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You’re fired…

How many CEOs of top global companies were replaced last year?

Well, the answer may surprise you and what also may surprise you is the reason they lost their job.

PwC have been keeping track of the movements of the CEOs of the largest 2,500 global publicly listed companies since 2000 and the most recent data for 2018 has been released and it shows some interesting things.

In 2018 the number of departures of CEOs reached a record level with nearly 18% being replaced (up from 12% in 2010).

It was the reason for their departure though which raised some eyebrows.

CEOs can leave their jobs for a variety of reason and PwC categorised the reasons as planned (e.g. they were due to retire), forced (e.g. they did something a bit “naughty”) or M&A (e.g. they were no longer needed due to a merger or acquisition).

The latest split showed the 18% of departures as:

Planned – 12.0%

Forced – 3.6%

M&A – 2.0%

Digging a bit deeper though into the forced departures shows some worrying reasons.

Historically the main reason CEOs were forced out was due to poor results but for the first time the largest group of CEOs forced out was due to integrity reasons.

In 2018, 39% of those forced out were due to integrity reasons. Ten years ago in 2008 the corresponding figure was only 10%.

These integrity issues could include scandals such as improper conduct, fraud, bribery, insider trading, environmental disasters, misleading CVs, and sexual indiscretions, according to PwC.

So, in summary more CEOs are being fired and the main reason is integrity issues.

All in all, a pretty poor performance…

Dog seized to pay tax bill…

It’s always best to keep up to date with your tax affairs. Although most people don’t enjoy paying their taxes, it’s the law and if you don’t pay there can be serious consequences.

Over in Germany reports have emerged that make it fairly clear that you don’t mess with the German authorities when it comes to taxes.

An unnamed lady was behind in paying her taxes.

The authorities sent a debt collector around to collect whatever assets the family had to settle the tax liability.

According to the lady in question, two valuable items were identified.

One was the wheelchair of her paraplegic husband. Now, before even getting into the rights and wrongs of taking a disabled person’s wheelchair to settle debts, luckily for the family it was not an issue as it turned out that it was owned by a local association and was not the property of the family so the debt collectors couldn’t take it.

The authorities though have denied they tried to take the wheelchair and a spokesman said “Mobility aids for the disabled are absolutely exempt from being seized as collateral.”

One item though which was not exempt from being seized was the family pet.

Alas for Edda, the family dog, she was taken by the debt collector.

Edda is a pug and they are a pretty fashionable dog breed at the moment and the debt collector took the dog as settlement for the debt.

Edda was then listed on eBay and was sold to Michaela Jordan, a local police officer for €750 (approx. £650).

There’s a twist in the “tail” though in that the new owner has now sued the local authorities who sold Edda as apparently, she was advertised as being a healthy dog but has required veterinary treatment costing approximately €1,800.

We wish Edda well.

Would you send a selfie of your legs for a bonus?

I’m all for equal rights in the workplace. It doesn’t matter whether you’re male or female. It doesn’t matter what the colour of your skin is or your religious preferences. The only thing that does matter is whether or not you can do your job.

Not everyone shares the same view though and in Russia, aluminium manufacturing company Tatprof is offering a bonus to its female employees if they wear a skirt and makeup.

Oh, and to get the bonus they have to send a selfie of them showing their legs and make up to their (mostly male) bosses.

The bonus is 100 Russian Rubles (approx. £1.25) and it’s been reported that 60 people have so far sent in selfies to get the bonus.

Some may say that there are 2 sides to the argument.

The first, and probably most obvious, is that this is a step backwards in the workplace. A person should be judged by their ability to do their job rather than what their legs and make up look like. It’s 2019 for goodness sake and not the 1950s.

A counter argument though was put forward by Anasasia Kirillova, who works for the company’s department of corporate culture and internal communications who said that “Many women automatically put on trousers, so we hope that [the campaign] will increase our ladies’ awareness, allowing them to feel their femininity and charm when they make the choice of wearing a skirt or dress”.

It seems the message is coming from the top of the company.

According to Ms Kirillova, Tatprof’s male CEO Sergei Rachkov “really wants to maintain the female essence in every female employee of the company, so that young women do not have male haircuts, do not change into trousers, so that they engage themselves in handicraft, project all their warmth into raising children”.

