VideoAs Motorola Inc. CFO David Devonshire prepares for next month's first-quarter earnings report, he expects to pay special attention to media questions about a restatement of earnings for prior periods. While the revised numbers reflect a simplification of the company's business sectors — organizing them into four groups instead of five — the press often sees red flags in a restatement. "Reporters will want to understand the metrics of the past and the present and the future, and I have to be ready to explain all the changes," he says.
That means that Devonshire and CEO Ed Zander must pack as much as they can into the hour of media interviews that the corporate communications staff typically sets up, just before the analyst conference call that reporters often monitor. Motorola's approach, of course, reflects the provisions of the Securities and Exchange Commission's Regulation Fair Disclosure. "We know that this is the one shot to get things out," Devonshire says. If a reporter's questions have to be answered later, "I have to be very careful about it."
How times have changed. Twenty years ago, "the CEO was the one the Street and the press wanted to hear from," says Frank R. Gatti, CFO of Educational Testing Service (ETS), in Princeton, New Jersey, and a 23-year veteran of The New York Times Co., where he was vice president for financial management until his departure in 1997. "With the advent of conference calls, and with the use of the Web, CFOs are much more intimately involved," he says.
"The finance chief has got to be a terrific communicator today," adds Peter Crist, whose Chicago-based Crist Associates specializes in public-company CFO recruitment. "Their increasing dealings with the press parallel the end of the green-eyeshade era, and mark the era of the strategic CFO — with all the embodiments of personal style that goes with it."
"Harmonic Convergence"
How does the press explain the evolution of CFOs into media stars? Bloomberg News editor-in-chief Matthew Winkler pegs the emerging high profile to the volatility of interest rates that deregulation started, helping turn junk bonds and merger mania into household terms in the 1980s. As the bull market for stocks and bonds began its 20-year run, the investment community also swelled with participants in newly minted 401(k) retirement accounts and mutual funds — which in turn vastly expanded the audience for the business press. "It was harmonic convergence, with the demographics of the so-called Yuppies coming of age and taking charge of the world, just as there was an explosion of financial assets and values," says Winkler, who helped start Bloomberg News in 1990. "I can't think of anything that was as important in changing the landscape, and in changing the way journalists perceived their subject."
Like Bloomberg, other financial-news outlets sprouted, such as CNBC and the former CNNfn. Publications including the Wall Street Journal, the New York Times, and Investor's Business Daily made some efforts to beef up coverage of accounting and corporate finance, as did the business pages of major metropolitan dailies.
As reporters looked for someone to discuss the company's role in the story, they found that "people involved in finance were not cardboard characters; they had impact on people's lives, and couldn't be relegated to the fourth section in newspapers," according to Winkler. And business journalists often got the same message from Wall Street securities analysts, who long had served as a major link between reporters and the companies they were writing about.
Harvard Business Review editor Thomas A. Stewart says that as American companies began to narrow the gap that had developed between finance- and management-accounting practices — a gap captured by Robert S. Kaplan and H. Thomas Johnson in their 1987 book Relevance Lost: The Rise and Fall of Management Accounting — some finance chiefs found "a new job" in using finance and technology to design new competitive strategies. CFOs "not only had the purse strings, they had the managerial accountability," says Stewart. And often "the CIO and CTO reported straight up to the CFO, so the finance chief became more relevant to the business."
Some Stumbles
As CFOs were increasingly taking charge, investors were demanding more information showing how earnings would compare with analyst estimates. Such media queries are best answered by the CFO, and CEOs became willing to let the CFO answer. "In past years, I'm not sure CFOs wanted to deal with the press," says ETS's Gatti. "But now, with CEOs endorsing the new press-contact role, for the most part CFOs like the role."
All the while, according to Motorola's Devonshire, the gradual decline of the COO role made more finance chiefs the number-two executive, hastening their designation as media spokesperson. "There was a lot of stumbling initially, because they didn't have the background for dealing as public personae," he says. "But I really think people learn from others" — and a few finance chiefs set the pace. At the top of Devonshire's list of model CFOs: Gary L. Wilson, who left the CFO post at Marriott Corp. and joined The Walt Disney Co. in 1985, leaving there in 1990. Wilson is now chairman of and a principal investor in Northwest Airlines. "You looked up to Gary and said, 'Wow, if he could do it, why couldn't I? He started the trend."
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