Opinion

Indecent disclosure

Finance | John Tate | 29 Jun 2009

IT will hugely help FDs in their role in future, says John Tate. 

Regular readers of this column will know I have been rabbiting on about  IT driving the transparency agenda for a couple of years. The recent MPs’ expenses scandal highlights how technology can facili-tate getting sensitive information into the public domain. The topic of charity CEO expenses has become a major talking point and this was kicked off via my blog posting. Without technology this would not have been possible.

So IT makes information disclosure much easier. But is this a good thing?

Regarding disclosure of CEO expenses most finance directors I have talked to think this is positive. But Acevo (the Association of Chief Executives of Voluntary Organisations) has not supported this. Why? It appears cer-tain chief executives are not always so keen on transparency. MPs certainly weren’t. The 300 police offers currently being investigated for potentially fraudulent use of their corpo-rate credit cards clearly are not.

If FDs are keen but CEOs’ resist greater transparency, what can be done?

I’d like to tell you a story. Once upon a time an FD joined a privately-owned com-pany. They sold widgets. There were three people on the board – the FD (male and married with children); the design director (female with partner) and the MD (male and married with children).

In the FD’s first year the business made a good profit. The design director then decided to launch a range of more expensive, upmar-ket widgets. In year two performance started to suffer.

The FD had several lengthy and increas-ingly tense discussions with the MD. He could not understand why he was so resist-ant to returning to their old style of widgets. Then he discovered the MD was having an affair with the design director – which all the shop managers seemed to know about. Their view was that the design director had always wanted to design upmarket rather than mid-range widgets and ‘pillow talk’ ensured she got her way.

So what was the FD to do about this? He was a committed professional and did not want performance to suffer. There was a real danger the business would go bust without a change in design direction.

He tried to exert pressure on the MD. He requested that the whole design team spent a week in the shops seeing what was going on. This request was rejected. He invited the design director and the MD to the monthly shop managers’ meeting. They accepted and got blunt feedback from the team. But this did not have the required effect.

So the moment came and he plucked up courage to tell the MD that most of the staff knew of his affair and he felt this was impacting on the business. This was not an easy discussion and his relationship with the MD pretty well completely broke down.

What was the outcome? A couple of days later the FD spotted a fax from a headhunter addressed to the MD with some CVs for a new FD. The FD left without a job to go to. The business struggled on and went bust some years later. Fortunately the FD found other means of generating a salary so all was well for him.

In the charity sector we have boards  of trustees who can support an FD in an issue like this – as long as they know what is going on.

Acevo research suggests that governance on many boards is weak and that greater transparency is needed. Unfortunately we all know that there are things happening in the charity sector that are not right. Whilst this may be the exception rather than the rule we owe it to the sector to do our collective best to get this resolved.

I feel angry that the chief executive of Acevo is resisting expenses disclosure. Trustees of Acevo should be ashamed to their roots that they are not tackling this issue.

I encourage FDs to push for greater  transparency. We need to get CEOs and boards of trustees to support this, because if they don’t the widespread availability and use of web- based technology will force  the issue.

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