Now, I’m personally not convinced by this counter argument but what about opening up the bonus option to everyone in the company?

What about offering the bonus to men as well as women who send a selfie of themselves wearing a skirt?

Best to take it back…

Most of you have probably had an interview. In fact, some of you may have had a number of interviews but a boss of one of the top companies in Australia has recently disclosed a pretty unusual way of deciding who not to offer a job to.

Trent Innes, who heads up Xero in Australia said that he will greet the person when he or she arrives for the interview and then take them to the kitchen to offer them a drink before heading to the meeting room with the drink. Even if they aren’t tea or coffee drinkers they will generally walk away with a glass of water.

He explained in the Venture Podcast with Lambros Photios that after taking the drink back for the interview “one of the things I’m always looking for at the end of the interview is, does the person doing the interview want to take that empty cup back to the kitchen?”

He explained that what “I was trying to find was what was the lowest level task I could find that regardless of what you did inside the organisation was still super important that would actually really drive a culture of ownership.”

He went on to say, “You can develop skills, you can gain knowledge and experience but it really does come down to attitude, and the attitude that we talk a lot about is the concept of ‘wash your own coffee cup’.”

That’s quite a smart move by Mr Innes as he said that attitude was the most important trait he looked for when hiring people.

He said that “Especially in a fast growth company or a start-up environment or scale up environment – you need people with a really strong growth mindset and that comes back to their attitude.”

So, how many interviewees do you think offered to take their cups back?

Perhaps surprisingly, the number of people who offered to take their cup back to the kitchen was pretty high. According to Mr Innes only 5 to 10 per cent of the interviewees didn’t offer to return their empty coffee cup back to the kitchen.

So there you go. If you’re attending an interview and you go to the kitchen with the boss to get a drink, it’s probably a good idea to offer to take the cup back.

Superman helps hackers.

It’s a sign of the times that hackers are constantly on the lookout for weaknesses in people’s computer security systems.

Individuals can go a long way to making things more difficult for the hackers by ensuring they have up to date anti-virus software in place and that their passwords are good passwords.

But what is a good password?

Before answering that, let’s look at some bad passwords.

The National Cyber Security Centre (NCSC) has just released a report on some of the most hacked passwords. They analysed hacked accounts where details were being sold by hackers.

Last year an astonishing 23 million people around the world with the password “123456” were hacked.

You should really hang your head in shame if your password is 123456 as it’s very easy to hack into.

OK, what about the name of your favourite football team as your password. Would that provide you with more protection?

Alas not as football team names are very common passwords.

Roughly 280,000 accounts were breached last year with the password “Liverpool”. 

“Chelsea” and “Man-Utd” passwords were breached 216,000 and 59,000 times respectively.

Using the names of your favourite music artist also isn’t a good idea.

The most popular passwords using the names of music artists are “blink182” and “50cent” (these are probably popular as they satisfy the need to have letters and numbers in a password).

If you’re a fan of superheroes then avoid Superman, which was the most common superhero inspired password.

So, onto good passwords.

According to Ian Levy, the Technical Director of NCSC, “Using hard to guess passwords is a strong first step and we recommend combining three random but memorable words. Be creative and use words memorable to you, so people can’t guess your password.”

There you go.

As easy as 123 or should that be, as easy as “123456”…

Would you stand for this?

Do you work in an office? Do you sit down at your desk most of the working day?

If you do, then it may be a good idea to ensure you stand up and move around a bit during the day.

Recent research has estimated that 1 in 9 deaths can be blamed on sitting down for at least 6 hours a day.

Let’s pause for a moment as that’s a shocking figure!

In the UK alone that would equate to thousands of people dying every year due to lack of movement and the cost to the National Health Service is estimated at £700 million annually.

Research published in the Journal of Epidemiology and Community Health estimated that 17% of diabetes, 5% of heart disease and 8% of lung cancer cases could be avoided with less sitting.

Leonie Heron from Queen’s University Belfast was the lead author of the study and said “You need to put your body under a little bit of stress to maintain a healthy heart and whole system”.

She went on to say that “It suggests that it is bad for our health how our working lives are structured for a lot of people. You can attenuate that risk by being more active in your leisure time, but it’s something employers can look at. Maybe they should be providing opportunities for employees to be active during the day, perhaps making sure people move every hour…or providing opportunities during lunch and coffee breaks.”

