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Why financial returns and social returns are not mutually exclusive; buying your dream house with your IRA; the perils of unassigned seating; Congress's financial gamesmanship; and more.
CFO Staff, CFO Magazine
December 1, 2006
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Thank you so much for your timely article on the business case for social responsibility ("Virtue Rewarded," October). It is gratifying to know that company executives, especially chief financial officers, are increasingly aware of just how important social responsibility is.
As part of the larger socially responsible investing movement — now representing more than $3 trillion in assets — the General Board of Pension and Health Benefits of The United Methodist Church has long been advocating for greater social and environmental accountability among many of the country's major companies. We do so because we believe that corporations focusing on short-term profitability, to the detriment of long-term sustainable business practices, are not good investment choices. It is our experience, and belief, that strong financial returns go hand-in-hand with strong social returns. For us, sensitivity to a company's social responsibility is an essential element of our fiduciary duty to our plan participants.
The General Board of Pension and Health Benefits, the largest denominational pension fund, with approximately $15 billion in assets, uses traditional shareholder advocacy tools to encourage companies to be more socially accountable. Just this year, we have urged as many as 20 companies to adopt better corporate-governance practices, to maintain high vendor standards, to label genetically modified foods, to report on issues relating to global warming, to guard against predatory lending, and to embrace sustainability. These issues, reflecting our specific religious tradition, with its emphasis on stewardship and justice, are at the very heart of how companies operate and perform.
As more executives come to understand that financial returns and social returns are not mutually exclusive, stakeholders everywhere will benefit. Thanks for telling this important story.
David H. Zellner
Chief Investment Officer
General Board of Pension and Health Benefits
The United Methodist Church
I thoroughly enjoyed your article on corporate responsibility. We call ourselves a "triple bottom line" company and have strict measurements around what we do. We thought we were alone!
Go Ahead, Buy that Dream House
Great article on the value of self-directed individual retirement accounts ("A Chance to Direct," October). However, there were a couple of misconceptions I'd like to bring to your attention.
An IRA owner may invest in a sibling's business, since siblings are not disqualified persons according to the Internal Revenue Service. Of course, all those transactions should be market rate and aboveboard.
You may also buy the beach house you are in love with, as long as you don't use it while it is held by your IRA. You may rent it. When you are eligible for distributions, you may petition the IRS for a waiver to allow you to purchase the property from your plan (not usually allowed, but it may be granted if you can show that the IRA would benefit the same as if it were sold to a non-disqualified third party), you may take it in partial distributions over several years, or you may take the entire property at once as a distribution.
Transactions are not as complicated as they seem if you deal with an administrator that guides you through the process.
Jaime J. Raskulinecz
Entrust Northeast LLC
Verona, New Jersey
Thanks for the Road Map
We have been on an adventure in unassigned seating over the past 18 months, and I really wish that your valuable real-estate report had been available at the outset of our journey ("Take My Desk — Please," October). I can assure you that your article mirrors well the experiences that we have had. I also appreciate the insights from companies that are further down this road.
Orange Business Services
I read with interest the article "Take My Desk — Please" about how reconfiguring office space can save companies money. However, these companies may end up dishing it out elsewhere. The first thing I noticed was the picture on page 100 of a woman slumping in an easy chair with her laptop, in the worst possible posture. It may sound inviting to give up our ergonomically correct desk chairs for a comfy sofa, but the company may soon end up with more employees' medical bills for shoulder and back pain, migraines, and sinus and breathing problems. And unless lockers are allocated for employees, they can hurt themselves carrying everything around to a new spot each day. What's more, functioning with earpiece phones instead of desk phones can lead to more-frequent ear infections as no doubt people will not clean them often enough.
Add to the bills and lost work time the suggestion to consider a totally paperless environment, which makes us totally dependent on computers. Anyone who has ever worked in an office that depends mostly on computers, with no files to run to for backup, is aware of the consequences of a computer crash.
Who's Minding the Store?
The same U.S. Congress and Administration that passes the Sarbanes-Oxley Act and holds hearings to hold corporate executives accountable for their misdeeds hides behind cash-basis accounting to mislead the American public ("Deficit Retention Disorder?" Topline, October).
In addition, this same group misdirects funds that should be going to the small businesses that support the U.S. economy to large companies (such as Halliburton) that have the Administration and members of Congress in their pockets. It's no wonder that so many MBA students think it's OK to cheat to get ahead!
The current Administration and Congress should be held accountable for such outrageous behavior, but, since they are the ones "minding the store," it will never happen.
Henry L. Wilson
"Deficit Retention Disorder?" describes the kind of financial wizardry that caused Congress to strip former Washington, D.C., mayor Marion Barry of most of his mayoral authority and appoint a board to run the city's financial affairs. Since there is no über Congress to do the same to the U.S. Congress, may God help us all.
What Lies Ahead
"Delayed in the USA" (September) was outstanding in its presentation of the [infrastructure challenges] facing the United States in the coming years. Two issues remain: how fast can we close the gap and who has a solution set to focus on potential mitigation?
John A. Deasy
Breaking the Spending Cycle
I found "The Money Bowl" (August) to be fascinating and well written. I think that breaking the spending cycle lies in the hands of the consumer. As you know, a major source of revenue comes from broadcasting rights, whose media providers sell advertising slots. Consumers would have to stop supporting those agencies, so the problem seems quite unsolvable.
When Will They Learn?
Last spring you published a letter from me regarding some of the problems with upper-level executives being out of touch with reality ("Through Shareholders' Eyes," Letters, March).
Recently, we saw the results of another backroom deal that surfaced with UnitedHealth Group and its backdating of stock options. Although one news report stated it may not be illegal, in anyone's mind it is unethical. They were caught; how many others have not yet been caught on this or other issues?
When will companies learn that these practices are not acceptable? Is anyone worth the salary and stock options these executives get? Why don't the companies give the options to the common workers who have earned the profits for the companies — not to those sitting in the ivory tower?
Gordon S. Knudson CPA
In "Topping the CFO," a sidebar about pay levels for finance specialties that accompanied the November compensation feature, "Pay Up," the rise in controller salaries was incorrectly given. The correct figures for the increase are: from $151,500 in 2003 to $184,300 in 2005.