Spotlight

There is an infinite amount of things a board could and should focus on, but here are five trends boards should consider to help their organisations thrive into the future. By Kieran Moynihan As we count down to 2020 and a new decade, it is very timely to reflect on the significant changes that have happened in the last decade in the areas of boards, directors and corporate governance – and importantly, the major trends that are happening right now that will shape boards across Ireland over the next decade. This time 10 years ago, many company boards were in a firestorm in the middle of the financial crisis. Despite the significant strengthening of corporate governance codes between 2000 and 2010, a significant number of companies and boards, from large Plcs to SMEs ultimately failed to protect the interests of their shareholders, employees and broader stakeholders. This pattern was common across the world and resulted in the major strengthening of corporate governance codes and national company laws, with the result that now – both in Ireland and across the world – there has never been stronger corporate governance codes, company law and regulation in place to ensure that boards and their directors discharge their stewardship duties to secure a sustainable long-term future for their organisation, shareholders and stakeholders. As we stand now, there has never been greater scrutiny placed on boards and directors – not only in large companies listed on the stock market, but across the full range of companies, charities, non-profits and state boards. All shareholders, employees, stakeholders and the public at large have a strong understanding that the behaviours, culture, effectiveness, performance and decision-making of the board of directors have a fundamental impact on the organisation. Despite the strengthening of our corporate governance and company law framework, we continue to see serious issues with boards. Unfortunately, this will continue to be a pattern. The collapse of Carillion in the UK with the catastrophic loss of jobs and significant impact on many state projects in the UK and Ireland sent shockwaves through the UK and Irish business world. When serious problems arise in Plcs and large charity, non-profit and public sector boards, there is significant media attention with in-depth analysis forensically examining how experienced boards made up of executives and non-executives with decades of experience could preside over significant destruction of shareholder value and very poor levels of stewardship that severely impacts on employees, broader stakeholders and – in some cases – the very future of the organisation. In reality, while the scale of the organisation might differ and the board directors may have a lot more experience on high-profile boards, the complexity of the “people equation of the board” means that any board in the large private company, SME, charity, non-profit and public sectors can struggle to deliver on the leadership, performance and responsibilities that their shareholders and stakeholders have entrusted to them. Boards are, by their very nature, complex and while all strengthened corporate governance and company law are very important, the reality is that the behaviours of the individual board members and the board team collectively will ultimately impact on whether the board can genuinely excel as a high-performing board team, demonstrating the highest standards of ethics and ensuring a long-term sustainable future for all their shareholders, employees and stakeholders. It is also important to highlight that in our work week-to-week supporting board teams across Ireland, the UK and internationally across all sectors, we see truly outstanding and committed board teams and directors who are excelling for their shareholders and stakeholders with a genuine commitment to “always do the right thing” and continually improve their board effectiveness and performance. We will now look at the key themes that are impacting boards, both in Ireland and internationally, as we approach 2020. While many of these themes are particularly relevant to Plcs on the stock market, these themes are already finding their way into private companies and charity, non-profit or public sector boards. Progressive board teams, irrespective of scale, are also embracing these trends as key components of the board’s leadership and drive for genuine, long-term sustainable success. 1. Focus on environmental social governance (ESG) One of the most dramatic changes in company boards around the world throughout 2019 was the significant shift away from “shareholder primacy” to a much broader focus on both shareholders and all stakeholders including employees, customers, suppliers, partners, environment, state and the public at large. This is quite a radical shift in thinking for boards and companies. The business and broader community across the world was quite shocked when a highly influential group of 181 CEOs representing many of the largest US and global companies (e.g. Walmart, UPS, Amazon, Johnson & Johnson) issued a radical statement on 19 August which outlined: “While each of our individual companies serves its own corporate purpose, we share a fundamental commitment to all of our stakeholders. We commit to: Delivering value to our customers. Investing in our employees. This starts with compensating them fairly and providing important benefits. It also includes supporting them through training and education that help develop new skills for a rapidly changing world. We foster diversity and inclusion, dignity and respect. Dealing fairly and ethically with our suppliers. We are dedicated to serving as good partners to the other companies, large and small, that help us meet our missions. Supporting the communities in which we work. We respect the people in our communities and protect the environment by embracing sustainable practices across our businesses. Generating long-term value for shareholders, who provide the capital that allows companies to invest, grow and innovate. We are committed to transparency and effective engagement with shareholders.” This represents a truly seismic shift in how the boards of companies look at their role. While delivering and maintaining shareholders’ best interests will always be a fundamental responsibility of a board of directors, it will now need to be shared with a broader set of responsibilities to operate and behave in a way that takes into account the needs and concerns of all its stakeholders. The emergence of a “multi-stakeholder model of corporate governance” in companies has been coming for some time as globally, there is a very high level of soul-searching going on in terms of “the role of business in society” and the business sector’s responsibility in supporting increasingly challenging social and environmental issues. While this is currently playing out in publicly listed companies, this change is starting to trickle down to large private companies and SMEs will also be affected in time. A key catalyst for this will be that investment, asset management and pension funds globally are now placing a key emphasis on ESG and this in turn is resulting in all types of investment and financial firms – from venture and private equity investors to debt providers, sovereign wealth funds, banks and private investors – now asking a lot more of companies and their boards in the area of ESG and stakeholder engagement in return for their financial investment and support. What does this mean for companies? We are already seeing large companies listed on both the Dublin and London stock exchanges place a very significant emphasis on ESG and broader stakeholder engagement. The boards of progressive large private companies take their lead from their Plc counterparts and over the coming years, a lot more will be expected of the boards of companies and organisations to demonstrate that their actions are not solely driven by profit and financial performance but by a balanced, sustainable commitment to all shareholders and stakeholders for a sustainable future. There is also a strong school of thought globally that this more long-term approach to business and profit will help reduce the enormous impact on jobs and communities caused by excessive corporate pursuit of profits and risk-taking. 