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In this Feb 2006 issue of On Target :
ICMA-IMA Merger Update
What's On
Bookshelf
MERGER NEGOTIATIONS SUMMARY OF OUTCOMES TO DATE
Fruitful negotiations were held at the IMA headquarters in New Jersey during the period January 30 to February 1, 2006. Representing IMA were Paul Sharman (CEO), Carl Smith (Chair), Bill Brower (Chair Elect), Priscilla Payne (Education) and Jim Gurowka (International); and representing ICMA were Leon Duval (President) and Janek Ratnatunga (Education).
The visit by ICMA representatives and the ensuing discussions turned out to be extremely vital because without the face to face sessions (both formal and informal) no potential for closing the process would have existed. After three days of very intensive negotiation, a signed MOU emerged that was mainly positive towards a merger, but contained two potential ‘deal-breakers’. The process from here is that ICMA will refer the draft agreement that emerged from the discussions to its Executive Board and the IMA will refer the same to their top decision making body called the Board of Regents.
The summary of the Draft Agreement in terms of ICMA stakeholder interests are as follows :
Members
The ICMA CMA’s need to be recognised as having a legitimate and prestigious professional qualification and accordingly be afforded full CMA status by the IMA. This has never been granted to anyone who has not been directly examined by the IMA in their history. Therefore the AMAs and GMAs currently in the pipeline must complete their CMA program within 12 months from the merger date.
In addition, the IMA Board of Regents must agree to recognise ICMA members who have been awarded the CMA without examination. This applies to our Foundation members and those CMA’s accepted under our 10 year rule. This could be a potential ‘deal-breaker’ as the IMA has never recognised any person who did not pass examinations as a CMA (including Charles Horngren, who had to sit for and pass the CMA exams).
There will be no further intake of AMAs, GMAs and CMAs under the 10 year rule after merger date.
IMA will handle all membership administration matters which will include the distribution of the journal, sending of annual fee statements and collection of cash, and the maintenance of the members’ data bases.
All CMA members will be required to undertake 30 hours of CPD per annum, as is currently the requirement for IMA’s own CMAs.
Educational Programs
All future graduates (accounting and non-accounting) will be required to do the four stage (four papers) IMA program for certification as CMAs.
These members will be required, however, to have only two years practical experience (compared with the 5 years currently required by ICMA).
However, ICMA Australia believe that if its existing two part post-graduate CMA program is abandoned and prospective CMAs are required to take IMA’s four undergraduate level courses as the education prerequisite for membership, the membership pipeline from the other accounting bodies (e.g. CPA, CA & CIMA) will disappear. The ICMA believes that this will give rise to serious questions on the membership growth potential of IMA in overseas market, especially in Australasia; and therefore the long term viability of the IMA Regional Council after the merger. Also the articulation opportunities towards an MBA will have been lost.
As such the ICMA has recommended that its two module CMA program is continued as a separate pipeline for qualified accountants. The IMA however believes that this topic should be dealt with at a later date as it has implications with regard to cross accreditation issues between professional bodies throughout the region as well as in the USA. It instead, sees the role of the ICMA 2-subject program as CPD, and to be made available to all USA qualified CMAs as well. This difference of views is the second potential ‘deal-breaker’.
Course Providers
Assuming the two ‘deal-breakers’ are resolved, the ICMA Recognised Provider Institutions (RPIs) would continue to offer the two existing CMA program subjects as either a route for existing qualified accountants, or as CPD.
All RPIs will be given the approval to market and deliver the four part IMA program.
The existing CAT, Advanced Diploma and Stage 3 of the GMA program will be continued; however Stage 4 will become the IMA program of 4 papers.
The RPIs will also have further opportunities of providing the 30 hour CPD programs which may include parts of the CMA program.
As there are other providers in most countries appointed by IMA, the marketing of these programs will not be exclusive.
General
The merged entity would be a Regional Council of the IMA domiciled in Australia and active in the Asia Pacific region.
The assets and liabilities of ICMA will be transferred to IMA.
The ICMA Executive Members to be bound by a 10 year non competitive clause.
Elected head of the Australasian Regional Council will have a seat on IMA Board of Directors. Note the Board of Regents is an invited membership and we have suggested that a representative from Australia be invited to join.
Existing ICMA structure will cease to be a CMA certification granting organisation although it will still be involved in the granting of CAT, Advanced Diploma and GMA awards.
The proposed merger date is now June 30, 2006, as this is the financial year date for both institutions.
What's On
January 14 to April 1, 2006
CMA Philippines seminars on Advanced Management Accounting and Advanced Strategic Management Accounting (Batch 6) conducted by Business Sense for ICMA.
February 9 – 18, 2006.
CMA Lebanon seminars on Advanced Management Accounting and Advanced Strategic Management Accounting conducted by the Hamidi Business School for ICMA.
March 2 - 5, 2006
Advanced Management Accounting 4-day Seminar in Mercure Hotel, Sydney, conducted by the Australian Institute of Finance and Management and ICMA.
March 6 - 20, 2006
Advanced Strategic Management Accounting 4-day Seminar in Mercure Hotel, Sydney, conducted by the Australian Institute of Finance and Management and ICMA.
May- June 2006
Advanced Management Accounting and Advanced Strategic Management Accounting 7-day seminar conducted by the Institute of Chartered Accountants of Sri Lanka for ICMA.
May 6 to July 22, 2006
CMA Philippines seminars on Advanced Management Accounting and Advanced Strategic Management Accounting (Batch 7) conducted by Business Sense for ICMA.
June 30, 2006
Proposed completion date of merger with IMA, USA.
August 12 to October 28, 2006
CMA Philippines seminars on Advanced Management Accounting and Advanced Strategic Management Accounting (Batch 8) conducted by Business Sense for ICMA.
Book Shelf
As an academic who teaches strategic aspects of management accounting I was interested in the article in CFO magazine for February 2006: “Fast in, Fast out” (pp. 22-29). This article by Elizabeth Fry discusses performance incentives for CFOs in particular how short-term incentives can do damage to companies.
Research quoted in the article shows that the average tenure of CFOs in corporate Australia in the last two years was just 4.7 years. Expansion strategies – which are often implemented over at least five years – are not consistent with the incentives offered for short-term results. In a low-growth environment, the latter can be achieved only by squeezing budgets. The longer-term sacrifices made can destroy corporate value, and frequently end careers. Hence the high turnover of CFOs.
Competitive institutional investors and corporate governance initiatives directed at stakeholder concerns make matters worse. Only if, as one CFO interviewed suggests, investors start to look for companies that can generate long-term growth will the problem be reduced.
Note this article provides a table which details the remuneration provided to 158 CFOs from S&P/ASX 300 companies, splitting this into fixed and short-term and long-term incentive amounts. (Academics reading this could now skip to the next paragraph.) This shows the 25th percentile to be over $30,000 p.a. and a mean of nearly $700,000! Yes, as I wrote elsewhere (some years ago now), if you stick at an academic career for 10 years after graduating, you may be lucky to earn half as much as someone with half as much experience. But then there are all those intrinsic rewards such as the knowledge that the people we teach will end up making that much contribution to the world.
Other articles in this issue of CFO include one discussing the outlook for the impact that technology could have on the finance function in 2006, and another on the problems of self-interested behavior by company directors and structures and procedures that might manage these.
Bill Richardson
Please feel free to share anything that you have found interesting. You can send your ideas to: Bill Richardson, Dept of Accounting & Finance, Monash University, PO Box 197, Caulfield East VIC 3145.
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