The previous accounts have offered very useful points: a variety of actors operating in financial markets build expectations about what the future holds based on constant information flowing directly and indirectly, the latter through the financial media. These information flows have become a strategic tool when corporations and their public relations departments, in a bid to influence decision makers, make use of mini epistemic communities, or ‘discourse networks’, as Davis calls them, to advocate the validity of their strategy and inflate share prices.
Froud et al. (2006) take the idea of narratives as a strategic tool and develop it further by arguing that narratives are used in routine economic representation of giant firms to shareholders. The rhetoric of shareholder value and the strong pressure to perform according to financial parameters form the background of their account, in which corporations, investors, journalists and analysts are involved in co-authoring narratives of purpose and achievement to try to manage investors’ expectations and avoid costly share price oscillation. Despite uneven levels of power, actors involved in the process keep a degree of agency that allows them to challenge information and,
consequently, outcomes cannot be a priori established, with winners and losers differing in every round.
They argue that firm narratives are collectively authored by public
relations/communication departments, journalists and analysts that, having access to each others’ texts and analyses, re-write and re-interpret them constantly. These stories are usually influenced by broader narratives, both at sector and at macro levels, which function as contextualisation ‘canopies’. Abrupt changes in the plot of the story by corporations are taken as a breach of an implicit contract between management and investors, with consequences going from a few hours of share price instability to a crisis that may overhaul corporate governance or even invite attempts of hostile takeover. To avoid disruptions, companies try their best to keep the information flow and warn against possible changes as early and smoothly as possible. This is done by frequent meeting between investors and CEOs and CFOs, both as scheduled events (annual and quarterly results) and private one-to-ones.
Discourses, however, only go so far. Action, in form of management strategic moves, is the visible side of stories, the turning of plans into ‘reality’. In this category are most of the mergers, acquisitions and other strategic decisions that keep the story flowing to investors but, at the same time, change the corporation, its drivers of profitability and its future story line. In a crude way, the process of communication consists in firms building their stories around promises of future financial results that will stem from specific management moves, building expectations that are
acknowledged and analysed by financial actors. Those managerial actions are causally linked with the delivery of financial numbers that, in the following year, will be scrutinised by journalists, analysts and investors. At this point in time, the company is already different from the one that made the promises and new narratives will be built from the numbers just delivered. In other words, narratives set in motion the
performative which, in turn, will alter the company and its future narratives. In their case study of General Electric (2006, p.299-368), Froud et al. show how Jack Welch, in the early 1980s, divested one fifth of GE’s asset base to enact the strategy of only keeping business competitive enough to be number one or two and built an impeccable reputation of a star CEO; Jack Nasser, on the other hand, bought Kwik-Fit in the late 1990s to prove that Ford was on its way to becoming a consumer company providing automotive products and services, a business sold three years later by a new CEO (Ibidem, p.250- 304). The difference was that while Welch was
building in GE a financial service basis that would keep the profits growing for the company, Nasser’s strategy was a kind of symbolic gesture that was eventually doubted by analysts, journalists and business schools’ academics (the cultural circuit of capitalism again), who could not see how his strategy would deliver short-term results.
Stories are accepted or challenged depending on various factors, but the gap between promises and numbers is the quicker and more legitimate way to question corporate narratives: numbers presented by management will set in motion a whole new set of narratives that can reinforce, or damage, credibility. Both too good and too bad financial results, usually checked against commonly agreed accountancy figures like share prices, revenues and return on capital employed, expose firms to a wave of questions about management miscalculations and their links with strategic moves. But there are other structural and very often interlinked issues that can empower external actors to challenge corporate narratives: complexity and context of the industry to which firms belong is one of them. How complex or simple an industry is reckoned to be must influence the reception of stories from the part of the media or market
analysts; the more transparent and predictable the sector is considered to be, the more likely it is to be questioned. The reason for this is linked to Golding’s concept of stories in a box. To simplify intricate corporations, financial actors strip them down to a few essentials that can be easily followed and compared. Some industries, like oil and pharmaceutical, have important benchmarks (oil reserves and drugs in pipeline) besides traditional accountancy numbers that provide a window into their future performance. They are thus judged by both sets of parameters.
Industry narratives and grand narratives about the economy in general are other factors influencing whether stories are challenged or not. Within this wider framework, civil society’s perceptions of narratives can help in the contestation of business prerogatives. The pharmaceutical industry narrative that justified high profits with the need to innovate has fallen under heavy criticism from civil society since the 1990s, throwing the whole sector into turmoil. In this particular case, reassuring the general public, media and governments of the social benefits of patents and high profits is even more important because the market is shaped and constrained by institutions and regulations and cost recovery is dependent on a favourable regulatory framework. When the industry narrative is under fire by social actors, governments
are compelled to intervene, threatening the business bottom line (Froud, Johal et al. 2006, p.152-167).
Crisis, therefore, can also start in the civil society domain and reach the financial realm because of their potential to affect profits. In relation to the City, crises where wrongdoing of senior management is suspected are particularly hard to manage. Merck’s withdrawal of the pain killer Vioxx, in September 2004, after grave accusations about the safety of the drugs reached the public, was also surrounded by controversy and loss of credibility after a string of media reports about the suspicions that top management at the American company knew about the risks and chose not to disclose them to the market and to patients were published (Ibidem, p.167).
These scholars add contingency to the communication process by highlighting different levels of narratives that bring more complexity to the construction of stories and more actors able to challenge corporate narratives and practices that can affect the bottom line. Their view also sheds light on how these routine interactions between firms and financial markets are not simply rhetoric, as promises have to be enacted and failure is punished, both with tangible effects on the corporation itself. Central to this analysis are assumptions about the instrumentality of actors and the importance of numbers in their calculations, presenting a convincing account of failure and change within this environment. On this cultural economy account, narratives are a tool capable of constructing a shared reality that moves forward as long as there is consistency between narratives and numbers. This is enlightening in the context of financial market interactions but its attempts to draw actors from other realms is circumscribed to the effects of these actors’ narratives on firms’ profits, without an analysis of how firms are dealing with these attacks in other spheres. Given the importance of these inherently political actors, any attempt to discuss giant firm representation cannot sidestep interactions outside stock markets.
Moreover, the framework has mainly ex-post explanatory power regarding when and why perceptions change. Narratives and numbers discrepancy, contested industry narrative or management wrongdoing cannot explain, for instance, why under Jeff Immelt’s management GE’s shares have chronically underperformed the S&P 500 index by more than 20%, even though the company has met tough financial targets, expanded to fast- growing sectors, increased its participation in booming emerging markets and sold slow-growth and underperforming businesses. In other words, the main measurement of the power or weakness of a story is made against the
absence or existence of contestation: a narrative is considered powerful inasmuch as it is able to avert its own collapse and weak when it does not. While this opens the possibility for failure and change that is missing in structuralist approaches, it does not help our understanding of the processes and elements that gives narratives leverage, which is the main concern of this thesis.