2. Engagement between the board and employees  One of the areas that has come into focus as part of this shift to a multi-stakeholder model is the relationship between the board and employees. The vast majority of employees in companies and organisations, large and small, would legitimately ask “what relationship?” Since the first boards of directors formed in the early 1600s (the Dutch East India company is considered by many to be the first company board of directors), the absolute focus of the board and company on financial performance made it very difficult for the board to genuinely partner with employees and incorporate their perspectives and concerns into the board’s thinking and the company’s decision-making. We recently completed an external board evaluation for a FTSE-listed company in the UK. As part of the external evaluation and alignment with the UK Corporate Governance Code (2018), one of the newer areas in the 2018 UK Code we closely evaluated was the engagement model between the board and employees, and how the board and senior management team enabled the “voice of the employees” to be heard and taken into account in the boardroom. In this case, the board and executive team had an outstanding approach to employee engagement and this was reflected in an extremely talented, loyal workforce and an excellent reputation in the market for quality and customer-centricity. The UK’s Financial Reporting Council (FRC), as part of its guidance on board effectiveness, has issued some new far-reaching guidelines as follows: “With the aim of strengthening the ‘employee voice’ in the boardroom, the Code asks boards to establish a method for gathering the views of the workforce and suggests three ways this might be achieved, consisting of: A director appointed from the workforce; A formal workforce advisory panel; and A designated non-executive director.” The FRC also suggested that employee engagement with the board could be further strengthened through: Hosting talent breakfast/lunches, town halls and open-door days; Listening groups for frontline workers and supervisors; Focus or consultative groups; Meeting groups of elected workforce representatives; Meeting future leaders without senior management present; Social media updates; Visiting regional and overseas sites; Inviting colleagues from different business functions to board meetings; Employee AGMs; Involvement in training and development activities; Surveys; Digital sharing platforms; and Establishing mentoring between non-executive directors and middle managers. The vast majority of Plcs in the UK and, by extension, Irish Plcs are finding this a very radical change. In nearly all cases I have seen, Plcs in the UK and Ireland are opting for a designated non-executive director to represent the employee voice and interest in the boardroom. Outside of some European countries like Germany, where employee representation at the board is mandatory for larger companies, Ireland and the UK do not have a history of employee directors at the board. In a survey in October 2018 by the ICSA Governance Institute in the UK, 91% of companies surveyed indicated that they are not considering adding employees to their board, despite the strong encouragement and guidance in the UK Corporate Governance Code and FRC guide on board effectiveness. In my discussions with a number of Plc board chairs, they indicated that their biggest concern was that an employee could lack the overall breadth of experience and judgement to not only contribute effectively at board level and take the overall shareholder and stakeholder perspectives into account, but to handle very difficult issues involving – for example – potential employee layoffs, change of work conditions, etc. This is a very complex area, with sensible arguments on both sides of the debate. In terms of company and organisation boards in Ireland, I believe progressive boards will assess what is happening in this area globally and find ways to increasingly engage employees and to ensure that their perspectives and concerns are genuinely integrated into the board’s decision-making process. In his wonderful new book, Future Proof Your Career, John Fitzgerald provides far-reaching insights into how the workplace has changed fundamentally and that employees today, particularly younger employees, are re-assessing their overall approach to work and their employers. The era of “a job-for-life and unstinting loyalty to an employer who does not genuinely value you” is over and boards are increasingly nervous of the difficulty in attracting and retaining high-calibre employees. When I see a very high-quality board, whether it’s in an SME, Plc or non-profit, charity or public sector board, they have an emphasis on building a genuine relationship with their employees, on nurturing the talent in their organisation, on inspiring their employees to go the extra mile for their clients and colleagues, on treating and supporting their employees with the utmost respect and dignity. Progressive boards also see the very strong link between customer satisfaction and the attitude and performance of employees engaging with customers. We have all seen over the course of our lives the difference it makes, whether as a consumer or a business, when you have employees of a company or organisation who are genuinely customer-centric, who take great pride in delivering for their team and company. 3. A step-change in the value being added by the board As we go into 2020, the boards of companies and organisations have never been under such pressure to demonstrate the genuine value they add to the executive team and the company/organisation. A very wise board chair once said to me that if all the board is doing is merely oversight, and does not add any genuine value in terms of strategic “move-the-needle” thinking, helping the executive team optimise their decision-making and supporting the executive team in times of crisis, the board is ultimately doing a disservice to the shareholders and needs to be refreshed and strengthened to enable the board to add serious value. Every company, no matter how big or small, faces a very challenging set of headwinds, ranging from major business model and technology disruption in their market segment, significantly reduced barriers for new market entrants, unprecedented levels of competition, Brexit, volatile trading and geopolitical considerations as well as attracting and retaining outstanding employees. Clearly, oversight and the board acting as a key line of defence in safeguarding the financial, legal and operational health of an organisation will always be a critical responsibility for a board – but this in itself is not enough to deal with all the headwinds and chart a course of long-term sustainable success for the organisation. A high-performing board team that excels for its shareholders and stakeholders has a great mix of executive and non-executive directors (NED). Successful NEDs bring serious strategic firepower to the board team that both compliments the CEO and executive team, but also brings different thinking. They stretch the strategic envelope of the CEO and executive team in terms of disruptive fresh thinking around new business models, innovation areas, mergers and acquisitions, and new product/service/geographic market areas while helping the CEO and executive team face up to the brutal reality that it’s time to walk away from a once highly successful product or market area. In working with boards, I often highlight the role of the board and NEDs as a lighthouse that shines a light in front of the executive team and, in many cases, illuminates dangerous rocks that could threaten the organisation. As a former CEO and in working with so many CEOs and board teams, I can testify first-hand that many CEOs and executive teams are working so hard and are so close to the day-to-day cut and thrust of the organisation that they can find it very difficult to step back, take a very objective look at their competitors, where customers are at, disruptive trends and the many significant threats and opportunities that are appearing in today’s marketplace. An outstanding NED has a great work ethic, curiosity and interest in the organisation to go the extra mile to not only engage in high-quality challenge and debate with the CEO and executive team, but to roll up the sleeves, add serious value in the strategy area and ultimately increase the quality of executive and board decision-making. 