Why merge?

By Robert Colapinto 
Illustration: Brian Cronin

First came the news. Next came the questions thick and fast. Now here are the answers

The proposed CA-CMA merger and the CA-CMA-CGA merger in Quebec have drawn a tidal wave response from CAs around the country. The CICA and the provincial institutes have been inundated with letters from members on the topic. Most CAs were stunned by the seemingly radical change the May 11 mass e-mail proposed. "I first thought that it was one of those joke e-mails," laughs Ed Miner, a management consultant for the federal government. Miner and his colleagues in industry and public practice are still digesting the details of the proposition, "but I'm ready now for a few questions."

And until the 16-year CA veteran hears much more about how this extraordinary process is going to move forward and why, he will be far from ready to put his X to any merger ratification. A few concerns come to mind: what's the business case for this seemingly drastic move? How compatible are a CMA's skills and experience with the rigours required of the CA profession? And who are these CMAs anyway? "Terms like "grandparenting" are being  tossed around a lot as well," Miner says. "Dilution" is another worrying word in many of the e-mails flooding the CICA and the provincial institutes' offices. So for Miner and a number of other CAs, some crucial questions remain unanswered.

"Like any CA worth his salt, these guys are not going to sign off their good names and profession's reputation and future without access to and analysis of all the facts, figures and spreadsheets they'd expect to be available in any audit they might run into in their daily working lives," says Brian Hunt, CEO of the Institute of Chartered Accountants of Ontario and a member of the Council of Senior Executives (CSE). "We know this because we are them. We're [a] part of the premier profession and damned if we're going to wreck it."

Since the announcement of the proposed merger, the CICA and the provincial institutes have been actively ramping up their efforts to provide the membership with hard facts on the foundational reasoning for it. "Look, we're not fooling ourselves," says Hunt. "Although we think we have a good case for merger and we have reasoned explanations and data to support this move, we know that a number of CAs will still howl 'Nay' to it no matter what. It's human nature." Hunt's mission, as he sees it, is to take a strong business case for merger and disentangle it from the heated emotion of the moment.

A number of the town hall meetings going on all over the country have reflected much of this passion. "These are initial stages," says Hunt, adding that the profession is preparing circulars, e-mails and other communications that will provide "more facts and more facts." Steve Glover, CEO of the Alberta institute and chair of the CSE's Strategic Planning Task Force, is presently finishing his 100-page strategic analysis of the CA market, the results of which support the viability of a merger. "I suspect most members will only want to view abstracts of certain sections to satisfy their concerns," he says. "But the whole thing, our complete rationale, data and research will be available."

This is a relief to Brian Galvin, FCA, MBA and a distinguished academic with decades of moulding young minds at the U of T and Queen's. He has attended two meetings chaired by Hunt and has found them informative and thought-provoking, but not as convincing without Glover's research and conclusions on the state of the profession. "Thus far, I have been having trouble with transparency," he says. Glover understands, aware that his report and accompanying documents will help assuage many fears, from dilution to the sensitive issue of grandparenting. "I admit there has been some reluctance here, because much of what we have to say describes our weaknesses and threats to the CA, as well as strengths and opportunities. And there is some concern," he says, "that our competition will use the stuff against us to get an edge in the marketplace. But having presented at a few raucous town halls, I know we have to be as transparent as possible."

CAs at the last town hall Galvin attended complained that they felt rather uneasy, having worked their guts out to get their designations only to see the treasured certification grandparented to another accounting body. "Here's some CMA coming in and having it handed on a platter," he recalls another person saying. "I and others find this very unsettling."

Hunt, however, points out that the impact of the proposed changes on members in public practice will be negligible. The merger does not intend to make it any easier for CMAs. Those who wish to practise as public accountants will have to go through a regulatory and qualification process that is equivalent to what CAs have to pass through in the audit and assurance education stream, unless they already have the right to practise under provincial law.

Hunt insists there will be no lowering of standards. The qualification process will be as rigorous with the merger as it is to-day, and in fact, he says, it will be even more so. The merger will not dilute the CA designation in the eyes of the market because it is well documented that CMAs have repositioned themselves in the management accounting market and are competing with CAs for positions in all but the biggest public firms.

