Pursuing shareholder value: The rhetoric of James Hardie

Abstract

In this paper we analyse the media release by James Hardie Industries Limited (JHIL) announcing the establishment of a separate entity to fund current and future asbestos litigation claims using the interpretive tool of rhetorical criticism. At the centre of the corporate reorganisation which alienated asbestos-related liabilities from the corporate group was the concept of shareholder value. This concept was presented as an unequivocal rationale to persuade the public that the reorganisation would resolve the asbestos liability issue and benefit both shareholders and legitimate asbestos claimants alike. Accounting is implicated by the use of accounting concepts such as assets and liabilities to persuade stakeholders of the financial viability of the new entity. These concepts were presented as objective and unproblematic without consideration of the nuances of accounting measurement, recognition and disclosure criteria.

Keywords:

• Shareholder value
• Organisational discourse
• Rhetorical criticism
• James Hardie Industries Limited

Acknowledgements

The authors would like to thank Professor Brendan McSweeney for his encouragement and assistance in bringing this paper to publication. The authors would also like to thank the two anonymous reviewers and the participants at the Asian Pacific Interdisciplinary Research in Accounting Conference, Auckland 2007. Their comments have helped enormously in developing the paper.

Notes

1 “James Hardie Resolves its Asbestos Liability Favourably for Claimants and Shareholders” (see Appendix A).

2 On the 15th February, 2007, the Australian corporate watchdog, the Australian Securities and Investments Commission (ASIC), commenced civil penalty proceedings relating to disclosures by James Hardie Industries Limited regarding to the adequacy of funding of this entity, the Medical Research and Compensation Foundation (the Foundation or MRCF). In particular, ASIC have targeted the market announcements of the 15th/16th February, 2001 for breach of duty of directors and officers (ss. 180(1) & 181(1)) and also misleading and deceptive conduct in connection with securities (ss. 995(2) & 999, Corporations Act, 2001).

3 In Australia contributions to pension/superannuation funds became compulsory for most wage earners in the early 1990s. This has resulted in institutional investors controlling large amounts of capital and a transformation of the landscape in the market for corporate control.

4 Prior to this, claims for asbestos related illness were confined to workers compensation claims. This shift altered the jurisdiction in which claims were adjudicated and opened the way for asbestos manufacturers to be named as defendants in all asbestos related claims.

5 This was part of a previous reoganisation strategy called ‘Project Chelsea’ (Haigh, 2006).

6 Unless otherwise specified all amounts referred to in this work are Australian dollars.

7 As background or contextual material, the complexity of the reorganization has been obscured by this explanation. The move to the Netherlands involved political and legal maneuvering that is beyond the scope of the paper.

8 A post-script to these events was the establishment of a Special Commission of Inquiry (the Inquiry) into the funding of the Foundation which led to the development of a scheme to attempt to ensure asbestos claimants are fully compensated. In early 2007 this scheme acknowledging liability and providing for future asbestos claims through partitioning and capping a portion of current and future operating profits was approved by the Australian shareholders of the now Netherlands-domiciled parent company (JHI NV) (Clarke & Dean, 2007).