This article evaluates the process of firm-specific learning relating to the
development of actuarially based pension accounting at the Bell System in the
USA from 1913 to 1940. Drawing on Alfred D. Chandler's notion of an
“integrated learning base”, it analyzes the steps taken by
the firm in learning how to order the multiple forms of specialized knowledge
necessary for effective pension liability management. The study also explains
how this change moderated relationships between such stakeholder groups as
employees, investors, regulators, professional advisors and tax authorities. The
pension plan was a key economic benefit that sought to increase employee
retention and morale through the promise of retirement compensation for
diligent, long-term service. It also sought to address humanely the economic
problems of old age in a rising urban-industrial society, which had scant
resources dedicated to social welfare. Although originally a pay-as-you-go
system, the escalating costs associated with a rapidly expanding workforce
forced its abandonment in favor of an actuarially based system in 1927. The
article analyzes this evolution in management practice through the New Deal era
and the emergence of a national social security system in 1935.
Abromowitz, M.
and
David, P.
(2000), “American Macroeconomic Growth in the Era
of Knowledge-Based Progress: The Long-Run Perspective”, in
Engerman, S.L.
and
Gallman, R.E.
(eds.), The Cambridge Economic History of the United States,
Cambridge: Cambridge University Press
, pp.1—92.
2.
Adams, S.B.
and
Butler, O.R.
(1999), Manufacturing the Future: A History of Western
Electric,
Cambridge: Cambridge University Press
.
3.
AT&T
(1916), Annual Report of the Directors of American Telephone
and Telegraph Company to the Stockholders for the Year Ending December 31,
1915,
New York: American Telephone and Telegraph Co.
4.
AT&T
(1922), Annual Report of the Directors of American Telephone
and Telegraph Company to the Stockholders for the Year Ending December 31,
1922,
New York: American Telephone and Telegraph Co.
5.
AT&T
(1937), Telephone Investigation 1935—1937.
Comments Submitted to Federal Communications Commission By American Telephone
and Telegraph Company on Commission Exhibits 581, 582 and 583. Bell System
Pension Plan: Actuarial Aspects 581, Investment of Funds (582), Administrative
and Financial Aspects (583),
New York
.
6.
AT&T
(1957), Depreciation: History and Concepts in the Bell
System.
American Telephone and Telegraph Co.
7.
Chandler, A.D.
(2001), The Epic Story of the Consumer Electronics and
Computer Industries.
New York: Free Press
.
8.
Chandler, A.D.
and
Tedlow, R.S.
(1985), The Coming of Managerial Capitalism: A Casebook of
American Economic Institutions,
Homewood, IL: Irwin
.
9.
Crisson, G.
(1925), “
Irregularities in Loaded Telephone Circuits
”, Bell System Technical Journal, Vol.4,
October, pp.
561—85
.
10.
Danielian, N.R.
(1939), A.T.&T.: The Story of Industrial
Conquest .
New York: The Vanguard Press
.
11.
Ernst, D.R.
(1995), Lawyers Against Labor: From Individual Rights to
Corporate Liberalism.
Urbana: University of Illinois Press
.
12.
FCC, Exhibit
136 (1936), US Federal Communications Commission, Accounting
Department — Telephone Investigation, Special Investigation Docket
No.1, Report on Bell Telephone System Pension Plan Service Pension
Payments, Record Group 173, Box 3,
College Park, MD: National Archives
.
13.
FCC, Exhibit 136 (1937), US Federal Communications
Commission, Telephone Division, Special Docket No.1, Comments on Exhibit 136
entitled Report on The Bell System Pension Plan — Service Pension
Payments , Record Group 173, Box 1,
College Park, MD: National Archives
.
14.
FCC, Exhibit 250 (1936), US Federal Communications
Commission, Accounting Department — Telephone Investigation, Special
Investigation Docket No.1, Report on Bell Securities Company, Record Group
173, Box 4,
College Park, MD: National Archives
.
15.
FCC, Exhibit 581 (1936), US Federal Communications
Commission. Accounting Department — Telephone Investigation, Special
Investigation Docket No.1, Report on Actuarial Aspects of Bell Telephone System
Pension Plan, Record Group 173, Box 33,
College Park, MD : National Archives
.
16.
FCC, Exhibit 581a (1936), Appendix 1,
Memorandum Relative to Actuarial Determination of Accrual Charges for
Service Pensions on the Full Service Basis,
American Telephone and Telegraph Co., Comptroller's Department, Chief
Statistician's Division , New York
, February 1929.
17.
FCC, Exhibit 581b (1936), Appendix 9, Report on an Audit
of the 1930 Accrual Rates and Letter, dated June 19,1931, from Woodward,
Fondiller and Ryan to C.A. Heiss,
American Telephone and Telegraph Company
.
18.
FCC, Exhibit 582 (1936), US Federal Communication
Commission, Accounting Department — Telephone Investigation, Special
Investigation Docket 1, Report on Investments of Bell Telephone System Pension
Funds, Record Group 173, Box 33,
College Park, MD: National Archives
.
19.
