Prelims
ISBN: 978-1-80382-762-9, eISBN: 978-1-80382-761-2
ISSN: 1479-3504
Publication date: 28 October 2022
Citation
Carduff, K.C. (2022), "Prelims", Previts, G.J. (Ed.) Corporate Reporting: From Stewardship to Contract, the Annual Reports of the United States Steel Corporation 1902–2006 (Studies in the Development of Accounting Thought, Vol. 26), Emerald Publishing Limited, Leeds, pp. i-xviii. https://doi.org/10.1108/S1479-350420220000026007
Publisher
:Emerald Publishing Limited
Copyright © 2022 Gary J. Previts
Half Title Page
CORPORATE REPORTING
Series Page
STUDIES IN THE DEVELOPMENT OF ACCOUNTING THOUGHT
Series Editor: Gary J. Previts, Case Western Reserve University, USA
Previous Volumes:
| Volume 1: | Henry Rand Hatfield: Humanist, Scholar, and Accounting Educator, by Stephen A. Zeff |
| Volume 2: | Foundations for the Future: The AICPA from 1980–1995, by Philip B. Chenok and Adam Snyder |
| Volume 3: | The Story of a Fortunate Man: Reminiscences and Recollections of 53 Years of Professional Accounting, by Maurice E. Peloubet, ed. Alfred R. Roberts |
| Volume 4: | Development of the Income Smoothing Literature 1893–1998: A Focus on the United States, by Dale A. Buckmaster |
| Volume 5: | The Murphy–Kirk–Beresford Correspondence, 1982–1996: Commentary on the Development of Financial Accounting Standards, ed. Robert J. Bricker and Gary J. Previts |
| Volume 6: | Doing Accounting History: Contributions to the Development of Accounting Thought, ed. Richard K. Fleischman, Vaughan S. Radcliffe, and Paul A. Shoemaker |
| Volume 7: | Accounting: How to Meet the Challenges of Relevance and Regulation, by Eugene H. Flegm |
| Volume 8: | The Life and Writings of Stuart Chase (1888–1985): From an Accountant’s Perspective, by Richard Vangermeersch |
| Volume 9: | Seekers of Truth: The Scottish Founders of Modern Public Accountancy, by T. A. Lee |
| Volume 10: | The Contributions of John Lansing Carey to the Profession of Accountancy, by Laurie A. Barfitt |
| Volume 11: | Abraham J. (Abe) Briloff: A Biography, by E. Richard Criscione |
| Volume 12: | Early Warning and Quick Response: Accounting in the Twenty-first Century, by David Mosso |
| Volume 13: | Gerhard G. Mueller: Father of International Accounting Education, by Dale L. Flesher |
| Volume 14A: | A Global History of Accounting, Financial Reporting and Public Policy: Europe, ed. Gary Previts, Peter Walton, and Peter Wolnizer |
| Volume 14B: | A Global History of Accounting, Financial Reporting and Public Policy: Americas, ed. Gary Previts, Peter Walton, and Peter Wolnizer |
| Volume 14C: | A Global History of Accounting, Financial Reporting and Public Policy: Asia and Oceania, ed. Gary Previts, Peter Walton, and Peter Wolnizer |
| Volume 14D: | A Global History of Accounting, Financial Reporting and Public Policy: Middle East and Africa, ed. Gary Previts, Peter Walton, and Peter Wolnizer |
| Volume 15: | Understanding Accounting Academic Research: Before and After Sarbanes–Oxley, by Stephen R. Moehrle and Jennifer Reynolds-Moehrle |
| Volume 16: | The Big Four and the Development of the Accounting Profession in China, by Paul L. Gillis |
| Volume 17: | Management Accounting at the Hudson’s Bay Company: From Quill Pen to Digitization, by Gary Spraakman |
| Volume 18: | Japanese Management Accounting: Cultural and Institutional Significance of Cost Designing, by Hiroshi Okano |
| Volume 19: | Count Down: The Past, Present, and Uncertain Future of the Big Four Accounting Firms, by Jim Peterson |
| Volume 20: | A. C. Littleton’s Final Thoughts on Accounting: A Collection of Unpublished Essays, by Martin E. Persson |
| Volume 21: | Understanding Mattessich and Ijiri: A Study of Accounting Thought, by Nohora Garcia |
| Volume 22: | William A. Paton: A Study of his Accounting Thought, by Kelly L. Williams and Howard J. Lawrence |
| Volume 23: | Harold Cecil Edey: A Collection of Unpublished Material from a 20th Century Accounting Reformer, by Martin E. Persson |
| Volume 24: | Persistence and Vigilance: A View of Ford Motor Company’s Accounting Over its First Fifty Years, ed. Yvette J. Lazdowski |
| Volume 25: | Historical Developments in the Accountancy Profession, Financial Reporting, and Accounting Theory, by C. Richard Baker and Martin E. Persson |
Title Page
Studies in the Development of Accounting Thought - Volume 26
CORPORATE REPORTING: FROM STEWARDSHIP TO CONTRACT, THE ANNUAL REPORTS OF THE UNITED STATES STEEL CORPORATION 1902–2006
EDITED BY
GARY J. PREVITS
Case Western Reserve University, USA
AUTHORED BY
KEVIN CHRISTOPHER CARDUFF, PH.D. (1971–2018)
Case Western Reserve University, USA
United Kingdom – North America – Japan India – Malaysia – China
Copyright Page
Emerald Publishing Limited
Howard House, Wagon Lane, Bingley BD16 1WA, UK
First edition 2022
Copyright © 2022 Gary J. Previts.Published under exclusive licence by Emerald Publishing Limited.
