Chris Traffanstedt
1 posts
Re:Module 2 DQ 1
There are many areas that can be addressed when it comes to social development and infancy but one of the most interesting and most fun is that of play. By play we are referring to that activity in which humanity engages in enjoyment of various objects and environments. This play is life long but it all begins in infancy and what flows from this time shapes future human development.
In infancy play involves, first and foremost, experimentation (Stages of Play, 2009). This experimentation is with the infant’s own five senses, interacting with the world around them. This helps the infant to establish social attachment and also helps them build their place in the world. Bright, colorful and textured toys attract infants to their developing senses. This play establishes five key areas of development for each infant and in each they are using their five senses. The first area of development is physical development. This is where play gives an infant the ability to work their motor skills. The second area is that of emotional development where they explore and learn how things make them feel. Thus, a game of peekaboo gives a child the ability to feel excitement, surprise and produces laughter. The third area is that of cognitive development where, as they play, they gain knowledge, grow in thinking and begin the important activity of problem solving. The fourth area is that of social development. Play begins to introduce the infant to other people and starts teaching them to interact with society. Finally, play grows the infant in moral development (Play, N.D.). It can be seen that, as children begin to grow in play, they learn rules and acceptable behaviors, which begins to develop the morality. As they interact with their parents the parent’s morality (good or bad) is also imparted.
It can be seen in this most basic introduction to play how important it is for children to be exposed to play. I believe it must be said that good playing is a must.
Play. (N.D). Encylopedia of Children’s Health. Retrieved from http://www.healthofchildren.com/P/Play.html#ixzz4QP28Cgjk
Stages of Play. (2009). Souvenirs, Gifts, & Novelties, 48(2), 80-85.
Tonya Klemmer
3 posts
Re:Module 2 DQ 1
Discuss how the social growth and development in infancy are related to the development of the five senses (hearing, sight, taste, smell, and touch) and speech.
As a child grows and develops they are developing their senses through things such as play, observation, eating, etc. When you observe an infant you will often see them looking around and turning their heads to any sounds that they hear. The more something occurs the more the infant learns and begins to recognize the world around them. As reported by Berger (2013), a newborn has no idea that the letters on a page might have significance, that Mother’s face should be distinguished from Father’s, or that the smells of roses and garlic have different connotations. It see ...
JAPAN: ORGANISATION OF PMDA, PHARMACEUTICAL LAWS & REGULATIONS, TYPES OF REGI...
Chris Traffanstedt 1 postsReModule 2 DQ 1There are many a.docx
1. Chris Traffanstedt
1 posts
Re:Module 2 DQ 1
There are many areas that can be addressed when it comes to
social development and infancy but one of the most interesting
and most fun is that of play. By play we are referring to that
activity in which humanity engages in enjoyment of various
objects and environments. This play is life long but it all begins
in infancy and what flows from this time shapes future human
development.
In infancy play involves, first and foremost, experimentation
(Stages of Play, 2009). This experimentation is with the infant’s
own five senses, interacting with the world around them. This
helps the infant to establish social attachment and also helps
them build their place in the world. Bright, colorful and
textured toys attract infants to their developing senses. This
play establishes five key areas of development for each infant
and in each they are using their five senses. The first area of
development is physical development. This is where play gives
an infant the ability to work their motor skills. The second area
is that of emotional development where they explore and learn
how things make them feel. Thus, a game of peekaboo gives a
child the ability to feel excitement, surprise and produces
laughter. The third area is that of cognitive development where,
as they play, they gain knowledge, grow in thinking and begin
the important activity of problem solving. The fourth area is
that of social development. Play begins to introduce the infant
to other people and starts teaching them to interact with society.
Finally, play grows the infant in moral development (Play,
N.D.). It can be seen that, as children begin to grow in play,
they learn rules and acceptable behaviors, which begins to
develop the morality. As they interact with their parents the
2. parent’s morality (good or bad) is also imparted.
It can be seen in this most basic introduction to play how
important it is for children to be exposed to play. I believe it
must be said that good playing is a must.
Play. (N.D). Encylopedia of Children’s Health. Retrieved from
http://www.healthofchildren.com/P/Play.html#ixzz4QP28Cgjk
Stages of Play. (2009). Souvenirs, Gifts, & Novelties, 48(2), 80-
85.
Tonya Klemmer
3 posts
Re:Module 2 DQ 1
Discuss how the social growth and development in infancy are
related to the development of the five senses (hearing, sight,
taste, smell, and touch) and speech.
As a child grows and develops they are developing their senses
through things such as play, observation, eating, etc. When you
observe an infant you will often see them looking around and
turning their heads to any sounds that they hear. The more
something occurs the more the infant learns and begins to
recognize the world around them. As reported by Berger
(2013), a newborn has no idea that the letters on a page might
have significance, that Mother’s face should be distinguished
from Father’s, or that the smells of roses and garlic have
different connotations. It seems that from an early age infants
are able to distinguish differences using their five senses. As
reported in a study conducted by Ratnarajah, Rifkin-Graboi,
Fortier, Chong, Kwek, Saw, Godfrey, Gluckman, Meaney, and
Qiu (2013), the neonatal brain is well equipped to process
cognitive functions needed at birth. This shows that from as
early as conception when development begins, an infant can use
their senses. We know that in utero a baby can sense their
mother’s voice, which is an indication that the hearing sense has
4. E-government XBRl Implementation in the United States
yU-chE chEN
Northern Illinois University
ABSTRACT: The financial crisis in late 2008 and its
aftershocks demonstrated
the need for a serious reform of the U.S. financial regulatory
system. This
article examines the role of e-government in improving the
transparency and
accountability of the regulatory system. It emphasizes
eXtensible Business
Reporting Language (XBRL), an information standard that can
improve financial
transparency by making reported financial activity information
machine-readable
and comparable. The article draws from e-government studies,
collaborative public
management literature, and management information systems
(MIS) literature to
develop a strategic model of e-government XBRL
implementation. The proposed
model consists of an overarching leadership and governance
strategy with three
interrelated areas of activity: stakeholder relationship
management, phase-in
implementation, and value articulation and clarification. The
implementation
process and success factors articulated in the model are
illustrated by the SEC’s
effort to implement XBRL. The conclusion presents policy and
management lessons
for better e-government implementation of XBRL and for
improving transparency
in regulatory systems.
5. KEYWORDS: e-government, financial regulation,
implementation, transparency,
XBRL
The financial crisis of 2007–2008 and its aftershocks called into
question the
effectiveness of the U.S. financial regulatory system. The
Treasury Department
described the upheavals as the biggest financial crisis since the
great Depression
(U.S. Department of the Treasury, 2009). The immediate impact
was the disap-
pearance of more than $2 trillion in value in retirement savings
and pension funds
as a result of plunging stock values in the U.S. market (Orszag,
2008). The long-
term consequences can be seen in the lingering unemployment,
which reached
8.5% (13.2 million people) by the end of March 2009, compared
to the precrisis
level of 5–6%. By the end of June 2010, the unemployment rate
was 9.5% (14.6
million people) (U.S. Bureau of labor Statistics, 2010).
The gravity of the financial crisis reveals several fundamental
weaknesses in the
242 PPMR / December 2013
U.S. financial regulatory system. A serious problem is the lack
of transparency when
it comes to the risks involved in various financial activities.
The use of complex
6. financial instruments, such as mortgage-backed securities,
masked various risks
borne by financial institutions as well as investors. Moreover,
regulators do not have
a comprehensive and systemic view of the risks in the financial
sector (Khademian,
2009). The complexity of understanding and regulating the
behavior of quasi- or non-
governmental financial institutions performing public services
further compounds
the problem (Rom, 2009; Stanton, 2009). Examples of such
institutions include
Fannie Mae and Freddie Mac, which are government-sponsored
enterprises, and
the credit-rating agencies (viz., Moody’s and Standard &
Poor’s), which are private
sector organizations that are paid by companies seeking credit
ratings.
Therefore, increasing transparency and developing a more
systemic view of
the risks involved in the financial sector are two critical
elements in any effort to
reform the financial regulatory system. Peretz and Schroedel
(2009), in their histori-
cal analysis of financial crises, recommend that transparency
can be enhanced by
standardizing accounting reports and making standardized
financial information
available to all stakeholders. A more integrated regulatory
system could help ad-
dress the problem with the increasing multiplicity of
participating organizations
and their disparate incentive structures (liou, 2007). National
governments should
be more engaged in designing an integrated system because
7. financial activities are
increasingly globalized and nation-states play critical roles
(Datz, 2009). certain
policy issues cut across national borders, such as health and
environment, and
thus demand an international and coordinated regulatory
response (liou, 2007).
Without doubt, this also applies to the globalization of financial
activities.
This article addresses the information challenges of increasing
transparency
and creating a systemic view of financial risks. The focus is on
the e-government
implementation of eXtensible Business Reporting language
(XBRl), a new
financial and business reporting language, as a critical element
in any financial
regulatory reform.
