21 Apr 2015 |Off Balance
FINANCE CHIEFS tend to stay out of politics, Off Balance has noticed. Some would say that finance chiefs rarely stick their head above the public domain parapet on anything.
So it was nice to see the AA's CFO, Martin Clarke, giving plenty of space on page two of today's City AM to reveal his wishlist for what a political party would do to win his vote in the General Election.
Perhaps unsurprisingly, he calls for "investment in industry" as top of the business agenda. Certainly not in spendthrift mode, he say there is a real opportunity for "modest" amounts of public money to be used alongside commercial and retail sources of funding to create industries of the future.
Despite Clarke declaring himself a Labour supporter, he described the party as "the worst offender" in "crude politically motivated policies that have nothing to do with their stated intent", citing the mansion tax as a cynical ploy to punish bankers.
He also wants a proper culture of philanthropy in the UK, with tax concessions and structures that mirror the US. Clarke also calls for someone to have the courage to admit that "throwing money" at the NHS is not the solution.
Off Balance is intrigued at how, given Clarke's wishlist, his party of choice will manage...
01 Apr 2015 |Gavin Street, Klood
A FEW FRIDAYS AGO I met up with Financial Director editor Kevin Reed for a coffee and got talking about everything finance, tech and career-related. As a result of this I am delighted to be writing a regular blog for FD from the perspective of recently-appointed finance chief in a start-up environment.
I have lots of things I am passionate to write about but first thing's first, let me provide a little bit of background about me. I qualified with ACCA and historically spent my time in large organisations in the banking and transport sectors. I learned much of my trade in these roles and gained a broad amount of experience in leadership, change management and different cultures.
However, last year I wasn't feeling the passion in my work any longer and I came to a natural crossroads. I thought back to the reasons I wanted to be a finance professional in the first place, which was to feel real purpose and value in my work through running a business or supporting someone else running theirs.
Somewhere in my career progression I had lost sight of this, but realised I wanted to do something on a smaller scale where I could measure my impact every day. That became my compass to find my next challenge.
After about six months of networking I had a stroke of luck and met the CEO and chairman of digital analytics company Klood. We hit it off and I have been supporting the business as CFO ever since. What a difference a year makes.
So now you know a bit about my background here is a brief insight into a day of my life being CFO of a tech start-up business.
6.00 am - 7.00am
Try to exercise everyday (Training for coast to coast cycle event!)
7.00 am - 7.30am
One of two rules I try to stick to everyday - to have breakfast with my two children.
After this I will work for a short period at home to check the company bank transactions and our previous day's KPIs. I am genuinely excited by this to see who has paid us, how our cashflow is performing and whether the metrics are moving in the right direction.
After this I will have a quick scan through my emails to see if anything urgent has come in overnight. I have to say this daily habit goes against the productivity tip of hitting your big items first of all each day but I've found in the world of a start-ups it pays to be on the pulse and be one step ahead before you move onto the big items of the day.
7.30am - 10.00am
Drive through the sunny countryside of Northamptonshire to Long Buckby train station and board the train the London Euston. I work on the train reviewing some business case proposals looking at how different pricing scenarios and product features would drive revenues and PBTs.
Challenging assumptions and reviewing cost drivers to ensure operational impacts of proposals are taken account of. This is the work I relish being involved with. Looking at plans and really trying to test it from a physical sense in a fully operational way.
10.30am - 12.00pm
Meeting with a large firm of accountants in the City to discuss ideas and options to raise funds to expand the business globally. I am greeted by three generations of accountants, the trainee, the newly-qualified and the experienced MD. We share stories and have an enjoyable in depth conversation about the options available and the best approach for the business.
We move onto how digital is changing everything at such pace and I give the three of them a quick guided tour around our cloud based accountancy package Xero. We discuss how new digital products are automating a number of standard and analytical tasks and how this is starting to drive a different kind of accountant with more time and emphasis on strategic direction and influencing.
12.00pm - 2.00pm
Hop on the tube. Arrive at a vibrant and busy coffee shop in the West End to meet a potential client who I have been introduced to by a mutual contact. This is certainly out of my comfort zone but I relish the chance to develop a broader skillset and drive the business forward. There's no better way to learn about your products than to show them off and talk about the features.
The meeting lasts for an hour and a half and as I need to shout above the noise and start to warm up I feel closer to closing the deal. We leave with a handshake and a sign up to a 14-day trial period. Not a paying customer, but certainly a step in the right direction.
