PracticePeople In PracticeListed companies face FD shortage as resignations soar

Listed companies face FD shortage as resignations soar

As increasing regulatory pressures and the technical demands of the role make a careers in finance less attractive, who would want to be a finance director?

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.

Changing demands
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.’

Increased regulation
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
scrutiny.

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

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