Tom Walton - Cohen Committee 1944.

'Corporatism and Unavoidable Imperatives: Recommendations on Accounting Principles and the ICAEW Memorandum to the Cohen Committee'. by Masayoshi Noguchi & John Richard Edwards.

ICAEW memorandum was submitted to the Cohen Committee in February 1944.
Tom Walton was a member of the Parliamentary & Law Committee as of 29th March 1943.

Summary -
The 19th century saw 'the high tide of laissez-faire', there followed a marked increase in state intervention in certain areas. Whereas the 'industrial sphere' was broadly left to 'the will of the manufacturers and the abstract laws of political economy' a measure of paternalistic control by the state was increasingly considered desirable in certain areas, particularly social administration. Spheres that were the subject of regulation include provision for the poor, safety at work, employment practices, policing, public health and education. It was also a period that saw steps taken to require statutory accountability from many entities where, in today's parlance, there existed 'a legitimate demand for the information that its financial statements would provide'. This changed dramatically during the first half of the twentieth century and government expenditure as a proportion of gross national product rose more than three-fold, from 12.7% to 39%, between 1910 and 1950.
The Institute of Chartered Accountants in England and Wales (ICAEW), had traditionally taken the view that the form and content of accounts were matters for shareholders and directors, with any intervention from auditors prompted by professional judgment rather than as the consequence of ICAEW standards. From 1942, however, the Council of the ICAEW began to issue the famous series of Recommendations on Accounting Principles (RoAPs), widely deemed to represent best practice. The substantive provisions of those issued early were incorporated by the state in the Companies Act, 1947. The reforms of CA47 have thus been interpreted as significant in achieving the disclosure of relevant and effective information for investor decision-making.
This paper argues that -
(1) the BoT, through the formation of the Cohen Committee, prompted the qualitative change that occurred in the content of RoAPs.
(2) before the ICAEW memorandum was submitted to the Cohen Committee, a corporatist structure is discernible in the relationship between the BoT and the ICAEW.
BUT -
What was the attitude of the ICAEW's Council towards corporate accounting disclosure pre-Cohen?
What was the reason for the emergence of the BoT's specific and autonomous interest in the amendment of company law?

The ICAEW traditionally insisted that the content of corporate accounts were matters for agreement between shareholders and directors. Excessive disclosure in accounts was harmful to the business interests of British firms as it entailed making available valuable information to competitors. (and tax authorities). 'It is impossible by legislation to protect fools from their own folly'.

The desire of the Board of Trade to institute 'a broad inquiry into the basic principles underlying the company law' originated with the bureaucrat. It may be doubted whether existing company law sufficiently recognises modern social trends in investments. The small investor needs special protection. Best understood 'as a reflection of the changes in social attitudes stimulated by World War II, which brought about unprecedented mobilization and control over resources used by the state'.

Membership of the Cohen Committee included people who were likely to be sympathetic to new ideas. (corporatist ideas).

From the 1880s onwards there were recurring attempts to achieve state recognition for qualified accountants as monopoly suppliers of accounting services. A legal monopoly of public practice.
The preparation of the ICAEW's submission to the Cohen Committee was the responsibility of the P&L Committee whose key role within the ICAEW's organizational structure, at this time, can be inferred from its membership profile. (Tom Walton was on the committee)

The Accountant records that the first five RoAPs dealt with technically difficult and intricate matters 'of the most fundamental importance while yet being amongst those which have occasioned the most varied discussions in the business and professional world', specifically the treatment in accounts of taxation in general, and Excess Profits Tax in particular. (surprise)
The qualitative change in RoAPs was prompted by the desire of the ICAEW to align itself with the priorities of the BoT.

Membership of the Parliamentary & Law Committee as of 29th March 1943 -
C. J. G. Palmour (President) - Whinney, Smith & Whinney London
H. M. Barton Barton (Vice-President) - Mayhew & Co. London
W. S. Carrington - Whinney, Smith & Whinney London
R. N. Carter - Carter, Chaloner & Kearns, Manchester
L. W. Farrow - Sissons, Bersey, Gain, London
C. E. Fletcher - Cooper Brothers & Co. London
G. R. Freeman - Gane, Jackson, Jefferys & London
H. L. H. Hill - Hill, Vellacott & Co. and London
Sir Harold Howitt - Peat, Marwick, Mitchell & Co. London
Russell Kettle - Deloitte, Plender, Griffiths London
Harold M. Moore - Edward Moore & Sons London
Herbert J. Page - Hudson Smith, Briggs & Co., London
The Lord Plender - Deloitte, Plender, Griffiths London
T. Walton - Walton, Watts & Co. Manchester
Sir Nicholas Waterhouse - Price Waterhouse & Co. London

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