FCC, Exhibit 582a (1936), Appendix 6, Memorandum Prepared
Prior to 1933 Presidents' Conference (Yama Farms),
Bell System Pension Fund Operations
.
20.
FCC, Exhibit 583 (1937), US Federal Communications
Commission, Accounting Department — Telephone Investigation, Special
Investigation Docket No.1, Report on Administrative and Financial Aspects of
Bell Telephone System Pension Plan, Record Group 173, Box 34,
College Park, MD: National Archives
.
21.
FCC, Exhibit 583a (1937), Appendix 10, General Discussion
of the Pension Problem and Suggestions as to Possible Methods of Meeting It,
dated August 10, 1926, Signed by C.A. Heiss.
22.
FCC, Exhibit 583b (1937), Appendix 15, Report, dated
October 24,1928, of the Special Committee Appointed January 4, 1928 to Consider
the Experience Under the Plan for Employees' Pensions, Disability Benefits and
Death Benefits and to Recommend Any Changes in the Plan That Would Seem Advisable.
23.
FCC, Exhibit 583c (1937), Appendix 16, Letter, dated July
15,1927, from Committee on Revision of Pension Arrangements to E.K. Hall,
Chairman, Employees' Benefit Fund Committee,
American Telephone and Telegraph Company
.
24.
FCC, Exhibit 583d (1937), Appendix 17, Memorandum, dated
December 29,1925, from N.T. Guernsey, Vice President and General Counsel ,
American Telephone and Telegraph Company
, to D.F. Houston, Vice President.
25.
FCC, Exhibit 583e (1937), Appendix 18, Memorandum, dated
August 11, 1926, from Roscoe T. Holt to C.M. Bracelen.
26.
FCC, Exhibit 583f (1937), Appendix 21, Memorandum, dated
August 25, 1924, from P.W. Saxton, Assistant Comptroller, to C.A. Heiss, Comptroller.
27.
FCC, Exhibit 583g (1937), Appendix 31, Testimony of
Donald R. Belcher in Connection with Tri-State Telephone and Telegraph Company
Valuation Case,
St. Paul Metropolitan Area
.
28.
Fcc
(1937), US Federal Communications Commission, Engineering
Department — Telephone Investigation, Special Investigation Docket
No.1, Report on American Telephone and Telegraph Company, Depreciation
Accounting and Engineering Methods, Chapter XI, The Osculatory Survival Rate
Method of Determining Age Distributions and Life Characteristics of Telephone
Plant,
Washington, DC.
29.
FCC, Docket 5188 (1942), “In the Matter of
Additional Operating Expenses in Account 672 (`Relief and Pensions') in the
Uniform System of Accounts for Telephone Companies Representing 4 Percent of
Unfunded Actuarial Liability Under the Bell System Pension Plan Proposed by
Certain Wire Telephone Carriers”, 2 December.
30.
Garnet, R.W.
(1985), The TelephoneEnterprise
: The Evolution of the Bell System's Horizontal Structure,
1876—1909,
Baltimore, MD: Johns Hopkins University Press
.
31.
Gherardi, B.
and
Jewett, F.B.
(1930), “
Telephone Communication System of the United States
”, Bell System Technical Journal, Vol.9, pp.
21—2
.
32.
House of Representatives
(1939),
Investigation of the Telephone Industry in the United States
, Seventy-sixth Congress, First Session, House Document
No.340, Washington, DC.Latimer, M.W.
(1932),
Industrial Pension Systems in the United States and Canada
, 2 Vols., New York : Industrial Relations Counselors.
33.
Leuchtenburg, W.E.
(1963), Franklin D. Roosevelt and the New Deal
1932—1940 ,
New York: Harper & Row
.
34.
Lustig, R.J.
(1982), Corporate Liberalism: TheOrigins of Modern American
Political Theory, 1890—1920,
Berkeley: University of California Press
.
35.
Marchand, R.
(1998), Creating the Corporate Soul: The Rise of Public
Relations and Corporate Imagery in American Big Business,
Berkeley, CA: University of California Press
.
36.
Miranti, P.J.
(2002), “
Corporate Learning and Traffic Management at the Bell System,
1900—1929: Probability Theory and the Evolution of Organizational Capabilities
”, Business History Review , Vol.76,
No.4, Winter, pp.
733—65
.
37.
Miranti, P.J.
(2005), “
Corporate Learning and Quality Control at the Bell System, 1877—1929
”, Business History Review, Vol.79,
No.1, Spring, pp.
39—72
.
38.
Sass, S.A.
(1997), The Promise of Private Pensions: The First Hundred
Years,
Cambridge, MA: Cambridge University Press
.
39.
Smith, G.D.
(1985), The Anatomy of a Business Strategy: Bell, Western
Electric and the Origins of the American Telephone Industry,
Baltimore, MD: Johns Hopkins University Press
.
40.
Stone, M.S.
(1993), “The Pension Accounting
Myth”, in
Coffman, E.N.
,
Tondkar, R.H.
and
Previts, G.J.
(eds.), Historical Perspectives of Selected Financial Accounting
Topics ,
Homewood, IL: Richard Irwin, Inc.
, pp.253—70.