Information Challenges and XBRL
Enhancing financial transparency to improve the financial
regulatory system needs to
address two information-related challenges. The first challenge
involves the problem
of understanding financial information when there is a lack of
standardization of
financial terms in reporting across sectors. comparing the
financial statements of
two publicly traded companies will prove difficult and
burdensome if the companies
use two different definitions for a single concept like
“equipment,” for example. The
other, related information challenge involves the laborious
process of monitoring
8. financial activities and associated risks. Financial information
that is not machine-
readable and comparable introduces opaqueness into the
financial sector.
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 243
A tested solution to these two challenges is the implementation
of XBRl.
First, XBRl implementation can address the problem of lacking
standardized
financial information, which when surmounted will be one
important step toward
an integrated view of financial risks. Fortunately, the U.S.
generally Accepted
Accounting Principles (gAAP) taxonomy can provide a standard
data diction-
ary for financial terms. This taxonomy also enables the
development of software
programs to assign a digital tag to an item of financial
information. For example,
a numeric value of net income is tagged to indicate that it is in
U.S. dollars; and
following the gAAP XBRl taxonomy, three decimal points can
be stipulated, for
example, for the period of 2009. Such tagging makes financial
data comparable
and machine-readable. This addresses the two fundamental
challenges, men-
tioned above, that are associated with making information on
financial activities
transparent. Moreover, business rules can be embedded in XBRl
for automatic
9. validation. Such functionality helped the Federal Deposit
Insurance corporation
(FDIc) increase its efficiency in validating financial reports
gathered from insured
banks. Prior to automatic validation, the FDIc had a large
number of financial
analysts perform the validation.
Implementation of XBRl further enhances transparency by
allowing all stake-
holders to monitor the financial sector. XBRl lays the
foundation for making finan-
cial data freely available to all stakeholders and in a format that
reduces barriers to
understanding them. The Securities and Exchange commission’s
(SEc) Interactive
Data Project is a case in point. The goal of this project is to
provide financial infor-
mation on publicly traded companies to investors and citizens.
What is unique about
this project is its ability to disseminate information
interactively. Even individual
investors with limited means can easily search for information.
Moreover, a broad
implication of making information available in a digital format
is the ability to lever-
age semantic Web (Web 3.0) capabilities to monitor financial
risks.
A dozen countries have implemented versions of the XBRl
solution to improve
their ability to monitor the financial sector for the purpose of
financial regula-
tion. The experiences of Singapore, the Netherlands, and
Australia are cited in
this article to illustrate various components of the integrated
10. strategy presented
below. A more thorough treatment of these implementation
cases is available
(chen, 2010), and XBRl International has a resource site that
contains the details
of selected implementation cases.1 collectively, these can be
resources for an in-
depth understanding of international XBRl implementation.
Integrated Strategy for E-Government Implementation of XBRL
government implementation of XBRl is essentially an e-
government project. This
is because it would involve the use of information and
communication technol-
ogy to create public value. As a result, e-government literature
with an emphasis
244 PPMR / December 2013
on IT leadership and governance for successful implementation
is relevant to the
effort of model development. The business literature that is
focused on manage-
ment information systems and on adoption and use of
technology is also relevant
because it pertains to successful information-system project
implementation and
its adoption and use as a critical measure of success. Figure 1
depicts the relevant
bodies of literature as they contribute to an understanding of
XBRl implementation
for improving financial regulation via increasing knowledge
about the financial
11. sector and financial transparency.
The network nature of XBRl implementation can benefit from
the insights of
collaborative and network management literature. E-government
implementation of
XBRl requires collaboration between organizations in the public
(governments),
private (software and accounting industries), and nonprofit
(professional account-
ing and XBRl organizations) sectors. collaborative and network
management
literature provides insights into successful management of
collaboration across
levels of government and other sectors.
collectively, these bodies of literature identify both the overall
implementation
strategy and various areas of strategic action. The discussion
below focuses on
arguments and findings pertinent to the characteristics of e-
government implemen-
tation of XBRl. The arguments are organized around strategic
components rather
than separate bodies of literature to reflect the integrative
nature of the strategic
model of XBRl implementation.
E-GOvERnmEnT LEADERShIp AnD GOvERnAnCE
leadership and governing activities are fundamental for
successful e-government
implementation (OEcD, 2003). The complex intergovernmental,
cross-sectoral
Figure 1. Literature Relevant to E-government XBRL
12. Implementation
Collaborative Public
Management: Cross-
boundary,
networked
E-government Implementation:
Leadership, governance, and
management
Management Information
Systems: Adoption and
implementation
XBRL
Implementation
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 245
nature of XBRl implementation highlights the importance of
leadership for better
governance and implementation. leadership in providing the
necessary executive
support for e-government projects is critical for their successful
implementa-
tion (cook, laVigne, Pagano, Dawes, & Pardo, 2002; McDaniel,
2005). Such
leadership provides the sustainable managerial support needed
13. for e-government
projects, which are usually long-term. Moreover, leadership is
critical for the
cross-boundary collaboration required for e-government
implementation of XBRl
(OEcD, 2003). E-government leaders can articulate the relevant
benefits to vari-
ous stakeholders (luk, 2009).
leaders of XBRl implementation can engage in three interrelated
areas of
governance activities to form an integrated strategy. The first
area is active stake-
holder relationship management. Active engagement with
stakeholders is critical
for e-government success (Papazafeiropoulou, Pouloudi, &
Poulymenakou, 2002).
Such engagement will help identify the needs of stakeholders
and find shared
interest and value propositions of e-government
implementation. The next area
is phase-in implementation. This approach assists in the
transition by delivering
initial benefits and working through problems at a more
manageable scale. The third
area is value articulation and clarification. leaders need to make
the business case
for various stakeholders to ensure their participation. Any major
implementation
decisions need to be justified based on the added public service
value.
These three areas of activity form an integrated whole under the
overarch-
ing leadership and governance strategy, as shown in Figure 2.
The broadest
14. set of activities in terms of scope and time is active stakeholder
relationship
Figure 2. Implementation Strategy with Interrelated Areas of
Activities
Value Articulation
and Clarification
Phase-in
Implementation
Active Stakeholder-Relationship
Management
Overall Leadership and Governance Strategy
246 PPMR / December 2013
management; here identification of stakeholders and active
engagement with
them throughout the process are critical. The development of
these relationships
allows for the identification of core stakeholders and their
respective interests, a
critical piece of knowledge in implementation. A more focused
set of activities
is XBRl implementation; here a phase-in strategy will prove
most produc-
tive. The experience of cases in other countries has generated a
large menu of
choices and innovative ideas. Delivering value to core
stakeholders is critical in
sustaining the momentum for implementation. Therefore, value
15. articulation and
clarification are at the core of the model. This is the strategic
core that should
guide phase-in implementation and stakeholder relationship
management. The
specifics of the three areas of activity in relation to XBRl
implementation are
the focus of the next three sections.
ACTIvE STAKEhOLDER RELATIOnShIp mAnAGEmEnT
The implementation of an XBRl project is rather complex. The
first major task
is the development of an XBRl taxonomy that harmonizes the
use of financial
terms. The complexity of standardization depends on the
number of terms
involved and the number of government agencies needed for
coordination.
The second major task is to develop XBRl software programs
and informa-
tion systems for reporting businesses and government agencies.
The number
of industries involved is a critical determinant of the level of
complexity. An
XBRl implementation involving multiple industries requires
more coordination
effort because the interests and concerns of the various
industries will neces-
sarily differ.
Resource dependence is a major source of implementation
complexity and
a critical dimension in interorganizational relationships (Pfeffer
& Salancik,
2003; Rethemeyer & hatmaker, 2008). An analysis of such
16. dependence aids in
the understanding of how a policy or program is implemented in
a networked
setting. collaboration among the three main participating groups
is critical for
successful XBRl implementation. government agencies depend
on the software
industry to design XBRl-enabled software programs for
business reporting. They
also need the assistance of professional accounting associations
for outreach and
educational efforts aimed at better implementation of technical
standards. XBRl
is a new way of handling reporting; outreach and education by
trade groups and
accounting associations will prove critical, especially if
members are to understand
the business case for XBRl implementation. When more than
one government
agency is involved in implementation, it is critical that
collaborating agencies
provide support in the form of resource contribution. For
example, Australia’s
XBRl implementation depends on the collaboration of
professional associations
representing bookkeepers and accountants (e.g., the cPA
Australia Institute of
chartered Accountants), the software industry, the Australian
Bureau of Statistics
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 247
and other government agencies, and numerous business
17. associations (e.g., the
council of Small Businesses of Australia).
A central administrative agency is needed for the
implementation of a new
technical standard that encompasses a complex web of
organizational players.
Provan and Kenis (2008) argue for the importance of a central
administrative
organization in projects in which the interests are diffused
among organizations
within a network. In such cases, they maintain, the need for
network-level manage-
ment competencies increases. That is, the importance of a
central point of contact
and coordination rises as the project’s complexity increases
(i.e., as the number
of stakeholders increases and the diversity of interests grows).2
Active engagement with stakeholders is an important element of
successful
XBRl implementation. The central agency works with
stakeholders to collect
input on the XBRl taxonomy and, of course, the actual reporting
with XBRl.