2.00pm - 5.30pm
I catch the tube and head over to thriving Shoreditch in East London where I spend the afternoon working in our London office in the basement of an old warehouse. Think of bare brick walls, industrial lights, trendy trainers, 20 start-ups on a floor and six people crammed on a row of desks - you get the picture.
Apart from the challenge of finding somewhere private to make a confidential call the environment is very creative and I love the contrast of working there compared to days when I am working in solitude in a quiet space.
I meet with our software development team to see what is being prioritised in their pipeline of work and discuss the cost benefit of adding additional people to the team. I then spend a few hours with our CTO reviewing our funding plans and business case assumptions before he flies back to Calgary, Canada where he is usually based.
5.30pm - 7.00pm
I catch the train home and catch up on emails. After a day of interesting meetings in London I plan a day of detailed tasks for tomorrow working from home in the morning and then in our Milton Keynes office in the afternoon. The list for tomorrow looks long and varied but then that's the joy of working in a small business. I reflect back on the contrast of my day and on my role as CFO of Klood and can certainly say I definitely feel alive again.
7.00pm - 8.00pm
Finally I arrive home and I am greeted by my family. I follow the second most important rule I try to stick to everyday - put my children to bed.
Now you know a little bit about my background I look forward to writing some future posted about the things I am passionate about and believe other CFOs will be thinking about.
Gavin Street is CFO of digital analytics business Klood. He will be blogging about things technology, finance and career-related for Financial Director
30 Mar 2015 |Off Balance
SOME WOULD SAY that it's easy to take digs at businesses that work in the personal finance sphere ... and Off Balance agrees. So when OB is looking to dish out a Captain Obvious Award to the most inane - or just plain silly - press release to wing its way into our email inbox, Experian made OB's life easy this month.
"IOU Ostriches", screams the press release. Seven out of ten Britons believe they have a good credit rating, but only two-thirds have checked, Experian wails. Failing to manage their rating will be a hindrance to those looking to move, considering that easy money doesn't [shouldn't? Ed] exist anymore. Perhaps they should join Experian to find out their credit rating, hmm?
As Experian has created a silly term for these people (IOU Ostriches, in case you'd forgotten) and the research states the bleedin' obvious, the credit-checker deservedly picks up our Captain Obvious Award. Congrats.
30 Mar 2015 |Arbinder Chatwal, BDO
AMBITIOUS businesses should be international businesses. That's at the crux of what we preach daily to our clients. Business confidence is at a high and it's the perfect time for UK businesses to expand into fast-growing markets overseas.
International trading however will inevitably throw its challenges, and too often it's the fear of the unknown that prevents thriving businesses with heaps of potential from going global.
Now when you consider the challenges for doing business abroad, surely language is the biggest barrier? Well perhaps naïvely, this was the misapprehension I very much laboured under, until a recent trip to Boston and New York.
Our friends in the United States may share our language, and to some extent our history, but, when it comes to the matter of bilateral trading, if you don't get things right you may get a slightly frosty reception (and I'm not just referring to the often Baltic Boston weather).
I had the honour of being invited on a US Trade Mission with the UKTI, the Greater London Authority, and the effervescent Boris Johnson himself. The mission was simple...increase and promote bilateral trade with UK mid-market companies.
Alongside us were 25 companies that sought to capitalise and gain funding from the US marketplace. As a trade partner, I was there to support the businesses in terms of accounting, tax and regulatory issues which are likely to arise from trading overseas.
Admittedly, while I've worked across the US and Canada, my real area of expertise is international trade and investment relations between India and the UK; and it's my relationship with UKTI and my work in India that prompted the invite.
The trip featured a mix of meetings, seminars and networking events with the British Consulate, and our ambitious brands had the opportunity to pitch for major US firms, including JP Morgan and Emigrant Bank.
Sadly, in Boston there was more snow than seminars, and the extreme weather washed out a number of key plans. In New York however, it was down to the nitty gritty; with the small exception of a quick visit to the Empire State Building...it would be rude not to!
New York is an imposing place, both in beauty and business, but it's the latter that somewhat surprised me.
Our US compatriots absolutely recognise the fundamental value in international trade. But while we speak with the same language, the culture is still very different.
Our delegates were advised by our US hosts to ‘own the room' and that they expected a blunt, confident pitch. We were told to leave our British modesty at home. The point is that, much like every country, Americans have their own way of doing business and they do it very well. British firms need to be aware of this cultural difference and change their approach accordingly.
Countless networking opportunities, 90 second pitches and an abundance of MOU's later...the results were staggering.
