Happy New Year and some reflections on 2013

Happy 2014 to my readers!

2013 was quite a good year, professorially speaking. Finally submitting the book manuscript at the beginning of the year felt like a great achievement and the process of getting it into print was relatively trouble free. The book launch in October at ICAEW was great fun. Unfortunately my co-author had to miss it through illness so she didn't hear the very positive comments from the four speakers (Martyn Jones, ICAEW President; Robert Hodgkinson, ICAEW Executive Director, Technical; Sir Adrian Cadbury; Sir Christopher Hogg)

The incomprehensible royalty statement I've just received suggests that 90 copies have been sold so far which isn't bad, given that the OUP marketing department seems oddly unconcerned about trying to sell the book. Review copies have yet to go out but there have been various mentions on line:

Two mentions by Robert Bruce:

http://www.iasplus.com/en-gb/news/2013/10/bruce-column-audit-committees

http://www.accaglobal.com/gb/en/member/accounting-business/domestic-dilution.html

Comments from James McRitchie on his excellent corporate governance blog:

http://corpgov.net/2013/11/review-reflections-the-cadbury-committee/#more-18240

Mentions of book launch:

http://uk.standardlifeinvestments.com/institutional/governance_and_stewardship/news/index.html

(scroll down to October 2013)

http://www.seechangeconsulting.co.uk/news.html

Another highlight was receiving the Lifetime Achievement Award at BAFA in April:

I had hoped to get some substantial writing done before the end of the year but I seem to have spent far too much time reading ill-informed media, LinkedIn and Twitter comment, firing off corrections and engaging in fairly fruitless arguments. But perhaps this is more useful activity than writing papers that will take a long time to get published and may only be read by a handful of people?

So it's about 17 weeks until I officially retire in April, at which point the university will award me the title of emeritus professor (or an emerita professor as some female professors seem to prefer, can't decide what I think about that). Not yet sure exactly what that will mean but I certainly won't stop doing professorial things, although I should have a bit more freedom to choose exactly what I want to do.

My friend Cath Gowthorpe has the right idea about New Year resolutions: call them intentions instead.

Here is a link to her very creative blog.

So my intention is firstly to move forward the various projects that have been stumbling along in the wake of the book, especially the work on NEDs in the public/third sector with Thom, the third Arthur Andersen paper with my Canadian colleague and the overview of the board diversity literature. There may also be a paper to be written out of the book. That's more than can be accomplished in 17 weeks but I hope I can make a good start.

Exactly.

Should all accountants have an accounting degree?

Tweets from this week’s Audit Quality Forum meeting revealed that Professor Peter Pope, now at LSE, had asserted that all accountants should have degrees in accounting. This caused both amusement and derision among those tweeting, professionally qualified accountants with degrees in a range of humanities and arts subjects. The tweets don’t record how Peter supported this assertion. With a degree in economics and accounting and extensive experience of delivering, examining, reviewing and developing accounting degree programmes since 1985, I have what might be considered a fairly well-informed view on the topic.

It would be foolish to prescribe that all accountants should have a degree in accounting without considering the content of accounting degrees and their relationship to professional training. There is much to be said for ensuring that the profession benefits from the broad range of experience and views that results from welcoming trainees from many other disciplinary areas. Employing firms have been known to complain that trainees with accounting degrees can present problems: these young people begin their employment knowing a bit about the area and this may lead to over-confidence. Someone with a degree in French or geography may be more malleable initially.

A more fundamental question is: what is the purpose of an accounting degree? - a particularly pertinent  question in these days of increasing university fees, Higher Apprenticeships and attempts to widen access routes to the profession. In theory, there is little point in a strongly technically based accounting degree programme.  In general, university lecturers, if they have a professional qualification at all, will, with the best will in the world, be somewhat out of touch with practice. Subsequent professional training is far more important in providing understanding of up-to-date approaches to the "how" of accounting.

