Management Accounting Standards (MAS) have evolved from when they were first used by businesses such as railway companies during the Industrial Revolution to attract investment, mostly from wealthy landowners. Investors were attracted by the prospect of increases in the price of the companies\u2019 shares.<\/p>\n
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In the 1970s the importance of \u201cshare value\u201d and \u201creturn on investment\u201d was boosted by the \u201cFriedman Doctrine.\u201d Milton Friedman declared that \u201ccorporate executives are employees of the business\u2019s owners (shareholders). Their primary obligation is generally to make as much money as possible for the shareholders. A business\u2019s sole social responsibility is to use its resources to increase its profits\u201d<\/p>\n
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This \u201cDoctrine\u201d has had calamitous consequences for several large companies such an ICI.\u00a0 The annual report of ICI in 1987 said that \u201cICI aims to be the world\u2019s leading chemical company, serving customers internationally through the innovative and responsible application of chemistry and related science.\u00a0 Through achievement of our aim, we will enhance the wealth and wellbeing of our shareholders, our employees, our customers and the communities which we serve and in which we operate\u201d.<\/p>\n
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Following a change in Chief Executive, the ICI report of 1994 said \u201cOur objective is to maximise value for our shareholders by focussing on businesses where we have market leadership. A technological edge and a world competitive cost base.\u201d ICI\u2019s share price peaked in 1997 but in 2007 what remained of the once great business was acquired by a Dutch company.<\/p>\n
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Since privatisation, water companies have put returns to shareholders above supplying their customers, maintaining pipework and preventing the pollution of rivers. They have even borrowed money to pay dividends. Such an insane business model was doomed to fail.<\/p>\n
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When company directors focus on share price and returns to shareholders they tend to cut their costs of production through reducing staff numbers, fail to maintain the quality of their products through cutting corners and are reluctant to invest in research and development; customers are lost, the share price falls and the company fails.<\/p>\n
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Warren Buffet paid dividends to shareholders only once. He realised that doing so reduced the amount of money his company was able to invest in making more money, which was his main aim. If shareholders wanted money from Berkshire Hathaway they had to sell shares.<\/p>\n
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Family owned businesses, not being concerned with the needs of shareholder investors are free to concentrate on the quality of their products and are able to invest their profits in research and development, often without borrowing, to ensure their success. Taylor\u2019s Yorkshire Tea, based in Harrogate, is a good example.<\/p>\n
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Management Accounting Standards should not be used to provide the headline measure of Farm Business Incomes. The return on investment in the inflated price of land does not represent their taxable earnings.<\/p>\n","protected":false},"excerpt":{"rendered":"
Management Accounting Standards (MAS) have evolved from when they were first used by businesses such as railway companies during the Industrial Revolution to attract investment, mostly from wealthy landowners. Investors were attracted by the prospect of increases in the price of the companies\u2019 shares. In the 1970s the importance of \u201cshare value\u201d and \u201creturn […]<\/p>\n","protected":false},"author":4,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[],"class_list":["post-1945","post","type-post","status-publish","format-standard","hentry","category-uncategorized"],"_links":{"self":[{"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/posts\/1945","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/comments?post=1945"}],"version-history":[{"count":1,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/posts\/1945\/revisions"}],"predecessor-version":[{"id":1946,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/posts\/1945\/revisions\/1946"}],"wp:attachment":[{"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/media?parent=1945"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/categories?post=1945"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/slrg.scot\/blog\/wp-json\/wp\/v2\/tags?post=1945"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}