CAs still rule the FTSE-100 roost

We last surveyed top FD qualifications just over three years ago, in our June 1998 issue. Back then, just 51 FTSE-100 FDs were members of the granddaddy of institutes, the ICAEW – and it looked as though they were on the verge of becoming the minority.

We’ve long since stopped talking about the changing role of the financial director but three years ago it seemed likely that this very trend would demand more of the FD than his institute’s training programme had ever prepared him for (we say ‘him’ even though the number of women in the FTSE-100 has doubled – to four).

Strategy issues and ‘business partnering’ skills demanded that the FD think about how to help his operations colleagues make beans, not just count them. MBAs and other ‘unqualified’ FDs seemed likely to grow in stature.

This survey shows, however, that Britain’s biggest companies still want the right letters after the name of their FD. Chartered accountants from the ICAEW now make up 56 of the FTSE-100s FDs, up five from our last survey three years ago. Most other institutes have broadly held their own: the Institute of Chartered Accountants of Scotland, ICAS, has edged up one, to six FDs; management accountancy institute CIMA has dipped one to 14; ACCAs are up one at 7.

There’s only one qualified American accountant (Robert McCullough from Amvescap – and he’s still the best paid). The arrival of South African groups Dimension Data and South African Breweries have brought South African-qualified chartereds with them.

It’s not as if there’s been a slow rate of turnover amongst FTSE-100 FDs. Three years on, some 60 FDs are in the FTSE-100 index who weren’t there in 1998, either because their company has been elevated or because the FD has. (Few have duplicated Philip Hampton’s success at moving from BG to BT.) Plus ca change, plus c’est la meme chose…

Some two dozen companies have disappeared from the FTSE-100 index since the last survey: SmithKlineBeecham has finally merged with GlaxoWellcome, Asda has fallen to American group WalMart, Railtrack has just dropped out. Almost two-thirds of the companies that have come in – including the likes of Celltech and Shire Pharmaceutical, Hanson and Imperial Tobacco, Dixons and Daily Mail & General Trust – have little in common except a track record good enough to get themselves into the premier league and an ICAEW chartered accountant as FD.

Of the 75 companies that are still in the FTSE-100 today, 32 have appointed a new FD in the last three years – and all but three of them are chartered accountants or, in the case of Diageo’s Nick Rose, members of the Association of Corporate Treasurers; just over half of the 32 qualified with the ICAEW.

But the question is whether a qualification does anything for the FD. Most institutes have focussed their efforts on the training of future FDs – but in doing so, have raised the status of their qualifications, and of today’s FDs.

Institute of Chartered Accountants in England and Wales
There was a time when the ICAEW’s image was looking distinctly tarnished. All the talk of the ‘changing role of the FD’ highlighted the fact that the accountancy institutes in general and the ICAEW in particular simply did not equip today’s FDs with the business skills they need.

Many thought the nadir came when ICAEW members voted against modernising the syllabus to allow students to elect for certain options – for example, corporate finance. But the true nadir probably came with Ernst & Young deciding to put the bulk of its trainees through the Scottish institute’s training centre.

The ICAEW has been modernising, however, with the creation of the Business & Finance and Corporate Finance faculties, joining the long-standing Audit and Tax faculties in providing specialist support services for members with particular business needs.

New president Michael Groom told Financial Director in June that ‘the institute is still the premier brand in accountancy and has a reputation that is second to none. A growing number of our members are moving into business and we are pushing this quite a lot. Over the past 12-months we have changed our examination procedure to cover more business. Years ago, we used to set papers on tax, accounting, etc. What we now have is a more business-orientated approach. Within this model we train in other applications of knowledge such as marketing and strategy that have to be applied across the field.’

Groom says that the ICAEW is now ‘on a wavelength’ with Ernst & Young and hopes to recapture the Big Five firm’s student intake after the end of E&Y’s three-year programme with the Scots. ‘One of the main reasons why they took the decision was that they were not sure that our members would allow us to change the training process, but in fact they did. We are now very bullish,’ Groom says.

He adds that the ICAEW is now moving towards a ‘suite’ of qualifications, not just the ACA. A programme with PricewaterhouseCoopers and Newcastle University, for example, will create a four-year course with business experience.Launching the institute’s Enterprise programme at the start of his presidential year, Groom said: ‘We will continue to fight to make sure that that people going into the top jobs come from our institute.’

Institute of Chartered Accountants of Scotland
The Scots have a favourite joke: ‘CA stands for “Chartered Accountant”. ACA stands for “Almost a Chartered Accountant”.’ The Institute of Chartered Accountants of Scotland has just six representatives among FTSE-100 companies, though it is, in theory, the most restricted institute in this survey in terms of geographic catchment.

Whether this changes in the future remains to be seen given, for example, Ernst & Young’s programme to put its English trainees through ICAS.

ICAS has a long history as an education provider, with an annual intake of over 800 students UK-wide. It has also provided many FDs for Scottish business. Students receive integrated training through classes and structured work experience with their employers. The end result, says ICAS, is professionals with the specialist knowledge and all-round business skills sought by employers world-wide.

The CA qualification aims to be technically up-to-date, flexible and relevant. In finance and general business situations it tries to equip members with the skills to provide effective business solutions. ICAS’s boast is that CAs are finding that their general and specialist expertise in business and financial management, along with negotiation skills, creativity and business acumen, are in great demand, in every sphere of commerce and industry.