What an accounting degree can provide is an introduction to the "why" of accounting. All accountants should have a good grasp of the role of their profession in society, they should take pride in the history of the profession, the huge contribution of accounting to economic growth. An understanding of this heritage is essential for the future development of the profession.  And, at a time when the profession faces considerable criticism, the accountants of the future should appreciate the immense power that the accountancy can exercise for good. There is little scope within professional training to develop critical thinking about these big issues. Accounting programmes could provide the space and support for this complementary study, not necessarily in the form of a traditional 3 year undergraduate degree.

However, I know from experience that making even a small shift towards emphasising the “why” of accounting is really difficult. Students choosing accounting degrees often seem to believe that numeracy is the most important requirement. This impression can be confirmed by a curriculum which emphasises technique and in assessment does not weight interpretation of numbers more heavily than calculations. They are likely to be more comfortable with  calculation and may be resistant to studying the history and sociology of accounting. Lecturers who have not studied these areas themselves may feel that they are having to work outside their own comfort zone.

Accreditation of accounting degrees by professional bodies is viewed as a useful marketing tool: the assumption is that students wishing to train as accountants seek degree programmes which will exempt them from some professional examinations. This aligns the curriculum to those examinations and reduces the space for studying the “why” of accounting.

There can be very few currently practising accountants who remember a time before accounting standards existed. (In a laudable initiative, ICAEW have harnessed the historical skills of Professor Steve Zeff and produced a record of that distant time: 

http://www.icaew.com/~/media/Files/Technical/Financial-reporting/Information%20for%20better%20markets/IFBM/Principles%20before%20standards.pdf 

Accounting standards were established to address the problem of trust in the profession. That problem has not gone away but standards have proliferated to the extent that financial reporting has become increasingly complex.  How can tomorrow’s accountants visualise a new solution if their training has not included some study of the history of the problem and some tools with which to critique the status quo?  This is what broadly based accounting degrees can  - and should – offer.

Board gender diversity: some thoughts

Having flu means I have just enough energy to read Tweets, anything longer requires too much concentration. And having a befuddled brain is not conducive to clear articulation of ideas but it's time I wrote something about board gender diversity, as well as collecting material for the literature review I have been planning for more than a year and harrumphing about what I see as misleading tweets about the issue. Here are some thoughts.

The debate, if it can be called that, about board gender diversity is now focusing on how to get more women on boards, not why this should be a sensible objective.The Davies review asserted that the business case was proven: women on boards improve corporate performance. But the evidence is very mixed. The authors of academic studies which identify a correlation between board gender diversity and various measures of performance are generally careful to note the limitations of their studies: correlation is not causation and the study may relate to a very specific context and not be generalisable. Media reporting of such studies often ignores such caveats. Policy makers and regulators are also prone to reviewing evidence selectively: Davies did not present a thorough review of the available research, possibly because it is scattered through various disciplines.

But why are the other arguments for increasing board diversity (in all forms) not widely discussed? There are undoubtedly good social and moral arguments to be made. US legal scholars have highlighted this: see for example the paper by Lisa Fairfax at http://www.nclawreview.org/documents/89/3/fairfax.pdf

Whether consciously or unconsciously, those who are pushing for change have chosen to present only the business case: is this because they see this as the best way to influence men, using the type of discourse with which they think men are most comfortable? It doesn't seem to be working too well.

The political aspects of the debate may be obscured by this focus on the business case. Viviane Reding and Angela Merkel, for example, are astute politicians who happen to be women: the board diversity issue provides them with a convenient platform. (I wonder how Margaret Thatcher would have positioned herself on this issue? Perhaps more interestingly, why wasn't it an issue in her day?) The issue also fuels the political ambitions of those who purport to be supporting male interests in the face of feminism.

One important effect of the Cadbury Code was to begin to make prescriptions for board composition acceptable. The consequences of this are still playing out. Although there was some initial resistance, board structures in large public companies have changed significantly over the last twenty years out (it's worth noting that current board structures are looking remarkably like the two tier boards that Cadbury critics were so afraid of, but that's a story for another blog) and the role of the independent non-executive director has become firmly embedded in the corporate governance architecture. But the notion of independence in this context is very problematic. Independence of connection which can be objectively demonstrated is a poor proxy for independence of mind which is the real goal. And the jury is still out on whether an independent board is always a good thing: see, for example, Bhagat and Black's study at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=133808

The gender diversity of a board is very easy to measure. But conflicting evidence is emerging as to whether gender diverse boards do result in all the benefits claimed for them. Does diversity of board composition promote diversity of thinking? It's easy to trot out mantras like "One is a token, two is a presence, three is a voice" but we are short of evidence as to how that voice influences board behaviour.

