Brian Walsh: deputy chairman, Nationwide Building Society.

Building societies seem to be a dying breed. Do you think that Nationwide will eventually demutualise and become a company?

Being a large, highly successful member-owned business is an important and unique position for us. Our members have opposed the idea of becoming a plc for a long time. The fact that we have doubled in size over the past five years, almost entirely through organic growth, supports the view that more and more people want to join our club.

You can still show the big banks a thing or two, then.

In many respects the corporate world benefits from the lead taken by mutuals in setting standards. We champion a range of consumer issues, campaigning for greater transparency and the fair treatment of customers, for example. The Sunday Times recently named Nationwide as the best big company to work for, too.

Your experience in the boardroom spans three decades. Things must have changed quite a lot over that time.

A great deal for the better. When I first became a non-executive director in the seventies I talked to various people to get a better idea of what was expected of me and their answers varied from "make sure they don't do anything stupid" to "focus on strategy and people". If I were to ask the same question today, the role requirements would probably include a long list of references to the new Combined Code, the Higgs report on corporate governance, the Smith report on audit committees, the Turnbull report on risk and controls, Sarbanes-Oxley and so on. The whole scene of corporate governance has changed and it's clear that boards are far more on the hook.

It seems that directors must address a far wider range of issues than they used to.

Today's board agendas cover factors such as ever-increasing regulation, risk management, the environment and HR issues. Despite this, the financials still tend to occupy much of our attention. The type of accounting information that we used remained unchanged for a long time, but the advent of international financial reporting standards (IFRS) has brought quite a marked change in the concept of profit, loss, the value of an asset or liability and how to report these externally. If you overlay this, in the financial services industry, with the changes in capital definition under the Basel II accord and the use of more sophisticated risk management techniques, you can see the challenge that directors face in keeping up with developments.

What do you see as the main effects of IFRS so far?

Reporting has moved on to a more economics-driven basis for the balance sheet. The accounts now focus on demonstrating the current market value of assets and liabilities, whereas the main focus before was on reported profit through the P&L--which will become quite volatile. This is why some recent IFRS results have been accompanied by reams of explanations. Another consequence is that profits and losses are distanced further from cash performance. While cash has become a key measure for many firms, to get free cash flow from the IFRS accounting data is more challenging.

Most of today's non-executive directors have operated with traditional accounting methods. I believe that the introduction of IFRS, and Basel II for financial services providers, will put quite a strain on them. It may even cause a generational shift in the boardroom. You need directors who understand the new processes. For those who haven't been involved with financial management for some time, that's going to be quite difficult.

So today's non-execs really need to take a financial fitness test.

Absolutely--and of course that's one of the requirements of the new Combined Code. Many companies are even using external resources to measure the effectiveness of their boards. Institutional investors have become more willing to get involved where directors are considered lacking. So we have got to the point where directors must ask themselves how they can ensure they are sufficiently up to date with the new requirements. There has to be a bigger training effort or there will be a generational shift not every non-exec in their sixties is going to attend night school and learn about economic capital.

How can CIMA help with this?

I think that the CIMA Mastercourses are extremely helpful in this department, particularly for smaller firms that need to get to grips with the new principles. In five to ten years' time this period will be seen as quite momentous for the accountancy world. The big question now is: can we get the present directors up to speed quickly enough? When I compare the new CIMA syllabus with the one I studied in the sixties, I have no doubt that the new generation of boards will be prepared for the challenge.

How much has the role of FD changed during your career?

It's gone from bean counter to prime mover. I was in the US when the concept of shareholder value emerged in the eighties. It was a time when a lot of corporate raiders were snapping up companies by tempting shareholders with very attractive offers. They were able to do this because many stocks were undervalued. The financial criteria by which managements were measuring themselves were not geared to creating value. They realised they had to improve the share price to increase the value of the company and keep the raiders at bay. That meant pressing different buttons for performance measurement. As a result, a new area of expertise was developed in generating shareholder value by delivering returns in excess of the cost of capital. So, from being largely geared to traditional analysis centred on earnings per share, all of a sudden firms focused on this other dimension: "cash is king".

All this led to a major refreshment of the role of finance directors. It gave the function tremendous authority and enabled many accountants to show their ability and move into general management. It also brought with it a greater emphasis on investor relations, which now occupies a significant amount of any plc finance director's time.

How will the UK housing market fare in the next 12 months?

Our forecast is for a slight decrease in activity, but we don't think there'll be a crash. If you look at the variables that affect the market, the level of debt compared with the value of housing is different from when it all went wrong in the late eighties. The general view is that prices will stabilise nationally but some regions will see a small rise and others will see a modest fall. I think the level of personal debt is a bigger issue, not only for individual consumers, but also for lenders who haven't been as prudent as they should have been.

THE WORKING LIFE OF BRIAN

* 1962-73

Ford. Financial manager. Joined from school at 16 as a trainee and took the Institute for Cost and Works Accountants qualification (now CIMA). The company later sponsored him to take an HBA. Walsh says that achieving both qualifications "paid great dividends".

* 1973-76

British Steel International. Finance and administration director. Involved in the evaluation, negotiation and funding of investment projects, disposals and mineral joint ventures.

* 1976-80

The First Boston Corporation/CSFB. Vice-president. Moved from steel to investment banking in New York. "A lot of investment was going into mineral projects at the time, so the two worlds dovetailed quite well," he says.

* 1980-82

The Singer Company. Vice-president and FD. Responsible for guiding a major restructuring programme.

* 1982-87

General Foods. Finance director. Headhunted to run the finance function of the firm's US operations.

* 1987-93

GKN. Finance director. Returned to the UK to join the board of the manufacturing giant.

* 1993-99

TI Group. Vice-chairman and group finance director. Headhunted by the FTSE-100 engineering group.

* 2000-

Non-executive director and consultant. Stepped down as a full-time executive. He is currently deputy chairman of Nationwide and chairman of its audit committee. He has been a consultant to other firms and serves on CIMA's member advisory panel. He is also one of the judges for this year's CIMA Financial Management Awards.