Since my last CEO message in the March-April issue of On Target titled “Who Governs the Governors? When Directors Become Dictators” highlighting some very concerning issues (raised by the Australian Financial Review (AFR) and other media) about the behaviour of the CEO and Board of CPA Australia, a lot has happened.
My article was quoted in the AFR under the heading “CMAs Janek Ratnatunga slams CPA”. This resulted in a number of phone calls to me from other media organisations for comments; and also from fellow academics and senior CPA members, some of who were on the CPA Australia’s Regional Board. All were extremely supportive of my stance; but some cautioned that CPA was in the habit of threatening legal action to all perceived “un-friendlies”; much like that other self-proclaimed “tall-poppy’ media celebrity leader in the ‘Disunited States of America’. I explained to them that any civil action from CPA Australia would require them to open their books under a legal process called ‘discovery’; and that was probably the last thing they would want to do; especially opening of their books on CEO and Directors’ remunerations, membership registers and other related issues.
Despite all the threats of legal action, and CPA Australia calling disgruntled CPAs as “rouge members”, the media attention spiked. There was even a parody on YouTube!
In fact, pursuant to Section 173(3) of the Corporations Act 2001, an electronic copy of the complete share register of CPA Australia was requested by Mr. Brett Stevenson, a dissident member (as was his right), in the form prescribed by Regulation 2C.1.02 of the Corporations Regulations 2001. CPA Australia were forced to provide this; but did not provide email addresses of the members. This prompted Independent Senator Nick Xenophon to give support to rebel CPA Australia members by stating that he will introduce a bill that closes a loophole that has allowed the accounting body’s leadership to keep members’ email contact details secret.
Mr. Brett Stevenson also sent a request to CPA Australia for a statement disclosing the remuneration paid to each of the directors of CPA Australia and its subsidiaries as per Section 202B of the Corporations Act 2001. After an exceptionally long delay, CPA Australia was forced to reveal the CEO Mr. Alex Malley was paid almost $1.8m last year. Chairman Professor Tyrone Carlin, a long-time associate of Mr. Malley, who has only been in the job since October, was paid more than $184,000 for his short stint as chairman, plus an additional $70,000 for acting as a director of CPA’s fledgling financial advice subsidiary.
The hefty pay packets enjoyed by Mr Malley and other directors and executives of the accountancy body were revealed in a 32-page booklet sent to all CPA Australia members; sparking an angry reaction from dissident members. Media attention has been unrelenting since the disclosure of this excessive (and some claim scandalous) money paid to a few individuals using money earned from membership fees.
At this juncture, it is worth noting what the ICMA CEO and Executive Board get in terms of remuneration. The CEO’s employer company received $30,000 last year as a stipend for the use of his time by ICMA. The rest of the Board; i.e. the Chairman, President, Secretary, Treasurer etc. received no remuneration, as they provided their services on a voluntary basis. This was how CPA Australia operated in the past.
An interesting side-issue was then raised in an AFR article of May 17 2017, asking “Is CPA Australia fudging its membership, growth numbers?
The CPA Australia CEO and Board had defended their excessive remuneration packages, and spending on promoting Mr. Alex Malley’s book and TV show by pointing to aggressive membership growth on his watch. CPA Australia in fact boasted in a recent memo of having grown its membership to “more than” 160,000; and stating that “more people are joining, joining from other bodies, and staying as members than ever before.”
But just four weeks later, CPA’s company secretary Mr. Adam Awty conceded in a written response to legal correspondence that, as of April 14, CPA had just 155,116 financial members. Either 3 per cent of CPAs resigned in under a month or the organisation had been overstating its numbers.
Whilst AFR’s May 17 exposé that CPA Australia may be fudging its membership growth numbers was well researched; it is not the only organisation using creative numbers, when it comes to accountants. Government Agencies and Universities also appear to be fudging the numbers for their own vested interests.
For example, in 2014, Mr Robin Shreeve, CEO of the Australian Workforce and Productivity Agency in a Report of the Skilled Occupation List Search Conference, noted that Accountants are currently in surplus, and will remain so in the medium term as (1) shortages have not been apparent since 2008; (2) vacancy levels are at their lowest levels since the Internet Vacancy Index began in 2006, and there is no sign of an upturn; (3) employment growth has been subdued over the five years to October 2013; and (4) employers across all three ANZSCO accounting occupations are recruiting without difficulty and have large fields of qualified candidates to choose from.
On the release of this report, it dawned on professional accounting bodies, universities and employment agencies that accountants could potentially be struck-off the SOL; resulting in a flurry of activity. Two of the professional accounting bodies suddenly realised that their pipeline of overseas accountants wishing to be their members in order to apply for migration could potentially dry up. The Australian universities that offered ‘accounting’ undergraduate and graduate conversion degrees foresaw the end of being able to milk their cash-cow. Employment agencies fretted about the loss of clients.
The result was that significant political pressure was exerted (even at Vice-Chancellor levels) to keep accounting on the SOL, and the numbers were worked with to show that there was indeed a ‘skill shortage’ of accountants! The result is that ‘Accountants’ remains on the SOL, even in 2017. This is despite strong evidence that those trained in accounting are simply not getting jobs in their chosen profession, especially if you are a migrant without the pre-requisite ‘Australian experience’. It can be argued that the professional accounting bodies and universities are being unethical when they are painting a rosy picture that there is a great need for accountants in this country. It simply is not so.
Returning to the issue that CPA Australia fudging its membership growth numbers; this is what you get when ‘Membership Growth’ is a KPI of the CEO. Also, membership growth is easy when you lower standards. Just imagine the CEO of a medical profession having such a KPI and then lowering the standards of doctors to meet it!
Many overseas qualified accountants, especially large numbers of such in Hong Kong and China, have been given automatic membership of CPA Australia, having been enticed to join by the possibility of migration into Australia.
Since being authorised as Migrant Assessment Authorities, CPA and IPA (but thankfully not the CA ANZ) have significantly increased their overseas membership numbers by opening marketing offices in many countries in Asia and the Middle-East; and via signing Mutual Recognition Agreements (MRAs) with overseas professional bodies (most with less rigorous assessment standards); and giving the members of those bodies an Australian professional accountancy qualification without any further assessments (not even in Australian Law and Taxation)! Some of these CPAs have opened back office accounting operations in their own countries; especially India and China, and taking business away from home-grown accountants. That too, having never been assessed in Australian Law and Taxation, but hanging out a shingle that they are Australian CPAs!
It is time that professional bodies stop having membership growth as a KPI for their CEO and senior executives to receive performance bonuses on; and start ensuring that quality is maintained in the training and assessment of their members, so that public confidence in the profession is maintained.
Professor Janek Ratnatunga, CMA, CGBA
CEO, ICMA Australia
The opinions in this article reflect those of the author and not necessarily that of the organisation or its executive.
