RSS feedsIt’s probably the most influential organisation that you’ve never heard of. Operating behind the scenes, without an office, with not a single employee – not even a website that the public can access – The Hundred Group of Finance Directors represents the interests and concerns of FDs in Britain’s biggest organisations. Part-talking shop, part-lobby group, the Hundred Group operates with utmost discretion, meeting government officials to discuss tax or pensions issues, influencing the accounting standards setters at the UK and international level, and providing advice for its members on topics ranging from the euro to the conversion to IFRS.
Philip Broadley, whose day job is FD of Prudential, is the current chairman of the Hundred Group, having succeeded AstraZeneca’s Jon Symonds last November. Broadley says that the Hundred Group is a “peculiarly British idea [in] that you have a group that’s established in the way that we are with no secretariat”. (His own PA and Pru’s press officer help with organisational matters and media relations for Hundred Group business.)
The Hundred Group is an invitation-only organisation, whose members come not only from the likes of the FTSE-100, but also from large privately-owned or public sector organisations. (The BBC’s FD, Zarin Patel, is a member, for example.) Membership is a prestigious thing: a few FTSE-100 FDs make mention of their involvement in the Hundred Group in their biographies in their own companies’ annual reports. A previous chairman said some years ago that he has seen FDs “in tears” when, because of changing corporate circumstances, they have been told that they no longer qualify to be members and must resign. (Ironically, the same fate could, in theory, befall Broadley if he were to find himself out of a job, should the unwelcome bid approach for Prudential by rival Aviva prove successful.)
Low-profile, but wholehearted commitment by its members is what makes the Hundred Group work. A chairman is chosen from among their number to run the show for a two-year stint. There are about ten FDs on the main committee, a few of whom also take on responsibility for running the Hundred Group’s various technical sub-committees that do more detailed work on issues such as tax, company law and markets.
It’s all time-consuming, of course, but Broadley insists that he has no difficulty fitting his Hundred Group duties into his working day at Prudential (about which he refuses to say anything during this interview, which he confines to Hundred Group matters). He prefers to be a little vague about the manner of his election to the chairmanship – “I think I missed the committee meeting when they were looking for the next chairman,” he jokes, before hinting that it was a process not unlike that used to elect Tory party leaders in the early 1960s: soundings were taken and “my name emerged”.
As far back as the early 1990s, with the arrival of new accounting standards and the Cadbury corporate governance report, FDs thought they were in imminent danger of being overloaded. With so much on their plates, the Hundred Group started to develop its role and the possibility was raised by then-chairman Hugh Collum (FD of SmithKlineBeecham at the time) that the Hundred Group might have to organise itself and get a secretariat.
Of course, it never happened. Even now, Broadley seemingly has no intention of changing the way the Hundred Group operates or organises itself. “Nor do I get any particular sense from the membership more widely that that’s what we should be doing”, he says. “When you talk to us you get our opinions that we’ve worked on ourselves.”
Setting the agenda
As chairman for the next two years, Broadley says he has “the fun” of being able to set his own brief. He spells out five priorities, the first four of which are IFRS, pensions, tax and relations with institutional investors. Several of these will, in themselves, raise consciousness of the Hundred Group beyond the arena in which it works. But the fifth priority is an explicit attempt to raise the organisation’s profile in Europe and Washington. Getting its voice heard in Brussels is, he admits, “quite tricky”, not only because the Hundred Group has no permanent presence there, but also because other lobby groups do; it can be hard to compete against more vocal campaigners.
Broadley’s ambitions seem modest, however. “Hopefully, at the end of [my] two years, we’ll be a little bit better known in Brussels where I 4 think decisions there do affect all of the members,” he says. Not all the membership is regularly or directly affected by US securities regulations so his aim is simply to “remain aware - in touch with - organisations in the States”.
But the Hundred Group might start to make more waves at home in future. It’s already made a tentative start, in fact. Broadley’s agenda item on tax follows on from a theme developed by his predecessor, Symonds, and is orientated towards engaging in debate about how much British companies pay in tax – and the question of Britain’s tax competitiveness against the rest of the world.
Early in March, the Hundred Group teamed up with PricewaterhouseCoopers to launch an annual Total Tax Contribution (TTC) survey, which revealed that the total tax paid by large UK companies is twice what they hand over in corporation tax alone – a sum that adds up to £18bn, when you also include employers’ National Insurance contributions, business rates, unrecoverable VAT and more than a dozen other taxes.
“Large companies are surely always going to complain about their tax bill,” Broadley admits. “But we saw a need to have the information available and research done on a proper and rigorous academic basis to be able to inform that sort of debate.”
It may be a debate, but it sounds like the Hundred Group is laying down a challenge to the government. Again, Broadley favours a low-key response. “I wouldn’t use the word challenge,” he says. “The Hundred Group’s been around for 35 years, influencing in a relatively quiet way. I think it’s a successful formula and I’m not about to radically change it.”
But Symonds, Broadley’s predecessor, got £5m backing from fellow Hundred Group members to fund a new research institute for five years, the Oxford Business Taxation Centre, which is part of the university’s Saïd Business School and should be fully up and running by the autumn. In theory, such a move might hint that the Hundred Group is moving closer to centre stage – though perhaps the opposite is true and the Hundred Group will simply allow the independent Taxation Centre to steal the limelight away from the corporate FDs.
