Cover story - Counting the beancounters.

The accountancy qualification has long been regarded as essential for aspiring financial directors. No self-respecting FD would ever expect to make it onto the board of a FTSE-100 company without having a set of letters after their name to prove that they know how many beans make five – and how to make it look like six (or four, if you prefer). But that’s no longer true. Financial Director’s first ‘beancounters survey’ looks at two aspects of the FD’s changing role. Firstly, we examined the extent to which FTSE-100 FDs are qualified accountants. Increasingly, the FD’s remit is seen to be growing to encompass more broadly based business strategy issues, ‘partnering’ other board members in a way that – arguably – makes an accountancy qualification, as such, unnecessary. Secondly, if it is true that the FD’s role now equips him for a job that involves deciding what beans to count, rather than merely how to count them, then we thought it would be useful to see how many former FDs are now chief executives in the FTSE-100. (We also looked at FTSE chairmen, but the nature of that role varies between the ‘chairman and chief executive’ head honcho, as at British Steel, to the ‘professional non-exec’.) Our findings show that just over three-quarters of FTSE-100 FDs have an accountancy qualification. The ICAEW and the ICAS in Scotland are the dominant institutes, with 55 FDs calling themselves chartered accountants. Fifteen FDs came through the CIMA management accountancy route, while just six are ACCA certifieds (two FDs – Richard Lapthorne at British Aerospace and Kenneth Hydon at Vodafone – are members of both institutes, so that’s why our FTSE-100 table adds up to 102). Two CIPFA public sector accountants feature, both at privatised utilities. There are also two US-qualified accounts. Four companies have no named financial director. There is a certain predictability about the explanations for these figures. Senior-ranking chartered accountants will talk about the fantastic training and discipline of the institute programme; certifieds will gladly explain that they are in “the next generation” of FDs, because theirs is a younger membership that has yet to “trickle up” into the older, more experienced echelons of the FTSE-100; CIMAs will talk about being “close to the business” and point to the salary surveys that show how their qualification is now hard on the heels of the chartereds. Of the 17 FDs who do not appear to be qualified accountants, some may have qualified in the past but have not maintained their membership. Charles Miller Smith, for example, current chief exec of ICI and former FD of Unilever, describes himself as “a lapsed ACCA”. But is an accountancy qualification of any sort really necessary to be a FTSE-100 FD? Roger Mann, the FD of Siebe who was interviewed by us in our April issue, is quite emphatic: he says: “It’s imperative to have an accountancy qualification to survive in the current financial world.” Mann even emphasises the importance of the basic, solid number-crunching skills: “The FD should have a good knowledge of UK accounting standards and international standards and US GAAP,” he says. Simon Duffy, who, as FD at music group EMI, has an MBA but is not an accountant, could not disagree more. He says an accountancy qualification is “not important at all.” It’s all down to the structure of the finance department, he adds: “The idea is to employ accountants.” So, no agreement there, then. The only way to resolve this one, presumably, is to answer three questions: What kind of FD do you want to be? What kind of FD can your finance department currently support? What kind of FD does your company need? Other than that, we’ll let the facts speak for themselves. In the chief executive stakes, about one-in-six chief execs boast an accountancy qualification or have been FDs in the past – either at their current company (Compass Group’s Francis Mackay, Keith Oates at Marks & Spencer) or elsewhere. (By the way, we have to admit to feeling a certain amount of sympathy for Safeway’s FD, Simon Laffin. Both his chief exec (Colin Smith) and his deputy chairman (David Webster) have been FD of the company – which must put a certain amount of “We know how to do your job” pressure on Laffin!) Predictably, perhaps, many came up through the engineering route, but chief execs do not lay claim to any particular formal qualification. It’s fair to ask whether the skills employed by an FD equip him for the chief executive’s