04 November 2005
The proposed integration of CIPFA and the ICAEW fell by the tiniest of margins last week. Steve Freer examines what we can all learn from the experience
Writing this is part of the therapy. Our failure to pull off the proposed integration of CIPFA and the Institute of Chartered Accountants in England and Wales (ICAEW) has left us all with a sense of disappointment and frustration. To fail to win the requisite ICAEW majority by such a narrow margin – less than one percentage point – somehow rubs salt into the wound. If only…
In 1990, the same two institutes made a previous merger attempt. That vote was also extremely close – CIPFA, 80.9%, ICAEW, 61.1%. All of our analysis suggested that everything that had occurred since then was likely to have a positive impact on the 2005 vote.
In particular, the profession is now more global (think Enron, Sarbanes-Oxley, IFRS) and the boundaries separating the public and private sectors have all but disappeared. The former creates an urgent need for the UK profession to get its act together in a much more impressive and co-ordinated way on the international stage. The latter – perhaps more significantly – means that the public sector is no longer a mysterious place that many ICAEW members have never visited and with which they struggle to identify.
Heading into the ballot we were therefore hopeful that the CIPFA vote would hold up at around the 1990 level and that the ICAEW vote would move up sufficiently to pass the magic two-thirds (66.66%) marker. In the event both votes increased by around five percentage points – but sadly the ICAEW result – at 65.7% – still fell tantalisingly short of the required threshold.
Rarely can a ballot have left so many important questions hanging in the air. Is this the end of this integration story or merely a blip in a saga that might yet have a happy ending? Could anything have been done differently to secure a positive outcome? What now for CIPFA and the ICAEW? What now for the profession?
Even with the benefit of hindsight, it is difficult to see how we might have tackled the project differently. Our approach to the negotiations was carefully considered and patiently executed. We invested a good deal of time and effort negotiating the detail, finding sensible accommodations on a variety of sensitive issues, such as education and training schemes and designatory letters, that have blighted previous merger attempts. At the same time, we never lost sight of our two strategic goals: absolute parity/equality of membership and real long-term commitment to the public services. In the event, the final scheme put before the two memberships received very positive reactions.
Behind the scenes, the teamwork and dedication to the cause, spanning the institute council and staff, has been exemplary. The integration team itself, led by the president, has been small and tight. But credit should be shared much more widely. The full council, for example, has played a vital scrutiny role, drilling down into the proposals, challenging the most sensitive and potentially controversial issues and helping to determine the room for creative manoeuvre that has often been critical to negotiating sensible, workable solutions.
Most members of staff have played the equally critical role of keeping the institute running smoothly and successfully. The fact that integration created uncertainty for individuals and their careers barely raised a murmur. Everyone stuck to their task selflessly while the integration plans were developed and implemented.
I particularly mention the importance of keeping the business running because from the very outset we were absolutely determined to ensure that the institute's current success should not be compromised by the integration initiative. Our 2005 business targets have therefore been every bit as challenging as in previous years. We have not made any concessions to the fact that the merger project has been running alongside our business as usual. And encouragingly, on best available information, we expect this year's results to be very positive.
This meant we had to manage the project very tightly. An interesting insight here is our spending on integration – approximately £100,000 over the 18-month life of the project. This was a complex transaction, which sought to bring together two organisations with a combined turnover of £90m, and required Privy Council consents to significant Charter and Bye-law changes and Charity Commission approvals for the charitable company aspects. CIPFA members with experience of similarly complex large projects will recognise that it would have been very easy to spend a great deal more on legal and other specialist advice, due diligence, preparation and publication of the formal proposals, and so on.
Of course, arguing that we managed the project well is not the same as saying that every aspect has run smoothly. Far from it. A particular disappointment has been the paucity of serious press coverage. Too often the story has been consigned to the joke column – 'Accountants launch merger in The Brewery!' (Perhaps we should have seen that coming.) Too often it has required spats or, sadly, spoiling tactics by other bodies to get the story on to the real news pages.
Another frustrating feature of the coverage has been the phenomenon that is the cheap and cheerful survey. If in doubt what to write, the pocket guide for busy journalists clearly advises: telephone ten people and call it a survey. The column inches of less than edifying coverage arising from dodgy surveys, including during the voting period, has been particularly depressing. This might sound like a slightly paranoid protest but when surveys of this type give rise to apparently authoritative front-page headlines there is a real danger that members are being misinformed and ultimately misled.
There are some important and serious issues for the profession here. How can we make progress towards a better structure if one body attempts to undermine another's efforts to change? This is where the competitive relationships between the bodies risk damaging the public interest. It is a critically important issue for the profession to consider. And how can we expect to get members to engage with the issues in a serious, open-minded way – focusing on the public interest rather than self-interest – if the profession's allies in the press take the perspective that this is an accountant's silly season story?
There is a bigger 'extended team' here, including all of the Consultative Committee of Accountancy Bodies and the accountancy press, that needs to play a more professional part if overdue reform is to begin. Heaven help the profession in the long term if it does not.
So much for looking back, but what about the future? Is this merger scheme dead or might it be resurrected in some way after such a close result? The honest answer is that we do not know. This is really an issue for the ICAEW to ponder. And ponder they should rather than rush to hasty judgements.
We all understand the arguments for significant decisions of this type to require special majority support. But if important change initiatives are regularly frustrated, despite commanding 60%+ endorsement, there inevitably comes a point where tensions arise. Governance of the majority by the minority is not a recipe for long-term contentment.
As a minimum, CIPFA and the ICAEW are likely to work closely together to capitalise on their 'mandate for change/co-operation'. We believe that this is a fair interpretation of votes that express 86.7% and 65.7% support for a combined institute. We might not have the full constitutional mandate for integration but there are many areas in which co-operation is likely to be feasible, mutually beneficial and welcomed by members.
That said, something similar was almost certainly proposed in 1990 with conspicuously unimpressive results. Therefore we should not take this opportunity for granted. Any agreement needs to be carefully developed. To be successful, it needs to offer real advantages for both organisations and tangible benefits for both membership groups.
More generally, the CIPFA council will also be taking the opportunity to review, refresh and refine the institute's development strategy. There are lots of big opportunities available – in the UK and overseas. The strengths that make us such an attractive integration partner also provide a powerful platform for further growth and development as an independent institute. But, of course, we have to choose the right openings and execute them successfully.
So the next few months promise to be very interesting. They will plot the course for the future development of CIPFA and the ICAEW. And they might yet have a very significant influence upon the shape of the UK profession for the next five to ten years.
Steve Freer is the chief executive of CIPFA