Convergence matters
On international financial reporting standards, Broadley makes two points. The first is that the IASB convergence programme, where 4 international and American standard setters are working to eliminate major differences between US GAAP and IFRS, is all well and good for companies that are looking to tap US capital markets. But for many others “that convergence goal is not, of itself, immediately obvious as a benefit. It’s some years too late to be arguing that you’d rather that wasn’t the goal,” he admits, “so what you can comment on is, should that be the number one priority to the [exclusion] of other things? Are there other tasks that should be undertaken?”
Simplifying the accounting standards would be on his wish-list: the IFRS rulebook is about three times the size of the UK one. “Finance directors who took their professional exams about the time I did could have read every single word in the UK accounting standard book,” he says, “and some of us, probably as sad as I was, could actually quote quite large chunks of it, in case you needed to define depreciation in the exam. But not many of us are in that position now.”
Without simplification, he says, accounting standards will generate less understanding rather than more, and so the “laudable goal” of improving communication between preparers of financial statements and their users may not be achieved, he cautions.
Future finance directors
Financial reporting issues overlap with pensions, another of Broadley’s key agenda items. Companies are unquestionably changing their pensions and funding policies because of the volatility impact of the reporting requirements. He highlights the particular problem of trying to measure hundreds of billions of pounds of pension liabilities off of a very long-dated gilt benchmark that’s made up of about £2.5bn of index-linked stock. Rather than focusing on a single number, Broadley says that there should be more communication based around a range of possible outcomes. Furthermore, the requirement to clear scheme deficits within 10 years presents difficulties for many, though he shies away from suggesting that the deadline should be longer. “If you have a strong employer covenant then 10 years would have a very different perspective to an employer that doesn’t have a credit rating,” he says.
Away from the detail of his Hundred Group agenda, there seems to be a growing unease among the community of finance directors these days that the job is losing its appeal, becoming too geared towards regulation and compliance, and just generally much more demanding. A recent survey even expressed concern about the inflow of new talent into the finance function.
Broadley doesn’t buy into this at all. “From my point of view, I think [regulation] tends to evolve at a pace that is manageable,” he insists. “I’m sure if you look back, if any finance director looks back at what he’s doing now compared to when he started, it’s going to look significantly different. But I think one can adapt and I don’t, therefore, feel that my role is more difficult now than it was when I started.”
As for new talent, Broadley, has a front row seat on this issue as he has the honour of inviting new members to join the Hundred Group. “The nature of people [who are] becoming finance directors has changed over time, as well,” he says. “We’re not all accountants, in a way we probably were a decade or more ago. We’re not necessarily all British, which I think was probably the case a decade ago, as well. I think it’s also clear that people are becoming finance directors at a younger age. I suspect that also means their career ambitions are different. But I think the people who want to
become finance directors are still coming forward, though I think they may be coming forward for different reasons than perhaps they once did.’
So no shortage of future members for the Hundred Group, then – but it will be interesting to see how the Group changes to respond to their needs, and if the softly, softly approach works for them as well as it’s worked in the past.
THEN…
Accountants as a spin-off of the ICAEW’s London Society of Chartered Accountants, the group was primarily concerned with rampant inflation that was then running at about 2% a month – and wreaking havoc with historic cost financial reporting. It later established itself as an FDs-only lobby group and broke its link with the LSCA.
Over the years, Financial Director has interviewed many of the chairmen of The Hundred Group of Finance Directors. Here’s a sample of their comments about the organisation.
Hugh Collum (SmithKlineBeecham, July 1991)
“From the word go it was felt we didn’t want to be a bureaucratic group with
lots of rigid rules and an expensive secretariat. We’ve stuck with the principle
that working party members are FDs and not their subordinates. Our prime concern
is not to produce a list of reports, but to make our views heard.”
Nigel Stapleton (Reed International, July 1991): “We don’t feel obliged to
express a view on everything that comes our way. We certainly didn’t respond to
every exposure draft the Accounting Standards Committee [precursor of the ASB]
issued.”
John Coombe (GlaxoSmithKline, September 2001)
“The key driver for the group is lobbying on behalf of FDs of the
FTSE-100. We keep an eye out for issues and we go on the issue where we have
points to make. If there are no issues, frankly, we just get on with our day
job. We are all pretty busy and have things to do.”
Jon Symonds (AstraZeneca, November 2003)
“[It’s not the role of the Hundred Group] to reconcile all the different
constituencies [but to take a view at] a more macro level. [Our] effectiveness
is increased through having a dialogue with government regulators early, trying
to get in at an earlier stage when thought processes are still forming, rather
than wait until you read it in the newspapers and say, ‘Oh, I hate this!’”
…AND NOW
MAIN COMMITTEE MEMBERSHIP
Jon Symonds: AstraZeneca
Ashley Almanza: BG Group
David Tyler: GUS
Eddie Weiss: Criminal Injuries Compensation Authority
Guy Neely: Maisha
Julian Heslop: GlaxoSmithKline
Ken Lever: Tomkins
Mark Armour: Reed Elsevier
Nick Rose: Diageo
Rosemary Thorne: Ladbrokes
Philip Broadley: Prudential
SUB-COMMITTEE CHAIRMEN
Financial Reporting
Ken Lever: Tomkins
Pensions
Eddie Weiss: Criminal Injuries Compensation Authority
Markets
David Tyler: GUS
Tax
Jon Symonds: AstraZeneca
Company Law
Philip Broadley: Prudential
