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By John Lorinc
Photography by Paul Orenstein
THINK YOU BELONG IN THE EXECUTIVE SUITE? A CA BACKGROUND CAN GET YOU THERE JUST LIKE IT DID FOR THESE CEO SUCCESSES
 The serendipitous road that led John Keating to the top job at one of Canada's fastest-growing energy firms began with the esoteric world of tax. The CEO of Canadian Hydro Developers Inc., in Calgary, got his start at Peat Marwick in the mid-1970s before joining the private oil and gas firm Petrol Properties as CFO, providing advice on the tax treatment of investments by nonresidents. "Without being a CA specialized in tax," he says, "I wouldn't have been eligible."
Keating soon became involved in all aspects of the business — petroleum land acquisition, engineering, staffing. But after the mid-'80s downturn hit Alberta's oilpatch, he decided to
leave, and in 1992 launched a pair of energy companies that were eventually merged to form Canadian Hydro. The firm, which specializes in hydro and wind power, now owns a $144-million portfolio of 10 hydroelectric sites and three wind plants. Things are looking good: Keating just finished a $30-million equity placement, and the company's cash flow is expected to double by fiscal 2005.
He doesn't miss the troubled oil industry, but Keating hasn't forgotten where he started. The CA training and approach to business problems is, in his view, one of the keys to his success. "Having an MBA is probably not enough these days. If I were doing it all over again, I would be a chartered accountant with tax training. I'd do it exactly the same way."
Such sentiments are standard fare among the members of that club of CEOs who began as chartered accountants and made the leap to the corporate world as their careers took flight. Most of them see their training as a core competency that gives them the ability to understand all aspects of the businesses they run.
Clearly, many boards think so too. According to the CICA's annual review of The Globe and Mail's Report on Business Top 1000 companies, about 8.5% of these firms are headed by CAs — a figure that has remained constant since the study was first conducted in 1997. Among them are some of Canada's business luminaries: Manulife's Dominic D'Alessandro, Bank of Nova Scotia's Peter Godsoe, and Research-in-Motion's James Balsillie. For 2002, CAs also accounted for 8.2% of chairs, 7.6% of chief operating officers, 9.7% of presidents, 18.6% of corporate secretaries and 54.5% of chief financial officers. Moreover, the proportion of the CICA's members working outside public practice has been rising steadily and now stands at six in every 10 CAs in Canada. The leading private sector employers of chartered accountants include major banks and insurance companies, such utilities as Hydro-Québec, manufacturers such as IBM and Bombardier, and retail giant Canadian Tire.
These leaders also stand out when it comes to giving investors their money's worth. The CICA's analysis shows that those ROB 1000 companies whose top officer is a CA significantly outpace other ROB 1000 firms in terms of one- and five-year rates of return on both equity and capital. "The ultimate objective [for senior executives] is to increase shareholder value," observes Elizabeth Farrell, adjunct professor of accounting at York University's Schulich School of Business. "CEOs need a strong financial background and from that perspective, the CA designation is really valuable."
But, as Toronto executive recruiter Michael Stern points out, "you have to get over it." Indeed, when headhunters look for prospective CEO candidates, they want to see evidence that those with CA backgrounds will go beyond the numbers, in the same way that they want upwardly mobile marketing executives to be able to think beyond marketing or sales. "If I ask someone to give examples of the kinds of contributions they've made to a particular organization, I would want to see examples that cover different areas of the company's operations," says Stern. "If I only get financial management answers, then I get concerned."
Recruiter Ernest Stoakley, who runs Stoakley-Dudley Consultants Ltd., in Mississauga, Ont., has noticed that demand for CA-trained executives has spiked in the past couple of years due to the economic downturn and the resulting demand by shareholders for more fiscal responsibility from their senior managers. "The people I know who've been doing executive searches are looking for CAs or certified management accountants or MBAs with financial training." In his experience, CAs tend to run lean and are more successful.
As Keating's story suggests, many CA-trained CEOs say they owe their success to more than just the ability to read balance sheets, although expertise in financial reporting is obviously a highly valued asset for corporations that are looking to recruit senior executives. "The CA route is a good grounding for doing a lot of different things," says Farrell. "What I see as important is diversification and the ability to learn as much as you can about different types of industries."
In fact, CEOs interviewed for this story say there are other aspects of the CA training and approach that figure at least as significantly as the ability to work the numbers. These include an ability to manage the due diligence process involved in mergers or acquisitions, teamwork and business contacts, experience with best-practice governance structures, exposure to a broad range of industries, and practice specialization in particular sectors. "Quite frankly," says veteran executive and FCA Pierre Brochu, "to be a CEO of any organization, you have to know a bit of everything."
 Take the case of Krystyna Hoeg, who, as CEO of Corby Distilleries in Toronto, is now one of the most successful executives in Canada's spirits industry. As a young CA working in the audit department at Touche Ross's Windsor, Ont., office in the 1970s, Hoeg found herself with a ringside seat to Lee Iacocca's historic turnaround of Chrysler. She had originally dreamed of becoming a doctor, but switched over to business. Then, as part of the audit team working on the Chrysler file, she found it "fascinating to watch a team of people come in and make such a big difference in an organization."