Is it cynical to sense an implicit expectation that boards need "good" women to restrain "bad" men, with gender providing some sort of innate distancing, just as independence is expected to assist NEDs in monitoring executives. In 1993, John Corrin, then chief executive of Allied Textiles, compared the  Cadbury Committee's report to "… a script for a ‘soap’ where the non-executive director is cast as saint, the auditor is a tarnished guardian angel, and the executive director is a villain."

 (Corrin, J. (1993) ‘A Blatant Slur on Executive Directors’ Integrity.’ Accountancy, April, 81)

However much people try to focus on the apparently objective business case, diversity remains a much more emotive subject than independence.

This is the sort of journalism that I find so frustrating:

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/10390970/Diversity-is-the-key-to-superior-performance.html

The headline "Diversity is the key to superior performance" is completely misleading: the article has interesting things to say about other aspects of boards. But my goodness - nine children! Did she have to mention that? To my mind, it undermines the whole tenor of the discussion.

At last....

.. the book!

Can't quite believe it!

Almost the end of August...

.. and the professor is on holiday this week, but it seems impossible to turn off completely if you're interested in corporate governance. Every time I open a newspaper something relevant pops out to get me thinking about research issues. And reading my Twitterfeed keeps me in touch. I have several contacts on Twitter (some of whom I know in Real Life) who do an amazingly helpful job of reading very widely and tweeting links to all sorts of useful reports and articles. I don't know how they find the time!

Usually I just take a quick look at the linked pages and bookmark them for later: sometimes later never comes.. but while I'm on leave I have time to read a bit more carefully if something really catches my attention, this for example (thanks to Dina):

https://www.gov.uk/government/publications/listing-decisions-of-uk-companies-motivations

This survey provides some interesting insights into what influences companies in making decisions about listings but covered only a limited sample of 31 companies. It is full of caveats about representativeness but, as I've discovered in much recent reading, those are likely to be lost if the findings are more widely reported. (Also note that it carries the authoritative imprimatur of BIS. I wonder how they review commissioned reports: at ICAEW all the research we fund is rigorously scrutinised from start to finish.)

The topic of this example is not very controversial but in other areas it could make a big difference. The recent Credit Suisse report illustrates this:

http://www.fortefoundation.org/site/DocServer/cs_women_in_leading_positions_FINAL.pdf?docID=17902

The authors of the report make it extremely clear that they have identified correlation between gender diversity and corporate performance but that the causes of this remain opaque. Not all the press reports of this study made this clear. The CS report is pretty comprehensive but there are some important studies omitted. Sadly the only people to note this seem to be the "anti-feminist" campaigners, who are more likely to focus on the studies indicating negative correlation, just as those at the other end of the spectrum will focus on those indicating positive correlation - for example, people who, for their own political purposes, are pushing very hard for regulation to enforce greater representation of women on boards. Angela Merkel and Viviane Reding come to mind..  (Eventually my paper on all this will get written...)

We could probably use a Ben Goldacre pulling apart some of the poor press reporting of social science.

Yesterday I went to hear Raj Thamotheram speak on responsible and sustainable investing. His talk was part of a course being run by the Smith School of Enterprise and the Environment
http://www.smithschool.ox.ac.uk/  Raj is a great speaker. You can read about him here: http://www.linkedin.com/profile/view?id=16019900&trk=tyah  He has lots of experience as an investor so can talk with considerable authority about the issues. I spend much of my time thinking about how corporate power can be controlled. Raj's thinking is more positive: he wants to see corporate power harnessed and used to do good, through the influence of investors. I'm rather too old and cynical to cheer for his suggestions as to how this might be achieved but I applaud his work and really hope he can persuade like-minded people to make things happen.