He continues that the CA designation has evolved over the past 150 years. "If we look back a few decades, we find CAs who didn't require a university degree — and there are a number in top positions today who don't have it. Indeed, we are a patchwork of various levels and kinds of education, training and experience. Yet, that's not stopped us from being the gold standard in the field." Every change in the profession's structure has fomented some sort of dissent or concern. "Going from a syllabus to a competency map, changes in the practical experience requirement, major changes in the UFE — they all required a look to the future, not the past," he insists. "Who is going to suggest old-guard CAs, who have not trained and been educated in the new environment, should not be allowed a place in that future?"

Galvin can accept such a rationale but is worried that, without timely release of information such historical and implied empirical support for further change, will be lost on a busy membership. He reminds them that when CAs were first presented with the university degree requirement it was called the 1970 Concept. "Well," he laughs, "it's now known as the 1972 Concept because, at the first bite of the cherry, the membership rejected it, and again, because they didn't have enough information."

Changes within the profession have been ongoing since its inception. Galvin and Hunt are of a vintage that saw the certified public accountants merge into the profession in 1962; furious questions about the gutting of the profession were raised until the membership was offered all the necessary information to make its informed decision. Recently, concerns about dilution were also voiced in Ontario when the Public Accounting Act's licensure reform legislation allowed for the de-coupling of certification and licensure. There was agonizing debate over the effect of such a fundamental sea-change in education and training in that province. The PAA [Bill 94] was accepted, in part, because it brought an end to the dreaded "funnelling" logjam of training in audit and assurance and guaranteed that no other accounting body could weasel its way into the A&A stream without its members fulfilling the high standards of public accounting expertise required of the CA brand.

"We simply have to communicate better," says David Smith, president and CEO of the CICA, as he considers Ontario's PAA and its relationship to misconceptions about a CA-CMA merger. "Some still feel this merger will somehow derail the Public Accounting Act," he says. "We have to be more forthright and clear that this kind of legislation actually opens the door for merger." According to Hunt, "This legislation paves the way for us to incorporate a management accounting stream into the CA education program, as we would inevitably do, with or without merger, as this is the additional area of expertise the marketplace increasingly demands of us."

The CSE's oblique assertion that CMAs are worthy of grandparenting into the designation because they have strong expertise in strategic management is met with some skepticism by CAs in industry. "This skill-set may be their forte, but CAs also have a long history of skilled management accounting — although not as in-depth with one company as CMAs," says Miner. Still, at the town halls most are willing to welcome new blood to this stream within the Competency Map, if they can be convinced that, overall, CMA inclusion will not dilute the brand.

The concern over dilution (and its validity) within the profession varies erratically from province to province. In Quebec it seems far less of a concern. "As you may know, Quebec is in merger talks not just with its CMAs but the CGAs as well," says Daniel McMahon, president and CEO of the Ordre des comptables agréés du Qué-bec. "And the question of devaluing the brand is less intense here."

A number of Ontario and western Canadian CAs have wondered why the CICA has not followed Quebec's strategy of CGA inclusion. McMahon explains that the Ordre is attempting to create one united body because its CA, CMA and CGA candidates all receive the same education in the first two or three years of their post-secondary education. "In fact," he explains, "they sit side by side in the same university classroom, receive the same information, tests and exams, until the last year when each student makes that fateful decision to follow one of the three paths." And once certified, the same regulating body, the office des professions, governs all three accounting entities. In the end, there is a kinship entirely foreign to similar accounting candidates in the rest of the country. Friendships, trust and respect start very early on, McMahon says. "Add the superior certification results CGAs produce in their national exams compared to CGAs in the rest of the nation," he says, "and it just simply becomes impossible not to include them with the CMAs in our merger talks."

