CFO in focus, August 2008

tauringhuang.

Aug 18th 2008
From Economist.com

Our monthly round-up of noteworthy articles published on CFO.com, a source of news and insight for senior finance executives


Under pressure

“An anatomy of a CFO’s agony”

By David McCann




“Relentless, exhausting pressure to hit numbers. Knowing you’ll be fired, and likely ruined, if they’re missed. Resorting to accounting shenanigans to make ends meet. Feeling trapped by blackball threats.”

This is how a former finance chief describes his experience taking a company public, an exercise that ultimately led to convictions of fraud for him and a clutch of his superiors. The anonymous CFO, who still awaits sentencing, shares a remarkable, blow-by-blow tale of cooking the books with CFO.com.

From his point of view, his actions were the result of extreme pressure from the top to make the numbers work. As he tells it, the stress took a heavy toll, with his personal life suffering as much as his professional life. Eventually, he lost perspective and began to accept things that no reasonable person would accept. Of course, it is worth remembering that at least some of his discomfort was self-inflicted, as his guilty plea may indicate.

Endangered species

“Who needs a COO?”

By Marshall Krantz




When Starbucks recently announced that it was eliminating its chief operating officer position, it became the latest member of a growing club. As COOs—a position often regarded as that of CEO-in-waiting—vanish from the executive suite, CFOs are stepping in to fill the gap.

With greater prominence and financial compensation, the upsides for a CFO who assumes COO responsibilities are obvious. But there are also drawbacks, such as “more hours in the day required to accomplish more tasks, and more blame when profits fail to meet expectations or just fail altogether.” Furthermore, although wider influence often means higher pay, this is not universal. As one veteran CFO laments: “the numbers are not moving as fast as they should for the extra time and burden of responsibility across broader areas.”

Fixer uppers

“What it takes to be a turnaround pro”

By Josh Hyatt




As economies sputter, it’s likely that a growing number of distressed companies will call on turnaround specialists to reverse their waning fortunes. The typical trajectory of such specialists includes “parachuting into a distressed business, assessing its financial condition, and then handily dispensing any fiscal foes.” Several of these superheroes speak about how they operate.

“We are not hatchet people,” says one, adamant that cutting costs, while important, is not the only goal. “Fixing a company is more art than science,” waxes another. “You have to come up with creative solutions.”

Seeking out turnaround situations is not for everyone, with those already in the business breaking down the requirements into three areas: strong people skills, accurate intuition and a willingness to work extremely long hours (ruthlessness could be added). Of course, with top experts commanding $1,000 per hour, “turnaround consultants may find comfort in the currency they collect.”

Flex appeal

“How the Big Seven flex”

By David McCann




Life at the seven largest accounting firms sounds idyllic, relatively speaking; their employees can pretty much write their own work-life script. These firms bend over backward to attract the employees they need, offering many ways in which work schedules, and entire careers, can be customised. This article details the flexible arrangements offered by the seven largest accounting firms.

In many cases, work-life programmes came about as a response to the newest generation of workers. A recruiter from Ernst & Young explains why: “Gen X is roughly half the population of the Baby Boomers, who are retiring. So Gen Y knows: 'Hey, they need us.' That empowers them.” Attracting and retaining talented women also motivates the firms to offer flexible working arrangements.

Most of these companies now offer these perks to all employees, who take them up enthusiastically across all demographic groups. Nonetheless, voluntary turnover at the largest four firms runs between 12% and 17% per year. The “war for talent” is an ongoing struggle.

Safe haven

“How to find America’s tax havens”

By Alan Rappeport




Navigating America’s Byzantine tax system is never easy. This article attempts to make the process easier with an interactive map that details the attractiveness of local tax regimes in the country’s largest cities. Although America has the third-highest income tax rate in the world, many states and cities offer various breaks in an effort to attract businesses.

Such breaks include “tax credits designed to spur investment and development, liberal rules allowing for state taxes to be deducted from federal tax requirements, and rules that allow firms to offset higher sales taxes with income tax reductions.” If a company is looking to expand or relocate from high-tax locales like New York City or San Jose, they should have a look at San Juan or Baltimore, “some of America’s very own tax havens.” Firms considering the latter should hope they do not count too many watchers of “The Wire” among their staff.