KPMG: 2 + 2 = The End - (Or, "Capitalism, states and ac-counting", Revisited)

KPMG: 2 + 2 = The End
(Or, “Capitalism, states and ac-counting”, Revisited)

Introduction
   What does the pandemic tell us about the nature of the state?
   The state used in ways previously ruled out – furlough and income
    replacement schemes, a ban on evictions, private hospitals
    nationalised
   Covid pandemic impact on retail – exposes existing weakness
   Debenhams announces the closure of all 11 stores in RoI, with no
    funds available
   Workers are members of the Mandate union – redundancy pay
    agreement, a “2 + 2” model (2 weeks per year worked, statutory; 2
    weeks per year worked, from the company)
   Leverage is in-store stock – workers have been picketing since April
   This paper draws upon publicly available accounting and legal
    documents, as well media (both mainstream and social) content
   AIM: to develop an analysis of the ways in which KPMG, the former
    Debenhams workers and state apparatuses interact.

Introduction

Introduction

Introduction

Introduction

Understanding the state
   State theories (Knutilla and Kubik, 2000):
     – Classical liberalism; Sociological functionalism; Elite and Pluralist;
       Marxist: Traditional and Neo; Anarchist & Feminist critique
   Role of the state – depends on which theory you adopt:
     – Ultimate expression of human nature
     – A neutral arbiter between competing parties
     – An instrument of class rule
   State periods – from political economy
     – Corporatist state (emerged in 1960s)
     – Neoliberal age (post-1980)
   Past four decades – dual dynamic             (Peck and Tickell, 2002)

     – Rolling back the corporatist state
     – Rolling out the neoliberal state

“Capitalism, states and ac-counting” (Catchpowle et al. 2004)
   Focus on the role of accounting in development of capitalism and the state
   Reject the relative autonomy (Miliband, 1983) analysis of the state, even if
    personnel/personal contacts insight is correct
   Build on the state derivationist analysis:
     – “the actions of states, accountants, capitalists and other social institutions
       cannot be understood on their own but only in relation to what shapes the
       dynamics of society as a whole, which in a capitalist system remains the
       pursuit of profits and capital accumulation.” (Catchpowle et al. 2004, p. 1049)
   Emphasises recent changes in capital accumulation, focusing on strategic
    intelligence and consultancy role of “Big 5” firms – mainly privatisations
   Insolvency services mentioned, mainly in a footnote:
     – “It is in its insolvency practice that one can see clearly the accounting
       profession’s role in a system which has capitalists with common interests but
       which are also like a band of warring brothers vying for a greater share and a
       for greater power for their particular functional part or sovereign unit of
       accumulation.” (Catchpowle et al., 2004, p. 1051)

Context of the dispute
   Decades of social partnership – incorporation of trade
    union leaders; contribution to Celtic Tiger years
   Clerys case in 2015 – used company law to move physical
    property assets out of reach of creditors, including staff
   Duffy Cahill Report (2016):
    – “The focus here is instead on attempting to facilitate and extend the
      use of the existing provisions of the Companies Act in the protection
      of employees’ interests.”
    – Mostly improved consultation
    – Only one proposal concerns the awarding and calculation of
      enhanced redundancy payments
    – The liability for these payments would fall on the state
   Estimated “2+2” package would cost €13m – state due
    €20m in taxes

Debenhams – key events
   9 April – Debenhams Ireland (DRIL) announces all 11 stores in RoI to close
   16 April – KPMG appointed as liquidators of DRIL
   21 April – Workers told by police that protest outside stores is “non-essential”
   7 July – Taoiseach: “Debenhams has treated the workers very poorly and in a
    shabby way and it is wrong to do so.”
   10 July – KPMG admit pickets are “… slowing down the liquidation process."
   8 Aug – National protest, Dublin (not supported by Mandate leadership)
   18 Aug – Protests at KPMG offices in Dublin, Cork and Galway
   4 Sept – KPMG offer €1m redundancy fund
   7 Sept – Dublin and Cork stores occupied; Police arrest Dublin occupiers; KPMG
    withdraw €1m redundancy fund offer
   22 Sept – Protests at KPMG offices in Dublin, Cork and Galway
   28 Sept – Waterford store occupied
   29 Sept – Open letter calling on ICTU to act
   13 Oct – KPMG granted injunction against pickets preventing stock removal
   21 Oct – Pickets stop stock being removed from 2 stores; police take names
   16 Dec – Talks result in €3 million training fund

KPMG and Kieran Wallace
   “At KPMG, trust is earned by doing the right thing – not just
    some of the time but all of the time” (KPMG’s Global Code of Conduct)
   KPMG (Ire) got €11m for setting up the procurement
    process for National Broadband Plan:
     – Received only 1 bid; could not carry out VfM exercise and
       admitted: “The solution on the table now … is more expensive than
       originally envisaged”
   KPMG (Ire) set-up a Public Interest Committee in 2013 –
    independent non-exec members included:
     – Pat Cox, former MEP and President of EU Parliament
     – Mary Harney, former Minister for Health
   Kieran Wallace (Head of Restructuring & Forensics, Head of Private Enterprise)
     –   Formerly special liquidator of IBRC – in 2015, joined legal with Denis O’Brien for an injunction to
         prevent the latter’s dealings with the bad bank becoming public
     –   Also in 2015 Wallace was the liquidator of Clerys