Yet it is fair to say that CAs have long considered the CMA and CGA monikers to be far lesser designations, ones that are not comparable to the CA in excellence. "This certainly has been my impression over the years," says Roland Bettesworth, a plant controller and a CA who is extremely suspicious of the bona fides of some of the CMAs he has encountered. "As I see [CMAs], they are definitely professionals and skilled specialists, but only to a point. And that point is well below the expertise of my designation."

Bettesworth admits he knows little about what hoops CMAs had to jump through before certification. "All I know is that mine were ringed with fire," he laughs. He simply wants the information that will assure him that CAs are not "trading down," and that the world out there knows this. "They talk about confusion in the marketplace with all these accounting bodies," he says. "Well, there'll be real confusion if the new profession doesn't make it clear to employers of its newest high standards and the level of excellence of these new prospective employees."

Bettesworth values his CA because he was assured it would provide him with a "differentiating edge" over his competition in industry. "Hell, I don't want people asking me if I'm a CA or a post-merger CA."

Hunt is emphatic in his response to this concern: "OK, let's be clear. Employers and peers look at the man or the woman, at their achievements, at their history. Someone's value doesn't start and stop at the CA or CMA or CGA or MBA tacked on to the end of their name."

This perception of CMAs is most widely shared by CA students and those recently entering or seeking entry into the workforce. "The young people who have only been in public practice and had one job after," says a sympathetic Smith, "have a psychological hurdle to jump. The tough memories of articling and the UFE is much fresher, and there's concern over an ex-CMA saturated market. It'll be our job to ensure them of the facts; and these are that this merger is proposed to provide a guarantee of a future, and a future in the highest positions in the marketplace."

Glover says this future will rely on providing CAs and their markets with more highly defined skill-sets. "If a company is doing a placement for a CFO and that person is to head up the corporate reporting function, then the CA is still the professional of choice. But," he says, "if it wants that CFO to be more oriented to new information systems and new technologies that integrate operations with accounting systems, CAs now have to compete with others." Glover looks back to the 1990s when business focused on the stock markets and new types of financial transactions. "Given that focus," he says, "it's not surprising a significant number of CFAs, MBAs and CMAs displaced CAs as CFOs."

As to the threat of the influx of CMAs over-saturating the market and a resulting fall-off in salaries, the CSE task force offers some hard numbers on the graying demographic trends facing the profession. As of 2003, a startling 23% of the workforce was 55 and older. The task force predicts the profession will produce an average net growth of only 500 new members between 2003 and 2008. By 2008, it predicts net growth will begin its slide to a catastrophic zero growth. These figures reveal that in the next 10 years, a smaller percentage of members will have to carry all the costs of supporting the profession. The picture looks even more troubling when you factor in the bottlenecks in articling positions: anecdotal evidence suggests in some areas of the country there are more students applying to the CA program than there are articling positions.

For Tim Forristal, the CICA's vice-president of education services, the greater the mystery about the CMAs and what they do, the greater the chance his fellow CAs will not support the merger. "The CMAs' foundational knowledge, for example, varies around the country," he says, "and that's going to be a challenge as we put flesh on the [certification] model that was included in the materials provided in the May 11 merger announcement. The CA, CMA [and CGA] foundational knowledge is identical in Quebec, but at the other extreme, there's BC, where they still don't have a uniform requirement for a university education. That will have to change." Forristal is unhappy with the rumour that the Competency Map is to be scrapped because of the merger. "Scrapped, no," he says, "modified, of course."

The multi-streamed model will be in force whether a merger goes forward or not, he says, but the Certification Committee may well adapt some of the existing competencies from the CMA body's current model. "I was on the strategic planning committee," he explains, "and in terms of the data and analysis and the research in how to deal with the narrow funnel and lack of growth in our profession, we were already looking for ways to attract a broader spectrum of students. The three streams just happen to conveniently accommodate the new profession." The challenge will be to identify how much education is required in rigour and depth between the three streams — audit and assurance, management and taxation.

Galvin, ever the stickler for detail, wonders not just about the CMAs' qualifications, but also at the overall process of conversion to a management emphasis. Although he recognizes it will be costly to build a new generation of strategic managers in-house, he wants to see some numbers. "Can't we see a cost-benefit analysis of the two options so we can make some kind of reasoned decision?" he asks.