job. Rodney Westhead, the former FD and current chief executive of Ricardo Group, offers his own insight into this issue in this month’s interview (see page 18). Other chief execs, such as Charles Allen at Granada Group, will have done some accountancy work in their dim and distant past, but moved on elsewhere within the business world rather than ascend to the rank of FD. At the highest level in the boardroom, the chairman plays a vital role. Woolwich plc chairman Sir Brian Jenkins says that the chief exec may run the company, but the board runs the chief exec. Sir Brian is, of course, a former senior partner of Coopers & Lybrand, and a one-time president of the ICAEW. In a similar vein, BTR’s Elwyn Eilledge recently joined the corporate world from Ernst & Young. Other beancounting chairmen include Reed International’s Nigel Stapleton, British Steel’s Sir Brian Moffat and GKN’s Sir David Lees, all of whom were FDs at the companies they now chair. Sir Ian Prosser, who is the chairman and chief executive of Bass, is a former FD of that company, too. We have sometimes argued that, if a barrister or a QC can be Chancellor of the Exchequer, then why can’t a barrister be a finance director? A controversial question, almost perfectly answered by Enterprise Oil chairman Sir Graham Hearne, a qualified solicitor and a former FD at Courtaulds. So top-level British boardrooms are not short of highly technically qualified FDs. How this picture changes over the coming years will be interesting to watch. Meanwhile, there’s one question to ponder: does the rise of accountants and former FDs to the ranks of chairman and chief executive make it less necessary to have a qualified accountant in the FD role? Does the spread of the beancounting FD make his own role redundant? We’ll be the first to tell you …

 FDs' accountancy qualifications  ICAEW                 51 ICAS                   5 CIMA                  15 ACCA                   6 CIPFA                  2 AICPA                  2 Other/none            17 No named FD            4   COMPANY                     FD                    QUALIFICATION  3i Group                    Michael Queen         FCA Abbey National              Ian Harley            FCA Alliance & Leicester        Richard Pym           FCA Allied Domecq               Tony Trigg            FCMA Amvescap                    Robert McCullough     CPA Asda Group                  Philip Cox            FCA Assoc Brit Foods BAA                         Russell Walls         FCCA Bank of Scotland Barclays                    Oliver Stocken        FCA Bass                        Richard North         FCA BAT Industries              David Allvey          MSCI, ATII, FCA BG                          Philip Hampton        CA, MBA Billiton                    Michael Davis         BCom SA Blue Circle Industries      James Loudon          MBA BOC Group                   Tony Isaac            FCMA Boots                       David Thompson        FCA British Aerospace           Richard Lapthorne     CBE, BCom, FCMA, FCCA British Airways             Derek Stevens         MBA, FCA British Energy              Michael Kirwan        FCA British Land                John Weston Smith     MA, ACII, ACIB, FCIS British Petroleum           John Buchanan British Steel               John Rennocks         FCA British Telecom             Robert Brace          FCA BSkyB                       Nick Carrington       FCA BTR                         Kathleen O'Donovan    ACA Cable & Wireless            Robert Lerwill        FCA Cadbury Schweppes           David Kappler         FCMA Carlton Communications      Bernard Cragg         ACA Centrica                    Mark Clare            FCMA Commercial Union            Peter Foster          FCCA Compass Group               Andrew Lynch          FCA Diageo                      Philip Yea            FCMA, FRSA EMI Group                   Simon Duffy           MBA Energy Group                Eric Anstee           FCA Enterprise Oil              Andrew Shilston       ACA, MCT GEC                         John Mayo             ACA General Accident            Philip Twyman         FIA GKN                         David Turner          FCA Glaxo Wellcome              John Coombe           FCA, FCT Granada Group               Henry Staunton        FCA Great Universal Stores      David Tyler           FCMA, MCT Guardian Royal Exchange     James Morley          FCA Halifax                     Roger Boyes           FCMA Hays                        David