4. Diversity and independence of mind One of the challenges every board faces is group-think, where “a psychological phenomenon in which the over-riding desire for harmony or conformity in the group results in an irrational or dysfunctional decision-making outcome”. While this is a well-documented problem that had a serious role to play in company boards in the financial crisis, it is a problem that can affect any board in any sector, sometimes with quite serious consequences. It is human nature; we can all be uncomfortable with having a contrary viewpoint and being an outlier in a group that manifests itself in a board team. Boards can therefore attempt to minimise conflict and reach a consensus decision without critical evaluation of alternative viewpoints by actively suppressing dissenters and isolating themselves from outside influences. The two proven antidotes to group-think are genuine diversity in the board team and an outstanding board chair who nurtures and encourages high-quality challenge, debate and who legitimises either a single or small sub-set of board members who have a significantly different viewpoint to the majority of the board or major concerns with a key proposed strategy or decision. The critical area of “independence of mind” is very topical in the financial services sector, as regulators focus on ensuring that the non-executive directors are genuinely independent and putting this independence into action in the board team. Alfred P. Sloan ran General Motors from 1923 to 1956 and exemplified this quality of board chair leadership before one of his top committees, saying: “Gentlemen, I take it we are all in complete agreement on the decision here?” Everyone around the table nodded in assent. “Then,” continued Mr Sloan, “I propose we postpone further discussion of this matter until our next meeting, to give ourselves time to develop disagreement and perhaps gain understanding of what the decision is all about.” In recent years, I have watched on in amazement at the debate around female representation on boards in Ireland and why there is still a strong need to impose gender quotas and so on, as there is still a portion of legacy-oriented boards resistant to adding female board members. Anyone who still feels, as we get ready to enter a new decade, that the addition of female directors, younger directors, directors with deep technology expertise and directors with diverse professional and industry backgrounds does not improve a board’s effectiveness, performance and decision-making hasn’t seen a genuine high-quality board in action. The critical objective of diversity on a board is diversity of thinking styles. The highest-performing board teams see diversity as the foundation of their board team’s ability to not only drive optimal decision-making, but also avoid serious group-think problems. As we enter 2020, we are finally starting to get to an era where it will be commonplace to have a wide mix of gender, age, professional, ethnic and industry sector backgrounds where the sole criteria is to have the best mix of the best people who excel as an outstanding, diverse board team on behalf of shareholders and stakeholders. 5. Culture, ethics, behaviours and values Throughout 2019, we have witnessed a series of scandals and serious crises involving the boards of a wide range of organisations throughout Ireland. We are not alone in experiencing this, as board scandals and crises are commonplace in most countries throughout the world. In many cases, there are common denominators such as an overly dominant CEO who rides roughshod over the board; or a CEO and board chair who are too close and, thereby, serious robust challenge and debate are suppressed. In the House of Commons Special Committee report on the collapse of Carillion, the following two conclusions are a frightening insight into how a board can lose its way so badly and drag everybody over the cliff-edge, resulting in tens of thousands of job losses: “Corporate culture does not emerge overnight. The chronic lack of accountability and professionalism now evident in Carillion’s governance were failures years in the making. The board was either negligently ignorant of the rotten culture at Carillion or complicit in it.” And: “Carillion’s directors, both executive and non-executive, were optimistic until the very end of the company. They had built a culture of ever-growing reward behind the façade of an ever-growing company, focused on their personal profit and success. Even after the company became insolvent, directors seemed surprised the business had not survived.” In contrast to these findings is the following recommendation in the Carillion report, which highlights the importance of courage and “conviction to do the right thing” in a board team: “Emma Mercer is the only Carillion director to emerge from the collapse with any credit. She demonstrated a willingness to speak the truth and challenge the status quo, fundamental qualities in a director that were not evident in any of her colleagues. Her individual actions should be taken into account by official investigations of the collapse of the company. We hope that her association with Carillion does not unfairly colour her future career.” Early in my own career, I often wondered about the famous phrase from Peter Drucker that “culture eats strategy for breakfast”. For board teams facing into a new decade, it has never been more critical to focus on culture and the board’s key role in working with the CEO and executive team to define and embody the culture, behaviours and values of an organisation. I sometimes hear board members from companies and organisations say that “culture is only for multinationals with tens of thousands of employees – we don’t have time to worry about things like that, we have a business to run”. Yet around the world, organisations and their boards are significantly increasing their focus on culture, ethics, behaviours and values as they recognise that a strong, healthy and vibrant culture in an organisation is a fundamental enabler of long-term sustainable success. Where an organisation has a healthy, vibrant and respectful culture that is embraced and put into practice day-to-day from the board chair and individual board directors right down to the most junior employee, you have the foundation for a sustainable organisation that is genuinely customer-centric. In this scenario, everyone’s default approach in the organisation is to do the right thing, inappropriate behaviours – irrespective of the seniority of the individuals involved – are not tolerated, and all employees, stakeholders and shareholders are genuinely proud to be a part of the organisation. In hyper-competitive and challenging markets, the stewardship and leadership of the board and executive team will influence an organisation’s employees, culture and customer-centricity. This will, in many cases, make the fundamental difference in terms of which companies and organisations will be still standing in 2030. Kieran Moynihan is the managing partner of Board Excellence, a specialist board practice that helps boards and individual directors excel in the areas of effectiveness and performance. Kieran has over 20 years’ experience serving on boards as a CEO and executive director, non-executive director and board chair.

