Survey: Sarbanes-Oxley Making CFO Job Tougher

Now that companies must meet strict new reporting guidelines, who's leading the effort to comply with the Sarbanes-Oxley Act of 2002?

Apparently, it depends on who you ask.

According to a recent survey of CFOs, CEOs, board members and operating executives (conducted by Research International on behalf of Deloitte Consulting and BusinessWeek), 63 percent of CFOs believe they are responsible for complying with the new corporate-governance regulations.

Just 13 percent of the finance chiefs in the survey -- which polled directors and officers of S&P 1500 companies -- said they believe the chief executive officer assumes this role.

But a mere one-third of CEOs (and 30 percent of board members) believe the CFO currently leads in complying with the new rules.

In fact, 47 percent of CEOs surveyed say they are responsible for compliance with Sarbanes-Oxley, and 40 percent of board members agree with that assessment.

All of the executives did agree that their companies would benefit if finance chiefs played more of a strategist role to help set the course of business performance.

"The survey sounds the alarm for today's CFO to take action," says Mike Ippolito, partner of Deloitte Consulting and a leader in the firm's strategy and operations practice that focuses on business transformation. "The findings demonstrate that the CFO is pivotal to restoring public trust and that the CFO can serve as an important bridge between the CEO and the board on governing matters."

Just as the CFO must dare to dissent when necessary, Ippolito believes the CFO must serve the CEO with effective insight on the affairs of the company and its businesses. "The best practice is to balance both steward and strategist roles within the CFO function, rather than attempt to surgically separate the two and risk the viability of both," he notes.

Deloitte pointed out in the survey that historically the CFO has been more of a steward --with authority over financial processes -- than a strategist. CEOs and CFOs have different opinions on the ideal role of the chief financial officer, however

Nearly half of CEOs believe that the CFO should ideally be a strategist. But only 35 percent of CFOs see strategy as an ideal position for themselves. Rather, 47 percent seek a "balanced" role ,and only 18 percent see themselves as ideal stewards.

Conversely, all groups surveyed were in agreement that the current regulatory environment encourages the CFO to play a steward role in the future.

The survey also asked CFOs about job satisfaction.

For example, a whopping 93 percent of CFOs said their job is more difficult under Sarbanes-Oxley and its heightened reporting requirements. (To find out about the hidden traps in that piece of legislation, read "What You Don't Know About Sarbanes-Oxley.")

The increased scrutiny does not have many finance chiefs considering a career change, however. Just one in nine said they seriously considered leaving their job in the last two years.

One possible reason: Eighty-seven percent of CFOs think their pay will rise in the next two or three years, whether or not they take on added responsibilities.

All survey participants agreed that board audit committees will continue to assert greater authority in governance matters. One worrisome disconnect: only 47 percent of CFOs thought that audit committees were "deeply qualified." By contrast, nearly 61 percent of board members and 69 percent of CEOs said audit committees were up to the task.

In addition, about 88 percent of CEOs and board members agreed that the CFO should be directly involved in governance authority. Around ninety-six percent of CFOs agreed with this viewpoint.

On the controversial question of whether the role of CEO and chairman should be split, 49 percent of the CEOs agreed that their roles should be separate from the chairman role, as did 45 percent of CFOs.

Spiegel Settles With SEC
The Securities and Exchange Commission settled charges with Spiegel alleging the catalogue retailer withheld material information from the public.

Spiegel consented to the arrangement without admitting or denying the SEC's allegations.

Last month, Spiegel management announced that the SEC had launched an "informal investigation" into the conduct of the company and its officers and directors as well as into the company's compliance with its disclosure obligations. The probe stemmed, in part, from Spiegel's failure to file financial reports on time.

In early February James R. Cannatar resigned as CFO of the catalogue specialist one day after the company's auditor, KPMG, said there was substantial doubt about the company's future after it failed to comply with some of its debt agreements.

The SEC's complaint alleges that, at the beginning of last year, Spiegel did not report that the company's independent auditor had notified the company that it may not be able to continue as a "going concern."