Millions of pounds worth of investments were made, and companies on both sides of the pond are still forging deals now, so the trip was unquestionably a success. It does however, highlight a clear gap which more mid-market firms could - and should - be taking advantage of.
The UK is now getting a global reputation for research and development rich businesses and that's something to be really proud of.
Entering any new market is never going to be easy, but with the support of business advisory firms and the government, it's clear from our trade mission that the results are significant.
The next few months will be a telling time in the run up to the General Election, and I hope that we see some policy changes that reflect the need to drive British businesses forward in this economy, both domestically and internationally.
Arbinder Chatwal heads up the Indian Advisory Services Group for BDO
17 Mar 2015 |Off Balance
OB HAS SEEN many a CFO departure line, including the oft-miscontrued ‘has left for other affairs'.
Sometimes it says they ‘retired', which has never made much sense for OB, particularly as they then seem to take on a welter of different roles. ‘Retiring', for OB, means getting on the knee protector and digging weeds, or going on long cruises with Rob Brydon.
But times change. And tech execs do seem a lot different to their ‘bricks and mortar peers'.
Not only do they wear open-necked shirts [Or T-shirts! Ed], but their departure spiel is, well, a lot more fluffy.
So take a bow the departing CFOs of Google and Uber, both of whom have turned the rigid, formulaic process that is writing a leaving letter, and turned it into a surreal art form.
"This story starts last fall. A very early morning last September, after a whole night of climbing, looking at the sunrise on top of Africa - Mt Kilimanjaro. Tamar (my wife) and I were not only enjoying the summit, but on such a clear day, we could see in the distance, the vast plain of the Serengeti at our feet, and with it the calling of all the potential adventures Africa has to offer. (see exhibit #1 - Tamar and I on Kili)."
That is the second paragraph of Google CFO Patrick Pichette's note. As the FT's Lucy Kellaway so brilliantly points out, some of his words "sound weirdly familiar; I find myself singing Toto's Africa, one of the corniest pop songs ever written".
Not to be outdone, Uber CFO Brent Callinicos said of his departure: "Time and memory are true artists; they remold reality nearer to the heart's desire."
Wowsers. In fairness to Brent, his email internal note was leaked to the WSJ.
But he has nothing to be ashamed of. Surely it's better than saying ‘to pursue other interests'? Off Balance salutes these Shakepearian techy-numbers geeks.
27 Feb 2015 |Off Balance
STANDARD CHARTERED CFO Andy Halford (pictured) may feel like the new kid in class, having been in situ for just eight months, but he's soon to be head boy.
After many weeks of speculation, the financial services business announced the impending departure of CEO, and former FD, Peter Sands. But Sands is not the only one heading for the exit door. Chairman Sir John Peace is off - in 2016 - while its Asia chief leaves as well. Oh, and just for good measure, three non-execs go as well, including former Barclays and BZW FD Oliver Stocken.
So, you'd think poor old Andy wouldn't have any finance pros to bounce off of in the interim. In fact, you'd imagine the boardroom to be a bit lonely - who would he pull a cracker with at Christmas?
Well, actually, there's still ex-BP finance chief Dr Byron Grote, and ex-Barclays FD (yep, another one) Naguib Kheraj serving as non-execs.
You may be asking how many non-execs StanChart has. Well, a lot. And as part of the reshuffle, it is looking to reduce its overall board to...14.
So Andy H won't be on his lonesome. Off Balance you knew you worried about him.
29 Jan 2015 |Alex Edwards, UKForex
THE surprise for the eurozone last week wasn't the unveiling of a quantitative easing programme by the European Central Bank. What was surprising was the scale of the programme, at €60bn (£44.8bn) per month for the next 19 months. This huge announcement caused the euro to nosedive and, in combination with the divergence between the ECB's monetary policy and that of other major countries, will likely continue to weigh on the single currency over the next year.
Still, once the dust settles, the markets may start to see QE as a positive. The programme demonstrates that the ECB remains fully committed to battling deflation. For this reason, it wouldn't be a surprise to see pockets of support for the euro over the next few weeks.
The recent Greek elections are also piling pressure on the single currency. With the election of left-wing party Syriza on Sunday, there are growing fears that the Greek bail-out programme will fall away in the near future, with a confrontation between Greece and the ECB. These fears for the bail-out programme have set euro investors on edge. The single currency fell to an 11-year low following the election, but recovered slightly after the event. If discussions deteriorate further, however, we can expect the euro to be under pressure for some time yet.