In this relationship, communication is especially critical when
the taxonomy has
to meet the needs of both reporting businesses and government
agencies. Active
management is especially critical for resolving any
implementation obstacle within
a networked setting (Mcguire, 2002). Insofar as no one
organizational participant
has the resources and knowledge to complete the coordinating
task, a significant
amount of coordination and joint decision-making is required to
18. manage a network
(Agranoff, 2007). The need for focused attention and consistent
action is critical
in managing a network setting that abounds with policy barriers
that can prevent
knowledge sharing across organizational boundaries (Dawes,
2009). For XBRl
implementation, one such issue arises when businesses and
software developers
engage in a “waiting game.” Businesses tend to wait for
software developers to
produce a mature, low-cost software solution for the
implementation of XBRl
before they adopt the standard. however, software developers
are waiting for a
critical mass of businesses willing to commit to the purchase of
software programs
before they invest in the development of such software.
Network and project management skills are crucial in active
stakeholder rela-
tionship management. Mcguire (2002) has identified a set of
core management
activities that a network manager needs to focus on in order to
help a network of
organizations achieve policy and service objectives. These are:
activating, framing,
mobilizing, and synthesizing. Empirical evidence gathered from
a comprehensive
study of local emergency-management systems also points to
the importance of
managerial skills in improving the effectiveness of
intergovernmental collaboration
(Mcguire & Silvia, 2010). In the case of XBRl implementation,
framing such
implementation as a reduction of the administrative burden for
19. reporting businesses
may help garner their support. Of course, companies large and
small are concerned
about costs, but small businesses may have to bear a
disproportionate burden of
the costs of implementing XBRl (“Interactive Data,” 2009).
consideration of the
problems entailed in managing a complex IT project is also
relevant in XBRl
248 PPMR / December 2013
implementation. A central agency for XBRl implementation
needs to have an
adequate level of technical capacity if management is to
understand and evaluate
the strengths and weaknesses of the solutions suggested by
service providers. IT
management capacity has been identified by several studies as a
crucial element for
successful IT outsourcing in particular (Brown & Brudney,
1998; chen & Perry,
2003) and for e-government implementation in general
(Melitski, 2003).
phASE-In ImpLEmEnTATIOn
Phase-in implementation is another area of activity in
successful XBRl imple-
mentation. large information technology projects, such as an
XBRl implemen-
tation, are complex and long-term in nature. A phase-in
implementation strategy
allows for identifying implementation obstacles and possible
20. solutions. Pardo
and Scholl (2002) emphasized the importance of social,
technical, and behavioral
issues resulting from the complexities of large technology
projects in the public
sector. For complex information technology projects, such as
enterprise resource
planning (ERP), strong project management is a critical element
for success
(Kerimoglu, Basoglu, & Daim, 2008). Phase-in implementation
is a productive
method of leading and managing complex e-government projects
such as the ones
for XBRl implementation.
A rich menu of phase-in implementation strategies is evident in
a preliminary
survey of XBRl implementation around the world (chen, 2010).
This array of
strategies can serve as a source of ideas for governments around
the world as they
contemplate XBRl implementation or make adjustments to their
implementation
strategies. One strategy involves phasing in large companies,
then small ones. This
strategy encourages the development of software and should
lower costs over time.
Another strategy incorporates a graduated shift from voluntary
to mandatory partici-
pation. The voluntary program, although positive, would have
only limited adoption
(Efendi, Smith, & Wong, 2011). A later mandatory participation
requirement would
create a network effect that could facilitate complete
implementation.
21. Shifting from partial to full reporting is another productive
phase-in strategy.
Partial reporting can be used to focus initial efforts on high-
value data elements, at
least from a regulatory point of view. Not all data elements
have the same degree
of relevance with regard to the core aim of a standard business-
reporting system
that uses a common language, as is the case for XBRl. Partial
reporting that
initially focuses on critical data elements would give reporting
businesses time
to learn and adapt at minimal cost. The implementation of XBRl
by Singapore’s
Accounting and corporate Regulatory Authority (AcRA) is a
prime example of
such an approach.
Pilot projects constitute another strategy of phase-in
implementation. This
strategy identifies information system issues and simultaneously
gathers feedback
from the user community. User involvement, as information
system implementation
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 249
studies suggest, improves the usability of the system and
ultimately increases use
and satisfaction (Andersen & henriksen, 2006; Delone &
Mclean, 2003).
Of the strategies mentioned above, the most appropriate for any
22. given project
is the one that best fits the institutional environment and the
implementation
objectives. The experience of complex enterprise resource
planning projects
highlights the importance of fit to the specific organizational
context (gattiker
& goodhue, 2005). For example, Singapore’s AcRA found it
useful to imple-
ment a partial XBRl report option. In this way, it was able to
lower the barrier
to reporting, especially because the majority of the reporting
businesses were
small. But mandatory reporting makes sense for countries that
require a network
effect or prefer a regulatory approach. countries can shift from a
voluntary to a
mandatory approach, beginning with larger companies and
moving to smaller
ones.
Value Articulation and Clarification
Articulating and realizing value is critical in guiding phase-in
implementation and
active management of stakeholder relationships. The need to
articulate and realize
value is consistent with management recommendations designed
to ensure suc-
cessful management of public management networks (Agranoff,
2007; Mcguire,
2002). The central assumption is that an incentive system is
able to engage
stakeholders and help them move toward shared policy
objectives. Articulation
is concerned with ensuring that each stakeholder group
23. understands the benefits
and costs associated with participation. To effectively manage
change, the XBRl
project office needs to spend quality time and effort to address
concerns and dispel
misconceptions. Such articulation is required to ensure the
participation of key
stakeholders and mobilize their support.
Implementing XBRl is fundamentally about managing change;
demonstrat-
ing that the benefits outweigh the costs is key to eliciting
support for change. E-
government projects typically involve changes in information
processing as well
as in supporting policies and procedures. In e-government
implementation, change
is continuous (Stojanovic, Stojanovic, & Apostolou, 2006).
Public administrators
need to address two fundamental challenges of XBRl
implementation: diffused
benefits and delayed realization. The benefits of XBRl
implementation are typi-
cally diffused across the entire economy. For example, the
efficiency resulting
from XBRl implementation may be large for the economy as a
whole—as in the
case of the Netherlands—but the benefits will be diffused
throughout the economy.
Thus, trade and professional associations may be reluctant to
support implemen-
tation. Delayed realization of benefits reflects the fact that real
savings will not
materialize until three or four years into the future, perhaps
even later, when a
significant number of businesses will have adopted reporting
24. with XBRl. The
initial investment required to first develop XBRl taxonomy is
quite significant.
250 PPMR / December 2013
Then, real benefits will only result after a critical mass of
businesses begins to
adopt XBRl taxonomy in their financial reports.
A diffused and long-term value proposition requires a sustained,
high-level
input of government resources during phase-in implementation,
and it also re-
quires active stakeholder-relationship management. More
specifically, diffusion
requires active government involvement in brokering reporting
businesses and
software-developer industry commitments; neither party has a
strong incentive
to invest before the benefit has amassed a critical segment of
the market. Since
government, representing the taxpayers, has the most to gain
from aggregating
the efficiency gain for the entire economy, the initial
investment in the develop-
ment of taxonomy and in education and outreach should be an
essential part of its
active stakeholder-relationship management. The long-term
perspective implies
the need to constantly demonstrate the value of XBRl
implementation to all the
stakeholders. The realization of values like efficiency and data
quality should be
25. made via proof of concepts, business cases, and so forth. An
extensive education
and outreach effort is required to achieve long-term value.
One management practice for sustaining momentum over the
duration of long-
term implementation is the Earned Value Management (EVM)
approach, which
was first introduced by the U.S. Office of Management and
Budget. The central aim
is to provide a systematic and timely way to monitor project
performance. Such
performance is measured against the resources allocated for the
given performance
target. In the case of XBRl implementation, earned value may
be projected as
efficiency gained through the reduction of administrative costs
entailed by busi-
ness reporting. Earned value can also be tied to annual
performance targets, such
as adoption rates, improvement in data quality, and timely
reporting.
The SEC’s XBRL Implementation: An Illustrative Case
The SEc case is a critical example, given its emphasis on
transparency and em-
bodiment of implementation complexity. The SEc’s effort to
implement XBRl
deals with the fundamental benefits of XBRl: transparency and
accountability.
When fully implemented in June 2011, the SEc’s Interactive
Data Project, which
utilizes XBRl, was expected to make financial information from
more than 12,000
publicly traded companies readily available to investors and the
26. public. The goal
was to make financial data accessible and ready for analysis,
either via interac-
tive functions on the Web or downloaded for easy analysis, even
by individual
investors. The unprecedented level of transparency made
possible by making raw
data accessible and machine-readable provides information and
tools for public
monitoring. This level of transparency is the basis for
accountability. After all,
knowing the financial activities of these companies is the first
critical step in
holding them accountable.
