Profile: Mark Otty, chairman at Ernst &Young

Mark Otty, the new chairman of
Ernst
& Young, has just run the London marathon when we speak to him. In a
modest three hours and 12 minutes. So did he have to train hard?

‘No’ is the short answer. He barely needed to. It emerges that he ran a 35
mile ultra-marathon two weeks before. Suggestions that Otty likes to jog, which
emerged relatively early in his candidacy for the top job at E&Y in the UK,
are no joke. ‘I do about 40 miles a week,’ he says.

Ten months in to his new role, Otty is enjoying himself: And whilst the UK
industry frets about the dominance of the Big Four over UK audits, Otty and his
executive team have already moved on to a much bigger prize ­ global
integration. You get the feeling talking to him that once the mid-tier have
caught up with the Big Four in the UK, the Big Four themselves will already have
taken a further step ahead.

The most obvious sign of Otty’s focus on the bigger picture is his
frustration with the burden of dealing with regulatory issues. Asked what he
dislikes about the job so far, he says: ‘I would love to get rid of the
administrative stuff. There’s a lot that you need to have at least a passing
knowledge of.’

He is referring to things like company law changes, and other regulation.
Where Nick Land, his predecessor, would have been only too happy to discuss the
details of the latest regulatory initiatives, Otty regards it as ‘administrative
stuff’.

In that vein, he has appointed Jan Babiak to handle regulation. And he is so
unconcerned by the institutes that he says he cannot remember which one he is a
member of.

Insiders say his real emphasis has been on global integration, driving
forward the integration of the ‘seven region’ structure of the firm. His key
lieutenants are not heads of E&Y UK any longer, but heads of E&Y NEMIA ­
northern Europe, the Middle East, India and Africa.

The global division of E&Y will help to head off some of Otty’s concerns
about
the UK, he says, reflecting broad concerns that other accounting firms have not
voiced in the past.

‘What is the long term prognosis for the UK economy as ownership and activity
shifts into emerging markets? Yes, we continue to see big growth in services in
the UK ­ but is that a long-term sustainable play? I believe we need to be a
global organisation to respond to the needs of our clients but also to create
opportunities for growth.’

And on the UK dominance of capital markets: ‘We can certainly see that there
has been a shift in capital markets activity in the last few years from the US
to the UK ­ but the dark lining is that it’s reasonable to assume that it could
shift out just as quickly from the UK.’

That, and ownership changes, pose significant concerns for accountancy firms.

‘We have seen ownership shift. What impact is that going to have on the services
sector? There’s more work done where the holding company is and less where the
holding company used to be. These are the questions I am asking.’

Diverse approach

Otty has worked in the UK for six years for E&Y, having grown up and worked
in South Africa before then. It is clearly an experience that marks him out from
other leaders of UK accounting firms.

‘[In relation to] emerging markets, well, I grew up and lived in an emerging
market.’

South Africa’s racial struggles and mix have also marked him, he says.
‘I talk a lot about diversity. In any team I am part of I look for diversity
because it adds a richness to the mix. And that’s not because I read the
textbook but because I experienced it in South Africa in a very real way.’

That must feed into a strong ethical line. When talking to Otty, whether
about big business or even the press, you feel he is not just relating a point
of view, but a deeply held ethical position.

‘In the marketplace today there are questions about the integrity of big
business, which bothers me a great deal,’ he says, implying the firm could now
take an ethical tone.

He dismisses suggestions tax avoidance activities might compromise such a
stance. ‘That has changed. We addressed that prior to the energy I’ve put into
values,’ he says.

‘I don’t think we’ve got any big gaps as it relates to our attitude to tax
avoidance.’

With the UK business, Otty expects double digit growth this year. That comes
on the back of 15% growth last year, which will not be exceeded. But business
continues to be good.

E&Y has been chipper about its prospects for a while, with its new
consultancy arm thought likely to prop up the extraordinary growth. It now has
around 26 partners in the practice, and the arm is ‘growing rapidly’ but only
‘in line with expectations,’ he says.

It’s a mark of the pace of change in the accountancy world that the absence
of astonishing and surprising growth seems to be so disappointing
He says also that he hopes to grow the firm’s government business.

Not that it doesn’t have a lot of that work, he just sees an opportunity.

Does he intend to recruit more partners in that area? ‘Yes’. From rivals?
‘That’s always part of the game, isn’t it?’

Although he does have a tendency to duck some questions. Asked about the
Ferox case (the hedge fund sued E&Y, apparently for having filed its
accounts too early) and the threat of a litigious culture in the UK, he says:
‘In most markets litigation is an issue. We need to make sure in terms of
economic competitiveness that it doesn’t become a problem.’

And on the comments of Cairn FD Jann Brown, who criticised E&Y and the
other firms for not providing enough support on IFRS, he says: ‘The Big Four
learned a lot through IFRS implementation and invested an enormous amount.’

On a personal level, his rapid rise through the UK firm is interesting. He
only arrived in the UK six years ago.

‘It was really about a new challenge. I was working all over the world on a
project basis. It was time to do something new. I had a strong relationship with
the UK firm for a long time, and so it was a natural place to come.’

Would he go back to South Africa?

‘I’m very opportunistic about these sorts of things. I am always being asked
what my long term career plan is.
‘I don’t have a long term career plan. I grab the opportunities as they come. If
that opportunity was in South Africa I would go back but I don’t have any plans
to go back right now.’

Otty on the record

On the chairmanship of E&Y:
‘It’s going very well. I’m enjoying it, whatever expectations anyone else had
for me. The fact that there’s so much going on is the biggest factor for me.
There doesn’t seem to be enough hours in the day. I hadn’t anticipated that
there would be so much capital market acquisition.’

On the institutes:
‘I’ve got affiliation status with one of the institutes ­ I honestly can’t
remember which one.’

On the threat of an overly-litigious business environment:

‘In most markets, litigation is an issue. We need to make sure, in terms of
economic competitiveness, that it doesn’t become a problem.’

On claims that firms had not provided sufficient support during IFRS
transition:
‘The Big Four learned a lot through IFRS implementation and invested an
enormous amount.’

His focus on diversity:
‘In any team I am part of I look for diversity because it adds a
richness to the mix. And that’s not because I read the textbook but because I
experienced it in South Africa in a very real way’

On the integrity of business:
‘It’s about bringing the values to life in an organisation.
In the marketplace today there are questions about the integrity of big
business, which bothers me a great deal.

Graduates are asking what sort of organisation they are becoming part of.
What I worry about is-we are operating in a situation where credibility of
business is low and as a consequence the best people emerging choose not to get
into formal employment. If we are going to be successful, we need responsible
business that’s not operating separately from the community.’

On his future
‘I don’t have a long term career plan. I grab the opportunities as they
come. If that opportunity was in South Africa I would go back but I don’t have
any plans to go back right now’