The merger: which way now?

Like most issues with a history to them, the truth is obvious. Over a hundred years ago, when accountants wore top hats and voluminous beards, the future for the burgeoning number of accounting bodies was understood.

In the first month of the last century the president of one of the Scottish accounting bodies described them as ‘an absurd diversity’. And it was obvious to him that logic would force amalgamations, mergers and rationalisation.

But here we are some 105 years later and even an attempt at merging the largest, the ICAEW, with the smallest, CIPFA, has failed. You can imagine the ghosts of mergers past shaking their whiskers in disbelief.

Part of the problem is that in an ideal world you wouldn’t start from here. With
six well-defined accounting bodies, all of which trade off the idea that their members are the best in their field, it is always going to be very hard to establish a common ground capable of moving members to vote themselves out of their current membership body and into a larger organisation.

And there is no obvious unifying reason. Back in the mid-1960s an attempt was made to bring all the bodies together. At that point all the bodies, bar two, voted in favour. ICAS and the ICAEW voted against (albeit very narrowly in the case of the Scots).

By 1970 a rescue effort was up and running. This time the Scots and the other
four bodies voted for the idea. But the ICAEW voted against.

In 1989 the ICAEW and ICAS came up with a plan to merge and create a British Institute ­ but the Scots voted against it. Subsequent years saw the ICAEW attempt a merger with CIPFA, which foundered on an ‘ ICAEW vote against the idea.

Then the Association of Chartered Certified Accountants created a unilateral plan to merge everyone together. Unsurprisingly, springing this idea on an unsuspecting profession failed. The efforts at mergers had become increasingly frantic and inept.

So why didn’t the ICAEW/CIPFA effort work this time? There has always been a theory relating to the age profile of the membership of those accounting bodies participating in merger efforts. The generalisation, borne out by anecdotal evidence, suggests that, by and large, younger members tend to vote against, older members tend to vote in favour.

So as the age profile of the profession rises, mergers should be more likely to succeed. Older members see themselves as having less at stake. The younger members still believe that what they have fought hard to gain is the finest qualification possible. They don’t want to see it diluted so they vote against.

This was why this time the ICAEW was so proud of the idea of creating a merger but with separate qualifications intact. They thought they had cracked the problem at last. They obviously hadn’t.

The ICAEW has also always had a solid rump of protesters who are against most things, whether it be increases in subscriptions or mergers. The institute has never managed to marginalise this rump. And in the days of websites and the internet the rump can be better organised than ever. They can always snipe more effectively than the establishment can cut off their arguments.

This time around you could also add in two factors that came from out of leftfield, even if they were self-inflicted. The first was the perceived arrogance of the attempt to change the merged body’s name to a simple Institute of Chartered Accountants.

This, predictably, got right up the nose of the Scots and led to a wave of furious exchanges as well as complaints from all around the world. Members who were floating voters became unhappy.

The second was the measure known as UITF 40, which is likely to land firms, particularly smallish ones, with a greatly increased one-off tax bill relating to revenue recognition for work in progress. Whether justified or not the ICAEW is seen by its members as having not been belligerent enough on the issue. So there were specific associated gripes undermining the merger process.

But the biggest obstacle is the obsession with accountability, which the ICAEW and many other membership bodies exhibit. Nothing so wearies and annoys members
than the feeling that they are constantly being asked what their accounting body should be doing.

Members of any professional body know why they became a member. And if they are really upset at what it is doing, they will let it know. But most members of any organisation, assuming the basic services are being provided, are more interested in getting on with their lives and livelihoods. What gets them down more than anything else is the feeling that they are being pestered constantly for their views on what the membership body should be doing.

The cult of accountability and its inclusion in membership bodies’ mission statements has done much more damage than those at the centre can ever understand.

And this has a knock-on effect when a really big issue like a merger proposal comes up. Members start to receive a blizzard of letters, emails, videos, DVDs and general bumf. All these exhortations do not make them enthusiastic. It increases their feeling, already planted by the accountability overdrive, that the body to which they pay their subscriptions has completely lost its grip.

At one point in the recent ICAEW campaign one of their enthusiasts, fresh from a day at the studio compiling audio-visual persuaders, asked what he could do over the next couple of months to bring the merger to fruition. ‘Go and watch the rugby’, I said.

He assumed it was a joke. It wasn’t. Leaving members alone for a while would have
been a much better way of achieving his long-term goal.

So what does the long history of merger efforts tell us? In the past merger failures have tended to result in endless working parties dealing with organisational change like reducing the size of councils, promoting greater cooperation and so on. It tends to be activity for activity’s sake.

But chief executives, particularly people like Eric Anstee who have been brought in from a business background, see their role as bringing about change. They are not happy with just running an efficient administration. But it may be that the time for mergers of the six UK accounting bodies is in the past.

The best chance was the attempt to create a British Institute back in 1989. It would have been heavily influenced by the Scots keen on an expansive profession. And the ICAEW in the year after that merger failure held its annual conference in Brussels. The feeling that the biggest accounting body in the world should take on more of a world role was, at that time, palpable.

Fifteen years on it may be time to accept that working closely together is the best that can be done. And perhaps future mergers will be determined more by the economics of the marketplace.

But that assumes that egos and short memories will not come to the surface once more. As one friend put it a while back: ‘Every ten years or so the ICAEW simply feels the urge to go out and blow £1m on a failed merger attempt’. He was wrong of course. It was actually £1.4m.