MARTIN SCICLUNA is a happy man. The chairman of Deloitte, one of Britain’s biggest accountancy firms, has just found out that the cloud hanging over him has proved to be a mirage.
Last week, Scicluna was told that the complaints brought against him and Deloitte by the Joint Disciplinary Scheme have been dismissed by the tribunal that heard the case.
The complaint against Scicluna was that he failed to report Stephen Ives to the Institute of Chartered Accountants. Ives worked on the audit of Capital Corporation but was dismissed by Deloitte after it discovered irregularities in the way he bought a Range Rover from the casino company.
Scicluna, 55, is thrilled he can now concentrate on his work again. But the case has stirred an anger that his eyes cannot hide.
Scicluna didn’t like the headlines, or the slurs on his name and the firm. “Yes, I was angry, even incandescent with rage,” he said. “We said consistently that there was no merit in the case and we didn’t break any rules. We said we took the right action at the right time. I like to think our ethics at Deloitte are higher than the rules.”
From the window of his seventh-floor office at Stonecutter Court, just off Fleet Street, you can see two enormous cranes at work on a new Deloitte block.When it is finished, there will be about 5,000 people working within four adjacent buildings, creating a company accountancy campus.
Deloitte has been transformed in recent years. Some 20 years ago staff used to joke that it was ninth out of the big eight. Today it is one of the big four, second only to Price Waterhouse Coopers (PWC) in terms of revenues.
Accountancy firms measure success by the profit per partner, and on this score Deloitte comes out top, with an average of £702,000 being earned by each of the 600 partners. “It’s pretty macho, but it’s the magic number that the industry looks at to see how we are doing compared with each other,” said Scicluna.
How has Deloitte achieved it? Scicluna attributes the success to John Connolly, a senior partner and chief executive.
The two have worked together for 15 years, the last eight while Scicluna has been chairman. One who knows them both said: “They are a fantastic duo.”
Scicluna said: “The partners are happier serving their clients, leaving our great management team to run the firm. Partners don’t worry about the size of their offices, that sort of thing. They have a ‘jacket-off’ approach with clients at all times. You don’t find that in many other firms.”
Scicluna is hands-on, too, acting as lead audit partner for Cadbury Schweppes.
Other FTSE 100 clients include Severn Trent and the Daily Mail.
When he won the Reed Elsevier account in 1994, Deloitte had only three FTSE 100 audit clients. Today it has 22, putting the firm second to PWC, which has nearly half of Britain’s top 100 companies.
Scicluna is confident Deloitte can grow further, faster. “We have high standards in everything we do and a great respect for diversity,” he said.
Good people stay a long time. Fresh blood comes from bringing in 1,000 graduates every year to add to its 10,000 workforce.
“We are uniquely placed because we are the only one of the big four that has not given up consultancy. This puts us in a powerful position because we offer solutions to clients that our competitors are simply unable to do,” he said.
Deloitte also gains from being part of Deloitte Touche Tohmatsu (DTT), the global organisation that is a Swiss Verein — a complex structure where member firms are entirely separate.
DTT is also second to PWC globally; earning revenues of $18 billion (£10.3 billion), employing 115,000 people and claiming to look after half the companies on the planet.
This brings us to the so-called cartel that the big four operate over the world’s accountancy services. Critics claim the power of the “quadropoly” has led to exorbitant fees and made it harder for new firms to break into the market.
Scicluna doesn’t deny their dominance but he does say the problem has been exacerbated by governments. “After Enron, the US Department of Justice made a huge mistake in closing down Arthur Andersen, thereby reducing numbers.
“If there were five London hospitals and one had a bad outbreak of MRSA you wouldn’t close it down, would you? You might fine it or punish it in some way, but you would try to fix the problem,” he said.
The Deloitte boss added that allowing outside capital into firms may be one way of helping the smaller players. The proposals for proportional liability to limit the cost of litigation would also help reduce barriers to entry.
More crucial, he said, is the soaring cost of complying with new regulations such as those brought in under America’s Sarbanes-Oxley act.
“It is crazy to have a situation where compliance costs are now so high that companies such as Porsche and Rank are turning away from the American markets,” said Scicluna.“Go to China to see how we are in danger of becoming seriously uncompetitive.”
His fears for the West were brought home vividly after a recent trip to Beijing for a DTT board meeting. “The dynamism was extraordinary; it really is the new Wild West,” he said. “I told my children to pack their rucksacks and head east if they want adventure.”
Scicluna has been at Deloitte since 1973, joining as a graduate on £1,450 a year. He became a partner in the fastest time ever and Deloitte’s youngest chairman at 45.
He is as fascinated by accountancy as the day he started.
“What we do is so exciting,” he said. “For Cadbury, I go around the world to visit their factories and meet the people — to New Jersey or Australia for confectionery or Dallas for beverages. This gives you a real feel for what is going on at the heart of the business.”
But how do you persuade the chief executive of an FTSE 100 company that you are better than a rival? Scicluna pauses for a minute: “It’s about quality in everything we do — experience and track record, chemistry and style, trust and a jacket-off approach.”
What is touching about talking to Scicluna is the way his children appear in his conversation in a way that rarely happens with businessmen. Any spare time he has is devoted to them — football, jazz, opera, forcing them to trudge for hours around Rome to take in the culture, or cooking breakfast for his son as part of a lost bet.
He has looked after them since his divorce six years ago. All that culture seems to have made an impression on the eldest, Mark, who is studying the history of art at Bristol University. His daughter, Claire, is on a gap skiing course, while Edward is taking A-levels.
Scicluna grew up with four sisters in a close Catholic family in Malta and this may account for some of this warmth. His father was director of Malta’s ports, so he was raised in a lively, cosmopolitan atmosphere.
“There was often a new ship to visit in the harbour and a Russian or Chinese captain to dinner. Malta is at the crossroads but it’s very small; everyone has to leave to see more of the world,” he said, even though the Maltese have just rated themselves the happiest people in the world.
Scicluna left the country at 15 when he won a British Council scholarship. He came to Britain to study at Berkhamsted School, instantly falling in love with the school and the country. Today he has a grand country home not far from the school in Hertfordshire.
The engaging Scicluna does have one weakness: he has been an Arsenal supporter since he came to north London from Leeds 30 years ago, and rarely misses a home game.
“Yes, it has been painful at times over the past few months,” he said, “but what a magnificent victory over the Galacticos (Real Madrid) at the Bernabeu.”
With the Joint Disciplinary Scheme matter out of the way, Scicluna can focus on securing another term as chairman — the election is next month. If the partners vote for him again, he will be even happier.
