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Please include your full name, title, company name, address, and telephone number. Letters are subject to editing for clarity and length.

In "Can You Spot the Finance Expert?" (September) Alix Nyberg Stuart does an excellent job reviewing issues companies must consider when designating a member of the audit committee as a financial expert.

Although the required industry knowledge was watered down in the Securities and Exchange Commission's final version of the rules, such knowledge can still be crucial. In highly regulated industries such as insurance or banking, someone with experience as the CEO or CFO of a manufacturing company may meet the SEC's definition of a financial expert, but be baffled by industry-specific arcana. Similarly, someone with domestic experience could be bewildered on the audit committee of a company engaged in currency hedging. These companies may provide specialized training to the members of the audit committee and can select audit-committee members whose experiences are complementary.

With respect to whether designation as a financial expert places a bull's-eye on that person, the courts will give deference to the SEC's expertise and its inclusion of a safe harbor under the rules. The financial expert will have no greater degree of responsibility than other members of the audit committee or board.

Allison D. Garrett
Associate Professor of Law
Faulkner University
Thomas Goode Jones School of Law
Montgomery, Alabama

"Can You Spot the Finance Expert?" contained inaccurate and misleading information about Procter & Gamble's audit-committee chair, Mr. John Smith.

Mr. Smith is more than qualified to serve in this capacity. He meets SEC and P&G guidelines, having served as assistant treasurer and comptroller of General Motors Corp. Beyond these roles, Mr. Smith served in supervisory capacities of others in senior financial roles, including GM's CFO, while serving as the company's CEO and president.

Mr. Smith is both independent and an audit-committee financial expert as that term is defined in SEC guidelines. He has not merely relied on his prior financial experience to fulfill his obligation as audit-committee chair and financial expert, but has been a driving force behind providing financial training to all audit-committee members. Further, Mr. Smith has spent time in one of our major Accounting Service Center facilities in Costa Rica to observe our accounting systems and controls on the ground.

Clayton C. Daley Jr.
Chief Financial Officer
The Procter & Gamble Co.
Cincinnati

Can — Or Should?

I enjoyed "Secrets of the M&A Masters" (September), and agreed with many of the article's observations. However, I think you missed a subtle but important characteristic of the masters' approach to mergers and acquisitions: they view M&A as an integrated process, from deal identification and evaluation to due diligence to negotiation of the definitive agreement and on through postclosing integration.

While each of the "secrets" is practiced by these masters, and likely should be emulated by those organizations striving to improve their own M&A processes, it is the integrated process that consistently delivers above-average success. For example, without frequent communication between the organization's business units, corporate strategy group, and M&A group, it is next to impossible for an organization to "never stop shopping," because it will only identify opportunistic deals that fall in its lap or deals brought to it by an investment banker.

In addition, while the application of hurdle rates is important, consistent application of the same hurdle rates across all potential deals is the only way to truly allocate resources, including capital and management and deal-team time. There will always be transactions that fail the hurdle rates and still should be pursued, but if all deals are evaluated against a single yardstick, the justifications for pursuing those exceptions will be more thoughtful and robust.

The masters also approach due diligence as much more than the simple confirmation of financial data. The due-diligence and deal teams constantly look for deal stoppers and deal shapers, as well as issues that will have an impact on the postclosing integration process.

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