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 251
The complexity of the XBRl implementation arises from the
number of
industries involved and the sheer number of reporting
businesses and data ele-
ments. The SEc covers a vast majority of industries; almost all
industries have a
publicly traded company under the SEc’s jurisdiction. The
variety of industries
means that definitions of financial terms will be unique to a
particular industry
and unique to different financial and regulatory interest groups,
all of which are
seeking to protect their own interests. The sheer number of
reporting businesses
and data elements is another source of complexity. There are an
estimated 3,000
27. data elements for each of the approximately 12,000 companies,
and this yields
more than 30 million data elements to be reported each quarter.
In fact, the U.S.
XBRl taxonomies include at least twice as many XBRl tags and
definitions as
any other national taxonomy (Kernan, 2008).
The SEc case illustrates some key elements of the
implementation strategy.
The analysis of the SEc’s XBRl implementation draws from
various informa-
tion sources, including archival research, official government
documents, and
interviews. This article adopts the case study technique by
examining both the
processes and the elements of implementation.
DEvELOpmEnT AnD ImpLEmEnTATIOn OF XBRL AT ThE
SEC
According to the SEc, its mission is to “protect investors,
maintain fair, orderly,
and efficient markets, and facilitate capital formation.”3 The
SEc accomplishes
its mission mainly by making available basic financial
information related to
investment. Such transparency in financial information is
considered the first and
most important step toward a healthy financial market. Thus,
the SEc requires
public companies to disclose meaningful financial information
and facilitates its
dissemination to the public.
The increasing complexity of the financial market and advances
28. in information
technology have compelled the SEc to move to an electronic
disclosure system
known as Electronic Data gathering and Retrieval (EDgAR),
which was fully
phased in by 1996. EDgAR takes advantage of Internet
technology to disseminate
electronic files in hTMl and AScII formats, and this is based on
paper disclosure
forms. In this way, the SEc significantly improved access to and
dissemination
of disclosure information.4
In 2004, the SEc concluded a formal assessment of the potential
benefits of
implementing XBRl for information disclosure. This assessment
was conducted
under the leadership of its chairman, William Donaldson. The
agency’s staff and
leaders saw potential in using XBRl as a standardization method
to increase the
efficiency and accuracy of processing financial information.
This prompted the
initiation of a voluntary filing program in March 2005, targeting
public companies
that wished to file their financial statements in XBRl format.
To launch its voluntary program, the SEc invited companies to
participate by
252 PPMR / December 2013
submitting their financial reports in XBRl format. The program
was designed to
29. test XBRl technologies and identify implementation issues. The
program spanned
from 2005 to 2008. The establishment of the Office of
Interactive Disclosure
(OID) in 2007 elevated the importance of organizing the
implementation effort.
The number of participating companies in the voluntary
program was more than
100, with a total public float of over $2 trillion, which
accounted for approximately
2% of the publicly traded companies registered with the SEc
(“Interactive Data,”
2009, p. 6777). The analysis by Efendi et al. (2011) suggests
that these companies
tended to be large and more innovative.
XBRl implementation at the SEc has involved several groups of
stakeholders,
and investors make up one of the main groups. With XBRl
implementation, both
institutional and individual investors are able to get timely
financial information.
Thus, XBRl is critical to the democratization of financial
information, for it
reduces the cost of data gathering and analysis (Debreceny et
al., 2005). XBRl
implementation not only provides company-specific financial
information in an
easily accessible format, but it also lowers individual investor
barriers to financial
information access and analysis. Another main group of
stakeholders is constituted
by the publicly traded companies in various industries. The
diversity of sizes and
industries means that this stakeholder group is very complex.
30. Still another group of stakeholders includes the accounting
firms and asso-
ciations that provide professional services for financial
reporting. The American
Institute of certified Public Accountants (AIcPA) has been
instrumental in the
development of XBRl taxonomy, and it represents certified
public accountants in
the XBRl implementation process. The financial-reporting
software industry is
another main stakeholder group. Both accounting firms and
reporting businesses
rely on the availability and affordability of software programs.
Financial regulators
such as the FDIc are the government stakeholders; they share
the SEc’s mission
of protecting the health of the financial markets. The larger
XBRl community in
the United States and around the world is also a key
stakeholder. Its primary role
is in taxonomy development and the dissemination of
knowledge about XBRl
implementation.
The limited-adoption voluntary program, which extended from
2005 to 2007,
prompted the SEc to consider a different approach. More
specifically, it published
proposed regulations in May 2008 to mandate the use of XBRl
for financial
reporting and sought comments on these proposals as a part of
the rulemaking
process. According to the SEc, the mandatory stipulation was
required to create
a network effect, which otherwise would not be possible with
the voluntary ap-
31. proach attempted between 2005 and early 2008.
According to the SEc, the proposed regulations received more
than 79 com-
ment letters from stakeholders identified above (“Interactive
Data,” 2009, p. 6777).
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 253
concerns were raised about the cost of rule compliance and the
complexity of
compliance, among other issues. The SEc published its finalized
rules in December
2008, and mandated a phased approach to implementation. With
regard to costs,
the SEc cited its primary responsibility to investors to provide
transparent financial
information as the rationale for its mandate, but the issue of
disproportional cost
born by small businesses was recognized in the final rule. The
solution was to
conduct a phase-in implementation, wherein large companies
would be the first
required to report using XBRl, then medium-size companies,
and later small ones.
This approach would give the software industry time to develop
applications and
slowly bring down costs for small companies.
Since 2005, an important concurrent development has been the
development
of XBRl taxonomy and XBRl implementation by the FDIc and
in other coun-
32. tries. The FDIc took the lead in 2005 and was the first U.S.
federal agency to
implement XBRl. Since 2006, more than 8,000 financial
institutions have filed
XBRl-formatted quarterly reports to the FDIc (Federal Financial
Institutions
Examination council, 2006). The FDIc was instrumental in
disseminating infor-
mation and knowledge about XBRl implementation. In
2005/2006, the XBRl
unit of AcIPA worked on the development of the XBRl
taxonomy for the U.S.
gAAP. This development provided the standards necessary for
the SEc’s XBRl
implementation, because a vast majority of the corporations
filing with the SEc
follow the U.S. gAAP accounting standards.
At the time of writing, the most recent development in the
SEc’s effort to imple-
ment XBRl is the requirement for all mutual fund companies to
comply by 2014
(cacas, 2010). Entering the second year of XBRl
implementation, the Office of
Interactive Disclosure at the SEc focused on the phase-in
process, and it aims to
bring in a large number of companies in its final year, hoping to
move beyond the
XBRl taxonomy based on U.S. gAAP by 2011. The complexity
of implementa-
tion entailed by bringing in mutual fund companies and making
the data available
online is likely to put significant demands on the SEc’s
resources.
Supportive momentum has begun to gather on capitol hill,
33. especially with
the increasing recognition of the need for transparency in
financial activities,
including those beyond the SEc’s purview as well as those
within. For example,
Senate Bill 303 aims to improve public access to data through
the Web site grants.
gov by having a uniform standard for reporting, where the XBRl
standard is
considered the most relevant (cacas, 2010). The Obama
administration has made
open government a priority. The Web site USASpending.gov is
an example of its
efforts to make federal government spending more transparent.
The comptroller
of the Office of Management and Budget (OMB) has recognized
the potential of
XBRl for the Web site USASpending.gov, especially when the
U.S. Treasury has
centralized data available for reporting (cacas, 2010).
254 PPMR / December 2013
InTEGRATED STRATEGY FOR ThE SEC’S XBRL
ImpLEmEnTATIOn
Leadership and Governance at the SEC
leadership and governance activities for the SEc’s XBRl
implementation illus-
trate the encompassing nature of leadership and the
connectedness of the three
areas of activity presented earlier in the section on e-
government implementation.
34. chairman christopher cox’s leadership was instrumental in the
XBRl imple-
mentation. he was a champion of using XBRl to modernize
interactive data
disclosure (Efendi et al., 2011). he actively engaged
stakeholders by educating
staff and legislators on the relevance of XBRl for achieving
public policy objec-
tives such as transparency and accountability. In addition, the
OID provided the
organizational capacity to lead the XBRl implementation.
The SEc has focused on the strategic priority of increasing
transparency in the
financial sector for the benefit of investors and the public. This
policy focus has
helped the SEc to articulate its position to various stakeholders
and to stay on the
path of creating value for the public. central to the phase-in
implementation, the
move from voluntary to mandatory participation was justified
on the grounds of
generating tangible benefits for both investors and the public.
The specifics of the
three areas of leadership and governance activities are outlined
below.
Active Stakeholder-Relationship Management
The SEc’s XBRl implementation has a well-established lead
agency, the OID,
that is charged with project management and oversight of
stakeholders. having
a central agency with a clear policy priority helps the SEc
navigate the diverse
interests of the different groups of stakeholders. Moreover, the
35. SEc has actively
engaged various stakeholders via both formal and informal
processes. Formal
processes include incorporating public commenting as an
established element of
the rule-making process. Information available in the pressroom
section of the
SEc Web site and public appearances by SEc officials provide
additional formal
channels of communication. Informal processes include the
SEc’s participation
in XBRl conferences, training sessions, and meetings with
representatives from
professional associations and industries.
