Charles T. Horngren, Management Accounting Pioneer: 1926–2011

Charles T. Horngren, the Edmund W. Littlefield Professor of Accounting, Emeritus, at the Stanford Graduate School of Business, credited with pioneering modern-day management accounting, died Oct. 23 in Palo Alto after a long illness. He was days shy of his 85^th birthday.

Known to everyone as Chuck, he was not only a well-loved member of the Stanford community, he was also regarded with the same admiration by his professional peers beyond the university. In 1990 he was inducted into the Accounting Hall of Fame and was honored repeatedly for his contributions to the American Accounting Association, for which he served as president and director of research. His textbook, Cost Accounting: A Managerial Emphasis, is now in its 14^th edition. It is just one of several of his books that have molded the education of generations of accounting students worldwide.

“He was a straight talker who had time for everyone — faculty, staff, and students alike,” said Stanford Graduate School of Business Dean Garth Saloner. “I always found him to be a caring, compassionate, and supportive colleague who took a keen interest in those around him. I will miss him deeply.

“His calm demeanor, even temper, and wry sense of humor were ever-present. He could reliably be found in the faculty lounge at lunch, green apple in hand, and a good story or anecdote at hand. He was a workhorse, sometimes teaching four sections in a single quarter.”

Horngren was credited with changing traditional accounting education in the 1960s “from cost accounting’s overwhelming emphasis on accumulation and calculation of product costs to managerial accounting, which explores the uses of costs for various purposes,” wrote Thomas Burns, a professor at Ohio State University and chairman of the Accounting Hall of Fame when Horngren was named to the Hall in 1990.

“The use of accounting data for decision-making purposes foreshadowed the informational approach that was to sweep accounting research,” said William Beaver, one of Horngren’s students who today is the Joan E. Horngren Professor of Accounting, Emeritus. “Chuck defines the term outstanding education in every sense of the word,” said Beaver. Horngren endowed the professorship in 1984 to honor his wife, who died in 2010.

In addition to the professorship established at the business school, he established the Horngren Family Vitreoretinal Center at the Byers Eye Institute at Stanford University, and the Horngren Family Alzheimer’s Research Fund in the Stanford School of Medicine.

The Horngrens were married in 1952 and had four children who survive them: son Scott and his wife, Yone McNally, of Portland, Ore., daughter Mary and husband Dennis Wilson, and daughters Susan and Catherine, all of the San Francisco Bay Area. They are also survived by grandchildren Erik Horngren and Chelsea and Marissa Frost.

A memorial service is planned for 10 a.m., Saturday, Nov. 12, at St. Thomas Aquinas Church, 751 Waverley St., Palo Alto. A reception will follow at the Garden Court Hotel, 520 Cowper, Palo Alto. The family asks that in lieu of flowers, memorial donations may be made to Pathways, 585 North Mary Ave., Sunnyvale, Calif., 94085.

Horngren was recruited to the Stanford Graduate School of Business in 1966 as Dean Ernest Arbuckle was building an impressive faculty that would earn the school a world-renowned reputation. Horngren brought a friendly, witty personality that made him popular with both his peers and students, and his intellectual powers were always in demand and respected.

His academic work influenced management education, but he also affected accounting practice through his service on professional boards. He advised Stanford University during the indirect cost debate in the 1990s and was a frequent speaker to both academic and professional audiences, always arguing for behavior that met his exacting standards. In 2008 he was asked by a writer for Business Finance magazine what he would do to improve the field of finance.

“I think the whole area of risk needs much closer attention from people who have financial responsibilities, especially when you look at the current subprime disaster. Everyone is blaming everyone else, and I think the whole shooting match is guilty in some respects. There is a lot that could have been avoided, whether through regulation or just smarter people. I am really trying to distinguish between whether it was greed or unwise decision making that got us there. It seems that greed affects decision making too often. The question is, “How are we going to disentangle the influence of greed and keep it from being destructive to decision making?”

Born in a blue-collar neighborhood of Milwaukee on October 28, 1926, he grew up an avid baseball fan and fantasized for a time about becoming a major league player until reality set in. Following high school graduation, he entered the U.S. Army. In 1946, he enrolled at Marquette University where he majored in accounting and, in his junior year, took a part-time position with the Veterans’ Administration to tutor homebound, disabled veterans.

After graduating as class valedictorian in 1949 with a BS degree, he worked in public accounting but soon discovered that he loved teaching and began teaching a heavy load of accounting courses at a for-profit business college. He earned an MBA degree from Harvard Business School in 1952. His interest began to focus on decision making by general management, and he developed a better appreciation of accounting as a decision-making tool.

In 1952, the University of Chicago offered him a teaching position in accounting if he would also enroll in the PhD program. At Chicago, William J. Vatter became his mentor and was a stimulating influence in broadening and deepening his interest and conceptual skills. He received his PhD degree in only three years while teaching full time.

Horngren taught at Marquette University and University of Wisconsin-Milwaukee before returning to a tenured accounting position at the University of Chicago. There he worked with colleagues Sidney Davidson, Nicholas Dopuch, David Green, and George Sorter, the founding editor of the Journal of Accounting Research, plus outstanding doctoral students including William Beaver, who he later recruited to Stanford, Joel Demski, and Philip Brown.

True to Vatter’s influence in financial management, Horngren made major contributions in both financial and management accounting. In the former field, he wrote a number of thoughtful articles, including three with Sorter on “relevant costing.” He played key roles in helping shape the development of private-sector standard setting by serving on the all-important Accounting Principles Board from 1968 to 1973. Among his more influential articles were several in the 1970s and the 1980s on the efficacy of the standard-setting process. He served as a trustee of the Financial Accounting Foundation, which oversees the Financial Accounting Standards Board, from 1984 to 1989.

As significant as his mark was on the world of financial accounting, Horngren’s biggest imprint was on management accounting. Influenced by Vatter’s path-breaking textbook, Managerial Accounting, published as a “preliminary edition” in 1950, he published his own Cost Accounting: A Managerial Emphasis in 1962. Almost by itself, his textbook changed the field. His objective was to demonstrate to faculty and students alike how the most important role of accounting within a company was as a management tool for making wiser decisions.

Prior to the 1960s, cost accounting textbooks had placed primary emphasis on the construction of inventory cost for use in financial statements and only secondarily conceded space to the management uses of accounting. The book soon became one of the most respected and widely used textbooks in the field, used throughout the world, and is currently in its 14th edition with coauthors Srikant Datar and Madhav Rajan.

He was the author of four other textbooks on financial and management accounting, all of which continue to be published with coauthors in their later editions. In addition, he wrote more than 50 articles on a wide range of accounting topics.

Horngren had long been active in the American Accounting Association, and served as its president from 1976-77. He won numerous awards and accolades including the AAA’s inaugural Outstanding Accounting Educator Award presented in 1973.

By Cathy Castillo