Strategic bankruptcy: the case of James Hardie
In this paper we use Delaney’s (1989; 1992) theory of strategic bankruptcy to study the corporate response of James Hardie Industries Limited, a company faced with a significant product liability legacy, asbestos. Confronted with the uncertainties of mass long-tail tort claims Delaney argues companies prefer to conduct their ‘business’ in the arena of corporations law and employ both legal and accounting constructs to define the ‘unit’ of business to deal with claims. The corporate restructuring undertaken to create such a unit was not conducted in an organizational vacuum; other powerful institutions and stakeholders create ‘noise’ which served to constrain and shape, as well as facilitate the options available to James Hardie. This case highlights the socially constructing nature of accounting as well as the ability of companies to harness accounting concepts to achieve organisational goals and transfer risk to vulnerable parties.