Financial decision-makers: the readers of this magazine carry much weight in the corporate world just by virtue of having that collective title. In real life, though, the bulk of that power is concentrated at the top of the food chain, where FDs are able to find out and affect what regulatory changes might be afoot before they wash up at their door. For those outside that group, that influence is rare. How can FDs of sub-FTSE businesses gain access to channels where their voice can be heard by those making decisions that affect their mandate?
Andy Halford may have the answer. The chief financial officer of Vodafone may be vilified in the press as the man who engineered the mobile communication giant’s escape from paying several millions of pounds in tax in a gargantuan battle with HM Revenue & Customs (HMRC). But as chairman of the Hundred Group – the secretive, powerful lobby for FDs and CFOs of the UK’s biggest businesses – since last October, opening up the group’s activities and considering ways the wider FD community can have a hand in discussions it has with the tax authorities, HM Treasury and various advisory groups to the government is something he is giving far more attention to than his predecessors.
Change of image
First on Halford’s agenda has been to amend the group’s image enforced under his predecessor, retiring BG Group FD Ashley Almanza, of a highly secretive, inward-looking group. Observers including Financial Director nearly fell off their chairs when the group’s distinctly out- of-date website was relaunched days after Halford’s succession to the chairman’s role was announced, displaying a full complement of information on its scheduled meetings, letters sent and minutes taken, the committees and their leadership set out and clear explanations of the issues it is currently working on. “There’s still quite a lot more I think we should do with it, but at least it’s not five years out of date,” Halford tells Financial Director.
The Hundred Group has long seemed something of an ice maiden, not answering calls from journalists about its work, neglecting to furnish a moribund website with updates, not bothering to report on its achievements or discussions, and generally giving rise to the image of a highly secretive boys club. Almanza rarely spoke about the group’s activities: other FDs who know him have told Financial Director over the course of his tenure as chair that the group’s silence emanated from his aversion to the media and the limelight.
“Certainly from talking to people [in the group], this balance of how visible or invisible to be is down to the individual. When the group was chaired by [ex-GlaxoSmithKline CFO] Jon Symonds two or three terms ago, I think it was really quite visible,” Halford says. “Ashley has done it on the other end of the scale. Quite a few people have said to me that the group is invisible and it doesn’t need to be. But it is for the incumbent to decide how much they want to make of it.”
The silence that has emanated from the group perhaps also reflects the fact that only a few members really participate. Halford is working on that too.
“There is clearly a fairly small hardcore who are very involved, there’s some who have just never been involved, and possibly won’t ever be involved,” Halford admits. The group meets four times a year and in between those meetings four sub-committees work on its core issues: taxation, pensions, financial reporting and investor relations. Halford says the financial reporting committee draws the most members and the most time commitment. It’s a topic that bears down on all FDs all of the time – so it is a debate that the whole community should be engaged in.
“Some of what we want to achieve is best achieved behind closed doors and some of it is best achieved the opposite way. People need to be aware of what we are doing and what we are contributing to,” says Halford. “Whether we have the balance right I don’t know, but I’ve got a great opportunity to see different peoples’ views.”
The website is one way in which Halford thinks other FDs can easily get involved. Since Financial Director met with him, he has added email access to the heads of each sub-committee – a small move, but indicative of a big change.
“Why shouldn’t that be there?” he says of the decision not to display it previously. “I’ve had people contact me to get someone here to comment on X or Y issue, but we had no idea who to go to, how to point them in the right direction, he adds. “If people want to get in touch they should be able to pick up the phone and go to one of those people directly.”
He also recognises that the FDs of mid-market businesses may be the FTSE-100 FDs of tomorrow – the group sees churn of about 15 to 20 FDs each year – and believes it is the Hundred Group’s role to help mentor upcoming faces.
“Part of what we should be doing is about incoming CFOs. They may never have done a role like that before or had access to a network of others that they can talk to,” he says. “How can we set that infrastructure up in a light-touch way and probably not in groups that are directly competitive, so that new people coming into that world can know who to reach out to?”