The SEC also claims that Spiegel's auditor later provided a proposed auditor report stating that the audit firm had "substantial doubts" about Spiegel's ability to continue as a going concern if the company didn't address certain financial issues.

The commission also alleges that Spiegel chose not to make its required 10-K and 10-Q filings to conceal the "going concern" issue from the public.

"Instead, the company filed a series of Forms NT (notices of late filing) indicating that Spiegel was not in a position to file because various lending agreements were not in place," the SEC noted.

According to the complaint, statements made by Spiegel executives confirm that Spiegel management chose not to make its required filings to avoid disclosing the going concern notice -- and to avoid the "disruptions" that the disclosure of this information would cause.

The complaint also alleges that Spiegel failed to disclose its auditor's "going concern" notice in various press releases and public statements that discussed the company's financial condition.

Ahold Receives Letter From Deloitte
Koninklijke Ahold N.V. said it received a letter from Deloitte & Touche on Feb. 24 stating that the embattled supermarket giant's independent auditor no longer maintains its auditors' opinions in connection with the financial statements for 2000 and 2001.

Ahold said in an SEC filing that D&T filed its letter with the Amsterdam Chamber of Commerce on March 5, 2003.

The "notification" referred to in the D&T letter: Ahold's press release dated February 24, 2003 announcing that the company will be required to restate its fiscal years 2000 and 2001 financial statements.

D&T said its opinions regarding the company's 2000 and 2001 financial statements should no longer be relied upon, according to Ahold.

(To find out what former Ahold finance chief Michael Meurs said about the company's acquisitions in an interview conducted in 2001, read "What Meurs Told CFO.")

Hiring Managers Upbeat
How high will the unemployment tide rise?

On Friday, the Labor Department reported that the jobless rate jumped to 5.8 percent, as companies cut an unexpected 300,000 jobs in February. That was the biggest drop in hiring since the aftermath of the Sept. 11 terrorist attacks.

In a survey completed just a few days prior to this announcement, however, more than half of hiring managers said they plan to hire new employees in 2003, according to CareerBuilder.

Of those who planned to hire, 13 percent expected to add 100 employees or more, while 48 percent expected to hire 10 employees or fewer.

The top three reasons given for hiring new employees: to increase productivity and the numbers of customers served, improve customer service, and improve efficiency.

"Companies are adjusting their staffing levels to meet market demands and deliver organizational objectives," said Eric Lochner, vice president of corporate marketing for CareerBuilder. "With these goals in mind, hiring managers continue to be highly selective in the recruitment process to fill open positions with the best candidates."

More than two-thirds of hiring managers said they anticipate filling open positions in 30 days or fewer with one-third of these managers expecting to fill open positions in 14 days or fewer.

On the other hand, eight percent of hiring managers said the process is expected to take three months or longer.

Short Takes

• Michael T. Chalifoux said he will retire as Circuit City's executive vice president, chief financial officer and corporate secretary. He joined Circuit City 20 years ago as corporate controller, when the company was still known as Wards Co.
  
  

The company said short-term personal health issues "have driven his desire to retire at this time."

Circuit City also reported that fourth quarter and year-end sales fell 5 percent while same-store sales increased 4 percent for the fiscal year.

• Morgan Stanley Chairman and Chief Executive Officer Philip Purcell and Chief Operating Officer Robert Scott posted a message on the company's internal Internet site March 6 calling on employees who own stock to vote for the four directors up for reelection at the investment bank's April 11 shareholder meeting.
  
  

The feeling among some corporate governance experts is that the investment bank is trying to head off an attempt to require the annual election of board members. Last year, a majority of shareholders supported a non-binding resolution to eliminate so-called staggered terms for directors, meaning they want all directors to be voted upon in the same year.

• U.S. junk bond mutual funds took in $1.33 billion of net cash in the latest week, the fourth-largest inflow on record, according to AMG Data Service.
  
  

Junk bonds are clearly the top-performing fixed-income asset this year, posting a total return of 5.03 percent, according to Merrill Lynch. Treasuries have gained just 1.62 percent and investment-grade bonds 2.7 percent.