The Role Of The (Bank) CFO In Value Creation: An Interview With Mark Joiner, NAB
Mark Joiner, outgoing CFO of one of the world’s top 40 banks discusses the need to redefine value and rethink business models in this interview with Carol Adams.
Mark has held Chief Financial Officer (CFO) positions at the National Australia Bank (NAB) and Citigroup Inc, prior to which he spent 16 years with the Boston Consulting Group reaching the position of Senior Vice President of Corporate Development. He is a Chartered Accountant and holds an MBA. He has served as a Director of Clydesdale Bank Plc and Standard and Poors and is currently chairman of the Board of JBWere.
What role do you think business should play in addressing the key social, environmental and economic issues of our times?
A dinosaur business has the view that the job is to maximise profit even to the point of bending the rules. I think companies that stay in that mode will struggle.
There is a paradigm shift between the way my generation thought about business and the new generation coming through. They think more carefully about who they work for. They don’t want to work for companies that do good things, they want to work for companies that do good.
The emergence of social enterprise is changing business models. It is attractive to talent and customers. You can no longer think about returns to financial capital.
How can CFOs and the accounting/finance function assist a business in broad based value creation?
CFOs have more of the means of production. The CFO needs to put a company on a path to sustainable performance. The CFO should not look short term by e.g. not investing in IT, talent etc. The modern CFO needs to think about performance over 10 years about the robustness of the business model to support long term value creation. This is not just about capex, it is more and more about reputation, attracting talent etc. The CFO needs to enable adaption of the business model to changes in attitude, regulation, availability of resources, etc.
If you can’t express known truths in a computational way people don’t know how to weigh them. They don’t know how to incorporate them into internal rate of return calculations.
I was struck by a quote in an article in The Best Australian Business Writing 2012 edited by Andrew Cornell. In the article titled ‘Bobby Kennedy and the wealth of nations and corporations’, Jane Gleeson-White quotes Robert F Kennedy as saying: “Gross National Product… measures everything… except that which makes life worthwhile.” Later in the article there is a suggestion that accountants are the one last hope for life on earth. We need hard data. If you fail to quantify you allow poor decision making.
There is a great opportunity for the profession to step up.
Jochen Zeitz founder of the B Team with Richard Branson wants an analysis of the sustainability impact of every product transparently placed on it. That would change consumer behaviour.
To what extent do other CFOs share your views?
I’m not aware of any progressive CFOs in Australia. If there are any, they are not a force externally, outside their organisations, even if they are internally. I don’t see others I speak with getting fired up by these issues. If there are any, I would like to meet them to discuss ways in which we can spark change in the dominant status quo.
What should the accounting profession do to prepare the next generation of CFOs? What else can be done to encourage CFOs to lead change?
The accounting profession could help CFOs to lift their game through education and role models. A values approach should be part of the way a CFO sees her/himself. The focus of a CFO has changed from getting the numbers right to influencing big decisions then to leading strategy. The next step should be to get them to think about a business model that will be robust over a decade.
We need widely accepted standards that integrate other considerations rather than consultants using different methodologies. The International <IR> Framework is a good start.
What do you see as the key social and environmental issues impacting on the banking sector in particular? How should the sector prepare for this?
Bio diversity – it is the canary in the coal mine. Without bio diversity the system is out of kilter, less robust. There is nothing to replace something that is wiped out if you don’t have biodiversity. Carbon and water management are also important.
At NAB we are grappling with the concept of Natural Value. Can we express a value that the natural world brings into our business decisions and our customers’ business decisions? We need to understand the risks we are taking on. Our agri-bankers have embraced this, particularly those in the biodiversity hot spots in Australia. Our work on natural value is about risk awareness, risk management and customer service all bundled together. Over fishing, impact on seawater through pollution, etc all bring risks.
Banks need to be at the front and centre of social issues. It’s key to staff engagement and customer commitment. But there needs to be some filters: What can we do that reflects our values? What would people reasonably expect us to do? What can we do that links to the bank’s core business? So, for example in 2003, we began trying to understand the consequences of being left out of mainstream banking and working to develop microfinance products.
Our staff like to do the right thing, they like to help people and they like the bank to do so too.
When we stopped charging dishonour fees for bounced cheques we didn’t know what impact it would have on business, but we felt it was the right thing to do and aligned with our values. We lost $250m in revenue through dishonour fees, but the retail bank has grown and we are gaining more customers.
We are helping the financial education and empowerment of women. Women drive 90% of big decisions in families. If we are seen to support women, it will impact their future decisions. But even if it does not, it will make our female staff feel that this is the place to work.
Isn’t there a contradiction with your earlier comment that you need to be able to measure things to get them incorporated into decision making?
Sometimes you can’t quantify things and have to take a leap of faith. We are a values led organisation so we are passed having to quantify everything. Quantifying is for those starting out where the values are not in place.
What role will integrated reporting have in change?
Integrated reporting is a public expression that all the things that make up an organisation are equally important. An integrated report leads with the idea that performance on all fronts leads to an enduring business model and performance.
How are your Board responding to it? Are they concerned about liability for disclosing strategy that isn’t then met?
Our board are taking it in their stride. It reflects how we see ourselves. If we say one thing but behave in a different way internally our staff will tell the world within a few hours.
The ability to execute strategy depends on an external environment which to some extent is beyond our control. I think it would be extremely hard to prove that directors are at fault.