Chartered Institute of Management Accountants
If you’re looking for a profound lesson in what any accountancy qualification is actually worth, look no further than CIMA. The stature of the institute – which used to labour under the moniker ‘cost and management accountants’ and had all the sexiness of a man with a clipboard – has risen dramatically in recent years, because the members have actually trained in industry, not audit.

As industry itself has improved its financial management credentials over the past 20 years, it has raised its attraction as a source of employment for bright graduates – especially those who decide that relevant training experience is more important (or more interesting) than a Big Five apprenticeship. Employers, too, increasingly like to hire the FDs of tomorrow straight from university, rather than having to hammer the audit mentality out of newly-qualified recruits.

But CIMA had a slight case of egg on face recently in a situation analogous to that old adage, ‘The best man for the job is a woman’: in June, CIMA appointed an ICAEW-qualified chartered accountant to be the institute’s new chief executive. CIMA insisted that Charles Tilley, a former KPMG partner, was recruited for his experience, not his qualification. Indeed, that’s almost certainly true of all top level financial appointments. As CIMA said at the time, ‘We were looking for the best man to drive the business. At such a senior level it’s not just about qualifications.’ Tilley himself added that CIMA had ‘a meaningful mission statement’ and that he was impressed by the institute’s aim of building brand and business.

Newly-appointed institute president Bruce Epsley, meanwhile, has pledged to grow the CIMA qualification ‘in number and value’, making clear that he will focus on the ‘M’ in CIMA. ‘While the role of the financial accountant may diminish, that of the management accountant is flourishing,’ he said.CIMA had quite a high-profile coup last year when it launched its new syllabus with Dixons finance director Ian Livingston announcing that his company wanted to put its trainees through CIMA ‘because we want to train commercial business managers’.

Association of Chartered Certified Accountants
ACCA has a strong tradition of training members in industry and commerce, although it is probably true to say it has never had the influence in the boardrooms of the biggest companies. Certainly our survey shows that there are no more than half-a-dozen members in the FTSE-100 boardrooms – and one of them, Ken Hydon of Vodafone, is also CIMA qualified.

Mike Walsh, director in charge of education and training at ACCA, says the association recently completed a study to ascertain what employers want from ACCA qualified accountants working in industry, commerce and the public sectors, and that it has influenced the syllabus and training. In particular, at the final stages of exams, students now have a choice of business studies or an auditing specialism. He adds that there has been ‘a definite move towards [training in] wider management’.

ACCA also encourages members to keep up to date. The days of the qualification being the end of training are over. But whether the days of ACCA FDs being a tiny proportion of the FTSE-100 are over is another question.

Chartered Institute of Public Finance Accountants
If the newly re-elected Blair government keeps to its promise set out in the Queen’s speech of putting public sector reform at the heart of its next term, CIPFA members could find themselves catapulted to centre stage over the next few years – though it has to be said that the Thatcher-era privatisations haven’t done much to raise the profile of CIPFA FDs. Today, there are no CIPFAs in the FTSE-100.

Central government has already undertaken some (for it) radical change with the introduction of so-called ‘resource accounting’ – another name for the accrual accounting the private sector has been doing forever (and, ironically, doing so at a time when the private sector is increasingly looking to cashflow models of valuation).

In the 1990s CIPFA’s student numbers declined due to increased competition. Over the past three years however the downward trend has been reversed, exceeding targets in the education and training scheme’s student registrations for the third successive year after the first full year of the new professional qualification scheme (launched in 1999) – achieving 670 against a target of 570, a growth of 22 per cent on the 1999 registrations.

Like the other accountancy bodies, CIPFA is claiming its qualification is geared to acquiring financial knowledge within a management and strategic framework. Ken Gill, CIPFA’s director of education and training, says the education process is also dovetailed into the work experience. He says: ‘[Our syllabus] helps FDs not only to manage the numbers but also to be a general and strategic manager.’

Association of Corporate Treasurers
Unique amongst this list in that it isn’t really an accountancy institute – but that is probably to its credit. Like the others, the ACT is an examining body, and members carry the letters ACT, MCT or FCT after their name. But it is different from the Big Five institutes in that it is a mid-career qualification, not a graduate-trainee scheme. That makes it focus on members’ current needs, rather than simply satisfying their start-of-career requirements.

Two years ago, we were tempted to speculate that ACT-member FDs would outnumber ICAEW members in the FTSE-100 by the year 2014 (15 years after our 15th anniversary issue). There are more FTSE-100 FDs who are members of the ACT than our research could dig up (the membership book is only available to members), so it’s difficult to gauge progress towards that forecast. But growing awareness of risk issues and the increasing complexity of financial metrics – many based on the treasurer’s bible, the capital asset pricing model – make treasurers well suited for the FD role and reinforce our view that the ACT is on the way up.

Diageo FD and ACT member Nick Rose told us that treasury experience contains the right mix of discipline and expertise to prepare a financial manager for anything. But Rose is exceptional in the sense that he is a treasurer, not a chartered accountant: many FDs are members of the ACT and of an institute – which is a tribute to the ACT qualification.

Additional reporting by Accountancy Age.

  • This article first appeared in Accountancy Age’s sister publication Financial Director

Related reading

aidan-brennan kpmg