While diversity is the buzzword of today, it will soon be replaced by inclusion. Dawn Leane explains how both diversity and inclusion can be integrated in organisations of all sizes. It is virtually impossible to write an article on workplace diversity without referencing equality and inclusion. If diversity is the current hot topic in the workplace, then equality was its predecessor and inclusion will be its successor.   In a workplace context, equality is often associated with compliance. It suggests that as a society, we must legislate for our differences and sanction transgressions. The term “equality” is synonymous with the nine grounds on which discrimination is outlawed.   Diversity is a different concept. It is about valuing our differences, and it has a broader frame of reference than equality, including matters such as personality, cognitive style, education and socio-economic status.   Inclusion, while closely related, is still a different concept. The Society for Human Resources Management defines inclusion as “the achievement of a work environment in which all individuals are treated fairly and respectfully, have equal access to opportunities and resources, and can contribute fully to the organisation’s success”. It is the deliberate act of welcoming diversity and creating an environment where all different kinds of people can thrive and succeed.   But diversity is the buzzword of the moment. Employers have progressed from complying with equality legislation to recognising that a diverse workforce brings many benefits: innovation; balanced decision-making; reduced group-think; retention of key staff; and improved risk management among others.   Perhaps unsurprisingly, the technology sector is leading the way in creating workplaces that are genuinely diverse. While Apple contends that “the most innovative company must also be the most diverse”, Intel declares that “innovation begins with inclusion”. It’s easy to see how the technology sector readily benefits from diversity but other areas, including the professions, are also embracing the fact that diversity is good for business.   Nonetheless success rates for diversity initiatives are still low. A report published in January by the ESRI highlights the fact that the unemployment rate for the Travelling community is 82%. None of the community is employed in a profession and just 3% are employed in managerial or technical roles compared to 28% of the general population.   In March, the Central Bank of Ireland published a report which analysed the gender breakdown of applications for pre-approval as part of the fitness and probity regime. Of the pre-approval applications received by the Central Bank since 2012, over 80% have been from male applicants.   Why is it that so many diversity initiatives fail to deliver the desired outcomes? One reason is that many organisations take a ‘top down’ approach to diversity initiatives. While tone at the top is crucial to ensuring success, the top down approach can often manifest as policies and procedures that attempt to redress balance rather than encouraging a change in attitude.   A recent Harvard Business Review article outlined the negative impact of such policies, claiming that they are often counter-productive. The article suggests that the reason most diversity programs aren’t increasing diversity is because organisations are still utilising the same approaches that they have always used and relying on diversity training, hiring tests, performance ratings and grievance systems to support the diversity agenda.   Creating a diverse and inclusive workplace can mean changing the culture of an organisation. The best results are achieved when the focus is less on control and more on challenging existing attitudes, providing supports and encouraging accountability to ensure that good practice becomes embedded in the organisation. The following outlines specific initiatives that are delivering results. Accountability This is the most fundamental change an organisation can make. Without it, the other initiatives can fail to have any impact. It’s the old maxim – what gets measured gets done. For many organisations, publicly committing to diversity and publishing results – whether positive or negative – is driving change. Apple is among a number of organisations that publishes its hiring trends, highlighting areas such as representation among ethnicities and pay equity. While Intel also publishes its hiring rates, exit rates, promotion rates and pay equity, it goes a step further and ties a portion of its executives’ pay to achieving the organisation’s diversity goals. Education versus diversity training Organisations continue to provide diversity training, although it has been proved that such training doesn’t make people discard their biases – at best, it ensures that they are compliant. No-one is immune to unconscious bias; it is a manifestation of our life experiences. However, it often leads the best and brightest to feel unwelcome and not part of the success of the organisation. Rather than diversity training, progressive organisations such as Adobe are delivering enhanced awareness programmes to help eliminate hidden biases. These programmes cover topics such as how to identify bias, strategies and tactics for better decision-making, and how to speak up. Individualised development Most women say a clear path to career progression is important at work and, in response, organisations are now developing personalised, modular development plans to foster future leaders and improve gender diversity in leadership roles. Sponsorships Organisations are evolving beyond mentoring programmes towards sponsorship as a means to help level the playing field for under-represented groups. Sponsors serve a different purpose to mentors or coaching – they advocate for the advancement of people in the workplace, championing their work and potential with other senior leaders, helping them to secure optimal work allocation and opportunities to be more visible. Sponsorship is of particular help to women in the workplace and many relationships focus on women helping other women to gain profile at work. Returnships Returnships are a relatively recent development. Essentially, it is a professional internship designed specifically for people, most often women, returning after an extended career break. The position is relatively short-term, usually six months or so, and it allows the returner to refresh their existing skills and experience while deciding whether they want to return permanently to such a role. Returnships provide the returner with an opportunity to build their confidence and gain recent experience for their CV, while employers benefit from gaining access to the skills of experienced professionals. Inter-generational networks While many organisations were fearful of the