8 th INTERDISCIPLINARY WORKSHOP ON “INTANGIBLES, INTELLECTUAL CAPITAL & EXTRA-FINANCIAL INFORMATION”

1. 8thINTERDISCIPLINARY WORKSHOP ON “INTANGIBLES, INTELLECTUAL CAPITAL & EXTRA-FINANCIAL INFORMATION” “Intangible assets and/or intangible liabilities: where do we look from?” Bernard Gumb (Professor, Grenoble École de Management)

2. The origins: October 2007 The research pole on Intangibles (Pôle « Immatériels ») Facilitator Federating Enhancer Interdisciplinary

3. Experiencing feedback: Huge involvement of accounting and financial scholars Low (if not nil) involvement of economists and lawyers Poor impact of the crisis on discourses (we prefer studying goodwill vsbadwill) No common perception of Intangibles and Sustainability

4. The case of Intangible liabilities Google research (September 24, 2012): “Intangible assets”: circa 2,3 million results (62 800 on scholar.google) “Intangible liabilities”: circa 7 160 results (235) Why such a gap? Do we forget the merits of double-entry book-keeping? Abeysekera, I. (2006).

5. First understanding of Intangible liabilities (at firm level): “they represent what a firm owes to another entity or a deterioration in equity that either the firm doesn’t yet know about or for which there is no standard accounting procedure for recognizing “(Harvey & Lusch 1999). Examples: weak strategic planning processes, dangerous work conditions, potential environmental cleanup, potential product tampering, poor corporate reputation…

6. Similar understanding (at firm level): An intangible liability is intellectual capital (or an intangible asset) with a negative value. Conception close to Risks, Provisions, negative externalities K. Cravens, E.G. Oliver, The Reputation Index: Measuring and Managing Corporate Reputation European Management Journal Vol. 21, No. 2, pp. 201–212, 2003

7. An example: The status of a cooperative company might provide a sympathetic reputation to a company (an asset) and concomitantly hinder the dynamic capabilities (a liability). In other words, the “paralysis” is the price to pay (the funding) for the investment in reputation or other assets (employee loyalty etc.)

8. Another (multi-level) conception When we shift in a more meso-economic level, the point of view changes: what is an asset for a firm might represent a liability in the eco-system. An example: A leader company secures his patents and IP with successful actions. So doing, it creates entry barriers and generates monopoly rents, weakening the economic dynamics of the area.

9. Intangibles and CSR • CSR issues might be seen as Intangible liabilities as counterparts of Intangible assets: • Excess pay (IL) as a means for enhancing employees’ loyalty (IA) • Voluntary environmental expenses (IL) for acquiring and/developing a green reputation (IA) • Ambitious educational politics (IL) aiming to increase human capital at the national level (IA)....

10. New questions to address Is a correlation observable, on the long term, between CSR investments and the Intangible values of the firm? Is there a difference in resilience between CSR-related intangibles and more profit-oriented ones? Can we distinguish sustainable intangibles (those who resist to crises?) and speculative ones (those who melt with crises)?

11. Intangibles and the Spectacle A whole industry works on the design, the measurement, the visualisation of the Intangibles and Intellectual capital: Analysts, Consultants, Academics, Auditors, Fraudsters, Regulators, Tax authorities, Lobbies, voluntary disclosers.... The ability in this industry relies as much on hiding than in showing (Gumb 2007).

12. Intangibles and the Spectacle The process of producing the Spectacle of Intangibles is an integrated form in Debord’s typology (Debord 1888, Uddin & al., 2011). It includes in its narrative both the capitalist stance of SVM and the responsible stance of SRI & CSR. The production and disclosure of metrics, reports, dashboards is an industry of the Spectacle in the Debordian sense of the term. It creates an hyperreality (Baudrillard 1981, Eco 1986).

13. Where do we look from? • When we strive to measure IC, what is the impact, not only on entities’ performances, but also: • On risk, procyclicality and volatility • On managers’ behaviour • On earnings management • On creative accounting • On efficiency of ecosystems • ....

14. Conclusions Rediscovering double-entry book-keeping might help to redesign a balanced conception of the IC debate. The introduction of Intangible Liabilities in frameworks is a way to achieve “extended balanced sheets”. When theorizing on IA & IC we should emancipate from the entity dogma for a meso-economic approach. Taken together, the two tendencies might help the topic to embrace the concepts of SRI, CSR and the Spectacle.

15. References Abeysekera, I. (2006). The project of intellectual capital disclosure: research the research. Journal of Intellectual Capital, 7(1), 61–77. Baudrillard J., Simulacres et Simulation, Paris, Galilée, coll. « Débats », 1981, 235 p. Debord, G. Comments on the Society of the Spectacle (1988), Paris, Éditions Gérard Lebovici, 1988. Eco U., Travels In Hyperreality, New York, Harcourt Brace Jovanovich, 1986. Gumb B., “What is shown, what is hidden: Compulsory disclosure as a spectacle”, Critical  Perspectives on Accounting  ,18, 2007, p.807-828. Harvey M.G. & Lusch R.F. Balancing the Intellectual Capital Books: Intangible Liabilities European Management Journal Vol. 17, No. 1, pp. 85–92, 1999 Uddin S., Gumb B. , Kasumba S., (2011),"Trying to operationalise typologies of the spectacle: A literature review and a case study", Accounting, Auditing & Accountability Journal, Vol. 24 Iss: 3 pp. 288 - 314

16. THANK YOU