Thought Leadership Articles

As the need for Chartered Accountants grows, so does the shortage of available talent, says Dr Brian Keegan. If asked to describe an accountant, most business people these days would probably use the word “scarce.” Chartered Accountants are in demand perhaps as never before. One senior executive in the multinational sector damned the qualification with faint praise. He recently told me that he liked to hire Irish Chartered Accountants because they didn’t give him any trouble.  This misses the point. The shortage is not merely an island of Ireland phenomenon; it is a global issue. Contributing to a panel discussion on the topic at the International Federation of Accountants a few weeks ago, one of the panellists pointed to a simple reality: worldwide, more businesses are starting up than accountants are coming through the education process to service them.  Such entrepreneurial demands do not tell the full story, however. In the context of the destruction caused by the evil invasion of Ukraine, there is now a real possibility of a significant economic downturn in the western world.   Central banks are still trying to determine if the current surge in inflation is short-term, a result of supply chain disruption or a more systemic trend to be remedied by interest rate hikes.   As central banks, governments, and government agencies try to figure this one out, they continue to impose greater levels of reporting and regulatory requirements on businesses. One example is the drive towards environmental, social and governance (ESG) reporting. The EU’s Corporate Sustainability Reporting Directive (CSRD) is the biggest show in town for those in Ireland.   While the CSRD is still wending its way through the European institutions, it is clear that in the future at least five times more businesses will be required to report on ESG issues than is currently the case. These reports will also have to be assured.  The growing demand for qualified professional accountants is already evident in the rising number of students currently undergoing training with Chartered Accountants Ireland (though not necessarily in the figures of the other Irish accounting bodies).  This is partly down to our own marketing efforts and the training firms that continue to attract the vast majority of new entrants to the profession. However, supply chains of talent are more challenging to build than the supply chains of goods.   It will be critical to sustain this training momentum because some of the capacity issues we are currently experiencing are down to a fall-off in new entrants during the most recent recession.   If we continue to attract new talent into the profession, positioning the relevance of the accountant’s role in modern society really matters.   Although ESG reporting presents a capacity challenge, it also presents an opportunity to develop capacity. Assuring corporate sustainability achievements will be an attractive way to build a career for some new entrants. Yet, the European institutions framing the CSRD do not seem to have recognised this reality. On the contrary, at the time of writing, there are even suggestions that the “traditional” auditor would be precluded from providing assurance services on ESG matters.    It is hard to refute this argument without sounding self-serving. Nevertheless, without the participation of a vibrant accountancy profession, there will be no coherent reporting or assurance on ESG – and that is not in anyone’s interest. In the meantime, we will have to address the capacity issues, not just with the usual blandishments of good wages and attractive conditions for new students, but by facilitating the participation in the Irish market of accountants qualified elsewhere. Effectively doing so will be down to all of us – the Institute, firms and regulators alike. Dr Brian Keegan is Director of Advocacy and Voice at Chartered Accountants Ireland.

The Keynesian financial philosophy of deficit spending and government manipulation of economic activity has been popular, but does it still hold up post-pandemic, asks Brian S. Wesbury. Intellectuals and politicians often try to summarise or justify conventional thinking in pithy ways. Milton Friedman (in 1965) and Richard Nixon (in 1971) both used different versions of the phrase: “We are all Keynesians now.” John Maynard Keynes, one of the most famous economists of all time, supported deficit spending and government manipulation of economic activity, and Friedman and Nixon were both referring to the Great Society redistribution programs and the inflationary monetary policy designed to offset their cost. If economic policy was Keynesian in the 1960s and 1970s, as policymakers moved away from free market ideology, we are certainly all Keynesians now. COVID-19 spending and monetary policy are a clear continuation of this economic thinking. It all began in 2008 when the Bush and Obama administrations spent $1.5 trillion in taxpayer money to “rescue” the US economy, and the Federal Reserve (Fed) began quantitative easing (QE). That blueprint of policy response to the Panic of 2008 was used to respond to COVID-19 shutdowns. This time, the US Federal Government borrowed at least $5 trillion to spend, and the Fed increased its balance sheet by over $4.5 trillion. As a result of the Keynesian policies of the 1970s, the US experienced stagflation (slow growth and high inflation) – with both unemployment and inflation peaking in the double digits. Currently, inflation in the US is 8.1 percent, and the unemployment rate is 3.6 percent. So, while inflation is clearly happening, signs of stagflation are harder to find. This doesn’t mean economic growth isn’t being impacted. Multiple factors need to be analysed and untangled to fully understand the ramifications of lockdowns and government largesse. First, the US economy was artificially boosted by borrowing money and distributing it through government loans and pandemic benefits. Second, the US M2 money supply (measure of the money supply that includes cash, checking deposits, and easily-convertible near money) has increased more than 40 percent since February 2020, as the Fed renewed QE and monetised deficit spending. In other words, a great deal of that spending was paid for out of thin air. The impact of these policies was like giving morphine to an accident victim. The lockdowns dramatically damaged the economy, but the morphine masked the pain. All that pain-killer stimulus boosted sales and profits. This year, without new spending legislation—and, asؙ the Fed starts to reverse course, the economy will lose its morphine drip. On the surface, this suggests that the economy could be in trouble, but this ignores the impact of the third factor at play—its reopening. At least to me, it is clear that generous pandemic unemployment benefits had a massive impact on employment. In fact, the “Great Resignation” has had a lot to do with these benefits. While it was never the case, many thought the Build Back Better (BBB) spending bill would keep the money coming. Now that BBB appears dead, those people are heading back to work. In the first three months of 2022, 1.69 million jobs in the US have been filled, and this year will likely total four million jobs or more. So, even though the Fed will be lifting rates and Keynesian deficits will fall, the economy will expand in 2022, and profits should continue to rise. Unfortunately, we forecast that real GDP growth in the US will remain at less than three percent while inflation remains above five percent. This is reminiscent of the 1970s and, once society reopens fully following COVID-19 lockdowns, the full impact of these policies will be felt. The recent inversion in the yield curve suggests the bond market thinks that, if the Fed lifts short-term rates to three percent or so, it will be forced to cut rates again. This may be true, but we think inflation will prove a more persistent problem than the Fed or the bond market has priced in. The US is now stuck in a Keynesian dilemma of its own making, and the way out is to cut spending, cut tax rates, cut regulation, and tighten money enough to stop inflation. Because in the end, Keynesian policies don’t create wealth; free and open markets do. Brian S. Wesbury is Chief Economist at First Trust Global Portfolios.  This article represents the views of the author. This article was first published on FM Report.