impact millennials would have in the workplace, the more forward-thinking embraced the change and developed programmes to integrate existing and new generations. Such programmes include reciprocal mentoring, where younger people partner with longer serving ones to achieve specific business objectives. Generally, the younger person teaches the older person about the power of technology to drive business results while the longer serving person shares their experience and organisational capital. Over time, millennials will become a demographic bridge between Generation X and subsequent, more diverse generations at work. The ability of millennials to advocate and become accepted will be key to the successful transition from diversity to inclusiveness. Accessibility Trinity College Dublin established the first third-level programme for people with an intellectual disability in Ireland. The Trinity Centre for People with Intellectual Disabilities provides access to education and ultimately to the workplace to people who previously would have been excluded from both. Employers such as Bank of Ireland have recognised the contribution that can be made by those from such marginalised groups. Promoting family-friendly policies Most fathers in the workplace belong to a generation of men who place more value on work-life balance and taking time off with their children. Yet most family-friendly policies tend to be aimed at women and it is usually women who end up leaving the workforce to care for children or ageing parents. President and CEO of New America, Anne-Marie Slaughter, and Facebook COO, Sheryl Sandberg, agree that, in order to support women’s progression in the workplace, men must be allowed to take more responsibility at home. Organisations are beginning to encourage male employees to avail of family-friendly practices by “normalising” such practice. In the US, Facebook offers four months of paid leave to both male and female employees. Its CEO, Mark Zuckerberg, made a very public statement by taking two months’ paternity leave when his daughter was born. Conclusion The key to creating a diverse workplace is really quite simple. The starting point is to look beyond compliance and do what is right, rather than what is required. The role of senior management is to set the tone, to educate people and empower them to act; to make them accountable and trust them to do the right thing. Then, pay real attention to the results.   Intel’s Chief Diversity Officer, Danielle Brown, suggests that, “For diversity and inclusion work to really be successful and really break through, it absolutely can’t be an initiative that is buried in HR. Diversity and inclusion absolutely has to be an integral part of culture and part of everything that we do.”   With the implementation of such positive initiatives and future generations shifting attitudes and expectations, workplaces are being reshaped to become not just diverse but inclusive, closing the circle so that the term ‘equality’ reclaims its real meaning – the state of being equal, especially in status, rights or opportunities.ty and inclusion can be integrated in organisations of all sizes.  Dawn Leane is Director of People and Resources at Chartered Accountants Ireland.

Accountancy Ireland started out as a replacement for the members’ and students’ bulletins. 50 years on, it is one of the most valued member services provided by the Institute. By Stephen Tormey & Liz Riley In June 1969 – the same month that General Franco closed Spain’s frontier with Gibraltar, Georges Pompidou was sworn in as President of France, and Joe Frazier knocked out Jerry Quarry in round eight to win the heavyweight boxing title – the Institute of Chartered Accountants in Ireland published the first issue of Accountancy Ireland. In an understated ‘Word of Introduction’ on page 10, the magazine’s founding editor Ben Lynch described the magazine’s objective as being a “communications link” between the Institute and its members and students. 50 years and three editors later, the magazine remains faithful to its founding principle. Constancy amid change In the intervening years, Accountancy Ireland has helped the profession navigate a business and economic landscape that has changed utterly. From Ireland’s accession to the European Economic Community to dealing with the fallout from the financial crisis, our members – in sharing their insights and expertise through Accountancy Ireland – have supported and informed each other through one evolution after another. In this anniversary issue, we look back on some of the seismic events that have challenged the profession over the past five decades. Some are technical in nature while others are social and geopolitical, but the most striking thing about leafing through old issues is the realisation that, despite the changes brought about by technology, Chartered Accountants have been consistently driven by the same core value of integrity – which to this day remains one of the Institute’s five core values as outlined in Strategy 2020. “It is your journal” The pages that follow will take readers down memory lane with, we hope, a sense of nostalgia and enjoyment. And while looking back is always a useful exercise, it is incumbent on the editorial team to remain focused on the future. The information needs of the profession will continue to evolve, and we will endeavour to meet those needs as admirably as our predecessors did, but we will also consider how to share information in a way that is accessible, convenient and in keeping with modern news consumption as both trends and technologies change. While we can of course benchmark ourselves against similar publications and other international publications to which we aspire, our best source of guidance are the members we serve. Over the years, your input has driven many innovations within Accountancy Ireland – not least the launch of our podcast, which is now listened to around the world, and an increasingly tailored suite of publications that includes Briefly, Vision and Chartered Accountants Abroad. As we look to the next 50 years, your views and suggestions will help us shape our strategy and deliver information and insight in a way that meets your needs. To that end, please share your thoughts with us at editor@accountancyireland.ie – and criticism will be equally welcome, if not more so. As Mr Lynch quoted in 1969, “It is your journal. Contribute to it if you are able, praise it if it serves you well and criticise it if you must. By these actions you can help to make the journal a live force in the progress of the profession.” His words are as valid today as they were 50 years ago. You can see look into the past 50 years of Accountancy Ireland here. Stephen Tormey is the Managing Editor at Accountancy Ireland. Liz Riley is Deputy Editor at Accountancy Ireland.