Reprints and permissions service
Contact: permissions@emeraldinsight.com
No part of this book may be reproduced, stored in a retrieval system, transmitted in any form or by any means electronic, mechanical, photocopying, recording or otherwise without either the prior written permission of the publisher or a licence permitting restricted copying issued in the UK by The Copyright Licensing Agency and in the USA by The Copyright Clearance Center. Any opinions expressed in the chapters are those of the authors. Whilst Emerald makes every effort to ensure the quality and accuracy of its content, Emerald makes no representation implied or otherwise, as to the chapters’ suitability and application and disclaims any warranties, express or implied, to their use.
British Library Cataloguing in Publication Data
A catalogue record for this book is available from the British Library
ISBN: 978-1-80382-762-9 (Print)
ISBN: 978-1-80382-761-2 (Online)
ISBN: 978-1-80382-763-6 (Epub)
ISSN: 1479-3504 (Series)
Dedication Page
This dissertation is dedicated to my family and friends who have supported me through the experience, but especially my father, Joseph (rest in peace), and my mother, Eileen, who provided me with every opportunity a son could desire.
Contents
| List of Charts and Figures and Tables | xi | |
| Series Editor’s Preface | xiii | |
| Preface | xv | |
| Acknowledgments | xvii | |
| Abstract | xviii | |
| Chapter 1: Introduction | 1 | |
| 1.1 | Overview | 1 |
| 1.2 | Structure | 2 |
| 1.3 | Motivation for the Research Project | 3 |
| 1.3.1 | The Influence of US Steel Upon Public Corporate Reporting | 3 |
| 1.3.2 | The Development of Managerial Ideology in Corporate Reports | 6 |
| 1.3.3 | The Use of Content Analysis in Accounting Research | 8 |
| 1.4 | Limitations | 10 |
| 1.5 | Conclusion | 11 |
| Chapter 2: Literature Review | 13 | |
| 2.1 | Introduction | 13 |
| 2.2 | Importance of US Steel | 13 |
| 2.2.1 | History of US Steel | 14 |
| 2.2.2 | Men of Steel | 15 |
| 2.2.3 | Steel Industry and Other Steel Companies | 17 |
| 2.3 | Content Analysis | 17 |
| 2.3.1 | Content Analysis: Methodology | 17 |
| 2.3.2 | Content Analysis: Business Research | 20 |
| 2.3.3 | Content Analysis: US Steel | 25 |
| 2.3.4 | Content Analysis: Tone of Corporate Communication | 27 |
| 2.3.5 | Content Analysis: Conclusion | 28 |
| 2.4 | The Development of Managerial Ideology | 28 |
| 2.5 | Conclusion | 30 |
| Chapter 3: Traditional Content Analysis | 33 | |
| 3.1 | Introduction | 33 |
| 3.1.1 | Analysis of the Annual Reports | 34 |
| 3.1.2 | Purpose and Method | 35 |
| 3.1.3 | Summary | 36 |
| 3.2 | Enhanced Financial Reporting: The Gary Years (1901–1926) | 36 |
| 3.2.1 | Format of Report and Descriptive Statistics | 36 |
| 3.2.2 | Distinctive Features of the Reports | 39 |
| 3.2.3 | Previous Acknowledgments | 40 |
| 3.2.4 | Conclusion: The Gary Years | 41 |
| 3.3 | Regulatory Financial Reporting: The Transition Years (1927–1937) | 42 |
| 3.3.1 | Format of Report and Descriptive Statistics | 42 |
| 3.3.2 | Distinctive Features of the Reports | 42 |
| 3.3.3 | Previous Acknowledgments | 44 |
| 3.3.4 | Conclusion: The Transition Years | 45 |
| 3.4 | Progressive Financial Reporting: The Voorhees/Tyson Years (1938–1969) | 45 |
| 3.4.1 | Format of Report and Descriptive Statistics | 46 |
| 3.4.2 | Distinctive Features of the Reports | 46 |
| 3.4.3 | Previous Acknowledgments | 50 |
| 3.4.4 | Conclusion: The Voorhees/Tyson Years | 51 |
| 3.5 | Modern Financial Reporting: The Evolution Years (1970–1991) | 52 |
| 3.5.1 | Format of Report and Descriptive Statistics | 52 |
| 3.5.2 | Distinctive Features of the Reports | 53 |
| 3.5.3 | Previous Acknowledgments | 54 |
| 3.5.4 | Conclusion: The Evolution Years | 54 |
| 3.6 | Institutional Financial Reporting: The Cost Effective Years (1992–2006) | 55 |