The SEc has adopted a collaborative approach to developing and
implement-
ing an XBRl taxonomy. It reached out to the XBRl community
and accounting
associations to help it identify policy issues and technical
challenges associated
with taxonomy development. For implementation, the SEc
collaborated with
voluntarily participating companies to help with XBRl
reporting, and it involved
the XBRl specialists in the software industry. Such
collaboration allows the SEc
to understand the barriers to implementation from the
perspectives of the reporting
businesses and the software industry. For example, the SEc
conducted interactive
data roundtables to gather input from stakeholders such as
investors, regulators,
36. chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 255
financial auditors and analysts, and technology professionals
(Booth, 2007).
The SEc has sustained its implementation effort as part of its
active manage-
ment. Its active engagement activities include working with
stakeholders and
identifying challenges and opportunities for implementation.
The finalized rule
on mandatory XBRl reporting published at the end of 2008 was
the culmination
of this effort. More recently, the OID has been actively leading
the effort to imple-
ment the mandatory requirements. It has sought to clarify the
complex technical
details regarding footnote tagging and representation of
business rules.
Phase-in Implementation
The SEc implemented several elements of a phase-in strategy to
manage change.
One element was the graduated shift from voluntary to
mandatory participation.
The desire to enact this shift resulted from experimenting with
voluntary report-
ing for more than three years. An evaluation conducted by
scholars at the end of
the three-year period showed limited adoption (Efendi et al.,
2011). The SEc’s
own analysis indicated that the cost of compliance was not
overly burdensome.
The estimated average cost was approximately $40,000 for first
37. submission and
approximately $15,000 for subsequent years. This was based on
a cost-benefit
analysis conducted with participants in the voluntary program
(“Interactive Data,”
2009, p. 6804). These evaluation results supported the decision
to shift from a
voluntary to a mandatory approach. The mandatory approach
created the network
effect necessary to drive adoption and increase the size of the
market for the soft-
ware industry, enough to encourage it to develop XBRl
solutions.
Phasing small companies into mandatory XBRl reporting was
another ele-
ment of the implementation strategy. According to the final rule
published by the
SEc, domestic and foreign large filers with equity floats of more
than $5 billion
worldwide belong to the first group of XBRl filers for the fiscal
period ending on
or after June 15, 2009 (“Interactive Data,” 2009). The next
group encompassed
all other large accelerated filers using U.S. gAAP, for the fiscal
period ending on
or after June 15, 2010. All remaining filers using U.S. gAAP
constituted the next
group to file financial statements for the fiscal period ending on
or after June 15,
2011. Foreign private issuers using International Financial
Reporting Standards
(IFRS) as issued by the International Accounting Standards
Board (IASB) were
the last group to submit their annual reports for the same period
for all remain-
38. ing filers. The SEc anticipated that this phase-in implementation
could help the
development of software and would lower costs over time.
Value Articulation and Clarification
Articulating and clarifying the value of XBRl at the SEc is
important in direct-
ing phase-in implementation and ensuring active management of
stakeholder
relationships. The primary mission of the SEc is to serve
investors. In that
256 PPMR / December 2013
light, transparency is the highest value, and quality and
timeliness of financial
information constitute the two pillars of transparency. The shift
from voluntary
to mandatory reporting in XBRl as one variety of phase-in
implementation is
consistent with the SEc’s core value of realizing transparency.
Moreover, the
SEc must consider the disproportionate cost burdens that small
and medium-size
companies must bear with mandatory adoption. The phase-in
approach, starting
from large companies and gradually incorporating small
companies, can reduce
the costs of compliance. Once transparency is articulated as the
primary value,
the cost for businesses to prepare and file financial data in
XBRl format becomes
a secondary consideration.
39. The SEc articulated the benefits of XBRl to sustain its
implementation. From
the standpoint of investors and their supporting financial
analysts, XBRl provides
a faster and easier way to use the financial information filed
with the SEc. Making
all reported financial information follow the same reporting
standard ensures qual-
ity of data, comparability of company information, and ease of
analysis. Reporting
businesses are able to communicate their financial information
more effectively
and efficiently. With advances in business analytics, reporting
businesses adopting
XBRl are likely to see an increase in internal efficiency as well.
The early experi-
ences of United Technologies corporation (Stantial, 2007) and
Wacoal (haseqawa,
Sakata, Sambuichi, & hannon, 2004) demonstrate the promise of
enhanced internal
efficiency in preparing financial reports. For the SEc, enhanced
efficiency can be
seen in the use of software programs to ensure regulatory
compliance, especially
when compared against the former use of manual validation.
The XBRl implementation at the SEc adds value to transparency
and account-
ability. For example, transparency of executive compensation
can be facilitated by
using XBRl because data can be machine-readable and -
comparable. The Inter-
active Financial Report Viewer can help stimulate the
development of financial
analysis software tools that leverage the tagged data using
40. XBRl. having the
data machine-readable and -comparable is likely to further
increase transparency
and accountability, especially as the next generation of semantic
Web technolo-
gies begin to mature. coupled with the growth of open-source
and collaboration
opportunities, citizens will likely have tools that enable them to
monitor publicly
traded companies, and they will likely have an oversight
capability that otherwise
would previously have been possible only for large financial-
analysis firms.
Analysis of the SEC’s XBRL Implementation
The main findings of the SEc’s XBRl implementation are
summarized in
Table 1. The SEc’s experience shows the importance of
leadership and a central
management agency in XBRl implementation. chairman cox’s
leadership has
been acknowledged as a key success factor, along with the
establishment of the
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 257
Office of Interactive Disclosure to provide organizational
leadership. This find-
ing reinforces the fundamental importance of leadership in
managing long-term,
intersectoral, large e-government implementation. Its
importance is consistent
41. with the recommendations of the studies on the role of
leadership in e-government
implementation (luk, 2009; McDaniel, 2005; OEcD, 2003).
The SEc’s active engagement has utilized informal and formal
communication
channels and covered all stages of implementation. The
stakeholder relationship is
marked by a central implementation governmental agency and
by a collaborative
approach to obtaining support and input from stakeholders. This
finding supports the
relevance of having a central administrative agency with a
network of organizations
with diffused interests, as argued by Provan and Kenis (2008).
The active nature of
communication and management coincides with the
recommendations for over-
coming barriers to collaboration in a networked setting
(Agranoff, 2007; Dawes,
cresswell, & Pardo, 2009; Mcguire, 2002; Papazafeiropoulou et
al., 2002).
The phase-in approach has been productive for the SEc. The
SEc’s experience
shows that a voluntary approach has only limited ability to
create significant market
demand for XBRl software and to generate enough financial
information to realize
the benefits of XBRl. The move from large to small filers of
financial statements
is likely to be effective in reducing the costs and diminishing
the learning curve
for small filers. This finding is consistent with the value of a
gradual approach in
effective implementation of complex information system
42. projects.
The SEc’s focus on delivering public value to investors and the
general pub-
lic in terms of ensuring a healthy financial market has guided it
throughout its
XBRl implementation. Its move to mandatory XBRl reporting is
justified by
its primary mission. This singular focus also guides the SEc’s
effort to put more
machine-readable detailed financial information online as the
centerpiece of its
interactive data project.
Table 1. Key Findings of SEC’s XBRL Implementation
Main strategic
component Main findings
leadership and
governance
chairman cox was instrumental in providing leadership,
sustained by
organizational support of the Office of Interactive Disclosure.
This serves
as the overarching strategy for the three areas of activities.
Stakeholder-
relationship
management
collaborative approach engaged stakeholders at all stages of
XBRl
implementation and utilized formal and informal communication
channels.
43. Phase-in
implementation
gradual and deliberate shift from voluntary to mandatory
approach to
XBRl implementation, the need for a mandatory approach to
create
network effect and lower compliance costs
Value articulation and
clarification
Provided justification for shift in implementation strategy and
demonstrated value to investors and the public to guide
implementation
and stakeholder-relationship management.
258 PPMR / December 2013
Conclusion and policy Recommendations
Transparency of financial activities is a critical element in a
comprehensive regu-
latory strategy designed to combat the proliferation of
increasingly complex and
opaque activities in the financial sector. The financial crisis
arising in late 2008
and its aftershocks increased public interest in the health of a
globalized finan-
cial market. An e-government implementation of XBRl is an
important step in
moving to the much-needed goal of transparency. Providing
machine-readable
44. financial information to regulators and the general public, as
promised by XBRl
with interactive disclosure, will significantly increase
transparency and provide
an integrated view. To this end, this article has discussed the
relevance of XBRl,
summarized examples of e-government XBRl implementation
strategies, and
examined an illustrative case study.
