Academic journal article The Accounting Historians Journal

A Labor-Based Explanation for Accounting Innovation in a Late Nineteenth Century American Corporation

Academic journal article The Accounting Historians Journal

A Labor-Based Explanation for Accounting Innovation in a Late Nineteenth Century American Corporation

Article excerpt

Abstract: In 1888, the Quincy Mining Company changed its payroll accounting practices. Although efficiency was almost certainly a contributing factor, the nature and timing of this accounting innovation cannot be fully explained by efficiency alone. Instead, this paper attributes the new procedures to the transformation of American labor that characterized the last part of the 19th century. It is argued that the accounting changes reflect a realignment of the organizational relationship between management and labor. Through a contextual examination of a 19th century accounting innovation, this paper provides insights to the social and cultural influences upon accounting processes.

In January 1888, the Quincy Mining Company (QMC) changed the way it recorded labor costs. It could be argued that the firm was simply attempting to reduce posting costs and streamline its record keeping. However, our premise is that when QMC made the accounting changes in 1888 and eliminated a service that had traditionally been provided for its labor force, QMC also formalized a new concept of the significance of labor.

This study, a contextual examination of a l9th century accounting innovation, has two primary implications for accounting practice. First, it contributes to an extensive body of literature that interprets accounting activities within the context of social and cultural processes [Burchell et al., 1980; Meyer, 1986; Hopper et al., 1987; Hopwood, 1987; Hines, 1988; Miller and O'Leary, 1990; Tyson, 1990; Fleischman and Tyson, 1996; to name a few]. Although the viewpoints within this literature are diverse, a common theme is that accounting can be viewed as more than a one-dimensional activity driven by efficiency.

Second, this study provides firm-specific evidence to support a "labour process approach to economic and industrial history" as articulated by Hopper and Armstrong [1991, p. 406]. In contrast to Johnson and Kaplan [1987], who attributed l9th century accounting innovations to management's search for efficiency, Hopper and Armstrong [1991, p. 406] advocated laborbased explanations stressing:

. . crisis rather than continuity; contradiction rather than internal consistency; social and political conflict rather than harmony; the monopoly power of corporations rather than self-equilibrating competitive markets. 1

This paper argues that the accounting innovation of 1888 is attributable to QMC's labor processes in two ways. First, the bitter conflicts between management and labor at the Quincy Mine in the late 19th century eradicated any remnants of benevolent paternalism. One result was the elimination of an employee benefit in the form of a free "banking" service.

Second, the timing of the accounting change coincides with the reduction of labor's ability to constrain management's actions. In the developmental years of the Michigan copper range, the supply of skilled miners was limited. Mine managers that trod too heavily upon the miners faced strikes and the migration of skilled workers to other mines.2 The ability of miners to disrupt operations was a powerful constraint upon management practices. However, the transformation of American labor processes in the late l9th century weakened the power of the miners and made it possible for management to impose both technological and administrative changes. By 1888, labor homogenization and standardization virtually eliminated the value of a skilled individual. Consequently, miners were no longer accorded the privileged status they had enjoyed in the early years of the mining district.

The remainder of this paper will first define QMC's payroll accounting practices in 1887 and describe the changes made in 1888. Next, an overview of American labor processes in the late l9th century is provided as a backdrop for the events that occurred at QMC. This discussion focuses upon the transformation of labor processes that occurred in America and the resultant growth of organized labor. …

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