Profile – Douglas Flint, group FD of HSBC

Douglas Flint isn’t shy about coming forward. When the HSBC group finance
director feels strongly about something he’s happy to come out and say it. He’s
a man who clearly believes there is a time when you need to go public with an
issue. Not everything can be done behind closed doors, even with the contacts
that Flint has built over the years.Take for example the European Union’s
attitude to accounting standards. When the replacement for IAS 39 was released
earlier this month ­ the one that revised the highly contentious fair value
standard ­ the EU failed to adopt it. Flint clearly thought there was a problem
with Europe’s reluctance to come out in support and promptly sent a letter to
the Financial Times about his unhappiness.

In the note, Flint got right to the problem and spared no one’s feelings.
“Many of the objectors to IFRS 9 sought to take the IASB to a position they knew
it could never support, because their agenda was to create conflict with the
IASB as part of a larger political agenda”. Flint was unequivocal ­ don’t bring
politics into standard setting.

It’s Flint’s willingness to be involved in public debate, his passion for
reporting and his stature as the FD of one of the world’s biggest banks that
last week earned him the Outstanding Industry Achievement accolade at the
Accountancy Age awards.

The citation noted not only his 14 years on the board at HSBC, but his CBE
for services to financial services, his former membership of the Accounting
Standards Board and the advisory council of the International Accounting
Standards Board and his work researching financial reporting for the Group of
30, the think tank that boasts Nobel Prize-winning economist Paul Krugman,
European central Bank president Jean-Claude Trichet and former US Federal
Reserve chairman Paul Volker as members.

Flint says that finding time outside the day job for all his other projects
is difficult but it remains important to do so.

“Things have changed a lot over the 14 years I’ve been finance director here.
But at the same time I actually think the job still goes back to the
fundamentals ­ integrity, financial reporting, understanding the basics,
building a team and making a contribution to the development of the accounting
profession in the broader sense because… the integrity of everything we do,
that’s where it comes from.”

Flint came to HSBC in 1995 after serving as a partner at KPMG from 1988. He
has a reputation for intellectual rigour and integrity among highly placed
members of the profession. One highly placed regulator told Accountancy Age:
“He’s terrific. People listen to him.”

His visibility grew at the beginning of the sub prime crisis when it became
known that Flint had travelled to the US to sort out troubles at Household
Finance Corporate, an acquisition made in 2002, which was renamed HSBC Finance.
It was dubbed “the deal of the first decade of the 21st century” by The Banker
magazine. In the end it required substantial write downs. Altogether HSBC ended
up writing down almost £9bn from the crisis, but it came early and quickly. Bad
news did not linger around the bank and it has gone on to book substantial
profits without recourse to government bail outs, though it has had to engage in
a rights issue. Flint was in fact consulted by government as the planning for
the bail outs began in earnest.

View from the top

Ironically, if he was asked for an overview, he was well placed to offer it.
The executive suite of HSBC sits on the 42nd floor of the Canary Wharf tower
occupied by the bank. Our interview (filmed for broadcast on Accountancy Age TV)
takes place in a conference room overlooking London. It’s a staggeringly
effective vantage point.

From his own point of view Flint sees the markets changing, demanding
increasingly granular information about company performance and the role of
finance directors becoming ever more “intense” but he also sees his job as
helping the users of financial information understand what they’re seeing.

He is one of the few banking executives who publicly acknowledged that things
needed to be done differently and even publicly claimed that banks needed better
supervision.

But he doesn’t believe in quick fixes. “There is no silver bullet. There is
no single tweak you can make to a number of dials and say, ‘well that’s fixed
everything’. It all comes down to people, it comes down to management, it comes
down to the regulatory framework and supervision. It comes down to the way the
economies are organised and it comes down to consumer confidence. All of these
things have a role in the shaping of any economy.”

Which means it might be some time before everyone is happy with the new
regulatory and, one must suppose, cultural landscape for business. “I’m
absolutely certain that there will be a huge step from where we’ve come from and
we’ll address many of the historic issues but one’s always nervous as to what
happens next time.”

There’s that honesty. You can fix some things, but you can’t fix everything.
“I think it comes down to people, certainly people who have been through the
experience of the last few years will never want to be in the same spaces that
they themselves were in during that time.”

International standards and how they come about remain a keen interest of
Flint as last week’s letter proves. But he is willing to go even further on the
subject.

“I think it is utterly unreasonable to say that fair value accounting caused
the crisis. I think it’s possible to say in certain areas some of the
measurements that came out of an exit price model gave exaggerated prisms to
look at certain things but they were relevant to look through… at that point in
time,” Flint declares.

“It’s very important that we don’t get bifurcated standards and it’s very
important that the standards that are proposed are workable… There will clearly
always be interested parties who particularly like some aspects of change and
indeed if you had a set of accounting standards that everyone liked, they almost
certainly would be missing the point.”

Asked if the IASB is the right place to handle standard setting he says: “An
independent body is the right place, yes.”

The auditor’s lot

Flint has equally strong views about audit. He believes the auditors’ role is
widely misunderstood and audit report need some reworking to make them more
accessible. He doesn’t believe they need to contain more information. The
reasons are obvious. If you assume the auditors need to deliver, then you are
along the road to saying they are more accountable for financial report than the
company directors.

“One of the things I think would be better is if the role of the auditor was…
better understood because the audit reports are a fairly technical document and
I think there’s quite a lot of misunderstanding, misapprehension, as to what the
auditor actually does and what his report actually does.” What Flint wants is a
kind of plain English audit report.
But much of the debate at the moment, certainly among regulators, is not about
the style, but the content of the report.

Should they contain more information? “I think that’s the role of the actual
accounts. The accounts should explain clearly the basis of accounting, the
accounting standards used… That’s the responsibility of the preparer and if he
goes, as we do, well beyond accounting standards and regulatory and legal
requirements it’s because he thinks that adds value to the users of financial
information and that’s our job preparer.”