| 3.6.1 | Format of Report and Descriptive Statistics | 55 |
| 3.6.2 | Distinctive Features of the Reports | 56 |
| 3.6.3 | Previous Acknowledgments | 57 |
| 3.6.4 | Conclusion: The Cost Effective Years | 57 |
| 3.7 | Summary and Conclusions | 57 |
| Chapter 4: A Model-Based Method of Content Analysis: Hypotheses, Methodology, and Results | 61 | |
| 4.1 | Introduction | 61 |
| 4.2 | Development of Model | 62 |
| 4.2.1 | Dependent Variables | 62 |
| 4.2.2 | Dependent Variable: CONTENT | 62 |
| 4.2.3 | Dependent Variable: DISPLAY | 64 |
| 4.2.4 | Dependent Variable: TONE | 65 |
| 4.3 | Independent Variables and Hypotheses | 67 |
| 4.3.1 | Independent Variable: CONCENTRATION OF Ownership | 67 |
| 4.3.2 | Independent Variable: PROFITABILITY | 68 |
| 4.3.3 | Independent Variable: LEVERAGE | 69 |
| 4.3.4 | Independent Variable: MANAGEMENT TEAM | 72 |
| 4.3.5 | Independent Variable: HISTORICAL MILESTONES | 72 |
| 4.4 | Proposed Model | 73 |
| 4.5 | Methodology | 73 |
| 4.6 | Results | 74 |
| 4.6.1 | Test of Initial Model | 74 |
| 4.7 | Observations and Conclusions | 78 |
| Chapter 5: Findings, Limitations, and Future Research | 81 | |
| 5.1 | Introduction | 81 |
| 5.2 | Examination of Managerial Ideology | 82 |
| 5.3 | Summary of Research Findings | 83 |
| 5.3.1 | The Gary Years (1902–1926) | 84 |
| 5.3.2 | The Transition Years (1926–1937) | 85 |
| 5.3.3 | The Voorhees/Tyson Years (1938–1969) | 86 |
| 5.3.4 | The Evolution Years (1970–1991) | 87 |
| 5.3.5 | The Cost Effective Years (1992–2006) | 88 |
| 5.4 | Conclusion | 89 |
| 5.5 | Limitations | 91 |
| 5.6 | Future Research Questions | 91 |
| Bibliography | 93 | |
| Index | 97 | |
List of Charts and Figures and Tables
| Chart 1 | Disclosure of US Steel Annual Reports | 64 |
| Chart 2 | Text Versus Visual Information in US Steel Annual Reports | 65 |
| Chart 3 | Graphical, Non-financial Information in US Steel Annual Reports | 66 |
| Chart 4 | Tone Variables for the US Steel President’s/Chairman’s Letter | 67 |
| Chart 5 | Average Common Stock Shares Per Holder | 69 |
| Chart 6 | Profitability of US Steel Over the Twentieth Century | 70 |
| Chart 7 | Debt to Asset Ratio for US Steel | 71 |
| Fig. 1 | Explanatory Content Analysis Model for Changes in US Steel Annual Reports | 63 |
| Fig. 2 | Initial AMOS Structural Model | 75 |
| Fig. 3 | Model for Managerial Ideology in US Steel Annual Reports | 84 |
| Fig. 4 | US Steel’s Average Common Shares Per Holder | 90 |
| Table 1 | Descriptive Statistics of the US Steel Annual Reports: The Gary Years (1902–1926) | 38 |
| Table 2 | Descriptive Statistics of the US Steel Annual Reports: The Transition Years (1927–1937) | 43 |
| Table 3 | Descriptive Statistics of the US Steel Annual Reports: The Voorhees/Tyson Years (1938–1969) | 46 |
| Table 4 | Descriptive Statistics of the US Steel Annual Reports: The Evolution Years (1970–1991) | 52 |
| Table 5 | Descriptive Statistics of the US Steel Annual Reports: The Cost Effective Years (1992–2006) | 55 |
| Table 6a | Pearson Correlations | 76 |
| Table 6b | Pearson Correlations | 77 |
| Table 7 | Goodness-of-Fit Indices | 78 |
| Table 8 | Comparative Summary of Five Eras of US Steel Annual Reports | 83 |
Series Editor’s Preface
Kevin Christopher Carduff, (1971–2018), the author of this research, was educated at Case Western Reserve University (CWRU) receiving a doctorate with a major field in Accountancy in 2010. He taught at CWRU and two other institutions prior to passing away in April 2018 after an extended illness. His undergraduate and graduate work at the master’s level was also at CWRU, where he served on the staff as an Assistant Dean. While at the university he began work on his doctoral coursework. During a visit of Professor Richard Vangermeersch, a scholar who had been extensively involved in studies of U.S. Steel, Carduff undertook an early digitizing activity involving the annual reports of the United States Steel Company for which he had achieved a substantially complete collection. He was a pioneer in the use of digital data.
