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Readers comment on the aging of the baby boomers, cloud computing, the value of M&A, and other topics of recent stories in CFO.
CFO Readers, CFO Magazine
August 1, 2012
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In regard to the worry over baby boomers leaving the workforce, the institutional-knowledge challenge is being solved in many ways, and is creating less turmoil than projected by many business analysts ("When the Boomers Go," June). Many people age 50 and over are staying on because they need, or want, to continue working. Jobs, and the skills needed to perform them, are also changing, so some jobs are becoming obsolete; others are having some or all of the tasks automated; and many jobs have expanded the use of technology, thus requiring workers to perform them in new, and different, ways.
The anticipated drama of the baby boomers' exit hasn't really materialized, thanks in equal measure to the poor economy, delayed retirement plans, and unprecedented opportunities for older workers. While the age wave may be hitting some industries harder than others, the earlier concerns simply haven't come to pass. In fact, many older workers have fared better in the down economy than their younger counterparts.
Dr. Katherine L. Y. Green
Green Consulting Group LLC
Chevy Chase, Maryland
The Bright Side of the Cloud
Cloud computing is a way that small companies can allocate much-needed resources to other, more beneficial top drivers, such as sales and marketing ("Made for Each Other," June). When smaller companies begin to realize that software as a service is the best way to manage data, they will see the inherent benefit that the cloud presents.
How to Succeed at M&A
In my experience, the main reason for merger failures is poor management in the postmerger integration phase ("Do Mergers Add Value After All?" Strategy, June). Most companies fail to develop an integration process for the postmerger period, a failure due to: (1) not understanding how to achieve revenue and cost synergies; (2) not retaining key employees and customers; and (3) not understanding the corporate culture of the acquired company.
Can a company right a poor post-integration process? The answer is yes, but it will cost a heck of a lot of shareholder value. Although there remain questions about the value of M&A, companies today need to continue making acquisitions in order to stay competitive.
The other burden, besides taxes, that is even more significant to those affected is audits ("Small Businesses Spend More Time on Taxes," Topline, June). Sales-tax audits can be brutal, and IRS audits can take months, a year, or more — and large amounts of employee and tax-attorney time.
Ronald J. Cappuccio, J.D., LL.M. (Tax)
COLI Is A-OK
Your story "Key-Person Insurance: A Cash-Flow Caveat" (May) provided important information on this "increasingly popular tactic."
Corporate-owned life insurance (COLI) has long provided numerous benefits to shareholders and high-producing, quality executives who help to maximize shareholder value. COLI provides nonqualified plan sponsors with a cost-efficient asset that offsets the liability of the participants' account balances on the plan sponsor's balance sheet. For example, plan sponsors can use COLI policies to mirror the rate plan that participants earn in their voluntary nonqualified deferred-compensation plans. As a result, COLI helps companies reduce future liabilities, with an asset that should consistently grow in value. And with nonqualified retirement plans increasingly important for many executives earning more than $150,000 annually, COLI facilitates effective asset-liability management.
Contrary to what is stated in the article's last two paragraphs, there was no 2004 regulation that led to the COLI market being "essentially dead" from 2004 to 2010. By contrast, COLI has continued to grow in popularity since that time. In 2004, the COLI Best Practices Provision was first proposed and later became law as part of the Pension Protection Act of 2006. The measure and its high standards were widely supported by the industry's leading practitioners.
The Todd Organization