Hoeg's been transforming companies ever since. After a five-year stint in public practice, she moved to Hiram Walker and soon found herself in charge of an internal business services unit. One of her first moves was to reorganize the division, making it more service-oriented, to align with its North American division. Later, as North American head of procurement, she borrowed another lesson from the car industry and implemented a better strategic model to increase margins and reduce cost of sales within the division for which she was senior vice-president. As the incoming CEO at Corby (which generated an impressive $3.57 earning per share for fiscal 2002) Hoeg promptly moved the corporate headquarters to be closer to its major customer, and has since overseen a highly successful strategy to rebuild such brands as Polar Ice vodka. "The CA process and education really does teach you very well the dynamics of the profit-and-loss statement," she says. "It allows you the clarity to look at these issues and their impact on the business."
 Brochu, who started his accounting career in the late 1970s with the Montreal office of Coopers & Lybrand, adds that his methodical approach to managing companies is based on the way he diagnosed the problems of his audit clients. He worked for Benson & Hedges and Corby before taking on the CEO's job with a Quebec subsidiary of BCE, Télébec (now Bell Nordiq), which he held for four-and-a-half years. "Most of the time, you get into these organizations and they have no vision, so you have to develop the vision and that's the most difficult thing to do."
That's a major aspect of Brochu's current job, as acting-president of Radical Horizon, based in Montreal. An R&D outfit that develops wireless radio products, Radical Horizon recently hired Brochu on a consulting basis to secure venture capital financing to commercialize the firm's wireless platform systems. "I took it because of the challenge," he says. "It's totally different from what I was doing before."
That entrepreneurial instinct is not uncommon among CA CEOs, some of whom left public practice out of a keen desire to launch their own businesses. When Bob Lavery, CEO of Winpak Ltd., started the Winnipeg-based packaging giant in the mid-1970s, he fell back on his CA training while the small firm expanded through a series of mergers and acquisitions. "Typically, you hire people to evaluate acquisitions," says Lavery. He did the analysis himself. "You have to understand what goes on."
But Winpak survived to do those deals because of yet another dividend from his CA background. Lavery had been an auditor and a management consultant with Ernst & Whinney for 13 years prior to striking out on his business venture. He hadn't been looking to change careers; Winpak was actually something of an experiment. He had been retained by a Finnish firm to investigate the Canadian market. The client originally decided against the expansion, but Lavery swayed it with new partners. But Winpak turned out to be so undercapitalized it almost capsized in 1978. Lavery parlayed the contacts he made during his public practice days to secure a refinancing deal. "I had a sound reputation and that helped me get an audience with the bankers," he recalls.
In fact, professional reputations, built up over lengthy careers with large partnerships, often prove to be the springboard that transforms senior partners into top executives. Sixteen years into a career at Deloitte & Touche, Jim Hunter was just such a figure. As an audit partner, he also specialized in M&A for financial services firms. "I knew a lot about the financial services industry as a result of the work I did at Deloitte," says the president and CEO of Mackenzie Financial Corp., one of Canada's top fund families, with $36 billion in assets. "I understood the product extremely well from a financial point of view." He had also gleaned critical insight about the need to focus on drumming up business. "I learned that in public practice as well — without a sale, there's no work."
In 1992, Mackenzie recruited Hunter to chair the executive committee, which was then in the throes of a tumultuous management transition. He soon saw that there were plenty of problems to grapple with: succession, cost controls and product diversification. "Systems was a major issue," says Hunter, noting the company had to retool its processes to deal with very large trading volumes. From chairing the executive committee, Hunter moved into the COO's post in 1993, then became CEO in 1997. There are only a few CAs running fund companies on Bay Street, including CI Fund chair Ray Chang and Fidelity Canada's David Denison. But in his view, it's seen as an asset — particularly among bankers and investors, who were key players in Mackenzie's aggressive expansion into a 150-fund family during the 1990s. "Having a CA as CEO is definitely a positive because CAs understand well what drives earnings," Hunter observes.
They also understand what drives losses, as Raoul Heredia, a Montreal-based CA, knows from his lengthy experience as a turnaround specialist who has overseen repositioning plans at several major firms. A graduate of Concordia University, Heredia practised with PriceWaterhouse in Montreal and in Europe for 11 years, during which time he developed an expertise in operational audits, with a focus on economy efficiency and effectiveness.
In 1988, Heredia was hired as CFO by Taurus Footwear, which had bought the Greb/Kodiak line. Before long, he was in charge of executing a turnaround — the result of an over-leveraged acquisition. The process took five years and involved renegotiating credit lines, moving production offshore and embarking on a brand-licensing strategy for Kodiak. As CEO, he relied on what he describes as a CA's "diagnostic skills" to objectively assess a company's strengths and weaknesses, then sell a recovery plan to the board, the lenders and the investors. What was new for Heredia, however, was being in charge rather than just serving as an adviser. In public practice, he says, "they weren't my problems. They were the client's problems. This time, being on the inside, it was far more personal."
