ICAEW defends payout for outgoing CEOby
The Institute of Chartered Accountants in England and Wales is embroiled in another row about money, this time concerning the alleged golden handshake paid to outgoing boss, Michael Izza.
The Institute of Chartered Accountants in England and Wales (ICAEW) has denied claims it will hand its retiring chief executive a golden handshake of double his annual salary when he stands down later this year.
Michael Izza (above) is leaving after 21 years at the accounting body, but questions about the terms of his exit have clouded his retirement announcement.
Sky News cited sources indicating his goodbye payout could be twice his annual base salary of £492,000 – but an alternative source puts the figure closer to £250,000.
Industry figures also told the broadcaster that Izza’s final wage packet could include other benefits not in the top line figure.
A spokesperson for the ICAEW told AccountingWEB it “categorically refutes” claims that Izza will receive twice his annual salary when he retires from the 143-year-old institution.
“In March, Michael Izza announced his decision to retire from ICAEW by the end of this year,” a spokesperson told AccountingWEB. “The terms of his departure are in compliance with his contract of employment.”
The chief executive was awarded £630,000 last year. His base salary of £492,000 was topped up with deferred variable pay of £138,000, according to the ICAEW’s annual report.
The ICAEW said the total remuneration of the CEO would be published in its next annual report, due in April 2024.
When questioned over the transparency of its finances, the ICAEW said its reserves are a matter of public record “and we have always been transparent about them”.
“They exist to sustain ICAEW over the long term in its commitment to serve the public interest,” the spokesperson said. “A strong balance sheet makes ICAEW a resilient and enduring force for good in the economy and enables us to fund initiatives that support our strategy and are consistent with the obligations set out in our Royal Charter.”
The body invests in various non-profit initiatives, it said, including a programme that gives students from disadvantaged socio-economic backgrounds the opportunity to gain workplace skills.
ICAEW’s “hoarding” of fines in recent years, rather than dispersing to stakeholders or using the income to reduce membership charges, has irked many in the sector, however.
In February 2022, the association was forced to defend its decision not to donate the £13.5m it received in sanctions from a major insolvency to the bankrupt firm Silentnight’s pension fund following a barrage of criticism.
Political and media pressure to compensate the pension holders with the award from the Financial Reporting Council (FRC) prompted the institute to respond that it had earned a “windfall” and that the costs of its investigations are rarely reclaimed.
KPMG was fined in August 2021 for its conduct in the sale of Silentnight, which became insolvent as the business’s pension scheme ended up in the Pension Protection Fund.
Industry figures such as accounting and tax campaigner Richard Murphy have recently questioned the “extraordinary impact” of the fines levied by the ICAEW on its members which are paid to the regulator, the Financial Reporting Council (FRC).
“The FRC Conduct Committee of the ICAEW has become a profit centre for the ICAEW since 2015, as have fines received,” Murphy said. “Income from these combined sources reached £29.8m in 2020. Reserves have grown dramatically. And nowhere is there any sign that the ICAEW has any plan to put these funds to public use, which is the obligation imposed on it by its Royal Charter.”
A spokesperson for the ICAEW said until recently, many audit-related investigations undertaken by the FRC were funded by the mechanism set out in the Accountancy Scheme established by the regulator in 2004.
“Under the scheme, accountancy professional bodies paid for these FRC investigations in advance and in return, they received any fines imposed by the FRC,” the spokesperson told AccountingWEB. “All audit investigations by the FRC are now being conducted under its Audit Enforcement Procedure, introduced in 2016, by which all fines in those cases pass to HM Treasury.”
The ICAEW “would welcome the closure of the Accountancy Scheme” for non-audit investigations as well, with the money from all fines in all cases in future going to HM Treasury, the spokesperson added.
“We expect that the proposed Corporate Governance and Audit Reform Bill will enable the regulator to do this, and we continue to urge the government to bring this legislation forward at the earliest opportunity,” they said.
The ICAEW also praised the impact Izza has had on the profession during his time in charge of the institution. It said he has led calls for the government to overhaul audit and corporate governance “and continues to urge the UK Government to bring this legislation forward at the earliest opportunity”.
In January, Izza criticised the government for stalling on its promise to clean up a sector that had become mired in sleaze and scandal, noting that the intended changes had been “kicked into the long grass” five years on from the low of the Carillon debacle.
“Michael has successfully led the transformation of the organisation to the world leader that it is today,” added Julia Penny, ICAEW’s outgoing chair. “He will be greatly missed by us all and we are very grateful for his dedication to the organisation and his many achievements during the past 21 years.”
A search for Izza’s successor is ongoing.