The digitization of these reports facilitated searching the content for patterns and quantities of information. A previous CWRU study during the l990s for the American Institute of CPA’s (AICPA) Jenkins Committee employed content analysis of sell side financial analyst reports.
His thesis focused upon gathering and interpreting information regarding the role of its financial reports at a time when US Steel attained an iconic leadership role, from its formation and first report at the start of the twentieth century through that centurial era. Using content analysis, Carduff’s work examines the fiduciary communication perspective of the company’s management, reflecting an awareness of the right of shareholders to information about the performance and status of their invested property.
As the century progressed, the societal constructions of disclosure changed, and the annual report to shareholders of large publicly held companies became increasingly influenced by the disclosure requirements of the l930s Securities Acts. By the l960s, “Footnote #1” of reports was a required narrative to describe all significant accounting policies. Thereafter common financial packages were dictated as between the management report to shareholders, and regulatory filings with the Securities and Exchange Commission. By the 1990s the format and content of many large corporation reports, reflecting expectations of institutional investors, were again overtaken, resulting the so-called “10-K wrap-around” form of annual corporate report. Carduff exams the meaning and differentiation between the former, “trust/fiduciary” approach and the latter “contract/regulatory” model at US Steel.
As his physical health declined, he was unable to share the abundance of his work through the normal process of published papers. This book provides the structure and results so that other historians and scholars interested in this transformative period may benefit from the findings.
Appreciation is extended to Dr Carduff’s two sisters and brother who provided the necessary approvals for this volume.
Gary John Previts
February 12, 2022
Preface
Kevin and I first met in Cleveland at Case Western in 2005. I was there to meet with Gary Previts and Oktay Guvemli of Marmara University in Istanbul to discuss the 12th World Congress of Accounting Historians in 2008 in Istanbul. Gary asked me to speak with Kevin, as he was planning to study the annual reports of US Steel for his dissertation.
Since, based on my dissertation in an institutional study of the annual reports of US Steel, I was glad to talk with Kevin. We had nice conversation and I agreed to donate my collection of US Steel annual reports from 1902 to 2004 to Case Western, along with all my other books and notes on US Steel. I kept in touch with Kevin through the years and greatly appreciated his acknowledgment to me in his 2010 dissertation.
Kevin left us way too early. Gary and I both wish Kevin were here to write his own introduction but fate denied this.
Accounting has long been a field of knowledge. As such, scholarship in accounting is the same as in all fields of knowledge. There is a continual addition to the field of accounting scholarship. Kevin’s addition to the field of knowledge of accounting is the use of content analysis to give a new perspective on US Steel. He does a very good job of explaining these tools to study the content, display, and tone of the US Steel annual reports. Kevin also does a fine job in summarizing the history of US Steel. The reader is well prepared to grasp key accounting issues through the years.
