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Are MBAs more preferred than CAs as CFOs - a reality check?

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Are MBAs more preferred than CAs as CFOs - a reality check?

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The Ken came out with this article comparing CAs with MBAs from IIM A, B, & C. https://lnkd.in/gK5_WTnq

As usual, a lot of Tadka and Masala were added to headline numbers. Felt like the author began writing with a pre-determined conclusion & went around searching for data to fit the conclusion. Absolutely no nuance to cover all sides of a story; hence in this thread I too am intentionally choosing to highlight only Incorrect Assertions (IA) made in the article

  • First up: I finished CA 20 years ago, am also a CFA & grad of ISB Hyderabad
  • Worked as Head of Finance of a startup & also in a senior position in a Listed Company
  • Teaching students of CA, CMA, CFA & ACCA for the last 6 years in my own start-up indigolearn.com

IA 1 – People who currently are CFOs in the top 100 NSE listed entities who are either MBAs or CAs would have graduated 20-25 years ago at least. Muddying waters by talking about the number of CAs in CFO positions of Nifty companies and following it up with CA student enrolments statistics immediately can only be termed as disingenuous.

IA2 – IIM A,B & C have candidates of various streams; one should exclude non-Accounting / finance-related roles and then start comparing only fin + accounting candidates' stats with those of CAs. Else, the exercise is meaningless.

IA3 – Even in Finance & Accounting related roles – how many MBAs join in Accounting / Auditing / internal Auditing roles - please use that data if available to compare, instead of comparing aggregates.

IA 4: IIM A,B & C are premier institutions; you are comparing them with total CAs graduating/getting placed in a year, quite a few of whom take multiple attempts to clear. Please choose the top 1000-1500 CAs who are typically first/second attempts and then compare; otherwise please compare placement data of 10,000 CAs with 2,10,000 MBA graduates from 5100 MBA colleges in India

IA 5: In CA Entry is easy & Exit is tough – IIM ABC have a reasonably tough entry barrier; if the comparison must be made, compare with top 50 CA rankers only or first/second attempt pass students only, else comparison is not on a like-to-like basis.

IA6: Investment banks (where a lot of top-tier Finance focussed MBAs do join) pay high salaries for which skills required are different. Regulatorily, CAs are not required to have those skills because their core roles are auditors & accountants. If some CA does Join an I-Bank that is not by design but by his / her own actions. What has been done in this article is a comparison of the pay of Heart surgeons with that of General physicians when roles are completely different, despite both being doctors.

IA7: Prof. R. Narayanaswamy has very strong views against the current mode of functioning of the institute – not going to merits of the same; but to include only his comments without getting some from the other side to counter his points is unfair

IA8: The statement that CAs are losing to graduates of ACCA, CIMA, and CFA – betrays a lack of knowledge of the content of all these courses. Firstly, ACCA largely consists of students who are not interested in taking up the rigor of the CA course. India ACCA topper does not make as much as India CA All India ranker. Roles for which ACCAs and CAs are selected are not 100% overlapping – max overlap maybe 50% - again as I said comparison is not apples to apples

The statement that CFA is gaining popularity at the expense of CA is like claiming Ph.D. in Biotech is better than MBBS because both are in the same domain of science. But are they even in direct competition? CFA curriculum is oriented towards the financial markets and the CA curriculum by statute is focussed on Accounting & Auditing – how can one compare? Secondly, the number of total students in CIMA+ ACCA +CMA (US) in India is just about 50K whereas the total number of CA students is close to 10 Lacs. The dent in CA enrolments, if any, due to these courses is not meaningful at the moment.

IA 9: BCG recruits CA All India Rankers directly; Bank of America Recruits CAs directly outside of campus placements–the article states that these employers along with some others) recruit from IIMs but do not participate in ICAI placements is factually correct, but the undertone of the statement conveys that such recruiters don’t recruit CAs at all – could not be further from the truth – it is like Yudhishthira saying “Aswathama Ataha Kunjaraha”

Finally, commenting on the role of a CFO ( I know this may upset a lot of friends): The role of a CFO consists of Stewardship (i.e. focus on all things Accounting, Auditing, Compliance, Controls, Financial Management, etc) + Business orientation. In my humble opinion, the CFO job is 51% stewardship & 49% Business. There are periods of time when the balance changes, but it reverts to the mean soon.

The accounting function exists because of the business & not the other way around & hence the business is the priority for an organization. But for running that business there is a CEO & there are business heads – But for an Accounting function in an org, there is only CFO and no one above that – to dilute that function to have business focussed CFOs for extended periods of time is to invite trouble.

While there will be good non-accountants who may understand accounting, most of such non-accountants who become CFOs do so on the back of a strong financial controller who almost always is a CA. A CFO is not only expected to have knowledge of accounting but also, tax laws (direct & indirect), the Companies Act, internal controls, and Auditing processes. MBAs (without a CA background) do not have these skills.

Coming to the point that several top 100 NSE companies have several Non-CAs as CFOs- yeah, but most of the legwork is done by CAs below them and the role of CFO in these companies has been converted to CFO-Business instead of CFO-Accounting. This is a risk to the CFO as well as the Company because the one (CFO) who is responsible for the discharge of a regulatorily mandated function is depending on subordinates for critical aspects and does not have an inherent knowledge of key areas. In my opinion, the mean will revert as and when the Board / Audit Committee composition changes or the CEO changes.

 

 

Image by https://www.freepik.com/free-photo/citruses-apples_1504087.htm

Sriram Somayajula
09-Apr-2023
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