, P. S., 45 short-termism, 289 Shrivastava, P., 45, 47–8 Siemens, 279, 288 Sievers, B., 166, 232, 244 Silverman, D., 1, 165 Silvestro, R., 229 Simmel, G., 202, 203, 204 Simon, H. A., 21 Simpson, B., 127, 132 Simpson, Grandpa, 119 Simpson, H., 119, 120, 126, 127, 128–33, 134 Simpson, L., 119, 128 Simpson, M., 127 Simpson, O. J., 175 Simpsons, The, 4 simultaneity, 29–30 Singapore Airlines, 296 Singapore, 250, 252, 253, 260, 261 Sitkin, S. B., 25, 28 SkyTeam, 302

328 Index

Sloan, J., 102 Sloterdijk, P., 71, 72 Smigel, E. O., 187 Smircich, L., 17, 89, 180 Smith, A., 11–12 Smithin, J., 202, 203, 211, 222 Snow, C. C., 298 Sobek, D. K., 32 social construction, 27, 91–114 social justice, 106–7, 109 social movements, 202 Society for the Furtherance of Critical Philosophy, 156 Socrates, 15 Sony, 282 Soros, G., 200, 250, 254 Sorrenti, M., 16, 19, 28, 30 Soskice, D., 276 South East Asia, 200, 219 South West Water plc, 236, 242 Spain, 169 Spicer, A., 3, 4, 6, 90,100 Springﬁeld Nuclear Power Plant (SNPP), 120,127, 128 -33 Stacey, R., 16, 20, 23 stakeholders, 228, 275, 247–70, 287–8 Stalker, G. M., 12, 14 Stallybrass, P., 124–5 Standard and Poor’s 500 Index, 280 Standard and Poor’s Corp, 280 Star Alliance, 297, 302 Starbuck, W. H., 26 Starkey, K., 180 Steeneveld, M., 195 Steiger, G., 126 Stephan, E., 156 Stewart, T., 158 Stiglitz, J., 268 Stinchcombe, A. L., 211, 216 Stock Exchange and Securities Commission (Kuala Lumpur), 260 Stock Exchange of Thailand, 262 Stokes, J., 114, 156 Storey, J., 124 Strangleman, T., 65 strategic alliances, 7, 192, 295–307 strategising, 277

strategy, 2, 7, 17–22, 90, 173–5 Street, J., 123 structural tension: ﬂexibility versus rigidity, 301–2 Stubbart, C., 17 Sturdy, A., 43, 82, 113 subject positions, 91, 92–3 subjectivity, 49–51, 99–114 Suddaby, R., 189 supervisory boards, 287 surveillance, 166 Sutton, R. I., 190 Švejkism, 70–1, 92 Svensen, S., 87, 95, 96, 97, 98, 99, 104 Sydney Morning Herald, 222 symbolic struggle, 87–114 symbols, 173 T Tabrizi, B. N., 16, 20, 31 Taiwan, 250, 251, 252 Takahashi, Y., 283, 290 Tanner, L., 105 Tauber, M., 53 Taylor, F. W., 12, 147 Taylor, P., 67 TCE (Transaction Cost Economics) 46 Teece, D. J., 297, 299 Teicher, J., 3, 4, 90 Television, 119–136 Telmex, 170 Teng, B. S., 47, 299, 300, 302, 303, 305 tensions, 7, 15, 295–307 Texas Instruments, 252 texts, 49–51 Thai (Thai International Airways), 302 Thailand, 250, 253, 254, 255, 261–2, 265, 267 Thatcher, M. H., 223 Thayer, L., 12 The Journal of Business Ethics, 175 The Power of Ethical Management: Integrity Pays, 175 Thompson, E., 158 Thompson, G., 25, 276 Thompson, J., 211 Thompson, P., 65, 68, 69, 73, 88, 92

Index 329

Thorpe, M., 113 Thyssen Krupp, 282 Tiger Economies, 250, 264 time and motion, 12 Time, 219 Tobin Inititative, 223 Tokyo Stock Exchange, 282 Tolbert, P., 187 Toohey, J., 100 Torode, B., 1 totality, 28 Townley, B., 76, 91, 166 Toyota, 282, 290 Trade Practices Act, 98, 296 Trairatvorakul, P., 261–2 transgression, 69 Traunmüller, R., 53 Trethewey, A., 70, 82 Trevi, G., 175 Trinca, H., 87, 99, 102 Trist, E. L., 23, 24, 26, 30 trust, 24–25, 201–22 Turnbull, P. J., 95, 96 U Ullman, T., 121 Ungson, G. R., 299 Union Bank of Switzerland, 216 unions, 92, 287 United Arab Emirates, 97 United Biscuits, 236, 239, 240–1 United Kingdom (UK), 6, 7, 73, 94, 150, 247–8, 275, 277, 279, 281, 284–6, 287, 288, 289, 290, 291 United Nations (UN), 223 United States of America (US), 6, 7, 76, 94, 98, 121–36, 168, 169, 171, 205, 207, 221, 223, 247–8, 266, 275, 276, 277, 278, 279, 280, 281, 282, 284, 285–6, 287, 288, 289, 290, 291, 296 University of Sydney, 222 University of Technology, Sydney (UTS), 8 University of Wollongong, 54 US Council on Competitiveness, 247 US Federal Reserve, 211, 222, 250 US GAAP (Generally Accepted Accounting Principles), 278, 284, 286