Since the turn of this century, the accountancy profession has undergone exponential development and evolution. Not so long ago the stereotypical view (rightly or wrongly) of an accountant was of a dull, old, grey-haired man (not a typo!) crunching the numbers in a back office. Expectations were low; these accountants were not ‘people people’. They probably didn’t interact with customers. They had limited contact with other departments within organisations. Decision-making and the setting of the strategy was not the role of the accountant but of the sales and commercial team, which was the driving force in most organisations. Fast-forward to 2019, and there are some interesting facts concerning Chartered Accountants. Consider this, from the Institute’s 2018 Annual Report: Eight of the top 10 Irish companies have a Chartered Accountant as either CEO or Chief Financial Officer; 41% of the roughly 27,300 members of Chartered Accountants Ireland as at 31 December 2018 were aged 37 or under; 64% of the membership work in business with further analysis of the membership suggesting that roughly 700 are CEOs, 900 are business owners, and 2,800 are directors; and At 31 December 2018, women constituted 41.5% of the membership. Chartered Accountants are business leaders. Accountancy practices are recording unprecedented growth rates in both fees and employee numbers. So, what has happened in the last 20 years that revolutionised our profession and how we are perceived? A few key drivers have changed the skill set of the successful accountant: The impact of technology on record-keeping; The effect of technology on how we do things; The availability of data; and The expectations of clients/stakeholders. The impact of technology on record-keeping It is no secret that technology has changed the nature of accounting. The transition from the manual capture of transactions to the use of computerised application packages is one of the most significant changes in recent years. I remember my first assignment vividly as a trainee accountant. I had to prepare an organisation’s year-end financial statements.  The process went as follows: Record purchase and sales invoices manually onto a paper-based sales and purchases ledger daybook; Record all the payments made during the year by manually writing up all payments in the paper-based payments ledger using the cheque stubs; and Manually prepare a bank reconciliation, and so on and on. I wrote everything in pencil: no typing, no Excel formulas – all manual. One mistake in totting and I had to start over. My trainee days were not all that long ago, and it has been exciting to observe the changes in record-keeping in the intervening years. The accountant has evolved from a data processor to an analyst. Mundane processing no longer consumes his or her time, allowing the accountant to step out of the detail and begin to analyse, interpret, question and provide insights thereby meeting the current expectations of the accountant. While technical ability is still an assumed skill, analytical and problem-solving skills are now a standard requirement on any job description for an accountant both in practice and business. The form of examinations for trainee Chartered Accountants has changed in recent years, particularly at FAE level, to meet this expectation of our qualified accountants. The exams, through case study scenarios, reward students for their ability to apply technical knowledge to given situations and resolve problems identified rather than just regurgitating memorised material.  The effect of technology on how we do things In recent years, there have been significant changes in how we “do” our work (outside of record-keeping, as set out above) with advancements in technology. Basics such as email and social media have enabled easier and quicker communication and information flow. Take the audit profession as an example, which has transformed in the last decade due to an increased focus on technology in audit methodologies or simply as a tool to collate our audit documentation. It is impossible to avoid the phenomena of blockchain, robotic process automation (RPA) and artificial intelligence. All these have begun to change how we do things, but more is to come as these technologies start to unfold and usage gathers pace. RPA, for example, automates high-volume, low-complexity administrative tasks.  The use of RPA will not replace the entire job of the accountant, but it will save time in performing specific basic tasks which, as alluded to earlier, will allow the accountant to concentrate on analysing and interpreting data rather than producing it. The spread of digital technologies and their impact on business has transformed, and will continue to transform, accounting and the competencies that professional accountants require. Accountants will need to be technology-aware and embrace technology as part of their day-to-day work. 57% of those members who completed the Chartered Accountants Leinster Society Annual Salary Survey 2018 believed that automation would have a positive impact on their career. 40% felt that the same was true for artificial intelligence. Judging by these statistics, we possibly have further ‘embracing’ to do. The availability of data With the increased use of technology also comes a vast increase in data. Accountants are now required to decipher large volumes of data promptly and be capable of summarising and presenting that data in an understandable manner for the end user, often non-accountants. Presentation skills are, therefore, another critical capability. Data analytics is now an industry in its own right, with many of the larger accountancy firms employing hundreds of analysts to assist their accountants in analysing and interpreting data. 51% of members who completed the Chartered Accountants Leinster Society Annual Salary Survey 2018 believe big data will have a positive impact on their career. The expectations of clients/stakeholders With the advances in technology and the ever-changing world of business, the expectations from our clients and stakeholders have changed. We are no longer assumed to be in the back office processing but instead on the front line advising and challenging the status quo. Communication and interpersonal skills are no longer ‘nice to have’ qualities. They are now required competencies for successful accountants. The building of relationships with our clients and stakeholders is vital as we make that transition from back-office operatives to front-line advisors. Conclusion Technology will continue to influence the work of accountants into the foreseeable future, and application of existing and emerging technologies will be necessary. Technology should, therefore, be embraced and not seen as a threat. The role of the accountant will continue to be exciting and challenging. Technical ability will become an assumed skill alongside other skills such as analytical skills, problem-solving skills and presentation skills. These will become the ‘must have’ skills for the successful accountant of the future. Brian Murphy is Director, Audit and Assurance, at Deloitte and incoming Chair of Chartered Accountants Ireland Leinster Society.