Tibble          FCA HSBC Holdings               Douglas Flint         CA, ACT ICI                         Alan Spall            FCA Kingfisher                  Anthony Percival      FCA Ladbroke Group              Brian Wallace         ACA Land Securities             James Murray          FCA LASMO                       Dick Smernoff         CPA Legal & General             Anthony Hobson        FCA, MBA Lloyds TSB                  Kent Atkinson LucasVarity                 Neil Arnold           FCMA Marks & Spencer             Robert Colvill National Grid               Stephen Box           FCA National Power              Roger Witcomb NatWest Bank                Richard Delbridge     FCA, MBA Next                        David Keens           FCCA, MCT Norwich Union               Michael Biggs         ACA Nycomed Amersham            Giles Kerr            FCA Orange                      Graham Howe           FCA P&O Steam Navigation        David Morris          FCA Pearson                     John Makinson Powergen                    Peter Hickson         FCA Prudential Corp             Jonathan Bloomer      FCA Railtrack                   Norman Broadhurst     FCA, FCT Rank Group                  Nigel Turnbull        FCA, MCT Reckitt & Colman            Iain Dobbie Reed International          Mark Armour           ACA Rentokil Initial            Christopher Pearce    FCA Reuters                     Rob Rowley            ACMA, MBA Rio Tinto                   Christopher Bull      FCA, MCT Rolls-Royce                 Michael Townsend      FCA Royal & SunAlliance         Paul Spencer          FCMA, FCT Royal Bank of Scotland      Robert Spiers         ACIS Safeway                     Simon Laffin          ACMA Sainsbury, J                Rosemary Thorne       FCMA, FCT Schroders                   Nicholas MacAndrew    FCA Scottish & Newcastle        Derek Wilkinson       CA Scottish Power              Ian Russell           CA Severn Trent                Alan Costin           FCA Shell Transport & Trading Siebe                       Roger Mann            FCA SmithKline Beecham          Hugh Collum           FCA Smiths Industries           Alan Thomson          CA Standard Chartered          Peter Wood            ACIB, FCT, FSS, BSc, MSc Sun Life & Provincial       Gilles Avenel Tesco                       Andrew Higginson Thames Water                David Luffrum         IPFA Tomkins                     Ian Duncan            FCCA, FCT, FIMgt Unilever                    Hans Eggerstedt United News & Media         Charles Stern         ACMA United Utilities            Bob Ferguson          IPFA Vodafone Group              Kenneth Hydon         FCMA, FCCA Whitbread                   Alan Perelman         MA, MSc, MCT Williams Wolseley                    Steven Webster        CA Woolwich                    Rob Jeens             FCA Zeneca                      Jonathan Symonds      FCA  The bulk of our research data came from the March 1998 edition of the Price Waterhouse Corporate Register. To keep the exercise as simple as possible, we have not made adjustments for any subsequent changes, such as, most tragically, the untimely death of BSkyB FD Nick Carrington. Other information was derived from institute members' directories and company annual reports. The Price Waterhouse Corporate Register is published by Hemmington Scott (0171) 278 7769.  COMPANY           CHIEF EXEC             QUALIFICATION?   PREVIOUS FD ROLE?  3i Group          Brian Larcombe                          3i Abbey National    Peter Birch            CBE, FCIB  Alliance & Leicester         Peter White Allied Domecq     Antony Hales           BSc, MCIM Amvescap          (two chief execs) Asda Group        Allan Leighton Assoc Brit Foods  Garfield Weston BAA               Sir John Egan          MBA, FIC Bank of Scotland  Peter Burt             MA, FCIBS, MBA Barclays          Martin Taylor Bass              Sir Ian Prosser        FCA              Bass BAT Industries    Martin Broughton       FCA              Eagle Star BG                David Varney Billiton          Brian Gilbertson       MSc, MBL Blue Circle       Keith Orrell-Jones     FIMgt BOC Group         Danny Rosenkranz       BSc, MSc, DipBA Boots             Lord (James) Blyth     FRSA British  Aerospace        Sir Dick Evans         CBE British Airways   Robert Ayling British Energy    Peter Hollins British Land      John Ritblat           FSVA British  Petroleum        John Browne            MA, MS, FEng British Steel     Sir Brian