Utopian mentality, 216–7, 219–21 Uzzi, B., 210, 304 V values, 4, 25, 141–5, 146, 147–51, 193 Van de Ven, A. H., 16, 47, 298 Van Houton, D. 16 Vanderbilt, C., 168 Van Dijk, T., 90, 93 Varela, F., 158 Venezuela, 267 Venkatraman, N., 305 Vera, P., 31 Victoria, 106 Villaneuva-Madrid, M., 169 Vodaphone, 248, 280 Volberda, H. W., 29, 299 Volkswagen, 279 Voss, C., 229 W Wack, P., 18 Wall Street, 169, 200, 219, 254, 266, 280, 284 Wall Street, 219 Wal-Mart, 170 Wanous, J., 72 Ward, A. C., 32 Waterfront dispute (1997–1998), 93–114 Waterfront Industry Reform Association (WIRA), 95, 96, 100 Watergate, 175 Waterman, R. E., 12, 67, 165, 172, 173–4 Waters, J. A., 16, 17, 30 Waterside Workers Federation, 95, 96 Weber, M., 4, 140, 141–5, 147, 148, 149,154, 157 Weick, K., 12, 16, 17, 18, 19, 20, 21, 22, 25, 26, 27, 28, 30, 89, 165 Weinstein, D., 120 Weissman, R., 170 Wells, M., 97 Western Europe, 266 Wharﬁes, 3–4, 87–114 Wetherall, M., 90, 93 White, A., 124–5 Whitley, R., 276, 277, 278, 290

330 Index

Wiener, N, 141 Wildavsky, A., 47 Wilkinson, B., 76, 91 Wilkinson, T. J., 301 Williamson, O. E., 23, 46, 297, 299 Willis, Paul, 3, 68, 69 Willmott, H., 30, 32, 65, 69, 72, 73, 76, 88, 166 Wiseman, J., 99 Wittgenstein, L., 2 Wolf, M., 267 Wolfe, T., 219 Woodilla, J., 70, 82 Woodman, R. W., 21 Woodward, J., 12 Woolridge, B., 13, 17 work ethic, 101–2 Workplace Express, 99 Workplace Relations Act (WRA), 96, 97 World Bank, 172, 211, 248, 250, 250–1, 251, 252, 257, 260 Wortmann, M., 281 Wray, L. R., 211 Wright, C., 238 Wyman, D., 250

Y Yale University, 120 Yamawaki, H., 295 Yates, J., 12, 13, 16 Yorkshire Water plc, 232 Yoshino, M. Y., 299 Young, A., 251 Young, J. J., 238 Youssef, W., 297 Yukashoken Hokukushka, 284 Z Zeitlin, J., 29 Zeno’s paradox, 9 Zinn, H., 168 Žižek, S., 71, 73 Zuckerman, M., 266 Zugehoer, R., 276, 277, 278, 279 Zysman, J., 276

John Benjamins Publishing Company publishes Advances in Organization Studies as a reformulated continuation of the De Gruyter Studies in Organization. 1. ZEYTINOGLU, I¸sik Urla (ed.): Developments in Changing Work Relationships in Industrialized Economies. 1999. 2. HENKE, Holger and Ian BOXILL (eds.): The End of the ‘Asian Model’? 2000. 3. QUACK, Sigrid, Glenn MORGAN and Richard WHITLEY (eds.): National Capitalisms, Global Competition, and Economic Performance. 2000. 4. MAURICE, Marc and Arndt SORGE (eds.): Embedding Organizations. Societal analysis of actors, organizations and socio-economic context. 2000. 5. CHAN, Andrew: Critically Constituting Organization. 2000. 6. BOS, René ten: Fashion and Utopia in Management Thinking. 2000. 7. RHODES, Carl: Writing Organization. (Re)presentation and control in narratives at work. 2001. 8. HOSKING, Dian Marie and Sheila McNAMEE (eds.): Organization Behavior. Social constructionist approach. n.y.p. 9. CLEGG, Stewart R. (ed.): Management and Organization Paradoxes. 2002. 10. ITERSON, Ad van, Willem van MASTENBROEK, Timothy NEWTON and Dennis SMITH (eds.): The Civilized Organization. Norbert Elias and the future of organization studies. n.y.p.

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