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Financial executives should, and do, support disclosure of executive compensation. More letters: Sarbox benefits, the "transparency" of fair value, how AICPA is losing touch with members, and why employees can tell you more about customers than a survey.
CFO Staff, CFO Magazine
November 1, 2006
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"Pay Dirt" (October) addresses the sticky topics of executive compensation and new regulatory demands. As leaders of Corporate America, we must recognize that new regulation is a direct result of abuse of privilege.
Financial executives are correct in supporting the Securities and Exchange Commission's latest requirements for executive-compensation disclosure. In a June survey by Oversight Systems, 64 percent of financial executives said companies should explicitly report a postemployment agreement on compensation (that is, a golden parachute), and 58 percent said companies should explicitly report the dollar value of all noncash and nonstock compensation and benefits greater than $10,000. Only 18 percent said the SEC should not regulate disclosure of executive compensation. Further including exec comp in SEC filings invokes the controls inherent in Sarbanes-Oxley, tightening the relaxed approach taken toward stock-option grants, among other things.
As with any other SEC regulation, finance executives should implement strong controls and standardized processes for granting and reporting on executive compensation.
Oversight Systems Inc.
Seeing the Benefits of Sarbox
I found your discussion on the cost-benefit constructs around Sarbox very interesting ("Numbers Crunch," September).
The results of your CFO survey ("Progress Report") align with my own experience, with a majority of public-company CFOs that I speak to perceiving the benefits of Section 404 to exceed the direct and indirect costs by a considerable margin. In fact, based on my admittedly anecdotal perspective, I suspect that a respectable number of CFOs also agree that it is more desirable to adhere to more-stringent compliance imperatives and access traditional capital markets than to seek more-liberal compliance environments in less familiar territory.
In my personal view, perhaps the CFOs see benefits to Sarbox that the naysayers have ignored. Could it be that the difficult- to-quantify transaction costs and the risks associated with more-liberal compliance environments favor the U.S. capital markets after all?
Jai K. Sudharsan
Lead Adviser, Strategic Client Services
Commercial Solutions Group
Perot Systems Corp.
Trick or Treat in Business Reporting?
The article on fair value ("Will Fair Value Fly?" September) is timely, and Ronald Fink has done a thorough job in reviewing the pros and cons of traditional accounting-based reporting and fair-value reporting, warts and all. It shows the urgent need for improved company reporting.
With all its excellent examples and quotes, the article leaves you with an eerie feeling that someone (FASB or the IFRS?) is trying to pull the leg of the international business community. If it were not such a serious matter, and if one did not know that the people serving on the Financial Accounting Standards Board are really serious people, the whole concept might qualify as a Halloween prank.
After reading the article, no one could believe that transparency would be served if the cobweb of traditional accounting is replaced with the even thicker cobweb of fair-value reporting. Transparency, reliability, and relevance should be restored to company reporting, but that calls for new thinking and a new system of all-inclusive business reporting, not a rehash of transactions- based accounting spiced up with guesswork about an uncertain future. J. Michael Cook of Deloitte deserves kudos for boldly declaring that financial statements are almost completely irrelevant, and also for his advice that it is time to go from defense to offense.
The long overdue debate on realistic business reporting got a well-deserved kick forward from your article. I am eagerly waiting for the next round.
Hans V.A. Johnsson
A Valuable Perspective
While I always find the articles in CFO on Sarbanes-Oxley — and governance in general — interesting and relevant, I wanted to commend you particularly on "The Case for Clarity" in September's special section on the future of reporting. While clearly presenting the arguments for the collected wisdom as to the "pain," I thought the case made by corporate observers/actors for the economic and financial benefits (and market and financial integrity being reflected in value) was a valuable perspective, and not something routinely focused on or at least considered in the ongoing debate. I think it is a useful and challenging article for governance lawyers and corporate CEOs and board leaders.
Proskauer Rose LLP
This letter is in response to "The AICPA: Heading South?" (Topline, July). For starters, Anthony Pugliese, the AICPA's senior vice president of finance and operations, recently sent its members a letter stating that the AICPA had experienced a direct violation of its internal-control policies and procedures. This violation resulted in the AICPA losing the names, addresses, and Social Security numbers of its membership body. So much for 404.
As a longtime AICPA member and volunteer, I do agree with much of the assessment regarding the future state of the organization and can attest that it is "losing touch" with its members. Case in point: the AICPA recently promoted a non-CPA with no background in accounting to lead the revolution in business reporting, audit, and attestation standards. Ironically, the revolutionary path the profession is advocating (that is, increased transparency and restoring public trust) was allegedly based on a business plan and a strategic vision, by a CPA, whose name as author was removed from the report, which was then promoted by the AICPA and others. This is clearly moving south.
JW Susan Hinds
CEO and President
Strategic Management Harmony LLC
The Best Surveys
Great article on surveying the world of surveys and using technology to register customers' opinions ("Angry and Bored? You Must Be a Customer," July). I completely agree that surveys are not a panacea for improving customer perceptions. Seldom do they address bad data. To get to the root of any issue usually involves good old face-to-face conversation. And oftentimes surveys just don't capture the real picture and end up being a waste of time, money, and resources.
As your article says, finding out what customers really think is a crucial first step. The second step is taking corrective action. But the third step, which can be expensive, is follow-up. Make sure whatever you've done for your customer has truly satisfied your customer. Sometimes the most effective "survey" is simply paying attention to your front-line employees, the ones who interact with your customers. You'll learn a lot more about your customers that way.