The study is an exploratory investigation into the role of
electronic government
in improving transparency in the financial sector. The findings
and policy recom-
mendations draw from both the literature and the early
implementation experience
of the SEc. Policy and management recommendations should be
qualified with
this fact in mind. At the same time, this early investigation
offers opportunities
for future research into the impact of information technology on
clarifying risk
transparency and the resulting ability to manage systemic
financial risks.
The XBRl e-government implementation, as proposed by this
article, has an
overarching leadership and governance strategy embodying
three interrelated areas
of activity: active stakeholder-relationship management, phase-
in implementation,
and articulation and clarification of benefits. The examination
of the SEc’s XBRl
implementation shows how the proposed strategic model of
XBRl implementation
works in practice. This case reinforces the key notions of
45. implementation strategy
and illustrates how various areas of activity work together.
The analysis of the SEc’s experience offers broad, specific
policy and manage-
ment recommendations. The overall policy and management
recommendation is
to consider the proposed strategic model of e-government XBRl
implementation.
leadership and governance are foundational for an e-government
XBRl imple-
mentation that is intersectoral, long-term, and complex. Other,
similar XBRl
implementations would benefit from finding a strong
organizational champion and
sustaining leadership. Active stakeholder-relationship
management is essential,
given the multitude of stakeholders involved and the technical
complexity of new
data standards that encompass wide-ranging business rules. The
SEc’s experience
demonstrates the value of having a central management agency
in complicated
implementation. Future e-government implementation of XBRl
will have a better
chance of success with a central implementation agency.
Phase-in implementation can successfully manage change that
requires time,
learning, and broad-based adoption. The lesson from the SEc is
the need for a
chen / IMPROVINg TRANSPARENcy IN ThE FINANcIAl
SEcTOR 259
46. mandatory approach in creating the network effect required to
achieve the goal of
universal adoption of new technical standards and lower
compliance costs. Other
countries may take note from the SEc in considering some form
of mandatory
requirements. The move from large to small filers is also a
useful phase-in imple-
mentation option that is transferable to XBRl implementation
projects in other
countries. The articulation of core values is likely to become
salient in XBRl
implementation as governments and other participating
organizations put more
emphasis on the creation of public value.
This article provides some broad lessons for improving
regulatory systems
through enhancing transparency via the use of information
technology. Public
administrators need to create an integrated and systemic view
through information
standardization. For example, Mullen (2005) recommends a
tighter and integrated
view of government-wide performance information. The
experience of XBRl
implementation also suggests the need for such standardization.
Implementation
should extend beyond the SEc to include the FDIc, the Federal
Reserve, and other
agencies that collect information on the financial sector.
Enhanced transparency by
e-government holds the promise for better accountability (Kudo,
2008). Targeted
transparency that can result in ease of access and analysis by
47. ordinary citizens
and by stakeholders is a productive avenue (Fung, graham, &
Weil, 2007). The
deployment of information technology can improve the
efficiency of information
gathering, dissemination, and monitoring.
Another broad policy lesson is concerned with the
implementation of technol-
ogy-enabled transparency for regulatory systems. Public
managers must actively
identify and engage all stakeholders, including regulators,
regulatees, and the
interested public, to provide a workable integrated view of the
financial sector
being regulated. The ability to maintain focus on the core public
value created
through increased transparency is also critical. The sustained
effort to conduct
phase-in implementation will increase the chances of success, as
e-government
projects tend to deal with a high level of complexity and
uncertainty.
Acknowledgments
The author acknowledges research support provided by the IBM
center for the Business
of government. An earlier version of this article was presented
at the Fifth Sino-U.S. In-
ternational conference on Public Administration, “The Role of
government in Fighting
the Financial crisis,” Xiamen, china, June 14–16, 2010.
notes
48. 1. More details on major XBRl implementation projects can be
found at www.xbrl.org/
knowledge_centre/projects/map/, accessed December 17, 2010.
2. The project managers of the Australia SBR (Standard
Business Reporting) project have
emphasized the importance of stakeholder-relationship
management.
260 PPMR / December 2013
3. A direct quotation from the SEc Web site:
www.sec.gov/about/whatwedo.shtml, ac-
cessed May 2, 2010.
4. More details on the history of disclosure of financial
information are available at www.
sec.gov/spotlight/xbrl/oid-history.shtml.
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Yu-Che Chen is an associate professor of e-government and
public management
in the Division of Public Administration at Northern Illinois
University (NIU). Dr.
Chen received his master of public affairs and Ph.D. in public
policy from Indiana
University–Bloomington. His current research projects are on
cross-boundary e-
government, smart cities, e-governance performance, and open
government. His
most recent co-edited book is Electronic governance and cross-
Boundary col-
laboration. His research has appeared in Public Administration
Review, American
Review of Public Administration, Public Performance and
Management Review,
and government Information Quarterly. His teaching interests
are in informa-
tion technology management, collaborative public management,
performance
management, and research methods. He received NIU’s MPA
Professor of the
Year Award in 2009 and 2013, is associate editor of the
56. International Journal of
Public Administration in the Digital Age (IJPADA), and is chair
of the Section
on Science and Technology in Government for the American
Society for Public
Administration (ASPA).
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The online version of this article can be found at:
DOI: 10.1177/0095399713479437
2013 45: 127 originally published online 12 March
2013Administration & Society
George E. Hale
1977-1985Issues'': A Case Study of Delaware Governor Pete du
Pont
State Budgets, Governors, and Their Influence on ''Big-Picture
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Administration & Society
45(2) 127 –144
60. and divided government. His leadership resulted in balanced
budgets,
repeated tax cuts, upgraded bond ratings, and reduced
unemployment. The
case illustrates how governors can impact “big-picture” issues
with influence
extending well beyond their tenure in office. An examination of
du Pont’s
leadership style suggests strong similarities to leaders studied
by Jim Collins
who have transformed other organizations. Looking at the
effectiveness of
du Pont’s leadership style suggests that clear priorities,
bipartisan solutions,
1Kutztown University of Pennsylvania, USA
Corresponding author:
George E. Hale, Department of Political Science, Kutztown
University of Pennsylvania,
P.O. Box 730, Kutztown, PA 19530, USA.
Email: [email protected]
479437AAS45210.1177/0095399713479437Administration &
SocietyHale
research-article2013
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128 Administration & Society 45(2)
and altering the institutional framework for tax and spending
61. decisions can
contribute positively to influence over “big-picture” issues of
state finance.
Keywords
governors, state budgets, leadership
Introduction
Studies of the state budget process generally characterize
governors as more
influential than state legislatures (Anton, 1966; Howard, 1973;
Schick, 1971).
Yet despite 40 years of empirical study, gaps in our knowledge
remain about
how governors influence budgetary outcomes. Relying on
comparative anal-
ysis of budget outcomes or surveys of state officials, these
studies do not
focus on how governors influence budgetary outcomes. In
addition, studies
of state budgetary politics focus on short-term influence over
budget out-
comes and pay little attention to the long-term “big-picture”
issues of a state’s
financial position.
Comparative studies of state budgeting focusing on annual state
appro-
priations find the governor’s recommended budget to be a
strong influence
on final legislative enactments (Sharkansky, 1968). Thompson
(1987) repli-
cates this research and finds that governors are “not as
dominant as before”
but “still play an important, if not paramount role in short-term
62. budget deci-
sions” (p. 775). In about two thirds of the states studied,
Thompson (1987)
concludes that Sharkansky’s “gubernatorial dominance model”
best explains
budget outcomes (p. 768).
Yet there are limits to gubernatorial influence. Examining
conditions of
divided government, Clarke (1998) writes, “Successful
opposition to the
governor, it seems, depends on controlling both chambers of the
legislature”
(p. 15). Another case study (Hale, 1977) finds that both agency
heads and
legislators adopt differing budgetary behaviors to respond to the
executive’s
leadership style thereby limiting the governor’s influence.
Other studies (Abney & Lauth, 1987, 1998; Goodman, 2007)
examine
gubernatorial and legislative influence over state budgets by
surveying
executive and legislative budget staffs. They find that executive
dominance
is not clear-cut. It often depends on institutional arrangements,
budget for-
mats, and information flows. Abney and Lauth (1987) identify
executive
dominance in 14 states, legislative dominance in 9 states, and
mixed results
in another 14 states. By the middle of the 1990s, Abney and
Lauth (1998)
found movement toward increased legislative influence over
short-term
budget outcomes. They suggest that gubernatorial influence
63. waned because
(a) governors no longer control the appropriations agenda; (b)
the item-veto
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Hale 129
is not effective; (c) increased partisanship undermines executive
leader-
ship; and (d) legislatures no longer are willing to enact reforms
to strengthen
the chief executives budgetary powers. Goodman (2007) finds
that the leg-
islatures’ ability to independently access budgetary information,
a separate
legislative budget agenda, and the addition of detailed language
in budget
bills, and consensus revenue forecasting can limit the
governor’s budgetary
influence.
Dometrius and Wright (2010) reexamine the issue of executive
and legis-
lative influence in an effort to reconcile the disparate findings
that executive
influence remains strong with findings that legislative influence
is growing.
