Risk & Compliance

CFOs: We Plan to Hire More in Q2

Almost 1 in 10 plan to expand finance staffs; business-services sector will see the biggest pickup. Also: Government report shows Enron's top 200 e...
Stephen TaubFebruary 14, 2003

Here’s a bit of good news for job-hunters seeking work in finance.

The hiring of accounting and finance professionals is expected to increase very slightly in the second quarter, according to a Robert Half International quarterly survey of chief financial officers.

Nine percent of CFOs said they plan to expand their accounting and finance departments, while 4 percent expect staff reductions. About 85 percent of the respondents expect no change in hiring.

Still, the net 5 percent increase is up one point from last quarter’s forecast and is the highest level reported since the third quarter of 2001, according to the Robert Half Financial Hiring Index. Robert Half International has been tracking financial hiring projections in the United States since 1992.

CFOs planning to hire additional accounting and finance professionals in the upcoming quarter were asked to identify the primary factor driving the demand. Nearly half (48 percent) of the 1,400 CFOs who participated in the poll cited business growth.

“Businesses that have reduced personnel or placed hiring plans on hold for several quarters may be experiencing pent-up demand for financial talent,” said Max Messmer, chairman and CEO of Robert Half. “While the overall hiring environment remains conservative, those firms that are adding staff are doing so to facilitate current or future expansion and to meet rising workload demands.”

For the second straight quarter, financial executives in the Pacific states are most optimistic about upcoming hiring activity—14 percent of CFOs from this region plan to add personnel during the second quarter, while just 1 percent anticipate staff reductions. The net 13 percent increase is up five points from the previous quarter’s forecast.

A net 11 percent of CFOs in the east north central region project hiring activity, well above the national average.

“Businesses in the Pacific region report demand at the staff level for accounts-receivables and accounts-payables professionals as well as collections specialists,” said Messmer. Due to low interest rates, finance professionals are also in demand in mortgage- and banking-related fields, he added.

Messmer said the east north central region is benefiting from growth in the health-care industry, resulting in the need for medical billing and claims specialists. In addition, corporate tax and audit specialists are in demand as public companies focus their efforts on corporate-governance issues, he added.

Looking at the data from an industry perspective, CFOs in the business-services sector are most optimistic about second-quarter hiring activity, according to the survey. Sixteen percent of those polled said they intend to hire accounting and finance staff—and none reported plans for staff cutbacks. The net 16 percent hiring increase is up five points from the first-quarter forecast.

Retail executives also anticipate strong hiring activity during the second quarter, with a net 13 percent increase projected, up 3 points from the previous quarter and up 10 points from the fourth-quarter 2002 forecast.

Enron’s Top Executives Got $1.4 Billion

Nothing like being generous with other people’s money.

Turns out the top 200 Enron Corp. executives were paid a total of $1.4 billion in 2000, according to a detailed congressional report released Thursday. Top Enron executives “essentially wrote their own compensation packages,” the report stated.

The total compensation package for the top Enron executives included $1.1 billion in stock options, $172.6 million in wages, $131.7 million in restricted stock, and $56.6 million in bonuses, according to the Joint Committee on Taxation, which presented the report to the Senate Finance Committee after a year-long investigation into Enron’s tax returns.

To put this into perspective, that means the top 200 executives at Enron were all making at least $850,000 in annual salary. More perspective: Enron paid its top executives $1.4 billion in compensation in 2000, yet reported net earnings of just $975 million that year.

The total compensation for the Enron 200 in 1999 was $401.9 million, and only $193.3 million in 1998.

Approval of Enron’s compensation packages “rested almost entirely with internal management,” according to published accounts of the report. Enron’s board of directors had a compensation committee to review the pay packages, but it was generally “a rubber stamp of recommendations made by Enron’s management,” the report noted.

“The lack of scrutiny of compensation was particularly prevalent with respect to Enron’s top executives,” the report also stated.

In fact, the report revealed that Enron chairman Kenneth Lay borrowed $106 million from Enron from 1997 through 2001 through an unsecured line of credit.

The three-volume report—yes, three volumes—also detailed a complex scheme by Enron that resulted in more than $2 billion in questionable tax and accounting savings. Those savings helped inflate the company’s income at the same time Enron was shelling out the huge compensation sums, according to the Associated Press’s account of the report.