Kevin’s key finding is that the US Steel annual report, like most annual reports of similar organization, “… has also changed dramatically, from a communication from managers to shareholders – reflecting a stewardship model – to a generic regulatory based form of government mandated disclosure in Form 10-K, abiding by a legal or contractual view” (p. 116). While I understand the legal dangers in the more conventional stewardship viewpoint, I still bemoan this change in corporate communication. I believe Kevin would have led a broad-based discussion of whether society is better served by the stewardship approach. This discussion is sorely needed.
It is important to note what further scholastic research could spring from this study. Certainly, an update of US Steel’s annual reports could be done. Another avenue of research could be studies of other companies with long histories, both within and without the steel industry. This type of research is helped by the digitization efforts recently done by libraries. Kevin’s research method is a model for comparative study of companies.
Please forgive my musings about 2027 – the 125th annual report of US Steel. I remember Gary’s chiding of me in 2002 for not celebrating the 100th annual report of US Steel. Gary, once again, was right. So why not a full-blown academic celebration in 2028 about the 1902–2027 annual reports of US Steel from an accounting and business history viewpoint? I am hoping that one feature of this celebration would be Kevin’s book.
Perhaps accounting historians would be interested in hosting this event? Another item could be the May 19, 1962 video of Marilyn Monroe’s singing to President John F. Kennedy on his birthday, a reprise about “How you deal with US Steel” referring to his efforts to beat back US Steel’s attempt to raise prices.
I’m hopeful that such conferences will celebrate and perhaps encourage a comeback of the stewardship view of reporting.
Richard Vangermeersch
Emeritus Professor of Accounting
University of Rhode Island
Kingston, Rhode Island
February 10, 2022
Acknowledgments
I would like to acknowledge my dissertation committee for providing insights, support and motivation to see me through this accomplishment: Dr Gary J. Previts (Chair), Dr Timothy, J. Fogarty, Dr Larry M. Parker, and Dr Bo Carlsson. My dissertation Chair, Dr Gary J. Previts, has been a consistent voice of encouragement and wisdom. I consider him my mentor and one of the most generous person in my life. I appreciate the hours of his time he provided to me. Dr Fogarty and Dr Carlsson have given me insights for many different aspects of this study and to my intellectual development. Dr Parker has been one of my biggest supporters throughout this process. Whenever I was discouraged, he was there new thought or idea, and always with a smile and a pat on the back.
I also need to thank Emeritus Professor Richard Vangermeersh of the University of Rhode Island, not only for supplying the annual reports for the US Steel Corporation from his private collection, but his constant support and encouragement whenever we met at conferences, and his postcards and phone calls.
I want to acknowledge the staff of the Kelvin Smith Library for converting the annual reports into digital copies for further analysis, especially Catherine Wells for her dedication to the digitization project.
Finally, to my family and friends who have had to endure me through this process and, yet, provided me with endless support and encouragement, thank you, and you never again have to ask, “Are you done yet?”
Corporate Reporting: From Stewardship to Contract
The Annual Reports of the United States Steel Corporation (1902–2006)
Abstract
By
Kevin Christopher Carduff
The United States Steel Corporation, formed in 1901, was the first company in the United States financial markets to be capitalized at the billion dollar level. Its iconic role in the industrial economy of the country has been studied from several dimensions. This research proposes to examine fully the reporting outcomes for the company. Previous content analysis projects (Claire, 1945; Vangermeersch, 1970, 1979) have examined shorter periods of US Steel’s external reporting. However, this study will examine a complete set of the company’s annual reports from 1902 to 2006, in hard copy and digital formats. It is motivated by an interest in establishing an historical perspective for a question posed by Ross Watts (1977, 2006), “Why do financial reports take their current form?”
The study is initiated with the undertaking of traditional, manual content analysis of the annual report data set. In this process, five separate eras of financial reporting were identified throughout a century of annual reports. The eras identified are: (1) The Gary Years; (2) The Transition Years; (3) The Voorhees/Tyson Years; (4) The Evolution Years; and (5) The Cost Effective Years. Each of these eras are distinctive in their reporting style and corporate financial information which was emphasized and reported. Next, a model-based method of content analysis was developed and performed using structured equations in an attempt to identify external variables which may have influenced the content, display, and tone of the annual reports over the period of the study. This analysis did not produce significant results; however, the process of developing the model and analysis of the reports provides a promising pathway for future exploration of single company datasets by clarifying the limitations of such modeling for long periods of time.
The findings altogether assist in improving an understanding of the managerial ideology of the company toward public reporting which appears to have evolved from a stewardship model of corporate reporting to a contract model consistent with the changing configuration of capital providers and management’s view of the information needs of such providers.