Emergent Frameworks in Global Finance: Accounting Standards and German Supplementary Pensions

Abstract

Adoption of international and U.S. financial accounting standards by leading German corporations presages a new era in European capital markets, with important implications for the design and management of German supplementary pensions. In this paper, we first introduce financial accounting standards boards, the evolution of U.S. pension accounting standards since ERISA (1974), and the introduction of FASB 87. We emphasize the quiet campaign by national and international accounting professionals to harmonize corporate accounting and the measurement of pension liabilities to accepted international standards. Using data collected from 1998 annual reports for German firms in the DAX 30 index, we report on and explain the adoption of international accounting standards by large German firms. This takes us to an analysis of the scope and significance of corporate pension liabilities. Noting the connection between accounting standards and global capital markets, we identify the implications of harmonization of German supplementary pension and retirement benefit systems for the mechanisms of financing benefits, the valuation of assets and liabilities, and the advantages and disadvantages of defined benefit as opposed to defined contribution plans. In combination, we show that historical differences between the Anglo-American system of corporate governance and the German system of entrenched management within interlocking boards of supervision and the representation of stakeholders' interests are now less compelling than assumed.

Geographic Variations in the Early Diffusion of Corporate Voluntary Standards: Comparing ISO 14001 and the Global Compact

“…However, there is little case-study evidence that similar supply-chain pressures are exercised by lead firms in relation to the GC, suggesting that the influence of exports may also be through noncoercive dynamics such as expanded information. Regardless of the underlying drivers, the fact that trade emerges as the most influential form of transboundary connection cum flow lends strong support to arguments about the role of major exchange partners in fostering cross-border convergence (Clark et al, 2001;Prakash and Potoski, 2006;Vogel, 1997).…”

“…Regardless of the underlying drivers, the fact that trade emerges as the most influential form of transboundary connection-cum-flow lends strong support to arguments about the role of major exchange partners in fostering cross-border convergence (Clark et al, 2001;Prakash and Potoski, 2006;Vogel, 1997).…”

“…Following Simmons and Elkins (2004), we point to two mechanisms through which transnational contact, communication, and exchange with other countries might plausibly give rise to cross-border spillovers: altered payoffs and information. Altered payoffs are hypothesized to arise where uptake of an innovation by actors in country A increases its relative profitability to potential adopters in country B. Altered payoffs may be financial, with adoption in other countries increasing the commercial value of a particular standard, or reducing the financial costs of implementation (Bennie et al, 2007;Clark et al, 2001). Altered payoffs may also be reputational, and bound up with corporate actors' quest for`legitimacy' amongst important stakeholders, with uptake in other countries helping to domestically institutionalize particular standards as`best' or`appropriate' practice (Guler et al, 2002;Mendel, 2002).…”

“…Altered payoffs are hypothesized to arise where uptake of an innovation by actors in country A increases its relative profitability to potential adopters in country B. Altered payoffs may be financial, with adoption in other countries increasing the commercial value of a particular standard, or reducing the financial costs of implementation (Bennie et al, 2007;Clark et al, 2001). …”

Cultures of Money

“…international agreements on the supervision and regulation of financial institutions are leading to an unprecedented harmonisation; credit cards are becoming international money equivalents; and accounting standards are regularising around an (Americanised) international norm (Previts and Merino, 1999;Tickell, 2000a;Clark et al, 2002).…”