That said, Halford is firm on the fact that the group’s central mandate – to represent the FDs of the UK’s largest companies with membership drawn mainly from boardrooms of the FTSE-100 – must remain its driving force. But it already has a handful of members outside that group taking its member numbers to around 115, including some FTSE-250 FDs, the John Lewis Partnership and the Post Office. Halford wonders if the FDs of smaller subsidiaries of large UK-listed entities should be permitted entry, or at least have a structure with which they can engage with the group.
“One of the items up for discussion among our members is whether it should be limited to London-listed companies or whether it’s a voice for other businesses. To be honest, I think it can be more the latter,” he says. “Land Rover is a big employer in the UK but it is owned by Tata in India. Should it be offered the ability to participate?” Halford says. “The only downside would be that, the more members you have, the greater the chance that you won’t have commonality of view. But my sense is we should be a little more expansive.”
The prime minister’s ear
The issues the group debates at the highest levels of regulatory and political power are those affecting all FDs: how to revitalise the economy and whether the right reaction to the economic crisis is to review and add to regulation.
Surely the economy would benefit from a discussion involving all FDs? To quote Halford, the group is working “to make sure that [the response to the economic crisis] is proportionate for what has happened, that we haven’t got a sudden rush, an excess of legislation, bureaucracy or whatever” – in short, it is doing all it can to dissuade the government and regulators from adding more onerous and expensive red tape to the FD’s plate. That is clearly a conversation all FDs should be vociferous in and as high up that food chain as possible.
But does the FD of a £50m turnover business have a direct line to it unless they approach the Hundred Group themselves?
Halford is also on the Treasury’s business forum for tax and competitiveness, a group made up of mostly FTSE-100 FDs but comprising two key business lobbying figures, the director-general of the Confederation for British Industry and exchequer secretary to the Treasury, David Gauke. The benefit to the Hundred Group’s members of having a foot in each camp can’t be understated. “It gives us very direct access to the thinking at the Treasury, which then easily feeds back into the group and issues that are central to us. They lock together very well,” he says. That’s not least in figuring out the horribly complex rules around taxation of foreign profits – the very rules in which Vodafone became entangled with HMRC for nine years – discussion of which with the Treasury means the Hundred Group may be able to influence changes early on.
“The government is now tabling what it is proposing to do and is open to getting others’ thoughts,” Halford says. “If we get two bites of the cherry or even three through the Hundred Group, the forum and through Vodafone itself to convey the views of the businesses we are trying to protect, encourage and grow, I’m very happy to do that.”
Room for a small one?
Halford seems enlivened by the debate on how to improve the UK’s competitiveness. And this feeds into the conversation about how smaller business FDs can involve themselves in the Hundred Group, as well as what responsibilities the group has towards their interests.
“There’s the issue of how many countries are supposedly leaving or considering leaving the country. The other one, which is more important, is how many companies formed today are thinking of the UK as the place to base their business,” says Halford. “That is much harder to monitor, but in the longer term is the more profound question. I strongly believe this country has got to keep as much and encourage as much productive activity as it possibly can,” he says.
“In the Treasury’s forum we’ve talked about what can be done to protect the sort of skillset needed and encourage it to stay in the UK. You can leave a company headquartered here but a lot of businesses will be looking at how activity can be carried out elsewhere at lower cost, which doesn’t affect the headquarters but can actually take skilled jobs out of the UK.”
It will benefit all parties to foster a single voice for the FD. That starts with the Hundred Group playing a role in conveying that to policymakers whose decisions touch them. But FDs must make the first move: they must reach out to the group as an important player in their interests, and not view it an entity solely concerned with the needs of FTSE-100 behemoths and their gargantuan tax bills. What could emerge is a tool to shape key decisions before – not after – they land on their desks. Why should FTSE-100 FDs be the only ones to enjoy that sort of influence?
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