The Changing CFO Prepared for the CFO Alliance-NY Breakfast Roundtable by Professor Howard P. Tuckman, PhD GRADUATE SCHOOL OF BUSINESS

Prepared for the

CFO Alliance-NY Breakfast Roundtable

by

Professor Howard P. Tuckman, PhD

“ The Wall Street Journal reported that in the first seven months of this year [2008], 70 CFOs at Fortune 500 and S&P 500 companies exited their jobs.” “ As difficult as 2008 has been, 2009 has the earmarks of being even more challenging as CFOs bear the brunt of the global economic crisis.” FEI president and CEO James J. Able, December 2008 A Changing Environment

“ The Wall Street Journal reported that in the first seven months of this year [2008], 70 CFOs at Fortune 500 and S&P 500 companies exited their jobs.”

“ As difficult as 2008 has been, 2009 has the earmarks of being even more challenging as CFOs bear the brunt of the global economic crisis.”

FEI president and CEO James J. Able, December 2008

Why is the situation so challenging? “ Today’s CFO must be something to everyone: the firm’s top accountant, the CEO’s strategic partner, the gatekeeper for new initiatives, the chief metrics officer, the head of financial reporting compliance, a spokesperson for external constituencies, and the board of directors’ (or at least the audit committee’s) new best friend. And in this post-Enron, post-WorldCom, post-Tyco world, the CFO must be as squeaky clean as Clark Kent. She, or he, must be the Super CFO.” Jonathan Karpoff, the Norman J. Metcalfe Endowed Professor in Finance, UW Business

“ Today’s CFO must be something to everyone: the firm’s top accountant, the CEO’s strategic partner, the gatekeeper for new initiatives, the chief metrics officer, the head of financial reporting compliance, a spokesperson for external constituencies, and the board of directors’ (or at least the audit committee’s) new best friend. And in this post-Enron, post-WorldCom, post-Tyco world, the CFO must be as squeaky clean as Clark Kent. She, or he, must be the Super CFO.”

Jonathan Karpoff, the Norman J. Metcalfe

Endowed Professor in Finance, UW Business

Old Skills Historian - Documentor of the past Statistician - Data provider and interpretation Treasurer - Proficient in cash management Active in securing debt or raising equity capital - Internally focused - New Skills/Old Skills

Old Skills

Historian - Documentor of the past

Statistician - Data provider and interpretation

Treasurer - Proficient in cash management

Active in securing debt or raising equity capital

- Internally focused -

New Skills Formulate and execute strategies Able to deal with rising stakeholder expectations Staying ahead of a increasingly complex competitive landscape New Skills/Old Skills

New Skills

Formulate and execute strategies

Able to deal with rising stakeholder expectations

Staying ahead of a increasingly complex competitive landscape

New Skills (con’t) On top of new technologies Plugged into the changing regulatory environment Able to oversee and ‘own’ risk management Comfortable in a truly global environment - Externally focused - New Skills/Old Skills

New Skills (con’t)

On top of new technologies

Plugged into the changing regulatory environment

Able to oversee and ‘own’ risk management

Comfortable in a truly global environment

- Externally focused -

Three Areas of Balance

Pressure to show that the balance sheet is honest, understandable, and accurate At the same time Pressure to find innovative and novel ways of raising capital Area of Balance – Transparent Creativity

Pressure to show that the balance sheet is honest, understandable, and accurate

At the same time

Pressure to find innovative and novel ways of raising capital

CFO must continue to build profits and to use the latest products At the same time CFO must focus on ethics as opposed to to complex or potentially obtuse deals Area of Balance – Ethical Profits

CFO must continue to build profits and to use the latest products

At the same time

CFO must focus on ethics as opposed to to complex or potentially obtuse deals

CFO Must make solid forecasts of revenue At the same time New pressures on CFO to play role in strategic planning, analysis of balance sheets, and risk management Area of Balance – Strategic Revenue

CFO Must make solid forecasts of revenue

At the same time

New pressures on CFO to play role in strategic planning, analysis of balance sheets, and risk management

P/E ratios have fallen dramatically suggesting that expectations about cash flow have fallen. CFO must find what drives expectations and explain to stakeholders. In Addition

P/E ratios have fallen dramatically suggesting that expectations about cash flow have fallen.

CFO must find what drives expectations and explain to stakeholders.

Value measurement Business taxation Adoption of eXtensible Business Reporting Language ( XBRL) Convergence of U.S. GAAP and IFRS Merger of the Financial Accounting Standards Board (FASB) and International Accounting Standards Board (IASB) Presentation of Financial statements taken from FEI (modified) List of Top Challenges for 2009

Value measurement

Business taxation

Adoption of eXtensible Business Reporting Language ( XBRL)

Convergence of U.S. GAAP and IFRS

Merger of the Financial Accounting

Standards Board (FASB) and International Accounting Standards Board (IASB) Presentation of Financial statements

taken from FEI (modified)

Complexity in financial reporting, controls and risk management Employee benefits issues including the new health care proposal Climate change legislation/ reduction of carbon emissions Emphasis on sustainable business taken from FEI (modified) Challenges Continued

Complexity in financial reporting, controls and risk management

Employee benefits issues including the new health care proposal

Climate change legislation/ reduction of carbon emissions

Emphasis on sustainable business

taken from FEI (modified)

Predicting timing and shape of recovery Dealing with potential inflation and deflation at same time Dealing with tighter rules for credit Factoring in differences in global recovery Protecting the supply chain Securing equity capital Partial List of Economic Challenges

Predicting timing and shape of recovery

Dealing with potential inflation and deflation at same time

Dealing with tighter rules for credit

Factoring in differences in global recovery

Protecting the supply chain

Securing equity capital

Pick one of the three balance areas Transparent Creativity Ethical Profits Strategic Revenue Which affects you the most? What impacts have you seen on your job and company? What are you doing to overcome the issue? Discussion

Pick one of the three balance areas

Transparent Creativity

Ethical Profits

Strategic Revenue

Which affects you the most?

What impacts have you seen on your job and company?

What are you doing to overcome the issue?