Of course, it's not just the euro that's under threat at the moment. The risk of deflation isn't just a problem confined to the eurozone. With recent sharp declines in the prices of oil, energy and broader commodities, as well as uncertainty around growth prospects for China, the outlook for inflation in countries such as Australia and Canada is worrying. So worrying, in fact, that the Bank of Canada recently cut interest rates and downgraded growth and inflation forecasts.
Although employment numbers from the US have picked up during the last year, this global inflation issue might mean a US rate hike is brought in to question sooner rather than later.
Alex Edwards is head of the corporate desk at UKForex, part of the OzForex group
27 Jan 2015 |Oliver Parry, Institute of Directors
THE shareholder spring of 2012 may seem like little more than a distant memory now, but its impact still reverberates across boardrooms in Britain. The investor uprising at Aviva, Prudential, Trinity Mirror, and AstraZeneca among others had an enormous impact on listed companies in the UK. It set in motion a chain of events which arguably contributed to the 2012 and 2014 revisions to the UK Corporate Governance Code, and it has dictated the discourse on executive rewards ever since.
This may come as a surprise to some; there are certainly those who feel that the uprising generated more light than heat. But the revolt over directors' pay and rewards set a context for boardroom announcements that journalists, policy wonks and government tuned into and have remained attuned to ever since.
Only last year a number of major plcs struggled to obtain widespread investor support for large executive pay packages. Barclays, Standard Chartered, Sports Direct, Burberry and latterly BG Group all faced shareholder pressure over the proposed pay packages of their respective CEOs.
BG Group's actions in particular was a cause for much head-scratching. Historically, the company had been very transparent in communicating with stakeholders, notably to the stock exchange.
But when shareholders voted on the pay package of a new CEO in a binding vote, BG chose to tear the results up. Not a little disrespectful and possibly not very smart. Even large investors who had nodded through pay packages on the back of large dividends, rebelled.
BG Group's actions are understandable in the context of it being long-recognised that charismatic leaders can have a massive influence on the share price. When Harriet Green left Thomas Cook last year without warning, the share price took an instant hit.
Such examples obviously provide leverage for high executive packages to get voted through - although BG failed because of the size of the package on offer (£25m) and the lack of a proven track record of Norwegian, Helge Lund.
One can speculate about why the board thought it was a good idea to put such a huge sum in front of shareholders. Perhaps it was put forward in the knowledge that it would certainly be rejected, which then kept the door open for a smaller but still substantial package offering a ‘win, win' solution? We will never really know, but the package Mr Lund ended up with was still, nonetheless, substantial especially when one looks at the relative size of BG compared to other companies operating within the same sector.
This year, new regulations are in place to curb such excesses. Companies will have to demonstrate that executive pay is linked to the long term performance of the company (as stated in the 2014 UK Corporate Governance Code).
Until the latest revision of the code which was published in September 2014, boards could choose to ignore a large chunk of shareholders provided the annual report was passed by a majority. It's therefore very significant that the FRC have now added the requirement that boards explain publically what action they plan to take following a meaningful opposing vote - which includes pay awards.
For the banking sector, there are further safeguards with the soon to be implemented FCA rules on executive remuneration which require UK banks to explain and justify remuneration for all their executive directors and CEOs.
The FCA explains on their website: "Our remit on remuneration is to make sure that pay practices in the firms we regulate do not encourage inappropriate risk taking and that firms do not pay out more than they can afford. We are not looking to limit individual levels of pay, as that is not our mandate, but we believe that firms must have remuneration policies that are consistent with sound risk management."
Add-in the government's Binding Vote Policy, which also aims to limit future pay awards, and it's clear that companies will be under pressure to demonstrate that, in all things, they are both fulfilling their fiduciary duties to their company and working constructively with shareholders.
We must wait and see what impact this all has. There is no doubt, as I've described, that executive pay has soared over the last few years and the IoD has spoken out against what we regard as grossly excessive levels at listed companies. This is certainly a matter for a company's owners to respond to, rather than politicians. But while the court of public opinion has been vocal in this area, many institutional investors have been far too apathetic.
Political sensibilities will be much keener this year with a General Election looming. It's important therefore that large listed companies don't propose pay packages that could do untold damage to corporate Britain as a whole and consequently become a red flag for opponents of the free market.
In simple terms, pay packages should be transparent, linked to long term strategy and performance and adhere to binding votes. Companies need to avoid capitulating to short term share price pressures and instead, maintain confidence and faith in a longer term strategy. Business needs to strengthen its focus on the longer term and the sustainability of value creation - as stated in the code. Exactly the ethos that the IoD believes is needed to continue to improve business performance.
Oliver Parry is a senior adviser in corporate governance, company law and financial services at the IoD
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