Should your (or indeed an) accountant be a member of your board of directors? Accountants, of course, have extremely valuable skills and in general extremely high professional standards.
But is that reason enough? I’d like to suggest three strong reasons to think carefully about this.
1. Tax Minimisation
In all likelihood your accountant, like most members of that excellent profession in public practice, has the principal job of preparing your tax return.
As such, we generally brief them to minimise the tax payable, don’t we? Sounds like a great idea, doesn’t it?
But that may not be the best place to start a board-level consideration of strategy, or of an acquisition, or of asset management. And if the owners’ exit plan involves selling the business as a going concern (it more than likely does, or should), then financial records showing years of minuscule profit for tax purposes are not going to help.
The question, “Is it a good business move, given the environment, risks and unknowns?” is a very different question from “Does it have tax implications?”, and should generate a very different answer. Tax implications may be part of the answer, but in many cases they will be a small part, and should not drive the final decision.
2. Leave Your Profession Behind
This was the advice given to me by a very prominent and experienced company director. To be a good director, you have to be able to leave your profession behind. That means, of course, stop viewing the world through the lens of a lawyer, medico or accountant, stop relying on your professional expertise to solve problems, and start thinking like a director. It’s a broader, longer-range, more self-critical style of thinking.
Many accountants can do this, of course, as can other professionals. But not everyone can. One of the most difficult boards I’ve come across included a professional who could not stop viewing the world through the lens of his profession. He was more of a hindrance than a help in the board’s work.
3. Members and Experts Can Be Different
Of course a board needs access to accounting advice, sometimes lots of it, and sometimes very technical. The same goes for legal advice. But that doesn’t mean that the expertise in such fields has to come from board members themselves. You can engage advisors and consultants.
Choosing who should be on the board is a challenging and risky task. Good boards have a committee to look far into future needs and maintain contact with possible candidates. The professional skills, as well as the other skills and aptitudes of candidates, are a factor. But a board is free to consult outside experts (it has to be, to do its job), and a certain professional skill set is not in itself sufficient reason to appoint someone – although it may be a contributing reason.
So rather than assume that your board should include an accountant (or a lawyer) because you need access to that expertise, consider the other ways the board can inform itself on accounting issues.
Most of what I’ve said above applies to other professionals, not just accountants. I’m not picking on accountants, but it’s where this kind of question most often arises, especially for smaller businesses.