My guess is that a lot of you do sit down for at least 6 hours a day working at your computer. It’s probably a good idea therefore to remind yourself to get up and move a bit when you can as it will be good for your health.

Unless, that is of course, you’re getting up to walk out of the office to have a cigarette…

Causing a bit of a stink…

There’s no room in the modern workplace for bullying and intimidating work colleagues.

Companies should have anti bullying practices in place and in most countries around the world there are laws to protect people who are being bullied.

The Oxford dictionary defines bullying as seeking to “harm, intimidate, or coerce someone perceived as vulnerable” but in some situations it’s difficult to decide whether or not an activity is actually bullying.

Over in Australia a worker claimed that he was bullied by a colleague who repeatedly broke wind at him.

David Hingst claimed that his ex-colleague Greg Short would “lift his bum and fart” on him up to 6 times a day.

Mr Hingst didn’t take this well and sued his former employer for A$1.8m (nearly £1m).

Now, let’s pause here for a moment and hold our breath.

Bullying in the workplace is clearly wrong but claiming damages of nearly £1 million when somebody breaks wind in front of you does seem a bit steep.

Mr Hingst was adamant though and last year took his case to the Supreme Court of Victoria.

The Court found that there was no bullying.

Mr Hingst didn’t agree with the decision and appealed against it and last week the appeal was heard by the Court of Appeal.

Mr Hingst reportedly told the Australian Associated Press that “I would be sitting with my face to the wall and he would come into the room, which was small and had no windows. He would fart behind me and walk away. He would do this five or six times a day”.

Mr Short, the alleged perpetrator of this “crime” had said that he may “have done it once or twice” but denied doing it with the intention of distressing or harassing Mr Hingst.

Alas for Mr Hingst, the Court of Appeal rejected his appeal and found there was no bullying.

Mr Hingst though isn’t taking this sitting down and reportedly has said that he plans to appeal to the High Court.

Room for improvement at the Big 4…

Oh dear. It certainly wasn’t a great performance by the Big 4 when it came to their annual inspections by the Financial Reporting Council (FRC) in the UK.

The quality of the audits performed had decreased and for KPMG in particular, according to the FRC “there has been an unacceptable deterioration in quality”.

The FRC is an independent body who check the quality of the audits undertaken by the 8 largest firms in the UK. Think of it as “auditing the auditors”.

They rate the quality of the audits undertaken using the following scale:

• Good (category 1)
• Limited improvements required (category 2A)
• Improvements required (category 2B)
• Significant improvements required (category 3)

Overall results from the most recent FRC inspections during 2017/18 show that 72% of audits required no more than limited improvements (compared to 78% in 2016/17). Or to put it another way, 28% of the audits reviewed required improvements (category 2B) or significant improvements (category 3).

For KPMG though things were particularly bad. When the FRC looked at their audits within the FTSE 350 (the largest 350 companies on the London stock exchange), they found that 50% required MORE than just limited improvements (compared to 35% in the previous year).

If you take a step back then this really isn’t very good is it. If you went to a restaurant where 50% of the meals served required more than limited improvements you’d be unlikely to go back to that restaurant again and I’m sure that restaurant wouldn’t be in business for much longer.

KPMG are going to face increased scrutiny by the FRC in the next round of inspections. 25% more KPMG audits will be examined over the 2018/19 cycle of work and the implementation of their Audit Quality Plan will be closely monitored.

So what went wrong?

The FRC noted that there were a number of factors. These included a failure to challenge management and show appropriate scepticism across their audits.

Stephen Haddrill, CEO of the FRC, said “At a time when public trust in business and in audit is in the spotlight, the Big 4 must improve the quality of their audits and do so quickly. They must address urgently several factors that are vital to audit, including the level of challenge and scepticism by auditors, in particular in their bank audits. We also expect improvements in group audits and in the audit of pension balances. Firms must strenuously renew their efforts to improve audit quality to meet the legitimate expectation of investors and other stakeholders.”

Whilst the level of quality found within the Big 4 audits fell, the performance of the mid tier companies improved. The FRC inspections on BDO, GT, Mazars and Moore Stephens showed general improvements in the quality of inspected audits.

