Two thirds of FTSE 100 CFOs are ex-Big Four
4 Dec 2017
Exclusive research conducted by Accountancy illustrates just how dominant the Big Four is as a force throughout FTSE 100 boardrooms
4 Dec 2017
The study revealed that 61 out of the 100 audit committee chair positions at the highest level of corporate UK are held by someone who previously worked for at least one of the Big Four firms – Deloitte, EY, KPMG and PwC – or one of their predecessor firms.
Not only that, but a similar proportion (64%) of CFOs are eligible to join one of the Big Four alumni programmes, while a further 15% of board chairs have a similar background.
Many of these former employees, directors or partners will have left their alma maters some years beforehand to pursue a career in industry. But a significant number would have spent their whole professional careers in just one of the Big Four, perhaps even becoming its senior partner, to then retire and build a portfolio of non-executive positions.
Accountancy’s research found that 14 FTSE 100 companies are currently audited by a firm where the current audit committee chair also spent part of their career. The equivalent number for CFOs is 13. However, only three board chairs are likely to bump into their auditor at a Big Four alumni event.
This latter group contains the familiar names of Sir Michael Rake, whose old firm KPMG audits Worldpay Group, which he chairs, and Sir Philip Hampton, chairman of GlaxoSmithKline, which is currently audited by PwC, the successor firm to Coopers & Lybrand, at which Sir Philip trained as an auditor in the 1970s.
In fact, the FTSE 100 is littered with well-known faces from the Big Four world. Board chairmen include Deloitte former senior partner John Connolly, now at G4S, as well as the firm’s former chairman Martin Scicluna, who presides over RSA Insurance Group as well as acting as audit committee chair at Worldpay.
‘The external audit is seen as having to be robust, fair and independent, something that can be relied upon,’ said Roger Barker, head of corporate governance at the Institute of Directors. ‘But close connections between individuals could in theory compromise this.
‘There is a limited source [of candidates], but there are safeguards,’ he added. ‘Audit committees are required to have one person with recent relevant financial experience, but not all. Committees can have a broader composition, where there is a balanced range of skills.’
For a more in-depth look at Accountancy's findings, read the full feature here.
Report by Philip Smith