Liquidations and the State
   Taoiseach, Micheal Martin, TD (7 July, 2020):
    – “Debenhams has treated the workers very poorly and in a shabby
      way and it is wrong to do so. The Deputy is correct that the company
      has availed of the legal framework within the Companies Act in
      regard to solvencies, winding-up and so on, to leave the workers
      extremely short.
    – “The State will have to do its bit to provide, within the legal
      framework, … In my view, the legislation will have to be re-
      examined in terms of the devices that companies may use,
      separating out assets from trading income in particular, to deprive
      workers of their just entitlements in terms of redundancy.
    – “This will not be an easy task because reform of any legislation can
      have unintended consequences …”
   By December, no legislation forthcoming and Martin refuses
    to instruct liquidator to pay the 2+2 due to moral hazard and
    setting a precedent

Debenhams – Financial Analysis 1
   Bad Management Practices
    – In 2018, Irish operation saw revenue increase by £1.7m
      to £149.2m, driven by “strong digital growth”, (2014:
      £135.5m)
    – International operations (Denmark, Ireland and rest of
      the world) made a profit of £28.2m million,
    – UK operations made a huge loss of £509.5 million.
    – All of that loss is attributable to non-trading and non-cash
      transactions.
    – For example, £77.7 million was written off because
      management abandoned IT projects.

Debenhams – Financial Analysis 2
   Fantastical Accounting
    – In 2018, £302.1m Goodwill write off, earning projections
      not being realised
    – Goodwill was generated when the group was re-floated
      in 2006
    – Having been taken private by a consortium including
      private equity firms in 2003
   Online dispossession
    – Court liquidation hearing in April, online business in
      Ireland worth €30m
    – Still in operation and is going to UK group

Discussion – Illustrations
 KPMG benefitting from strategic intelligence role
  for the Irish state
 KPMG benefitting from state regulated insolvency
  business
 The dispute illustrates:
    – the lack of workers’ rights in the Irish corporate
      insolvency regime
    – how the state apparatus is being used by KPMG to
      intimidate and potentially force the workers to end the
      pickets
    – the incredible resilience of the, mainly women, workers –
      271 days on picket lines

Capitalism, states and ac-counting -
revisited
   Cooper et al. (2004) extend state derivationists
    analysis by including totality (holistic) from dialectical
    method
   Dialectics also include contradiction and change (Rees,
    1998)

   These are present in Cooper et al. (2004) - this paper
    accentuates the contradiction
   The Debenhams case highlights not just the
    contradictions between different capitals, as is typical
    in a liquidation
   But also the classic foundational contradiction between
    capital and labour

Capitalism, states and ac-counting -
revisited
 Challenges the idea that the state is irrelevant or
  has been transformed
 Highlights the continued historical role of the state
  in capitalism
   – Protect private property rights
   – Control workers
   – Settle distribution disputes in favour of (finance)
     capital
 A process of sedimentation(?)

Capitalism, states and ac-counting - politics
   Politics and praxis
    – Limitations of Autonomous ideas on the state – you may
      not be interested in the state but it is interested in you
    – Years of corporatism and social partnership have led to:
          Unwillingness to fight among trade union leaders
          Forgotten history and lack of organisation among wider labour
           movement
    – Role of radical left/socialist politicians/activists important
      in popularising and sustaining the struggle
          On the picket line and in the parliament
          Blockading the stock and amplifying the demands
    – Critical accounting academics can help the struggle
      through utilising our skills and knowledge, in support of
      the workers (Catchpowle and Smyth, 2016)

Conclusion 1

Conclusion 2
   Near Future:
    – Growing inequality, impact of the pandemic, and restructuring
      of sectors like, entertainment, retail and office work
    – Likely to lead to state interventions – fiscal, judicial and
      physical
   Critical accounting ideas still need to confront the state, but
     – Are individual reforms enough and what is the best way
       to achieve them?
    – “Radical agendas, either revolutionary or reformist, must be
      formulated if civilisation is to saved from being drowned in the
      contradiction between callous and unregulated private property
      and increasingly autocratic and militarised police state powers
      dedicated to the support of capital rather than to the well-being of
      the people [and planet].” (Harvey, 2014, pp. 51-52)

Bibliography
•   Barker, C. (1991), “A Note on the Theory of Capitalist States” In S. Clarke (ed.),
    The State Debate, Hampshire, Macmillan Academic and Professional Ltd., pp.
    204-213.
•   Catchpowle, L.; Cooper, C. and Wright, A. (2004), “Capitalism, states and ac-
    counting”, Critical Perspectives on Accounting, Vol. 15 No. 8, pp. 1037-1058.
•   Harman, C. (1991), “The state and capitalism today”, International Socialism, No.
    51, pp. 3-54.
•   Harvey, D. (2014), Seventeen Contradictions and the End of Capitalism, Profile
    Books, London.
•   Knutilla, M. and Kubik, W. (2000), State Theories: Classical, Global and Feminist
    Perspectives, 3rd edition, Zed Books Ltd., London.
•   Miliband R. (1983), “Debates on the state”, New Left Review, No. 138.
•   Peck, J. and Tickell, A. (2002), “Neoliberalizing Space”, Antipode, Vol. 34 No. 3,
    pp. 380-404.
•   Rees, J. (1998), The Algebra of Revolution – the dialectic and the classical
    Marxist tradition, Routledge, Abingdon.

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