Here are the 14 ways Chartered Accountants and the wider profession are likely to evolve into the future. In 1996, chess grandmaster Garry Kasparov was famously beaten by IBM’s supercomputer, ‘Deep Blue’. This event was heralded as the real dawn of the age of artificial intelligence (AI) and the beginning of the eclipse of human intelligence. Kasparov sees it differently. He believes that while the rise of AI heralds a change, this change will not see human intelligence becoming redundant. Instead, AI will “help us to release human creativity. Humans won’t be redundant or replaced; they’ll be promoted.” Kasparov’s vision is one where machines and humans work together to create smarter tools, and where human work will evolve and adapt to open up new careers and industries in fields that are yet to be invented. Although machines won’t replace humans, the impact of technology on the accountancy profession will be significant. Many reports have trumpeted the imminent arrival of new and powerful learning machines that will replace accountants. While accountancy remains one of the occupations liable to disruption, the future is less dramatic with a transformation of the role and impact of accountants more likely than wholesale replacement. Here are some of the changes we can predict. 1. The gig economy The concept of the ‘job’ is fundamentally changing with professional service firms increasingly utilising flexible resources such as contingent workers and freelancers. Platforms such as Upwork.com allow professionals to sell their services to a global audience. According to Forbes, there were 53 million freelancers in the US in 2016. By 2020, this will rise to 50% of workers (this does not mean they will be full-time freelancers, however). 2. No-code AI  Software engineers and data scientist are expensive and in demand, but a new generation of technology is emerging. No-code AI will remove the need for engineers, making AI far more accessible. Some tools, such as Lobe.ai, use simple ‘drag and drop’ interfaces while others require no more technical ability than that needed to create a simple macro. These tools will enable skilled but not specialist users such as accountants to develop fully automated scripts with no coding know-how required.   3. The end of reconciliations  The good news is that the end of reconciliations is in sight with the rise of distributed ledger technology. Blockchain is one such technology and is probably most associated with cryptocurrency. One of blockchain’s most exciting aspects is that it is immutable, meaning a blockchain ledger will be permanent with an unalterable but transparent history of all transactions. Each verified transaction is timestamped and embedded into a ‘block’ of information, cryptographically secured and joined to the chain as the next chronological update. Blockchain’s applications potentially include decentralised digital, secure identity systems; the verification of qualifications through personal ‘skills wallets’ and reliable records of property ownership. Another new application already happening in real estate is tokenisation, which, as the name suggests, is the representation of an asset or equity in token form, which can be fractionally divided and held. A tokenised property would be similar to a real estate investment trust (REIT), but more flexible and low-cost due to the reduction in intermediary fees. 4. No more late night month-ends As processes are automated and systems post data from several sources, consolidate and reconcile it, month-end cycles will become far quicker and more accurate. 5. The end of sample auditing Audits will become more efficient and accurate as the audit of 100% of companies’ financial transactions becomes possible instead of a sample. AI will provide unique insights and a complete view of the financial health of the company, uncover fraud, highlight inefficiencies and provide further value from the audit. 6. Drones and robots  Amazon is already embracing using robots in its warehouses and testing drones for customer deliveries. Power utilities use drones to survey their lines while surveyors use them for mapping terrain. Just this year, PwC used drones during the audit of RWE, a German energy company, to measure stock, including coal reserves at a power station in Wales. 7. From compliance to insight Technology will simplify many processes and augment our human capabilities. Over the next 20 years, there will be less focus on technical skills alone and a higher requirement for critical thinkers and those who can provide insights. Clients will likely prefer to deal with a human over a robot, and Chartered Accountants will have the opportunity to become a financial storyteller by bridging the gap between computers and the business. 8. Real-time, self-service data Cloud technology has made accounting software accessible to non-specialists on any device and in any location. Information is available in a format that most business owners can finally understand. As this becomes the norm, the role of the accountant will be to give peace of mind, to provide reassurance, and to act as a sounding board. He or she will also be someone who understands the capabilities of the technology, can ask the right questions, and can find the right solutions. 9. Lifelong learning will become an imperative Speaking at this year’s Influence conference, Ravin Jesuthasan, a thought leader on the future of work and automation, spoke about the impending changes to work. He said that while “we don’t know what is coming, we need to keep retooling ourselves”. We must change our mindset, he said, as the old model of ‘learn, do, retire’ is replaced by ‘learn, do, learn, do – repeat’. In this situation, lifelong learning is no longer optional; it will be necessary to remain relevant and employable.  10. The pyramid is collapsing  The familiar pyramid-shaped organisational structure will change. Traditional entry-level roles are unlikely to be needed in the same volume as routine tasks become automated. Conversely, the requirement for qualified staff is likely to increase. The challenge for organisations will be balancing these needs: how to train and develop individuals to the required level with fewer entry-level positions. The question for educators and those entering the workforce is how to bridge this gap effectively. 11. Thinking differently  While technical skills will remain crucial, a premium will be placed on soft skills, which are the skills that differentiate us from robots. Emotional intelligence, presentation skills and critical thinking will become even more valuable in the years ahead. 12. Chatbots and decision-making Instead of diving into CHARIOT for technical information, accountants may have a unit on their desk – think Alexa or Google Assistant – which will be there to answer questions instantly. We could also see AI take a role in the review of complex documents so that, rather than spend hours poring over a 500-page contract, a machine will scan a document in seconds and determine whether it contains compliance and risk issues, for example. 13. Planning cycles will contract Speaking at the Influence conference, Valerie Daunt, Human Capital Partner at Deloitte, said: “Long-term plans are gone”. Instead, organisations must be able to change course quickly. To underline this point, Standards and Poor’s recently reported that the average lifecycle of companies is shrinking, with the average lifecycle of companies on the S&P 500 expected to be just 12 years by 2027 – down from 33 years in 1964. 14. The changing nature of the workforce The workforce is fast becoming more diverse, more international and with different values. Today, over 20% of the Irish population was not born in Ireland, and this rises to 33% of the working-age population in Dublin. Attitudes are changing too – one recently published survey found that 60% of workers are willing to take a pay cut to work in an empathetic company, while 35% said they would consider taking a reduction in salary in exchange for more annual leave. It was also reported that 50% of millennials would take a pay cut to work for a company that matches their values and that this cohort values “experiences over stuff”. Joe Carroll is Head of Professional Development at Chartered Accountants Ireland.

