AccountingWEB Interviews... Barry Melancon, AICPA President

Barry Melancon, President of the American Institute of Certified Public Accountants

Supporters and critics of AICPA President Barry Melancon agree on one thing - as the head of a profession in the midst of unparalleled change, Mr. Melancon has been in a truly unique position as a leader, and has experienced a leadership perspective not often experienced by many others.

AccountingWEB President Michael Platt sat down with Barry Melancon to get his views of the profession and to get a rare personal insight into the man charged with the responsibility of advocacy of a profession in the throes of change. What he found is a man who is passionate about what he does, is dedicated to a better future for the profession, and is absolutely committed to handling his job in the most professional way he knows how. And whether you agree with his approach or not, whether you agree with his style or not, whether you agree with his leadership skills or not, you must admire the political resiliency, dogged determination and passionate dedication of the man that has been steering the CPA profession for the past eight years.

We present below the complete, unedited, unabridged version of AccountingWEB's interview with AICPA President Barry Melancon so that you can get a better insight into the man at the helm of the AICPA.

Michael Platt: This past year has been an extraordinary one for you, an experience not shared by many organizational leaders. From a personal standpoint, what lessons have you learned as a leader and how might those lessons influence your future role?

Barry Melancon: One of the things that I've learned quite clearly is - rightly or wrongly - the power of the media. The media characterizes things in ways that have huge influences on people - our members, the public in general, and regulators - and just because they cast things in a certain way, it doesn't make it right, it doesn't make it completely accurate, it doesn't make it even fair. They do not always take into consideration all the points that need to be considered from a decision-making standpoint.

Michael Platt: How do you see the role of the AICPA changing over the next five years in the eyes of its members?

Barry Melancon: We are a much leaner organization than we were when I came in 1995. We've reduced employment at the Institute by 27% in the past eight years which has made us much more efficient.

I think we will have to become better advocates. It's easy to back away from advocacy when people criticize you, which has certainly been the case in the last year and a half. But who else is going to be an advocate for the profession when something is proposed that may actually not be in the best interests of the public or of the profession?

There will be more differentiation in our services and approaches to public and non-public companies. I think for instance in the form of public companies - clearly because of the results of Sarbanes-Oxley - we will be more of an input mechanism, articulating the position of the profession, and articulating some of the pitfalls of other proposals. For private companies, there are huge risks down the road in that area, and as a result, we're going to have to have a leadership role reaching out to other affected organizations such as trade groups representing other parts of the non-public environment, the US Chamber, among others. We have to be sure they really understand some of the potential negative impacts on the small business economy, the private business economy, that could evolve over the next few years.

Michael Platt: There are many issues demanding your attention these days. If you could only focus on one issue, what would be at the top of your agenda?

Barry Melancon: That's a very tough question because it presupposes that I can only focus on one, and that simply is not my role and not what we do as an organization. But given that, I would have to say that it would be the cascade of rules and regulations impacting non-public companies. We have put a major emphasis on working with state societies, state regulators, and market forces as it relates to the non-public arena. There are over 30 states that have some type of activity pending, - much of it would be very detrimental to small businesses, which are 50% of the US economy, and would also be very detrimental to small firms and our members who work in those small businesses. That is a top priority of this Institute.

Michael Platt: What are the three things that you would encourage individual AICPA members to do over the next year to make the most positive impact on the future of the profession?

Barry Melancon: Number one - We have to do a good job as a profession. It's easy to point fingers - somebody did or didn't do a good job. The research that we have seen shows that the market recognizes that there are a few bad apples, and it's not the profession as a whole that has suffered. But we must reaffirm that perspective by doing a good job in everything that we do.

Number two - People have a high degree of trust and respect for their CPA. Our big asset is that we start with 350,000 men and women in this profession who are truly outstanding. If there ever was a time to be involved in volunteerism, to demonstrate that you are a CPA, to use the initials "CPA" behind your name when you are doing things in the community, when you're servicing your client - now is the time to do it. We are faced with a situation that is very similar to what Congress faced in the early 1990s - people had a negative impression of Congress, but a really strong impression of their member of congress. People must connect the good things they do with their role as CPAs.

