How to sit at the FTSE100 table

Almost as soon as he was appointed, Mark Pain, the new finance director of
FTSE250 housebuilder Barratt Developments, signalled his intention to lead his
new company into the FTSE100.

Pain has already tasted life in the FTSE100 as the FD of Abbey National,
where at the age of just 36 he was then the youngest finance executive in the
index.

The move into the top index is a natural one, and would see Pain join Martin
Greenslade and Ian Dyson, the FDs of Land Securities and Marks & Spencer,
who have recently made the jump from smaller public companies into the top
flight.

Greenslade was formerly the FD of defence company Alvis Plc, while Dyson
joined Marks & Spencer from leisure group Rank.

But, what does it take for an FD to operate in the biggest index in the UK?
What sets apart the big league FDs from the rest?

An obvious difference is the significantly more lucrative rewards that come
with taking on a FTSE100 role, as opposed to one lower down the public company
ladder.
According to the latest FD salary survey conducted by Accountancy Age’s
sister publication Financial Director, the average salary of a FTSE100
FD is £330,000 while the FTSE250 average is £250,000. When it comes to total
pay, the average top 100 FD pockets £769,000, £339,000 more than his or her
FTSE250 compatriot.

But it takes more than a bigger pay cheque to differentiate a FTSE100 FD from
his small cap colleagues.

Mark Freebairn, chief of the CFO practice at headhunters Odgers Ray &
Berndtson, says that, although there are no technical areas that separate
FTSE100 FDs from the rest of the pack, age and experience do play an important
role.

‘If you are recruiting the FD for an M&S, Debenhams or French Connection,
you are looking for the same kind of personality,’ says Freebairn.

‘Theoretically there is no difference between a FTSE100 role and one in a
small cap, but you are unlikely to get a role at a larger group without solid
experience in other roles.’

John Collier, a director at executive recruiters Clive & Stokes
International and a former ICAEW secretary general, says the ability to
communicate with analysts, investors and the public is the main skill that
differentiates a FTSE100 FD.

‘The ability to communicate credibly with shareholders is a requirement for
all listed companies, but when you are working for a FTSE100 group that skill
becomes even more important,’ Collier says.

‘You are in a position with a much higher profile. If you get things a bit
wrong the impact is much bigger. A FTSE100 FD needs to be a better all-round
communicator. The higher up you go the more critical this skill becomes.’

This is a view shared by Freebairn: ‘The FD of a FTSE100 company spends far
more time working on investor relations and dealing with the city. The FD of a
large company must be a stronger presenter and media savvy.’

External relations, however, represent only part of the communications role a
blue chip FD has to master. In small caps, developing and implementing strategy
is a simpler process because decision making is crisp and streamlined.

The boardrooms of the UK’s top 100 companies are far more complex beasts and
require FDs to understand the nuances of dealing with large panels of
non-executives and winning their confidence.

‘The boards of FTSE100 companies, particularly in the bigger companies, are
more formally structured and require FDs to conduct themselves differently,’
Collier says. ‘An FD needs to be more aware of the political environment in such
boards, and have greater skills when it comes to influencing the board.’

In addition to these relationships, and communication skills, Freebairn says
that the FTSE100 FD also needs to have a global outlook.

‘FTSE100 companies are likely to be larger and more intellectually complex
than a smaller plc and an FD will need to have a grasp of global issues and
regulatory requirements,’ says Freebairn.

Ironically, according to Collier, the introduction of IFRS has helped
simplify the job of a FTSE100 FD working for a company with global interests
because the same accounting method will be used internationally. He adds,
however, that when an FD works for a company with a dual or secondary listing,
particularly in the US, an understanding of the global picture is essential.

‘A small company is unlikely to have a foreign listing, but in a big company
with a presence abroad, the FD must have an understanding of different reporting
regimes. Especially in the US where Sarbanes-Oxley applies,’ says Collier.

Collier adds that more is expected of a FTSE100 FD when it comes to
developing strategy and growing shareholder value. ‘A FTSE100 FD is seldom the
classic accountant. The FD is expected to be deeply involved on a financially
strategic level and have a direct engagement with business strategy,’ he says.