Shifting Strategies: the Pursuit of Closure and the ‘Association of German Auditors’

Abstract

Drawing on Weber’s [(1972). Wirtschaft und Gesellschaft: Grundriss der verstehenden Soziologie [Economy and society. An outline of interpretive sociology]. (5th ed.). Tübingen: Mohr Siebeck] theories of social stratification and closure, and on Parkin’s [(1979). Marxism and class theory. London: Tavistock] development thereof, this paper contributes a case study of Germany to the literature on closure processes (rather than outcomes), and outcomes falling short of professionalization. It explores the early history of the first German association of auditors, the Verband Deutscher Bücherrevisoren (VDB), founded in 1896. The paper traces how closure was pursued, at various times, by different means and to different degrees, depending on the changing social, economic and political contexts and on changing perception of what would best serve the association’s interest. By thus focusing on the shifting aims and strategies of the VDB, the paper contributes new insights into the dynamics within professions and between professions and their environments, and the dynamics and conditions underlying failed professionalization projects. The paper shows that, while the VDB had a degree of success in creating many of the structure and processes of a modern professional body, its ambition to achieve market and professional closure was not fulfilled.

Acknowledgements

I am grateful for funding provided by the Scottish Accountancy Trust for Education and Research (SATER) and for advice from Stephen Walker, Sebastian Hoffmann, Massimo Sargiacomo, Stefania Servalli and Lino Cinquini. Special thanks are due to three anonymous reviewers, and in particular to the patient guidance provided by the associate editor, Andrea Mennicken.

Notes

1 Closure and stratification are mainly dealt with in Part II (the older part) of Wirtschaft und Gesellschaft (translated into English as Economy and society). Weber wrote this between 1909 and 1913.

2 Thus, Chua and Poullaos (1993, 1998) explore the distinctive case of colonial accountants engaging with both local and imperial state agencies; Ramirez (2001) focuses on interdisciplinary conflict between corporate audit firms and sole practitioners which were preceded by the similar events in the German setting, and Coronella et al. (2015) examine a post-unification Italian setting. While there are similarities, considerable diversity also exists in European settings and the development of European professions, in particular with regard to manifestations of third parties, including the state, and the role of and status associated with higher education (Abbott, 1988, p. 26; Macdonald, 1995, pp. 85–94).

3 While Ramirez (2001) draws on Bourdieu.

4 The term freie Berufe is not restricted to university graduates, but refers to self-employed individuals only and therefore excludes civil servants or salaried employees (Jarausch, 1990; Kocka, 1990). Akademische Berufe refers only to professions requiring academic credentials (Jarausch, 1990) and ‘excludes those nineteenth-century professionals who were not trained in universities or similar institutions (like the English barristers), and it does not carry with it the notion of autonomy and self-controlled closure which usually define [sic] the “professions”’ (Kocka, 1990, p. 62). See Jarausch (1990) for a fuller explanation of the German terms.

5 As noted in the introduction, English translations such as ‘status group’ do not capture the German meaning fully and in particular do not signify very well the distinction between Stand and Klasse (‘class’) in German. Specifically,

In German, the term Stand evokes a sense of medieval history. It also implies a focus on rights and responsibilities that members of a shared Stand have to each other, especially as expressed through commonalities of life and shared codes of behavior. Specifically in Weber's formulation, these shared commonalities and responsibilities are mostly independent of any relationship within a free anonymous marketplace. According to Weber, this is an explicit contrast to the different feelings of solidarity and grievance that emerge from a shared position in a marketplace, as advantage-seeking buyers and sellers interact. Such groups Weber calls Klassen, that is, ‘social classes,’ in explicit contrast to the older solidarity of the Stände. (Waters & Waters, 2010, p. 155)

6 Social classes comprise the working class; the lower middle classes; the unpropertied intelligentsia and the highly skilled; and the propertied class and those privileged through education (Bildung). Compared to other types of classes, social classes are distinguished by greater social mobility, for individuals or across generations (Weber, 1972, p. 177). Stand most closely relates to social class, and differs most from commercial classes. Stände are primarily created by propertied classes, but while Stand can be based on class situation, it is not solely determined by this (Weber, 1972, p. 180).

7 These translations also do not capture the German concepts well. See Waters and Waters (2010) for a full explanation

8 Elsewhere, the foundation of professional associations was also motivated by attempts to break existing monopolies. This applied, for example, to the foundation of the Corporation of Accountants in Scotland in 1891 (Walker, 1991).

9 The Gewerbeordnung (§36) stressed that, where regulations attributed special credibility or legal significance to the actions of individuals practicing the trades specified in this law, these attributes only applied to individuals appointed by the state or municipal authorities.

10 The Deutsche Treuhand Gesellschaft was founded in 1890, initially as a finance and trust company for the protection of shareholders’ foreign investments (Meisel, 1992). From 1902, it included audit work in its service portfolio (Anonymous, 1914). In 1903, it carried out 27 external audits, and by 1907 approximately 400 (Quick, 2005, with reference to Lansburgh, 1908).

11 Unfortunately, no surviving documents shed light on whether this was due to existing members gaining a Handelskammer licence, or vereidigte Bücherrevisoren being newly admitted.

12 Mimicking formal characteristics of older professions is a common feature of professionalization (Ramirez, 2001). For example, English accountancy drew on models of older professions when it developed attributes of professionalism (Abbott, 1988, p. 26; Robson, Willmott, Cooper, & Puxty, 1994; Walker, 2004); local English societies emulated the organizational structures of Scottish societies (Macdonald, 1984; Walker, 2004); and the Institute of Accountants in New York (founded in 1882) attempted to imitate features of British accounting associations as well as the model of the ‘community of the competent’ employed in the medical profession, sciences and engineering in the US (McMillan, 1999).