Number three - We are much bigger critics of ourselves and our profession than the world is out there. Yes we took some hits, but we are being much harsher on ourselves than the world at large. We must find a way to pull together. It is easy to point fingers and say "this segment of the membership did this " or "that segment of the membership did that," and its simply not valuable in ensuring the long-term success of our profession.

Michael Platt: What has been the one accomplishment that you are most proud of since taking over at the AICPA?

Barry Melancon: If you look at the Institute, we are a much different organization. We're leaner, we're meaner, we're more willing to take risks to make things happen, we're not lethargic or unwilling to do things that might attract some criticism. We're trying to make things happen. We have incredible people on staff. We have to set the tone for the profession, and with that we have to be willing to take some of the criticism that comes with it.

Michael Platt: What's been the biggest success of the Institute over the past year that might have been overlooked by the media, overshadowed by other events or lost amidst the public debate about the profession?

Barry Melancon: Something that has been in progress during the entire time and is nearing completion is the computerization of the CPA exam. We are involved in a major undertaking with the cooperation of NASBA and the state boards and a third party technology provider. We will be delivering in April of next year the most sophisticated professional certification exam in the world. It will use simulations, it will be frequently available - virtually around the clock - and it is going to be incredible. That is a major accomplishment and there are some tie-ins to that. 1) Its a case study in the profession and the state boards working together towards a very positive end. 2) It ties in to our recruiting programs and the fact that we have another tool to attract the best and brightest young people into the profession.

Michael Platt: Why do you think it has it been so difficult for CPA firms to find and keep qualified staff?

Barry Melancon: There are several phenomena going on. Clearly the numbers were down - by almost 50% - from 1990 to 2000. One of the contributors was clearly the economy. Young bright people saw the Dot-com world and Wall Street as where they wanted to go. We were also in the midst of a very small generation - the demographics of the USA were such that the number of kids in school at that time were much less than in the decade before. We clearly had an image problem in the profession that we were trying to work on. And some would also fairly say that the 150-hour rule was being implemented in most of the states and that also has had some negative impact. But that is behind us for the most part.

What we're seeing now is a complete reversal of those trends. We have put major emphasis on educating the young people about the profession. I would encourage our members to look at a Web site called www.startheregoplaces.com. It educates and brings the student along from the standpoint of first getting them involved in business, then from business to accounting, then from accounting to the CPA profession.

Michael Platt: What has been your toughest personal challenge as the head of the AICPA?

Barry Melancon: The toughest personal challenge has been in dealing with the whole Enron matter - that goes without saying. The profession is not against change, but there are so many different points of views and the input mechanisms are very important, and the decision making process on top of that is very difficult.

Michael Platt: Look into your crystal ball and describe for us how the life of the front line CPAs will change over the next couple of years because of all the changes that are going on right now?

Barry Melancon: The big caveat is that it depends on how successful we are with the cascade issue. To the extent that the small business community is successful in preventing some of the restrictions that are appropriate for public companies - but not for private companies - then I think some of the impact can be minimized. However, small firm practitioners shouldn't be lulled by that comment into thinking there won't be any changes for small business and small firms. There will be changes.

Accountability in general is at a higher premium in all areas of our economy, but it could be a dramatic change if the federal answer is that it should be replicated in small business.

The trusted advisor role is still what the small business and private companies expect from their CPA, and that will continue. The need for our practitioners to continue to build competencies in a broad array of areas is going to be important. The need to understand some of the changes in financial reporting and expectations in that area - either by moving to more of a more international model or to a more bifurcated model where small business is looked at differently - is critical. You will see a more emphatic enforcement regime against people who do what might be alleged to be a poor job, either through state boards or through other regulatory agencies. I think that practitioners need to be mindful of that as well.

Michael Platt: Who are your career mentors and where do you turn for leadership advice and counsel?