They look at a broader data set—the American State
Administrators Project—
five replicated surveys of state agency heads in all 50 states
64. over a 20-year
time frame. They find gubernatorial budget influence has not
changed much
in two decades. Dometrius and Wright also discover that
“differences between
the governor’s overall influence and that of the legislature are
modest” (p. 787).
However, they also note significant differences across the states
and within
states over time. Structural elements of state government such
as the governor’s
powers or legislative professionalism do not explain changes in
gubernatorial
influence over time.
Dometrius & Wright (2010) also note that the struggle for
budgetary
supremacy is not necessarily a zero-sum game. To some degree,
governors
and legislators may chase different goals. They assert,
A governor knows that he or she is likely to take the bulk of the
praise or blame for
the big-picture element of the state’s overall financial status.
Legislators, on the
other hand, can sacrifice some policy preferences as long as
they glean other items,
especially from the budget specifics, for their constituencies
that can cushion their
reelection prospects. (Dometrius & Wright, 2010, p. 792)
Dometrius and Wright (2010) conclude, “Continuing to treat
budgetary
influence as unidimensional, and a type of zero-sum game, may
compare
apples and oranges. This is especially true if the two
65. institutions define the
terms and games differently” (p. 792).
Despite the general focus on the relative influence over
appropriations as
a short-term, zero-sum game, a few studies examine
gubernatorial influence
from a long-term perspective. Alt and Lowry (1994) show that
long-term
partisan differences in state taxes and spending exist. Alt and
Lowry’s (2000)
study of 33 non-Southern states from 1952 to 1995 shows that
Republican
and Democrat Governors shift the fiscal scale of state
governments in differ-
ent directions and that these shifts are greatest under unified
party control of
state. Yet this literature also does not address how governors
exercise long-
term influence over the scale of state government operations.
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130 Administration & Society 45(2)
As a result, we know comparatively little about how governors
use their
powers and skills to influence the direction of state policies.
One study of
gubernatorial success with legislatures finds that the sizes of an
electoral
66. mandate, popularity, and formal powers have little impact.
Ferguson (2003)
finds that a focused agenda is essential to success: “Governors
who pursue
broad agendas have a significantly harder time achieving their
goals than
governors who pursue more tightly constrained agendas” (p.
178).
Single-state case studies provide value by identifying
hypotheses or dem-
onstrating how politics actually works in practice. Nicholson-
Crotty and
Meier (2002) conclude, “We should focus on our goal—
enhancing our under-
standing of politics. Carefully done single-state case studies can
contribute to
this goal” (p. 420). This case study illustrates how executive
influence can be
exercised over the “big-picture” and long-term issues of public
finance. It
probes the leadership of Delaware Governor Pierre S. (Pete) du
Pont IV
(1977-1985) and how his influence extended through the tenure
of one
Republican and three Democrat Governors who followed.
Delaware Politics and Administration
Despite its small size, on many dimensions, Delaware is a
representative
state. The governor’s powers approximate those of the typical
state. In 2007,
Delaware’s governor scored a 3.5, the 50-state average, on a 5-
point index of
gubernatorial institutional powers (Beyle & Ferguson, 2008).
67. The political
parties are highly competitive as indicated by Delaware’s score
of .478, com-
pared with a score of .500 for a perfectly competitive state, on
the Rainey
index of party control (Holbrook & La Raja, 2008). Republican
du Pont faced
a House of Representatives controlled by Democrats for 2 years
and a
Democrat Senate for all 8 years. Finally, Delaware reorganized
its sprawling
state bureaucracy with more than 140 separate agencies and
created a cabinet
form of government in 1970 during an era when the majority of
states created
streamlined forms of government.
Today Delaware’s financial operations model best practices.
The 2008
Government Performance Project ranks Delaware among the top
seven states
in large measure due to changes unleashed in the 1970s,
“Delaware’s long-
term financial success can be linked to a strict set of spending
and taxing
controls that began more than three decades ago.” Similarly,
Alt, Lassen, and
Skilling (2002) construct an index of nine state-level procedures
for transpar-
ent state budgeting. Delaware stood as one of only three states
with eight of
the nine best practices (Generally Accepted Accounting
Principles [GAAP]
reporting, multiyear expenditure forecasts, annual budget cycle,
binding
revenue estimates, legislative revenue forecast, single
68. appropriations bill,
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Hale 131
nonpartisan staff drafting, no open-ended appropriations, and
performance
measures reporting). Furthermore, Delaware also is recognized
as one of
only seven states rated AAA by all three rating agencies.
Immediately prior to Pete du Pont’s election as Governor in
1976,
Delaware government underwent numerous changes typical of
era. In the
1960s, reapportionment following Baker v. Carr transformed
more state gov-
ernment by moving legislative seats from rural to suburban
areas. Second, a
1966 law established a merit system of employment. Third, in
1970,
Republican Governor Russell W. Peterson won adoption of a
major reorgani-
zation of the state bureaucracy folding 140-some agencies into
10 new cabi-
net agencies under the control of the governor. Soon, Peterson
noted, “My
seat as Governor got a hundred times hotter over-night. Now
everybody
knew the responsibility was with me and the cabinet secretaries
69. I appointed
and controlled” (Peirce & Barone, 1977, p. 106).
While today Delaware models financial best practices for other
states, 35 years
ago, it was a far different story. Delaware’s top personal income
tax rate
reached 19.8%. An unsophisticated state government coupled a
high debt
burden with the nation’s second lowest bond rating. The state
recorded a
series of budgetary deficits. Under Republican Governor Pete
du Pont, a
transformation began in 1977. His major reforms emerged from
a challeng-
ing environment—economic decline, divided party control, a
history of inef-
fective governors, undisciplined spending—that resembles the
environment
common today in many states. Soon his reforms became
entrenched in the
state’s political culture as his successors from both parties
embraced his
policies over the next 28 years. Boyer and Ratledge (2009)
conclude, “each
of Pete du Pont’s successors followed his lead by combining
bipartisan and
consensus politics with strong leadership and policy initiatives”
(p. 80).
Governor du Pont’s Early Missteps
When elected, Governor Pete du Pont provided few clues that he
would
reshape public finance and politics in Delaware. For one, he
lacked senior
70. executive experience. After a couple of years as a junior Navy
officer, he
briefly worked as a middle manager in the Du Pont Company.
After only one
term in the Delaware House of Representatives, he was elected
to the U.S.
House of Representatives in 1970. Frustrated as a backbencher
in the
Republican minority in Congress, du Pont launched his
campaign for
Governor in 1976 with a rather thin record of executive and
legislative
accomplishments.
He handily defeated incumbent Democrat Governor Sherman
Tribbitt
capturing 57% of the vote. The Governorship seemed to be not
much of a
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132 Administration & Society 45(2)
prize. In his inaugural address in January 1977, he focused on
the essential
challenge facing Delaware: “One might question whether this is
a good time
to become Governor. Our finances border on bankruptcy; too
many of us do
not have jobs” (Nagengast, 2007, p. 41). All three of his
predecessors failed
71. to win reelection. In addition to the nation’s highest personal
income tax rate,
at 19.6%, the unemployment rate stood as the second highest in
the nation;
the bond rating fell to the second lowest. The state budget ran a
deficit in 5 of
the previous 7 years. Out of control spending grew at triple the
rate of infla-
tion. Unreliable and politically driven revenue estimates
provided a shaky
foundation for state budgeting. Finally, du Pont faced a
legislature dominated
by an “old guard” and controlled by the opposition.
Although initially lacking a strategy on how to confront the
state’s fiscal
crisis, he moved swiftly to tackle it. He promptly established
the Delaware
Economic and Financial Advisory Council (DEFAC) to develop
indepen-
dent, transparent, and professional revenue estimates. Quickly
he froze hir-
ing, halted many construction projects, and proposed
terminating the
practice of granting semiannual cost-of-living adjustments.
However, sev-
eral missteps and an aloof and confrontational approach to
legislative rela-
tions produced negative reactions. In his first budget message
on March 3,
1977, he confronted the brutal facts: “The State of Delaware is
bankrupt.”
Intended as hyperbole to spark legislators into action, instead
the remark
troubled the financial community. Moody’s downgraded the
State’s bond
72. rating to Baa.
His first legislative session ended poorly. One observer
(Nagengast, 2007)
noted, “du Pont would find that many lawmakers in Dover
would consider
him a blueblood, patrician outsider who would have to be
watched carefully
and quite quickly take down a notch or two” (p. 44). When the
General
Assembly adjourned for the year, du Pont vetoed a budget that
surpassed his
bottom line. The General Assembly promptly embarrassed the
Governor by
overriding the veto. One cabinet member (Nagengast, 2007)
summed it up in
one sentence—“It was a horrible, horrible six months” (p. 44).
Positive Developments
By the time du Pont left office in 1985, the state balanced the
budget each
year, enacted two personal income tax cuts, adopted new
Constitutional con-
trols on taxes and spending, and limited future borrowing.