There is a crisis of trust in and about our profession, but it doesn’t have to be an existential crisis writes Lynda Carroll FCA. “It was the best of times; it was the worst of times…” So wrote Charles Dickens in his 1859 novel, A Tale of Two Cities. How apt a quote this is for the world in which we live today, and specifically for the audit and accountancy profession. Are we not in the best of times? Has there ever been a time when we appeared more omniscient and so integrated a part of commercial life, across so broad a spectrum? A time when scale and reach are valued (by us), when cutting-edge is where it’s at (according to ourselves), when ‘brand’ is everything (we convince ourselves) and when it’s cool to wield so much influence and have such a vast array of client opportunity. Everything from the statutory audit to tax to all forms of consultancy – management, organisational, strategic, merger and acquisition, people, procurement, cyber-risk, risk analytics, diversity and inclusion… the product offering suite seems endless; always expanding and intensely competitive. Yet, are we not also in the worst of times? There is a crisis, and it is proliferating; a crisis of trust and confidence in and about our profession. It is pervasive; it is not just something affecting practice, but it is in this area that it is most visible, public and controversial – it affects all in the profession, and it is corrosive. Even scary! Is this an existential crisis, or just another challenging phase? The answer to this big question is quite simple: it depends on which of these options we want it to be. What’s the problem? Let us reflect on some recent developments that have appeared large in the public domain. When an MP tells one of the Big 4 that “I wouldn’t trust you to audit the contents of my fridge”, as a profession, we have a problem. When we read on an almost daily basis about the failure of names like Carillion, Patisserie Valarie, BHS and see the integrity of their auditors called into question, we have a problem. When we see growing pressure from government and regulatory authorities in the UK to fundamentally restructure the accounting profession, to separate audit and consulting, to introduce meaningful competition and long-term changes to the regulation of audits, we have a problem. Why do we have a problem? I think it’s obvious, but let’s call it out. It’s a problem because it’s actually happening. It is of our own making; we have lost sight of the fundamental reason why we exist as a profession, what purpose and values we should have, and because it’s time to wake up. “Physician, heal thyself” or the cure imposed will be far more painful than one that is self- administered. The basis of trust In the ethical standards we have set for ourselves and our failure to meet them, we will find the basis for the current problem. IAASA’s Ethical Standards for Auditors sets out three overarching principles – integrity, objectivity and independence. These principles are the basis for user trust and confidence. Of these, independence is the bedrock upon which maintaining and demonstrating integrity and objectivity may perish. Who decides if the ethical outcomes required by those principles have been met? The answer – an objective, reasonable and informed third party. To this, in the 21st century, you may add the court of public opinion. Failure to demonstrate integrity, objectivity and independence in a clear and unambiguous manner is at the heart of the palpable erosion of trust and public confidence in the profession. How did we get here and why are we not ahead of the debate? Why are we not setting the tone of the discussion? How have we ended up in a reactive or defensive mode? Yet, this is how we appear to be, and appearance is reality in the 21st century. I think it is too easy to say it all got just too big, too multi-disciplinary, too difficult to manage, too many overlaps, too few competitors. It is a bit more fundamental than that – somewhere along the way, we lost connection to why we are here. Financial accounts preparation and audit are not sexy, but they are the reasons we are here.  Audit, let’s be honest, is a statutory obligation, not an elective option – but it is so for very sound reasons. It is a form of assurance to investors and the public at large that someone with a dispassionate eye has taken a look at the business and formed an opinion which it is willing to state publicly. For that opinion to have any value, reputation is fundamental. Reputation is built on sureness of purpose, values and a governance framework that acts to assure the assurance that the auditor can give. Communicating our value So, where to next? In Di Lampedusa’s masterpiece, The Leopard, we are told that in the face of great challenge and turmoil, “if we want things to stay as they are, things will have to change”.  We need a vision for our profession based on a collective review and recommitment to our purpose and values. We should undertake this review by taking back control of the problem, reaching out to a broad constituency of stakeholders to solicit their view on our purpose and what they expect of us. Because not only do we need to recommit, we need to understand what we need to do to re-engage the public positively and begin the journey of reputation repair and rebuild. If we re-establish the purpose and values that support the auditor and accountant, we will find the answer to how firms need to deal with and manage all the other non-audit and accounting services they currently provide. Lead from fundamentals and the answers to all other questions will surely follow – you might not like the answers, but at least you will know what they are. This is important for all in the profession – trust and confidence erosion, as I have said, is not solely a ‘practice’ challenge. We live in a world where awareness and action on environmental sustainability and governance (ESG) are lead indicators of understanding and living a business and a social purpose. We know that millennials are 60–80% (it depends on which survey you choose) more likely than any prior generation to want to invest in, work for and acquire product and services from businesses with strong ESG credentials. Governance is all about ethics, so go figure! We are at the heart of investor and regulatory confidence when preparing and signing off on financial statements, market disclosures, regulatory returns and, as members in practice, we are the fourth line of defence. We need the public to understand the roles we play in each situation – but if we don’t inform them as to what those roles are and how we deliver the outcomes expected, then who will? Too big to succeed? Perhaps it is time to realise that the ‘too big to fail’ mindset that framed the reaction to the banking crises could become the ‘too big to succeed’ reality for multi-disciplinary audit and accountancy firms. The big difference in the case of our profession is that few will shed a tear or seek to bail us out in the event of imminent demise. Looking at ourselves in the mirror in this way will not be easy, but it will be worth it. It is not the default way in which most of us confront a challenge, but if we are to get to a simple answer to the question I asked at the beginning of this article, it is probably the only way. I am reminded of Robert Frost’s wonderful poem, The Road Not Taken, and its final lines: “Two roads diverged in a wood, and I— I took the one less travelled by, And that has made all the difference.” Let’s not make it an existential crisis. Let’s make it another challenging phase and let’s make a difference. Conclusion Finally, I write this article from a personal perspective. I have never practised as an auditor, never been involved in financial accounts preparation or worked as a finance director. However, I am informed by my training in a Big 4 firm, working in financial services, prudential regulation, as an independent non-executive director, and by my enduring curiosity as to the role and purpose of the profession of which I am proud to be a member.   Lynda Carroll FCA is the Head of Capital Allocation & Risk-Based Pricing at AIB.