For Smith, cost is one thing, time is another. "I just don't see how we can develop this stream from within in a timely manner," he says. "In so many ways, we are on the clock in terms of providing the marketplace with the number of CAs needed to compete with other professions vying for management-related positions." It is generally agreed that more than half of CAs work in industry and demand for CAs is increasing in all market segments. Moreover, the CSE task force asserts that the number of CAs reaching the heights of vice-president of finance has degraded over the past 20 years to about 55% from 80% — a seemingly clear sign that both the stifling "funnel" effect and shortages have taken a toll on the impact of CAs in an increasingly complex and diverse marketplace. For Galvin, this precipitous decline can as likely be blamed on other factors. "The MBA schools churning people into finance for one," he offers. "This is yet another example of where research and statistics would offer us a better sense of what's going on out there." Glover is more than willing to agree that an influx of MBAs is a factor, and he is ready to offer some numbers. "We have only about 1,700 CAs coming out a year compared to 6,000 MBAs," he says. "And about half of them are MBAs specializing in finance or accounting areas that are closely aligned with us." It is Glover's intent to use the "new, larger and stronger" CA brand to compete with these MBAs. "It's the method we'll use to get the best and brightest to take the new CA route as opposed to the MBAs."

The CSE also believes CMAs have had just as great an impact on the CA's predominance. Hunt is in no doubt that the CMA designation has made quantum leaps in its perceived value in industry over the years, and it is these professionals that are directly competing for dominance in management accounting with their CA brethren. "At least within industry, CMAs are seen as an increasingly valuable human resource," he says. "They now have the education, training, competencies and standards worthy of competition."

Since his first town halls, Glover has noted a definite shift in the sentiment of shock and awe. "Emotions are being parked at the door and they're there to hear the argument," he says. "Still, I sense that members are looking for one silver bullet, the one convincing argument that will clarify the reason for merger. Problem is that our strategic analysis requires one to look at the compilation of strengths and opportunities as well as the threats we face. There's no one silver bullet; there never is."

The creation of one designation and one governing body will not blur the distinctive quality of the CA, whatever his or her specialty, says Smith. The challenge of identifying a secure future for the profession is his paramount concern, but it is not so overwhelming that he will allow for a rash, half-baked process as merger talks move forward. "We're a member-driven profession and proud of it," he says. "We will defer to them. But I'm convinced that in not too many years, with the CA still the dominant designation in the market, they'll look back on all this and wonder at all the hullabaloo."

THE CMA — HOW IT COMPARES The CMA designation is the brainchild of the CA profession no less. In 1920, it was recognized that the relatively young chartered accountancy field was not suited to fill specialized needs in the marketplace for professional decision-makers in management accounting. In more recent times, the CMA has been called on to develop both non-financial and financial strategies and business solutions for a wide variety of needs. In the past 15 years, CMAs have upgraded their brand to include expertise in marketing, information technology, human resources and strategic financial planning. Hence, the profession's catchy motto that the brand exists to create value, instead of measuring it. The development of these skills has required a revamping of the CMA certification process. This process, although different from the CA program, is comparable to and compatible with the senior profession and its present needs. Prospective CMAs may follow three routes to certification, including a joint CMA/MBA program and an executive CMA program for those with 10 to 20 years of practical business experience in upper-level management and finance roles. But the Primary Certification Channel is the common route to a CMA designation. It has a university degree requirement, 17 prerequisite courses, and a two-day uniform entrance exam to determine entry into the CMA Professional Program. About 60% of these hopefuls pass and move on to the two-year CMA Strategic Leadership Program and its final uniform national exam. The newly minted CMAs apply their skills within a rigorous two-year practical experience requirement. Lifelong continuous learning and development is mandatory in almost half of the CMA institutes/jurisdictions and the brand is subject to stringent rules of professional conduct. Comparable to but different from CAs, the modern CMA adheres to a laudably high level of professional standards in education, certification, discipline and integrity.

Robert Colapinto is a Toronto-based writer