There is a very telling quote buried in a recent study looking at the number
of finance directors who have recently jumped ship from listed companies.
The unnamed FD says: ‘Young guns used to say: “I want your job”. Now they
say: “I don’t want to do that… Life is too short”.’
The implication is clear – while the number of FD resignations has turned
from a drip to a downpour, are there enough candidates out there willing to step
into the breach?
Normally, around five FDs would leave their posts in the FTSE100, but last
year there were 16 departures (see box). Some were victims of takeovers, others
suffered pressure from the City, while a number retired. But while losing five
FDs a year is unfortunate, 16 really does smack of carelessness.
Mark Currie, FD at Management Consulting Group PLC, says that many more FDs are
taking the blame for a company’s failure to hit its targets. ‘FDs are now often
regarded by investors as the guarantor of the forward looking numbers. This, in
some senses, should make the FD’s job more interesting – you are having to form
much wider views than you would have done five or 10 years ago.’
Jeremy Rickman, managing director of recruitment firm Russell Reynolds
Associates, author of the study, believes that last year’s figure was
exceptional. He points to a number of factors that helped drive up the attrition
rate – retirement accounted for six departures, one was the result of a takeover
and three could be described as career moves. And if you worked in the retail
sector, your shelf life as FD suffered – witness the departures at Boots,
Morrisons and Marks & Spencer.
But he also concedes that there is the feeling that the job is not much fun
today. ‘The job is more technical today than it was five or 10 years ago, at the
expense of being strategic and commercial,’ he says.
Glyn Barker, head of assurance at PricewaterhouseCoopers, agrees. He too has
seen the rising trend in the number of FD departures and blames the added
burdens that come with the job. ‘It is a trend, it is very real.
The stress on CFOs of FTSE100 companies is immense. There is the enormous
burden of new accounting standards and making sure the market is prepared for
them. And SEC registrants have Sarbanes-Oxley.’
Philip Broadley, chairman of The Hundred Group and FD at Prudential, agrees that
the governance agenda has changed: ‘I’ve been here for six years and, during
that period, regulation has changed.’ But he adds: ‘From my point of view it
tends to evolve at a pace that is manageable.’
It is easy to point to the irresistible rise of red tape, whether from the
UK, Europe or the US, but there are other forces at play, notably the increase
in takeover activity, which is set to increase this year. As Barker says:
‘Strong companies are looking to do deals, and this puts enormous pressure on
CFOs as they are required to analyse targets and find the funding. And weaker
companies are under even more pressure.’
Barker also criticises the short-termism of the City. ‘Executives of big
companies are not normally rewarded for steady, successful management of a
company, but are penalised for failure,’ he says.
No wonder Currie, Barker and Rickman have seen a number of FDs heading
towards the warm embrace of private equity, where there is far less public
So what can be done to make the job more attractive? FDs are feeling lonely
and in the past they had a number of people they could turn to – auditors could
act as confidantes and non-executive directors would act as allies.
But now, in the wake of corporate governance concerns, both these groups are
distancing themselves from the FD. This needs to change, according to Barker.
‘We should be there to help, support and deliver,’ he says. ‘If I were chairman
of a company, I would want to see people supporting my FD.’
So are we likely to see a shortage of suitable FD candidates in the future?
Rickman predicts the number of departures in the FTSE100 will hit double figures
this year – but Broadley is confident the job is still attractive. ‘I would
still say to people that I have a great job and I relish doing it. If you asked
yourself whether if you knew then what you know now, would you want to be a
finance director in a large public company – absolutely.’
As Currie says, now should be a good time for FDs. ‘Boards have got smaller
and CFOs have got to seize the opportunities,’ he says.
BIG NAME DEPARTURES
Graham Heatherington – Allied Domecq
Tony Lea – Anglo American
Rene Medori – BOC
Howard Dodd – Boots
John Rishton – British Airways
John Coombe – GSK
Andrew Macfarlane – Land Securities
Alison Reed – M&S
Martin Ackroyd – Morrisons
Roger Payne – Rentokil
Graham Chipchase – Rexam
Roger Matthews – Sainsbury
David Nish – Scottish Power
Alan Thompson – Smith Group
Ken Hydon – vodafone
Davis Richardson – Whitbread
Growth in revenues of 6% has seen KPMG UK break the £2bn barrier, but its managing of partners has seen average take-home fall
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