If regulators create a distasteful rule that could affect your company's livelihood, maybe they'll relent if you remind them how annoying it is to enforce new regulations.
At least that seems to be the general idea behind Standard and Poor's latest appeal to the SEC. The rating agency has asked the SEC to rethink new rules aimed at stifling some of the conflicts of interest at rating agencies. Basically, S&P claims the SEC will be inundated with questions and complaints about the new regs — similar to those received from auditors and their public-company clients lost over how to talk to each other when the auditing rules under Section 404 were first laid out.
As we reported yesterday, the agencies have defended their reputations over the past year by insisting they're nothing like the audit firms — and could not have been expected to fully know that the underlying subprime-mortgage securities in structured financial products they rated were falling apart.
In an effort to prevent over-inflated ratings, the SEC has proposed prohibiting the raters' analysts from making recommendations to issuers of securities that they will later rate. S&P claims this rule could scare analysts and issuers into "not speaking at all." And besides, doesn't the SEC remember how "hard" the staff worked to clear up similar fears that occurred between auditors and public companies after 404 was issued?
"We expect the commission and its staff to be tasked ... with issuing modifications and clarification of what the rule is intended to ban, just as [they] were required to do following the adoption of Auditing Standard No. 2, in order to mitigate the unintended consequence of several critical ratings-related communications," S&P wrote.
It is widely-known that in 1913, Henry Ford, inventor of the Model T and first chairman of Ford Motor Co., agreed to pay the company's factory workers double the minimum wage for the industry — a stunning $5.00 per day. He also agreed to reduced the standard work day from nine hours to eight.
The rationale for the largesse reportedly was more strategic than altruistic. Ford was creating his own private-sector stimulus package, essentially making sure employees could afford to buy the cars rolling off of his legendary assembly line. In turn, the workers with Model Ts became mobile advertisements for Ford. The idea — a car made "for the masses" — caught on.
The financially beleaguered car company announced on Tuesday that will continue to offer buyout packages to employees at 14 more factories, in addition to the offers made at two other factories earlier in the month. According to the Wall Street Journal (subscription required), the carmaker is cutting back on overtime as well, figuring that by nixing overtime incentives, employees might be more likely to take the packages. That's a far cry from doubling workers' salaries.
This morning, Ford announced a loss of $8.67 billion for the second quarter, stemming from, among other things, a $5.3 billion write-down on its North American assets, and a $2.1 billion charge taken on operating leases held by Ford Motor Credit.
With the ghost of Henry Ford hovering over Highland Park, Michigan, this week, it's hard not to think about what type of stimulus package the company founder would have offered employees of this era.
Continuing the theme of this month's cover story, two recent pieces of research about the intersection of sports and business are worth mentioning.
A trio of academics from Cornell University -- Amanda Goodall, Lawrence Kahn and Andrew Oswald -- seek to answer the age-old question, "Why do leaders matter?" The search for evidence takes them to an unexpected source: professional basketball.
In studying more than 15,000 NBA games, the researchers find that "teams perform substantially better if led by a coach who was, in his day, an outstanding player." Roughly speaking, a predictor of a team's success can be traced to the extent of its coach's own achievements 20 years earlier (Isiah Thomas notwithstanding). Beyond basketball, this could prove useful for professional-service firms, high-tech companies, universities and other "high-performance workplaces where the employees are experts," the academics note.
But landing a corporate leadership role doesn't mean that a manager's playing days are over. After sifting through more than 20 years of German labour-market and socio-demographic data, Michael Lechner of the University of St Gallen in Switzerland finds that participation in sports boosts workers' earnings by making them more productive and strengthening their social networks.
Active sportspeople increase their earnings by around 1,200 euros per year, Lechner concludes, "suggesting similar magnitudes than for one additional year of schooling." This could prove useful in recruiting for the company softball team.
For the record, neither I nor anyone else on CFO's staff wrote this phony blog, ostensibly by Blackstone's Stephen Schwarzman, called Why FAS 157 is Worse than Al Qaeda.
But we did laugh ourselves silly over it.
The ersatz-Schwarzman's take on FASB? "They are among the most useless people on the planet and they are standing in the way of patriotic American commerce. Imagine the lamest Star Trek-watching nerds hell-bent on punishing the successful and cool kids with their nitpicky rules." (Hmm. Maybe he did really write this.)
Be sure to check out "Schwarzman's" proposed "SAS 69" solution, too.
We stumbled upon this blog by accident during a Google search for our own coverage of yesterday's fair value roundtable at the SEC, but we're more than a little amazed that anything beginning with "FAS. . ." is getting such play.
Gary Wilson has long been known as a corporate chairman (Northwest Airlines) and an influential board member (Yahoo, still, and Walt Disney, for 21 years, until 2006.) But to finance chiefs he'll always be one of the founders of the modern CFO-strategist role, which he played at Marriott, Disney, and Northwest. So when he writes of the need to take domineering CEO/chairmen down a peg — as he does in a Wall Street Journal op-ed piece today — he brings the perspective of a veteran CFO to the debate as well.
His article, titled "How to Rein in the Imperial CEO," points to the conflict of interest that infects the situation of the chief executive being one and the same with the board chairman — that individual charged with leading supposedly independent directors as they "hire, oversee and, if necessary, fire the CEO."
The combination post is a tool of empire-building in a company, he writes, continuing: "All too often, we also find an imperial air force of large private jets reserved for the CEO's trips to the Masters, the Super Bowl or that Paris 'business' trip."
Just the rare vestige of a bygone pre-Sarbox era, which brought the separation of CEO/chairman powers into vogue? Hardly, notes Wilson. Fully 65 percent of the S&P 500 still employ the old approach, he points out, led by heavyweights GE, Coke, Exxon Mobil, UPS, Deere, Caterpillar, J&J, and CSX.
Wilson is currently on an alternate director slate for transportation company CSX, proposed by a hedge-fund shareholder; so his thoughts about what to do there are pretty clear. But he peppers his op-ed, too, with tales about tension at Disney during the term of Michael Eisner, who had the two titles, along with that of America's favorite family TV-show host. And Wilson praises Yahoo for separating the posts, while also suggesting that the Yahoo board will produce "a good outcome" in any dealings with Microsoft and others.
If lots of ex-executives these days are proving F. Scott Fitzgerald wrong as they perform their virtuoso "second acts," 68-year-old Gary Wilson is showing that a CFO can be influential in the third act, as well.
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