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Thursday, May 17, 2012
Feature: August 2008
Help Needed
A looming shortage of accountants in academia
Story by Bill Romanelli
The accounting function is at the core of every business operation. There isn’t a single business that can exist without it. Couple that need with the repercussions from the Enron scandal, the Sarbanes-Oxley Act and the demise of the tech boom, and it’s little wonder accounting is sexy again. The student demand for accounting programs is at its highest levels in a decade, to the delight of accounting firms and right-brained business owners everywhere. The problem is, there’s no one to teach them.
At the heart of the matter is academia’s dwindling supply of doctoral candidates and professors in the accounting field. Universities must have at least 50 percent of business school faculty at the doctoral level to maintain accreditation with the Association to Advance Collegiate Schools of Business. Meanwhile, accounting firms and employers need a talent pool trained by the top minds in the field. With the American Accounting Association predicting the supply of accounting Ph.D.’s falling below 30 percent of demand, some observers are calling this a crisis.
“There simply aren’t enough people pursuing accounting Ph.D.’s to replenish those we’re losing to retirement,” says Greg Burke, director of John Waddell & Co. CPAs in Sacramento, and chairman-elect of the California Society of Certified Public Accountants. “Worse, the gap is going to get larger as baby boomers start retiring in larger numbers.”
The problem is particularly acute in Northern California, where there are only two universities producing doctoral degrees in accounting: Stanford University and UC Berkeley. Other universities in the region that need doctoral staff are being pummeled by an aging and retiring population of professors, California’s high cost of living, the state’s budget mess and an academic salary scale substantially lower than the private sector’s.
Business and academia are working together to address the problem, but even they say the current solutions are just the beginning. No one knows what a comprehensive solution looks like, but experts agree the problem is likely to get worse before it gets better.
In 2006, the most recent year for which data is available, just 144 accounting doctorates were awarded in the U.S., according to the Hasselback Accounting Faculty Directory, up from the all-time low of 103 in 2003.
The California State University system is currently facing a shortage of more than 100 professors, according to Valerie Milliron, co-chair of the education committee for the California Society of CPAs, and professor of accounting at Chico State.
In the next five years, she expects that figure to double. “Many of our faculty came on in the ’80s, and you can retire with some pretty good benefits at 55,” Milliron says. “Being frugal accounting types, they’ve managed their retirements well and can retire at age 55 or 60 with a healthy state pension. We’re looking at maybe half the statewide faculty leaving the accounting departments between now and 2013.” According to the Hasselback directory, 45 percent of accounting professors with doctorates are 55 or older.
With fewer doctorates, universities must cancel classes and programs or limit enrollment in order to keep the required ratio of Ph.D.’s on staff for accreditation. The impact of fewer classes is twofold: First, it sends prospective students looking elsewhere, and second, it curbs the number of accounting undergraduates.
For employers, that bottleneck effect can impact their ability to find and hire qualified talent. “As employers, we’re looking for people who’ve been taught by Ph.D.’s. The essential functions of financial reporting, controlling and others all rely on solid expertise,” Burke says.
What’s even more sinister about the shortage is that it’s a problem that feeds on itself. Fewer undergraduates mean a smaller pool of students to pursue graduate degrees. For universities, there’s also the consideration that not many master’s students want to spend another three or four years in school, at considerable expense, when they can enter the work force and start earning money.
The good news for the 150 or so new doctorate holders every year is that they’re in such high demand, they can pick and choose where they go. However, convincing them to move to Northern California with a high cost of living is another matter.
“It’s a very meaningful career opportunity, especially if you enjoy teaching and like financial issues. The financial world has changed considerably in the past 40 years, mostly due to research at the university level,” says Paul Griffin, professor of management at the UC Davis Graduate School of Management. “You won’t make the millions that come with a successful startup company, sure, but how many people really do? A career in academia takes time and effort, but it comes with a great degree of flexibility. Once you’ve established a reputation based on doing some groundbreaking research, you’ll be [desired by] huge organizations all around the world.”
One of the biggest obstacles is simple numbers. The baby boomer generation is roughly twice the size of Generation X, and while the Millennials are showing bigger numbers, the oldest of them are still in high school. There simply aren’t enough people walking around who are the right age to meet the need.
That said, the academic and business worlds are not idly watching. The California Society of CPAs has launched an accounting education initiative, supported by member companies, to provide financial resources for attracting and retaining doctoral instructors in California. The program includes scholarships, which make up to $30,000 available over three years, with no restrictions on how the money can be spent.
The only requirement of scholarship winners is that they must commit to teaching at a California university for at least three years after completing their programs, otherwise the scholarship amount converts to a standard loan.
The scholarship program was launched in 2005, and seven scholarships have already been awarded, meaning California universities have seven new instructors in the pipeline to help meet accreditation requirements.
John Angelo, director of strategic relations with the California Society of CPAs, concedes that seven instructors, when the current need is more than 100, is hardly a drop in the bucket, but no one can argue the scholarship program is already addressing the problem directly.
“We’re looking into ways we can increase the number of scholarships,” he says. “We have 14 chapters in the state that independently give money to undergraduates, so we’re looking at ways some of that money can go toward the Ph.D. effort. Our corporate members are already very supportive of the program, but as the talent pool continues to shrink, even as student interest in accounting programs increases, we’ll likely see that level of support increase even more.”
Of course, one other solution is to simply change the accreditation requirements.
Lowering the required ratio would certainly give California schools some breathing room, but so far the idea isn’t gaining much traction. Accreditation is provided by the AACSB, but requirements are determined by the AACSB’s member schools across the country.
“We’re very concerned about this problem, and every year our member schools discuss the accreditation requirement issue; the California State University system in particular has asked that changes be considered,” says Jerry Trapnell, vice president and chief accreditation officer with AACSB. “So far however, there has not been a groundswell of support to change the standards.”
Trapnell also points out that even with the current crisis, no schools have had accreditation taken away. Some are on probation, however, and AACSB works with those schools to explore options to preserve accreditation.
One pilot program by AACSB calls for finding individuals with doctorates teaching in related fields, giving them an intense orientation to accounting and having them teach accounting courses. “It’s not an ideal approach, to be sure, but we’re taking this problem very seriously and that requires some innovative, if temporary measures,” Trapnell says.
Burke agrees, saying there’s no magic bullet; it just takes time to make resources available to attract candidates, educate them and convince schools to restart lapsed programs. “We feel we have to do something; even if we can attract a few more candidates, that will open more classes and make more students viable for employers,” he says. “The only sure way to guarantee failure is to do nothing.”
