David M. Katz, CFO.com | US
September 6, 2006

CFO compensation

It has gotten to the point that our government has lost confidence in the free market economy that has made our country the richest on earth. It appears that rather than let the market and market forces drive the economy, the Government has decided to legislate as a means of influencing and controlling the business world. Bad guys will always be bad guys, one can't legislate them to extinction. Limiting or constraining executive compensation in the name of governance is ridiculous. What happened to performance as a measure of competance.

Posted by Rick Macchiarulo | Mar 8, 2007 10:59 AM ET

IRS Here to Help You?

Enforcement and penalties are the only ways to stop backdating. Stripping CFOs of the upside from stock compensation is not a solution for it could have several unintended and potentially damaging effects, including:

1. The cash compensation components for CFOs would go up significantly to replace the potential gains of option/stock grants. This strains cash flow and could be brutal on younger companies in high growth industries that require top-flight talent but cannot afford the cash portion of the bill.
2. Option-less CFOs do not benefit from value creation in the same way that shareholders do. This agency problem could reduce stock returns as CFOs would be compensated by other performance standards.
3. Without direct participation, CFOs could be motivated to seek remuneration from sources that only appear as notes on the financial statements.

Sarbanes Oxley has driven many companies to access international public markets. Legislating against CFOs in this manner will drive companies to incorporate offshore. Not good for our economy or our tax base.

Besides, have you ever believed it when somebody said, ?I?m from the IRS and I?m here to help you??

Posted by Kelly Lefkowitz | Oct 19, 2006 1:33 PM ET

They aren't thinking very well

A large number of CFOs are not rich and Everson's proposal takes away incentives for hard work and real enhancement of shareholder values.

It is baby with the bathwater thinking.
Disclosure as options are initially granted and penalties if options are backdated, etc. is a better option.

Posted by Robert Gentry | Oct 7, 2006 9:43 PM ET

How about disclosure?

Companies already disclose the # of shares under option that a CFO and other executives (and board members) hold. Couldn't the government do a "Public Service Announcement" to inform the public that such information is available, and allow the investors to make their own decisions? Isn't that what government is supposed to do, provide service to the public? Does greater complexity in the form of tax rulings and laws really provide any public service?
I know it helps the CPA firms, but how about the average investors?

Posted by James McMonagle | Oct 2, 2006 10:58 AM ET

Congress should look at themselves

This is again Congress's idea of punishing all CFO's and not the ones that break the laws.

If Congress's intention is to somehow change a crooked CFO's behavior by lessening or controlling their salary, they need to look at themselves first to see if it works.

Congress controls all of the salaries of government officials and give out little or no incentives in their pay. However there is still widespread corruption amongst its bureaucrats.

Some Congressman still have the perverted idea that incentives are bad for this country and that putting incentives in front of a CFO will corrupt them. A CFO is part of management as well as the company's compass and policeman. A lot of times the success of a company is due to a good CFO. Why shouldn't they be able to reap its awards for their hard work?





In my opinion, the best way decrease corrupton is to put very stiff punishments and make it easier to put away crooked CFO's. Punish the abusers of the system and not everyone else.

Posted by Bruce Kalem | Sep 28, 2006 3:03 PM ET

Why not stop paying CFOs, too?

I see, so we need to take options off the table since CFOs might not be able to resist the temptation to backdate. O.k., then let's also stop paying CFOs since every single one has overall responsibility for payroll and might be tempted to increase their own pay. And since most CFOs play a key role in determining medical and other benefits, let's exclude that from their compensation package as well to eliminate all that nasty collusion that's obviously such a huge temptation that no reasonable person could be expected to resist.

Or instead, how about we simply continue to punish the cheaters severely and realize that the vast, vast majority of CFOs are highly ethical and would never consider this kind of behavior? When will we realize that we can't legislate ethics? When will we realize that this is not a pervasive problem of many bad folks, a few of whom have been caught, but a rare situation where most of the cheaters are actually caught?

Posted by | Sep 28, 2006 2:29 AM ET

Lost for words

I'm lost for words so as an accountant I'll use numbers - "1984" - it's closer than you think.

Posted by John Laurie | Sep 8, 2006 1:35 PM ET

Too Much to Expect, Mebbe?

I can think of compensation
and corporate governance experts whose opinions I would solicit on this matter.

It is not altogether clear directing the IRS affords special insight upon which I might rely to formulate policy

However, that "take" is based on balanced, professionally expressed views.

It is difficult to be dismissive of senior government officials ... until they move away from expertise and legitimate policy concerns.

It becomes challenging NOT to be dismissive of comments designed to stir up political winds. Categorizing CFO's as potentially part of a cabal ... and "already plenty rich" is not the kind of testimony I would expect from an IRS Commissioner.

My own take is that back dating is simply unethical. It is not clear that we need our brave legislators to solve this one for us.

Finally, with the IRS withholding information from watchdog groups it has routinely provided in the past, I see no reason to cede the moral high ground on transparency to Commissioner Everson.

For some reason, I did not expect a political response to a policy question from someone in Washington.

Whatever was I thinking about?

Posted by Dale Norton | Sep 6, 2006 10:03 PM ET