Moffat       OBE, FCA         British Steel British Telecom   Sir Peter Bonfield     CBE, FEng, FIEE,                                          FBCS BSkyB             Mark Booth BTR               Ian Strachan           MA, MPA Cable & Wireless  Richard Brown          BS (Comms) Cadbury  Schweppes        John Sunderland Carlton Comms     June de Moller (md) Centrica          Roy Gardner                             British Gas,                                                           Marconi Commercial Union  Sir John Carter        FIA Compass Group     Francis Mackay         FCCA             Compass Group Diageo            John McGrath           BSc EMI Group         James Fifield                   (EMI Music)            BBA, MBA Energy Group      (two chief execs) Enterprise Oil    Pierre Jungels GEC               George Simpson General Accident  R A Scott              AAII GKN               CK Chow                BS, MS, MBA Glaxo Wellcome    Robert Ingram Granada Group     Charles Allen          FCMA, FHCIMA GUS               (no single chief exec) GRE               John Robins            FCT              Willis Corroon,                                                           Fitch Lovell Halifax           Mike Blackburn Hays              John Napier HSBC Holdings     John Bond              FCIB ICI               Charles Miller Smith   (lapsed ACCA)    Unilever Kingfisher        Sir Geoffrey Mulcahy   MBA              British Sugar,                                                           Norton Abrasives,                                                           Woolworth Ladbroke Group    Peter George Land Securities   Ian Henderson          BSc FRICS LASMO             Joseph Darby Legal & General   David Prosser          FIA, FSIA Lloyds TSB        Peter Ellwood          FCIB, CIM LucasVarity       Victor Rice Marks & Spencer   Keith Oates            MCT              Marks & Spencer National Grid     David Jones National Power    Keith Henry NatWest Bank      Derek Wanless          FCIB, MIS, MA Next              David Jones            FCCA, FCIS       Grattan,                                                           Kays Mail Order Norwich Union     Richard Harvey         FIA              Norwich Union Nycomed Amersham  Bill Castell           FCA Orange            Hans Snook P&O               Sir Bruce MacPhail     FCA Pearson           Marjorie Scardino Powergen          Edmund Wallis          CEng, FIEE,                                          FIMechE, CIMgt Prudential Corp   Sir Peter Davis Railtrack         Gerald Corbett                          Grand Met,                                                           Redland Rank Group        Andrew Teare Reckitt & Colman  Vernon Sankey Reed  International    John Mellon                   (ch exec IPC) Rentokil Initial  Sir Clive Thompson     BSc, FCIM,                                          FInstD, CIMgt Reuters           Peter Job Rio Tinto         Leonard Davis          FAusIMM, FRACI Rolls-Royce       John Rose              MA, FRAeS Royal &  SunAlliance      Robert Mendelsohn Royal Bank        George Mathewson       CBE, PhD,                                          FCIBS, MBA Safeway           Colin Smith            FCA              Safeway Sainsbury, J      Dino Adriano           FCCA Schroders         Peter Sedgwick Scottish &  Newcastle        Brian Stewart          CBE, CA          Scottish &                                                           Newcastle Scottish Power    Ian Robinson           BSc, FEng,                                          FIChemE Severn Trent      Victor Cocker          MIWEM Shell T&T         Mark Moody-Stuart Siebe             Allen Yurko            MBA SmithKline  Beecham          Jan Leschly Smiths  Industries       Keith Butler-                   Wheelhouse Standard  Chartered        Malcolm Williamson     FCIB, FIB,                                          FIMgt, FInstD, Sun Life &  Provincial       Mark Wood Tesco             Terence Leahy Thames Water      Bill Alexander         FEng, FIMechE,                                          FIMinE, MIOD Tomkins           Greg Hutchings         MBA Unilever          (no one chief exec) United News &  Media            Lord (Clive) Hollick United Utilities  Derek Green            FRICS Vodafone Group    Christopher Gent Whitbread         David Thomas Williams          Roger Carr Wolseley          John Young             CIAgrE Woolwich          John Stewart Zeneca            Sir David Barnes       CBE, FIMgt