13 Perhaps because it was taken for granted, the VDB's own original Articles of Association did not explicitly exclude women. In any case, by the mid-1920s the association had a small number of women members (see Table 1).

14 In practice, Bücherrevisoren did delegate minor work to assistants.

15 This difference in organizational form and personnel base was one of a number of factors that featured in the intra-professional struggle between Bücherrevisoren and Treuhandgesellschaften (Evans, 2003), which still had repercussions in the 1980s (Evans & Honold, 2007). See also Ramirez (2001) for somewhat later parallels in France.

16 A similar link was created in France, as the claims of professional independence and competence associated with sole practice enhanced practitioners’ social prestige. This was because ‘independence and distance were indeed only attainable by those gifted with enough economic and social capital to advertise themselves as sole practitioners’ (Ramirez, 2001, p. 398).

17 This problem appears to be symptomatic in most jurisdictions with a growing market where a professional organization has not developed sufficiently to facilitate closure. See, for example, Ramirez (2001) and Walker (1995).

18 The schools were initially independent of the state, but soon gained university status and fell under state control (Lindenfeld, 1990).

19 As evidenced by the emphasis on this topic at annual congresses. This was not only ‘proof that one was aware of a shortfall, but also that one was willing to remedy this’ (Sponheimer, 1925, p. 45, my translation).

20 For example:

Let us assume that a 19 year-old grammar school graduate attends the Handelshochschule for four semesters, passes the diploma examination and then completes the course for the training of Bücherrevisoren. We then have a young man of not yet 22 years of age, who has been officially certified as a Bücherrevisor. No doubt the young man is widely educated and possesses a wealth of desirable specialist knowledge – but he has absolutely no practical business experience. But that the latter plays a great, in fact the greatest role in the qualification of a Bücherrevisor, can be considered incontestable. (Anonymous, 1907b, p. 218, my translation)

21 In addition, academic endeavors in other areas were perceived as a threat to the Bücherrevisoren's jurisdictions. For example, Stern had published on industrial management and considered the valuation and depreciation of assets in manufacturing the domain of engineers.

22 The Handelskammer Leipzig, however, had supported the introduction of the diploma at the Handelshochschule. (I am grateful to Sebastian Hoffmann for drawing my attention to this.)

23 Although some regional associations of Handelskammern had established regulations on appointment and licensing by 1901 (Gerhard, 1956).

24 Letter from the Handelskammer Leipzig to the Handeshochschule Leipzig, 12 May 1909. Archiv der Handeshochschule Leipzig, Reference 83/23.

25 Its members’ lack of academic credentials was an obstacle to the VDB's lobbying also in its later activities. Although elements of its membership began to interact with the business schools, and some prominent members took up teaching positions (Gerhard, 1956, p. 13), in the 1920s its application for recognition of Bücherrevisoren among the freie Berufe was nevertheless rejected because Bücherrevisoren ‘are not, nor need to be equipped with academic tools [to the same degree] as doctors, lawyers, engineers (who are not merely technicians)’ (Schreier, 1925, p. 235, citing the supreme fiscal court decision of 15 July 1924, emphasis added, my translation). Bücherrevisoren were thus contrasted with engineers, who had become academized to a larger extent (see above). This is significant because freie Berufe were traditionally not restricted to university graduates, and this decision therefore demonstrates the rise of the formal credentials – the Fachprüfungen – observed by Weber.

26 Medieval guilds, for example, would at times attempt to increase membership to increase power, and at other times restrict membership to protect the value of their monopoly (Weber, 1972, p. 24).

27 Hintner (1926) estimates the total number of Bücherrevisoren in the mid-1920s at around 2000. However, Sponheimer (1925) estimates the number of vereidigte Bücherrevisoren at around 2000, and that of unlicensed Bücherrevisoren at approximately 10,000. Census data for 1925 suggests that a total of 18,132 individuals were engaged in audit and taxation work, but this includes vereidigte Bücherrevisoren, unlicensed Bücherrevisoren and employees of Treuhandgesellschaften. The number of vereidigte Bücherrevisoren included in this total is estimated at approximately 1800 (Schroup, 1929). The uncertainty regarding numbers is also noted, without resolution, by Henning (1990). It may partly be explained by the lack of a clear demarcation of the title and tasks of the Bücherrevisor.

28 It also supports prior research that emphasizes the influence of the state and of third parties (vis-à-vis the market) in the development of continental European professions (see e.g., Burrage et al., 1990; Chua & Poullaos, 1998).

29 This remained the case in subsequent years: post-World War I, several further attempts to gain state support to limit competition or create monopolies were unsuccessful. The VDB failed to convince, in the context of functionalist models of professions, of its public interest motives, and because the majority of its membership continued to lack formal academic credentials (Markus, 1997, pp. 12–13; Meisel, 1992, pp. 151–167; Schreier, 1925, pp. 235–236). Economic crises and large-scale corporate collapses eventually led to the introduction, in 1931, of an independent external audit and of a new professional title and qualification, the Wirtschaftsprüfer – both under state control (Gietzmann & Quick, 1998; Markus, 1997; Meisel, 1992). Although the VDB's earlier lobbying had influenced developments (Markus, 1997; Meisel, 1992), and it initially perceived itself as the body representing the interests of the new Wirtschaftsprüfer (Gerhard, 1956, p. 38), to the VDB's considerable disappointment, only around a third of its membership were admitted by September 1932 (Markus, 1997, p. 49).

Additional information

Funding

This work was supported by Scottish Accountancy Trust for Education and Research (SATER).