Putting sport into organizations: The role of the accountant

This paper examines how organizations can promote in their employees similarly high levels of interest, motivation, and fun that participants in sports commonly experience. Particular emphasis is placed on the role accountants can play in using what this paper terms hygiene and elevating factors. Hygiene factors ensure the fair and transparent recording of financial events; without them, the sport of work cannot occur. Elevating factors allow employees to experience their work as fun and enjoyable, and ultimately provide the basis for a high-quality game of work. In helping to put sport into work, accountants will find themselves creating systems that go well beyond what they have done in the past, and dismantling some of the systems they once worked so hard to construct and oversee.     

Valuing Pharma R&D: The Catch-22 of DCF

There are two principal methods for valuing pharmaceutical R&D projects—discounted cash flow (DCF) and real options valuation (ROV). As typically practiced, DCF valuations tend to be lower than the estimates produced by ROV techniques. Part of the difference, as many have recognized, stems from DCF s limited ability to take account of managers' real option to cut its losses when new information reveals a drug candidate's lack of profit potential. Another reason for the difference, however, is the widespread use in DCF valuations of established success rates that do not distinguish between projects that fail to pass safety or efficacy trials and those that are abandoned for lack of economic viability. If the appropriate success rates are used, the two methods should yield identical project values because they assume the same scenarios. The practical reality, however, is that the two methods deal in a completely different way with the possibility of abandonment for economic reasons. Because ROV accounts for this possibility directly in the model itself, it is much better suited than DCF to this task—indeed, that is the uncertainty that it is designed to deal with. And the fact that 30% of all pharma R&D abandonments are for economic reasons is a strong argument for using ROV rather than DCF to evaluate new drug development.     

Can business make decisive contributions to development? Towards a research agenda on corporate citizenship and beyond

This introductory article considers the increasingly prominent expectation that business can and will make a significant contribution to sustainable development under the banner of corporate citizenship or related terms. It suggests a research agenda that questions the underlying assumptions of this discourse and addresses some of the practicalities of enhancing the business contribution to development, with a focus on southern Africa. The suggested key research themes acknowledge the complexity and contradictions in current debates and expand the corporate citizenship agenda to embrace the possibility of more fundamental and systemic changes. These themes are (1) relating corporate citizenship to the southern African context; (2) the scope for innovative business opportunities and a new purpose for business; (3) the drivers and enabling conditions for corporate citizenship; (4) implementing corporate citizenship; and (5) measuring and monitoring the impacts of corporate citizenship efforts. The article cautions against too much optimism or excessive reliance on business contributions to development and it emphasises the need and opportunity for investigating the many open questions introduced here and in the articles in this special issue.     

ARTHUR SELDON: GREAT EDITOR, THINKER AND RADICAL ECONOMIST

Arthur Seldon, the founder editor of Economic Affairs and first Editorial Director of the IEA, died in October 2005, a few weeks before the 25th anniversary issue went to press. Many tributes have been paid to Arthur Seldon in obituaries in The Economist and the major national newspapers. In this special section of Economic Affairs we reproduce four of the speeches given at his memorial service on 15 January 2006. Respectively, they illustrate the fond affection for Arthur Seldon felt by Ralph Harris, the founder General Director of the IEA; Stuart Waterhouse, a fellow LSE student; Martin Anderson, who worked with Arthur Seldon editing Economic Affairs; and Geoffrey Howe, former Chancellor of the Exchequer. Three members of Arthur Seldon's family also spoke at the memorial service. Their talks concentrated on Arthur Seldon's family life, but the following more general thoughts particularly resonated with all present. His adopted son, Michael Perrott, commented that he was ‘a lion amongst thinkers, timeless and uncompromising’. Peter Seldon spoke of his father as ‘a visionary’ and ‘a genius’; he concluded, ‘we are all unique but the word could have been invented for Arthur’. Peter's brother Anthony Seldon commented that ‘he [Arthur] lives on in all of us’. – Philip Booth     

The Intertemporal Relationship Between the Currency Spot Market and the Currency Option Market

This study examines the lead/lag relationship between currency option and currency spot markets for the Deutsche mark and the Japanese yen. Using intraday currency option transactions data for the year 1989 and applying a European type currency option pricing model, pair data series of the implied and the observed exchange rates are compiled. Causality tests are then employed to test the causal relation between the observed and the implied exchange rate changes. The results indicate that the currency spot market leads the currency option market by about ninety minutes.     

South–North Refugee Migration: Lessons for Development Cooperation

Migration has become a major concern of European development policies. By improving socio–economic and political conditions through development cooperation, a reduction of South–North migration flows is envisaged. This new approach is examined by analyzing the causes of asylum migration from developing countries to Germany. The econometric findings suggest that support of democracy, economic development and trade will not reduce migration, at least not in the medium-run. However, restrictive legal measures work. Migration control by international development cooperation therefore seems to need a long–term perspective.     

Why DCF capital budgeting is bad for business and why business schools should stop teaching it

The targeted readership of this article are tax educators employed outside the USA and other readers who are interested in tax education and research within the USA. After briefly outlining key features of the US tax system, the article describes the ‘traditional’ approach to tax teaching and documented concerns with this approach. A number of alternative approaches to tax teaching stemming from the work of the Accounting Education Change Commission are described. In addition, a synopsis of prior tax education literature from the USA is presented so that interested readers can further investigate some of the specific techniques described. The pendulum of tax teaching in the USA has swung between a rule-oriented lecture format and a more abstract economic analysis. Now, the current concensus appears to prefer an eclectic approach with a combination of teaching methods, testing techniques, case, economic, and rule-oriented content. Although the underlying tax laws throughout the world obviously differ, it is suggested that the possibility that effective delivery strategies may be universal.