Barry Melancon: I have been extremely fortunate to have an unbelievably talented group of people who have been Chairs and Vice Chairs of the AICPA during my tenure here. Virtually every one of them has been different; they have come from a different perspective and have handled things in their own ways. But at the same time they are people you can have very open conversations with and get good feedback.

For instance:

The first chair that I dealt with was Ron Cohen. He built a very small firm into one of the eight largest firms in the country - Crowe Chizek. He understood growth and change, and was very passionate in terms of doing the right thing and was a very good person to work with.

Bob Mendick - very much of a visionary in the profession. He has written extensively about changes in the profession.

Stu Kessler - who really emphasized communications and working at the grass roots level, which is so important.

Olivia Kirtley - bringing the business and industry perspective. Just tremendously professional and intelligent in dealing with issues.

Bob Elliott - very strategic in thinking about the longer term.

Kathy Eddy - dealing with high stress points herself during those years and how to handle them with a smile, and how to balance things efficiently.

Jim Castellano - who could have imagined that in your year as Chair of the AICPA you would face all the problems dealing with Enron, working through all of those issues, and handling the input mechanisms? He's just been a tremendous sounding board.

And now Bill Ezzell who brings a different perspective and strong sense of values and a recommitment to those values at a time when the profession really needs to do that.

All of those people have been my mentors. I consult with each of them regularly, much beyond their year as Chairman. They give good solid advice, and they are very important to me.

I also have to tell you that we have an incredible group at the Institute's top management levels. One person does not run this place. We have a group of people who are incredibly dedicated and passionate and believe in what they are doing. Our staff team is just wonderful - they are mentors to me as I am to them. We work through things as a team, we talk about things, we "wrestle in the mud with them," and we try to come up with the best possible answers. They are wonderful people and they are very valuable not only to me but how we each progress in our own lives.

Michael Platt: How do you personally "decompress" from all of the pressures of the day?

Barry Melancon: We live in a 24/7 connected world. I've been carrying an electronic e-mail device for about three years - between a cell phone and that I am constantly connected.

I think decompression starts with the fact that I've got an unbelievably supportive and wonderful wife who helps me decompress - we either travel or we get in the car and we drive for a few hours. I decompress with sports - I'm a huge sports fan. I watch sports when I can - it's a time to not have to focus on the issues of the day. I'm also a rarity in that I drive in and out of New York City when I'm here. I travel about 60% of the time, but I drive in and out of the city instead of taking mass transit and driving in the traffic and hustle and bustle of New York City has its own therapeutic value - it keeps you focused on other things.

I don't fret over decisions that have been made or kill myself over 20-20 hindsight. I'll give you a prime example. We made a whole bunch of decisions related to Enron - and none of us knew then that WorldCom was coming. Had we known WorldCom was coming we probably would have made different decisions. But I can't change that - I can't go back in time to January of a year ago and say, "Well now I know WorldCom is coming and I'm going to make a different decision." A lot of people spend a lot of energy doing that, and I try to avoid doing that because I'm pretty confident that I take in the information I need to, and I consider points of view that I need to consider. Then I - or we as a Board - make a decision and we have to live with it. You can just consume so much energy beating yourself up about some things that it becomes counterproductive.

Michael Platt: What else would you like the accounting profession to know about you that might not be known by many people?

Barry Melancon: It's a great question - I don't normally like to talk about myself, but I'll address your question. I don't think that you could find anyone more passionate who works harder for the profession and cares more about the profession and the Institute than me. I work very hard, I work extremely long hours, I travel all over this country - I've been to all 50 states - and I love what I do, I love the profession. I am more dedicated now to the profession, given the problems of the past year, than I've ever been. People ask me about the criticisms of the Institute, of me, of the profession. I think what people need to know is it just makes me more committed to making sure that this profession has a bright, successful future, and that the good people in our profession are rewarded for the types of people that they are. That's me - I'm willing to go into the lion's den, I'm willing to face the challenges, and I have the confidence that I'm going to do good things for the profession. I think people don't know that about me as much as they probably should.

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