Heredia has been through a number of turnaround jobs since then, including a stint as CFO of Peerless Carpets, which he reorganized and then sold. He recently took a post as president of Concert Industries, a troubled manufacturing firm based in Gatineau, Que., that produces materials for healthcare products. He is also a partner with Montreal firm Friedman Taub Heredia Consulting Group, which acts on behalf of the shareholders of troubled companies. "When you're looking at a problem, you need to understand what gave rise to the situation and what the solutions are," he says, attributing this analytical ability to the troubleshooting that is part and parcel of the CA experience. "In troubled situations, there's no separation between financial problems and operational problems."
Accountants who left public practice and have risen through the corporate ranks face an intriguing professional dilemma: most say they built their business careers on their financial training, but the measure of truly successful CEOs is their capacity to look beyond the numbers and take command of the broader aspects of running the company. This kind of transformation, they say, turns on three things: strategic savvy, the ability to hire good people, and the willingness to stay out of the CFO's way. Most also agree that the basis for these skills is the generalist approach CAs pick up in public practice, where they have to master the nuances of different industries and sectors.
As entrepreneurs such as Lavery and Keating know, the early days in a company's existence don't provide much opportunity for reflection. After starting Winpak, Lavery was CFO and involved in sales as well as CEO. He also got a crash course in the technical engineering aspects of packaging — something that's not on the syllabus of any accounting course. Once Winpak had established itself, Lavery began to pull back from the financial aspects of the business and concentrate on growth; today, CAs run three of Winpak's divisions — an indication of how the company sees that type of background.
Hoeg, on the other hand, who joined existing businesses, says she always preferred to think about strategic issues and how financial considerations fed those larger decisions. Although this may be easier said than done, especially in situations where both the CEO and CFO are chartered accountants.
"You probably do get in the CFO's way," confesses Mackenzie's Hunter. "Once an accountant, always an accountant." In fact, CAs who are CEOs say they are especially cognizant of the potential for conflict, and take steps to set out clear boundaries. Hoeg says she and her CFO are full partners, and she consults with him regularly. In the end, he has the latitude to manage the company's finances as he sees fit. "I don't want to have anything to do with the CFO's job at all," she says. "I was very happy to move on."
In some cases, CEOs who are also CAs find that they have to convince their colleagues not to think of them merely as number crunchers. Brochu recalls an early meeting he had with senior marketing executives soon after starting at Télébec. Aware that their new boss was an accountant, their presentation to him focused on marketing budgets and resources. "Why don't you talk about marketing with me," he told them. "They thought I wanted to hear the financial aspect of their plans. But there was more to it. I wanted to find out what they wanted to do strategically. It was quite a revelation for them. I had to make them realize that I'm not just a bean counter."
The question of how to be a successful CEO is, however, secondary to the problem of building an accounting career to the point where such options arise. For young entrepreneurs such as Samir Manji, who started the Vancouver-based Amica Mature Lifestyles retirement home chain immediately after obtaining his CA designation, advancement through the ranks of a practice was never an option. He liked accounting as an academic pursuit but was eager to put the training to use in business because he didn't care for public practice. He knew what he wanted to do with his career and advises others to take stock of their preferences. "If you truly enjoy the work related to the numbers side of things, you shouldn't be a CEO. Those that enjoy public practice should stick with it."
Others voice satisfaction with both sides of their careers. Says Hunter: "I spent 16 years of my life in public practice and 11 in senior roles outside public practice. Both are outstanding places to work."
Most point out that practice careers tend to take unexpected twists and turns, which create opportunities to change course — often as a result of job offers from corporate clients. Indeed, many CAs tend to jump into the corporate world in their mid-30s, often, as Keating articulates it, "to control your own destiny."
Heredia observes that a career in practice requires a certain amount of patience, that CAs know they won't "get to the top until you pay your dues." But Hoeg counsels young CAs to be patient about accepting offers. "I do encourage new CAs to stay in public practice for a good period of time. That's where they have the opportunity to do their formative training."
Hoeg says those who leave too early can end up as junior employees in internal audit departments — postings that often prove to be unsatisfying. Even for those who graduate out of the comptrollers' office, there are times when the CA training (and the accompanying stereotype about accountants) can be a hindrance. One example Hoeg suggests is when pursuing a career in a marketing division, where promotions traditionally go to sales veterans. "It can be a double-edged sword," she says.
Yet, ambition, temperament and luck invariably play as much a role in the trajectory of careers as professional experience. "There comes a point where personal choices and opportunities come into play," says Hoeg. Adds Heredia: "There's a lot of exciting things happening in the business world. A CA can be on the outside looking in, or on the inside."
In the end, it's all about risk. CAs in public practice spend a great deal of time counseling clients on the financial consequences of risk-taking, writ large in a company's financial statements. Leading a company is an opportunity to view it from the other side. Those CAs who've done it seem hooked on the independence, the strategic thinking and, as Hoeg puts it, the business of "making money rather than counting it after the fact." As Keating says, "If you have a passion for doing something, get after it, follow your dreams, and the money will follow."
John Lorinc is a freelance writer in Toronto. |