The FRC’s Audit Quality Review is explained in more detail here and if you’re interested in reading the reports on the individual firms they can be found on the following links:

BDO LLP Public Report 2017/18 (PDF)

Deloitte LLP Public Report 2017/18 (PDF)

Ernst & Young LLP Public Report 2017/18 (PDF)

Grant Thornton LLP Public Report 2017/18 (PDF)

KPMG LLP Public Report 2017/18 (PDF)

Mazars LLP Public Report 2017/18 (PDF)

Moore Stephens LLP Public Report 2017/18 (PDF)

PwC LLP Public Reporting 2017/18 (PDF)

Would a good liar make a good accountant?

Do you have children? Have they ever told you a lie? Even a small teeny weeny lie?

Well, if they have then although you may not be particularly pleased with them, it may actually mean that they have good memories and excellent thinking skills.

Psychologists at the University of Sheffield tested 135 children and found that those children that lied performed much better than the honest children in the group.

The children in the study were aged between 6 and 7 years old and during the study they were given a trivia game. The answers to the trivia game were on the back of the card which they had been given. Initially, each child was in a room accompanied by one of the researchers but the researcher then left the child alone with the card with the answer on the back.

Before leaving the room the researcher told the children not to look at the answer but what the children didn’t know was that when they were alone in the room there were hidden cameras which were monitoring whether they would look at the answers on the back.

25% of the group subsequently cheated and looked at the answers on the back of their cards but claimed that they hadn’t cheated when the researcher returned to the room.

At a later stage, all of the children had to perform a separate memory test and the research found that the children who had lied performed significantly better than those children who didn’t lie.

Dr Tracy Alloway, project lead from the University of North Florida was also involved in the research and said that “this research shows that thought processes, specifically verbal working memory, are important to complex social interactions like lying because the children needed to juggle multiple pieces of information while keeping the researcher’s perspective in mind”.

This has got me thinking as a lot of the readers of this blog are accountants or studying to be accountants.

“Thought processes”, “verbal working memory”, “juggling multiple pieces of information” and “keeping other people’s perspective in mind” are all skills which many accountants need.

Does this mean that you would make a good accountant if you were a good liar when you were a child?

Whatever your answer is, I’m not sure I would believe you…

EY confirm the women were real

Some of you may have heard of the website Ashley Madison.

For those of you who haven’t heard of Ashley Madison, it’s a website where married people can register to meet other married people without their respective husband or wife knowing and then have an affair.

In fact, some of you may be registered members of the site (this does raise the question that if you are a registered member of Ashley Madison and are reading this business blog then at the moment you are finding business stories more interesting than having an affair so well done on that).

Ignoring the rights or wrongs of a website facilitating affairs, Ashley Madison has had an up and down ride over recent years.

Back in 2015, they were hacked. As a result the personal details of their users were leaked and there were a lot of users. When I say “a lot”, there were 32 million users.

The situation got worse for Ashley Madison though.

As well as their systems being hacked and details of who had signed up being leaked, it turned out that the vast majority of users were men and of the women who had signed up a significant proportion were Bots (i.e. a piece of software) or prostitutes.

All in all, not great selling points when trying to encourage new members.

In an attempt to build up trust (if trust is a relevant word for people looking for affairs that is…), Ashley Madison commissioned Ernst & Young to cast an eye over the membership data and see if it stood up to scrutiny.

There were some interesting results including the fact that 15,542 new members signed up each day in 2017 (that’s nearly half a million new users per month).

There were also more active women on the site than men. Globally, the ratio of active males to active females was 1 to 1.13 but there were variations on a regional basis ranging from Australia where the male to female ratio was 1 to 0.78 and Columbia where the ratio was 1 to 2.39.

Ernst & Young also reported that “The Client had used Bot programs to generate message activity with paying customers in prior years. The Bot programs were decommissioned in 2015 and our procedures related to calendar 2017 found no evidence that the use of Bot programs previously operated had been reinstated.”

So, in theory the registrations are human and there’s no danger of falling in love with a bot.

The full Ernst & Young report can be found at www.ashleymadison.com/2017report but I would be careful as if you’re viewing this on a computer at home and your husband or wife finds you’ve been visiting ashleymadison.com then there could be some difficult questions to answer.

Then again, if you start typing in the website and your web browser recognises it from a previous visit to that site then maybe…