The AP article claimed that the bankrupt company created a dozen tax-sheltering transactions that used such techniques as claiming the same tax loss twice.

Enron’s tax deals “pushed the concept of business purpose to the limit (and perhaps beyond),” the report states. “Enron’s behavior illustrates that a motivated corporation can manipulate highly technical provisions of the law.” By using advice from sophisticated lawyers, investment bankers, and accountants, “corporations like Enron have an inherent advantage over the IRS,” it added.

The report pointed out that Enron’s tax department became a profit center, with its own annual revenue targets.

Corporate Profits Are Encouraging

Turns out the fourth quarter of 2002 was actually pretty decent for earnings, according to two separate analyses of companies that make up the Standard & Poor’s 500 index.

Prudential Securities recently reported that operating earnings (which exclude special gains and charges) at more than 300 of the S&P 500 companies rose about 16 percent compared with Q4 last year.

Sales climbed by just 6 percent, however.

Given the disparity between revenues and earnings, it’s clear that U.S. companies have cut costs substantially.

That also means that productivity has improved greatly. Indeed, the output per hour of work for all of 2002 grew by 4.7 percent, the strongest showing since 1950, the Labor Department recently reported.

While earnings and productivity have surged, though, the stark reality is that sales growth is still not too encouraging. The reason: companies have found it all but impossible to hike prices as consumers continue to shop for bargains.

This problem is underscored at a company like Cisco Systems, whose earnings jumped 50 percent this past year—even though revenues fell 2 percent.

Bloomberg recently estimated that revenue rose 7.4 percent in the fourth quarter for the more than 300 companies in the S&P 500 that have reported results. The wire service also pointed out that sales growth in Q4 outstripped any quarter since the first three months of 2001. In that quarter, revenue rose 9.5 percent for the average company in the S&P 500.

No Letup in Borrowing Binge

What a week for corporate borrowers.

About a half-dozen companies, including those with junk ratings, raised at least $1 billion each in the debt market in the past three days.

On Thursday PHH Corp., a unit of Cendant Corp., trotted out $1 billion of paper in two parts, double the amount it originally planned to raise.

The offering includes $400 million in 5-year notes and $600 million in 10-year notes. Both issues were rated Baa1 by Moody’s and BBB by Standard & Poor’s.

CIT Group Inc., the commercial finance company spun off by Tyco International last year, issued $1 billion in three-year global notes, up from an originally planned $750 million. The CIT paper was rated A2/A.

MetLife Inc. issued $1.029 billion in 2.25-year debenture units, each with a par value of $50. The MetLife debentures were rated A2/A.

American Electric Power also issued $1 billion in debt this week, but in the private placement market.

Earlier in the week, Citigroup Inc. raised $1 billion from the issuance of 30-year global subordinated bonds. The bonds were rated Aa2/A-plus.

And finally, on Tuesday packaging company Crown Cork & Seal Co. raised $2.1 billion in the largest U.S. junk-bond sale in three years.

Meanwhile, a few companies filed huge shelf registrations.

Camden Property Trust filed to periodically sell up to $1.1 billion in debt securities, common and preferred shares, and warrants. The real-estate investment trust plans to use the net proceeds for general corporate purposes, including the repayment or refinancing of debt, property acquisitions and development, working capital, and capital expenditures.

And Unocal Corp. filed to sell up to $1.5 billion worth of common and preferred stock, warrants to purchase debt securities, common and preferred stock, and stock purchase contracts and units.

Short Takes

  • IBM said it signed a $2 billion outsourcing deal with auto-parts maker Visteon Corp. that includes taking over Visteon’s technology operations. Under the 10-year deal, IBM will handle desktop support, data-network management, customer-support centers, and application development. Visteon will continue to set its technology strategy.

(Editor’s note: To find out how some companies are getting better deals from outsourcers, read “Outsourcing: Buyer’s Market,” a CFO special report.)

  • Paris-based Orange, the mobile-telecommunications company controlled by France Telecom, said its finance director, Simon Duffy, has resigned and will be replaced by Wilfried Verstraete as chief financial officer. Verstraete, a Belgian, was formerly CFO at France Telecom’s Internet arm, Wanadoo. Reports said Duffy was in the running to get the top job at Orange. Apparently he wasn’t happy with the company’s decision.