He cited Unilever as an example of a company doing good beyond lip service to CSR through establishing, with WWF, the Marine Stewardship Council. I had a quick look at Unilever's web site while he was talking: 5 women NEDs out of 12, and not all recent appointments, but only two women on the "leadership executive".  What we don't know is why women join boards: are they attracted to companies which are already doing good things or are they attracted to companies where they think they can make a change for the better? That's the research that someone needs to do - and do properly, so that the findings are reliable. Not short phone chats with small numbers of people selected who-knows-how (here's another: http://www.warrenpartners.co.uk/pdf/mind-the-gender-gap.pdf).

So, many thanks to my Tweeting friends for finding me links to thought-provoking stuff, even though the worst of it should sink without trace...

Late spring cleaning

This is the time of year when, for the last 25 years or so, I have tidied out my office. I've just moved into a new office, my 14th office move in that time, and back into the place where I first started. Some of the offices I've inhabited no longer exist because the building housing them has vanished. Some have now been taken over by admin staff. They've all had advantages and disadvantages but one thing in common: I've never found it easy to do any work in them that required sustained thought. This means that my study at home is full of the material I use most often and would be lost without. In the days when publishers reps used to knock on my door regularly to ask about what textbooks I used and whether I would write one for them, they used to scan my shelves furtively and make quick notes about what they saw there: I always felt obliged to explain that I never used any of those books, they were the inspection copies that never made the grade.

The single filing cabinet in my office houses copies of paperwork that might be needed for future reference; copies of minutes of meetings and papers relating to all the admin responsibilities I've had over the years; and old teaching material which predates electronic versions. It could all be shredded and at some point between now and next April I shall probably have to do that. But the recent move meant that much of the stuff I no longer need has been thrown out and the office looks fairly neat and tidy.

Earlier in the year I had a blitz on my home filing cabinets and disposed of many hard copies of academic papers that are now available electronically. I've also cleared out some of my bookshelves at home and taken the books I no longer need into the office so that they can be disposed of at the next Book Harvest collection (http://www.bookharvest.co.uk/)

So, on the surface, both my office and my study look quite tidy at the moment. The untidy mess lurks within the bright shiny Mac on my study desk. I am incredibly bad at managing electronic stuff. This didn't matter much when there was less of it. When I came across a paper or web page that was directly relevant to something I was working on or teaching about, I would download it and file it (often in a file named "Interesting papers") or bookmark it. Usually I would discover these items via alerts to new journal issues which arrived by email or through following up links and citations in whatever I was reading. The files accumulated and it wasn't always easy to find things because I couldn't remember the filenames but I managed pretty well with the occasional clear out.

Yes, I used EndNote. I had an early version on my PC and thought it was an amazingly helpful tool when I first found it but over time I forgot to enter citations. I had a brief flirtation with the web version, too. Then a student told me about Mendeley which seemed better because it searched for me but I kept forgetting my password. I also discovered Diigo which seemed like a good idea but I kept forgetting about it and using conventional bookmarking instead.

Then the PC began to develop some form of technological dementia, at a point in the progress of the book which made this very worrying, so I took the plunge and bought the Mac. And discovered its neat way of dealing with downloads and its amazing Spotlight search feature. So for the last few months it hasn't seemed to matter where I put things as they were always so easy to find. And getting used to the Mac, an ongoing process, took up more time, so organising the accumulating stuff didn't happen.

And the speed of accumulation seems to have stepped up. On Twitter I follow a bunch of journalists, academics and governance practitioners who tweet links to information which is incredibly useful for work but the volume is high.  Other sources of useful links are the LinkedIn discussion groups I belong to.

So all this stuff has piled up and this morning I decided to sort through the 200+ bookmarks, the 400+ downloads and the random files on my desktop. It's taken me two hours to deal with the bookmarks: all I've managed to do is consider and delete about a third of them and sort the others into folders labelled "Work" and "Misc", both of which will require further sub-folder refinement.

Yes, this is big-time displacement activity. Yes, I should be writing that review paper on board diversity. But I can't start it until I have collected all the relevant literature into one place so that I can re-read it. And I've just remembered that some of the papers have been picked up when I've been using the iPad so they are lurking there in GoodReader. So I need to use Dropbox to get them all into the same place. But I also need to sort out those Dropbox files....