VideoNow even boardroom denizens are discovering firsthand what a tight job market feels like. As companies demand more of directors in terms of time and responsibility, it becomes increasingly difficult to find people who want to serve, says Susan F. Shultz, president of SSA Executive Search International Ltd., in Phoenix, and author of The Board Book.
Shultz estimates that for every board they serve on, executives spend 15 to 20 days a year away from their primary job responsibilities. That's just too many for some companies. General Electric Co., for one, discourages its executives from sitting on other boards, citing the time factor as the
reason.
The job squeeze is pushing many companies to hire recruiters to help fill vacant director seats. Shultz says she has seen a "definite" increase in the number of director search requests over the past few years.
Using recruiters may actually improve the board, notes Ken Bertsch, director of corporate governance for TIAA-CREF. Doing so widens the pool of candidates and increases diversity, he explains. -- Joan Urdang
TAX DEPARTMENTS
Technology Review Time
Corporate tax departments have been the forgotten stepchild of financial IT innovation--until now. According to a new survey by KPMG LLP, 70 percent of the Fortune 1,000 tax directors polled say they are currently leading radical restructuring efforts focused on using technology to reduce paper and manual data entry. "This is the type of reengineering that happened five years ago in other departments," says Steve Martucci, a partner in KPMG's Tax Management Solutions Practice. "Many companies are still just dealing with drawing financial accounting directly into tax software." And few companies are even close to being able to reorganize data electronically or leverage corporate intranets for
tax purposes.
Reducing the effective tax rate (ETR) is the goal of nearly half the 273 tax directors surveyed. Increasing cash flow, tax compliance, tax deferral, and audit defense are the other top objectives. And while technology upgrades don't directly reduce ETR, they can free up time for tax staff to focus on tax strategies. For instance, before Rich Schoenthaler, Ecolab Inc.'s manager of regulation and public affairs, implemented software programs to pull accounting data into tax programs, his 14-person department had little time to check its work for accuracy, much less plan strategically. "With regard to property tax," he says, "we got the bill and sent the check, because the process was so time-consuming."
One reason tax departments lag behind is that IT providers have been slow to tackle the area. For ex-ample, enterprise resource planning systems don't ad- dress tax needs. Also, many software vendors have been scared off by the frequent product updates that tax laws demand, says Diane Tinney, information coordinator for the Association for Computers and Taxation. However, corporate IT liaisons drive technology efforts forward, says Campbell's Soup Co. tax manager Riza Cebula, who contends the corporate link is "critical."
Automation has its problems, though. The tax chief at one of the most sophisticated shops in the United States declined to comment for this story, for fear the IRS would start demanding additional information once it recognized how easily it could be pulled from the system. -- Alix Nyberg
TAX DIRECTORS WEIGH IN
Reasons for improving tax processes
- Effective Tax Rate 46%
- Cash Flow 24%
- Compliance 16%
- Tax Deferral 10%
- Audit Defense 4%
Source: KPMG LLP Tax Management Solutions Practice
ONLY 18% of corporate audit committee members will seek more schooling to meet new financial literacy rules, says KPMG.
EXECUTIVE COMPENSATION
Take It Back
Now you see them, now you don't. Stock option rescissions are the worst-kept secret seeping out of corner offices. Top executives who exercised stock options and saw the price of the stock subsequently collapse are being allowed to cancel the trade altogether. This alleviates the executive-size tax bill that could be in excess of the total value of the stock, postmeltdown. What's more, the loans the companies made to executives so they could buy the stock are also being forgiven.
The concept is a boost for executives but not for stockholders, who are often kept in the dark about option "returns." Late last year, shareholder advocates asked the Securities and Exchange Commission to address rescission issues, such as informing shareholders when options are rescinded, and providing guidelines on how to book the rescission for accounting purposes.
Corporations beware, says Andrew Liazos, a partner and specialist in executive compensation in the Boston office of McDermott, Will & Emery. Based on new SEC conclusions, "the variable accounting consequences to the employer should be carefully considered before implementing an options exchange program," says the attorney.
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