Delaware also
captured two bond rating upgrades, adopted major economic
development
initiatives, and lowered its unemployment rate. After a
“horrible” start, how
did du Pont turn things around? What aspects of his leadership
style enabled
him to enact an impressive array of policy changes? And, what
explains the
longevity of the reforms he championed 30 years ago?
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Hale 133
It helps to examine du Pont’s leadership in the context of
framework pro-
vided by Jim Collins. Governor du Pont’s leadership style
resembles many of
the attributes of successful leaders identified by Jim Collins
(2001, 2005) in
his study of great private companies and nonprofit
organizations. These traits
include leaders who combine professional will with the ability
to work
through others, an emphasis on recruiting a top-flight team, the
tenacity to
confront “brutal facts,” the ability to focus on one key issue,
and a culture of
discipline to make and implement difficult decisions.
In addition to making executive decisions, Collins (2005)
asserts leaders
in the social sector must master what he terms “legislative
leadership” by
“getting things done within a diffuse power structure” (p. 9).
Executive skills
are essential when the leader has enough power to simply make
decisions, but
“legislative” skills are important when the chief executive lacks
the struc-
tured power to make all the important decisions by himself.
74. Clearly this was
the challenge facing the governor. According to Collins (2005),
“Legislative
leadership relies more on persuasion, political currency and
shared interests
to create the conditions for the right decisions to happen” (p.
11).
Before the budget veto override, du Pont showed few signs of
mastery of
the legislative process. His early political success did not
require coalition
building or credit-sharing. His limited state government tenure,
minority-
party backbench experience in Congress, and patrician
background did not
prepare him for working with the rough and tumble, working-
class General
Assembly. Moreover, lawmakers stood ready to put him into his
place. One
advisor noted,
Pete ousted a popular Democrat in Sherman Tribbitt, and there
was a lot of
acrimony over that … There was this sense of wrong that this
young scion of the
du Pont family was bumping a popular democrat. (Nagengast,
2007, p. 44)
In the summer of 1977 following the abortive veto, the
Governor recog-
nized the importance of personally forging relations with
legislators. That
summer the governor made a determined effort to start building
bridges.
After the veto, Boyer and Ratledge (2009) wrote, “du Pont knew
75. he had to
replace confrontation with cooperation with the legislature. He
reversed
course and ushered in a new era of bipartisan and consensus
politics that has
dominated the state” (p. 79). One Democrat legislative leader,
Lonnie
George, recalls,
He looked for social settings to get us together. I remember
going to a ballgame.
There is something about building a relationship when you are
not asking for
anything. It’s kind of like, we’re just going out to a ballgame,
have some fun, a few
laughs, tell some stories, and get to know each other. I give him
a lot of credit, for
taking this on himself. He could have had his cabinet build
these relationships. But
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134 Administration & Society 45(2)
he did it in social settings that were not threatening, where
nobody had to get on
the defensive, and we got to know him as a person. He got to
know us. (Nagengast,
2007, p. 68)
In his bipartisan outreach, Governor du Pont paid special
76. attention to the
younger, rising new leaders in the General Assembly. One was
the new
Senate Democrat President Richard Cordrey, 45 years of age,
who remained
in the General Assembly until 1996. The leader of a bloc of
conservative
downstate agribusinessmen in the Senate, Cordrey became a key
ally on
financial issues. Another key ally became Orlando George, the
32-year-old
Chairman of the powerful Joint Finance Committee, who would
later become
House minority leader and remain in the legislature until 1994.
When major
constitutional amendments were ready for consideration,
Cordrey became
prime sponsor in 1978 and both played leading roles delivering
bipartisan
support.
Another ingredient in du Pont’s formula for success involved
building a
remarkably strong cabinet. Intuitively, du Pont grasped the
insight from busi-
ness consultant Jim Collins. Instead of starting with vision or
strategy, Collins
(2001) asserts, effective leaders “first get the right people on
the bus, the
wrong people off the bus, and the right people in the right
seats—and then
they figured out where to drive it” (p. 13). He started before
taking office. As
a candidate, he recognized state finances as the critical
challenge facing the
state. He recruited a young University of Delaware economist,
77. Eleanor Craig,
as his economics tutor, to fill in gaps in his formal education as
an engineer
and as a lawyer. Craig later became a key advisor and chair of
DEFAC.
Recognizing that budgetary failures, unsophisticated financial
manage-
ment, and last-minute tax increases torpedoed both Governors
Peterson and
Tribbitt; du Pont immediately initiated a national talent search
for top-flight
financial executives. Du Pont’s Secretary of State, Glenn
Kenton (Nagengast,
2007), recalls, “We immediately set about a nationwide search
and talking
with other governors about the people to do these things” (p.
48). The Finance
Secretary came from a top job in Illinois, a budget director
moved from the
Governor’s office in South Dakota. His planning chief returned
to Delaware
from a job with the U.S. Office of Management and Budget. “So
we really
did do a nationwide talent search and that was really, really
important. And,
to this day Pete will tell you (it was) an important outside-the-
box decision
that he made before he ran,” recalls Kenton (Nagengast, 2007,
pp. 46-50). As
time went by, the Governor continued to look to other states for
financial
talent. In his second term, he again reached beyond Delaware’s
borders
recruiting new Secretaries of Finance and of Administrative
Services from
78. subcabinet posts in New Jersey and Pennsylvania.
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Hale 135
When necessary, he also moved members of his team to another
post or
reassigned their portfolios. After the first rocky legislative
session, he trans-
ferred legislative liaison responsibilities to his down-to-earth
Secretary of
Finance Pete Nellius. Relations improved almost immediately.
The governor
later joked, “Pete Nellius played poker with legislators and I
guess he lost just
enough money that they felt good” (Nagengast 2007, p. 47).
One legislative
leader recalled, “Pete Nellius was a wonderful extension of the
governor. He
was relaxed, non threatening and would ask how we can work
through this
together” (Nagengast, 2007, p. 47). He also often moved key
advisors to new
positions capitalizing on their strengths. In 1981, he moved his
planning chief
to a newly created cabinet-level economic development agency.
When his
new Administrative Services Secretary stood out, he promoted
her in 1982 to
Budget Director after only 1 year.
79. In addition to building a top-flight team, Collins (2001) argues,
“You
absolutely cannot make a series of good decisions without first
confronting
the brutal facts” (p. 70). Governor du Pont did this in his
inaugural address:
“The challenge, then, will be to recognize our limitations,
establish our pri-
orities and live within our means. It will require personal
discipline from each
of us, and political discipline from all of us” (p. 70). While the
bankruptcy
remark and veto override damaged his standing with legislators,
they also
represented turning points that signaled his resolve. Governor
du Pont
explained, “By the time we vetoed the whole budget in July,
things were
really awful. But in retrospect, vetoing the budget may have
won the war
because for the first time, people said you know, these people
are serious”
(Nagengast, 2007, p. 61).
Another aspect of du Pont’s leadership style is what Collins
(2001) labels
the “hedgehog concept” (pp. 95-96) derived from Isaiah
Berlin’s (1993)
famous essay. “The fox knows many things but the hedgehog
knows one big
thing,” Collins (2001) concludes, “Hedgehogs see what is
essential, and
ignore the rest” (p. 91). Governor du Pont’s priority was to
instill responsible
financial management as a way to lower taxes as prerequisites
80. for economic
growth. In his inaugural address he stated, “It will be painful,
but not fatal, for
a careful pruning of the shoots and branches of government will
lead to a new
prosperity, founded on economic growth” (Nagengast, 2007, p.
41). Getting
spending under control, and limiting the General Assembly’s
ability to raise
taxes stood as the first hurdle to clear. The public clearly
understood that
finances were the top priority. As Governor du Pont later noted,
“Being gov-
ernor is the greatest job in the world. You can do anything you
want—but you
can’t do everything” (Rosenthal, 2013, p. 94). His speeches,
appointments,
and legislative agenda reflected a clear priority of controlling
finances as a
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136 Administration & Society 45(2)
means to jump-starting the economy. The Governor and his
cabinet ham-
mered on this theme from one end of the small state to another.
Only after
success in his first term, did he move to a second major issue
upgrading eco-
nomic development.
81. A culture of discipline was also essential. His strategy for
confronting
undisciplined spending soon centered on changing the
constitutional frame-
work for taxing and spending. Following his horrible 1977
legislative ses-
sion, du Pont worked with his new allies by changing the
processes of
government. Already du Pont had changed the process for
estimating reve-
nues. By Executive Order, he established the DEFAC, including
private
industry members, university economists, and governmental
officials, to
develop the official revenue estimates at public meetings. He
also combined
the planning and budgeting functions into a new Office of
Management,
Budget, and Planning.
To inject discipline into the budget process, du Pont enlisted
business
leaders and new legislative allies to amend the state
constitution. In Delaware,
two successive legislatures must enact constitutional
amendments—no refer-
endum is required. By 1980, two amendments introduced by
Democratic
Senate President Richard Cordrey passed a second General
Assembly. One
limited spending to 98% of estimated revenues plus the
unencumbered
General Fund Balance from the previous year. The amendment
also required
that the remaining 2% be placed in a new Budgetary Reserve