With gender pay gap reporting on the horizon, it’s time for organisations to really examine whether they’re doing the best they can for female employees. Dawn Leane outlines 10 things every business can do to help women in the workplace. According to recent research, the advancement of women in the workplace has, at best, stalled. So, what can organisations do to get back on track? 1. Start with the culture Many organisations over-engineer initiatives to improve gender balance. This often manifests as policies and procedures, which research shows can be counter-productive and have a negative impact. Organisations should focus less on control and more on creating environments that are genuinely egalitarian. This is achieved by modelling appropriate behaviours and embedding good practice. 2. Ask questions Don’t assume you know why women are not advancing in your organisation. Issues can be specific to the culture of individual workplaces or teams. Without insight, you could spend a lot of time and money developing solutions to the wrong problems. Independent interviews with current and former employees can help build an objective picture of the challenges unique to your business. 3. Support fathers All fathers are entitled to paternity and parental leave. However, only a third took paternity leave last year. Research suggests that men and women believe fathers don’t take their full entitlement because parental leave is still viewed as the domain of women. Yet, fathers are no less interested and engaged in their children’s lives. Encouraging fathers to take leave might not do much for your individual organisation, but this is a wider issue for business and society and will contribute to higher staff retention and satisfaction. 4. Don’t outsource management responsibility A survey by the 30% Club found that employees spend increasingly less time with their manager discussing their personal development as they progress through the organisation. Opportunities for career-relevant advice and feedback are outsourced to mentors or coaches. Women at this stage of their career receive less advice from their manager than men by a ratio of four to one. While mentors and coaches have a role, it is the relationship with their manager that is pivotal to women’s development. 5. Provide access to gender-specific training This can be a divisive topic, but research shows that women benefit enormously from gender-specific training. The chance to discuss common experiences, like gender bias or personal leadership challenges, is key. However, it is important to ensure that management doesn’t wipe their hands after offering this kind of training. Other types of development opportunities should also be offered to women. 6. Create dress rehearsals Developing leadership abilities takes practice and requires learning from mistakes. With low levels of women in senior roles, those who do succeed have increased visibility. Organisations can create space for women to enhance their leadership skills without being subject to undue scrutiny. Opportunities such as leading projects or deputising for their managers, when coupled with appropriate feedback, can help to provide such a ‘safe’ space. 7. Reduce the opportunity for unconscious bias In organisations, even the smallest amount of bias can have significant consequences. Unconscious bias is prevalent in both women and men. The Implicit Bias Test developed at Harvard University offers incredible personal insight. Training for unconscious bias has proven to be largely ineffective. Until our conditioning changes, the solution is to limit the opportunity for such bias to occur. For example, blind, systematic processes for reviewing job applications will help to end such bias. 8. Monitor where women are in your talent pipeline The McKinsey Women in the Workplace reports advise that, for women, inequality starts at the very first promotion; entry-level women are 18 percent less likely to be promoted than their male peers. This has a dramatic effect on the pipeline as a whole. Organisations should be attuned to this, as it is easier to correct imbalance at earlier stages in the pipeline. 9. Accept that careers are marathons, not sprints Organisations often place too much emphasis on rapid advancement, leading people to burn out and leave, particularly when they have competing demands outside work. Reframing career development as a long-term goal allows both women and men to increase and to slow their pace as appropriate to their circumstances without being written off. 10. Focus on output not presenteeism If accountability and results are what matter, show this through flexible working arrangements. Hybrid working has been both a blessing and a curse to women in the workplace. Flexibility is necessary to ensure women continue to be productive and successful members of the team. Dawn Leane is the Founder of Leane Empower.