There are plenty of CFOs these days who are mad as hell about some law, regulation, or accounting rule. And there are a few who have decided they aren't going to take it any more.
One such executive is Alex Davern, CFO of $500 million National Instruments Corp., an Austin, Texas-based maker of test and measurement software. Last year, Davern became frustrated with the cost and time needed to comply with Section 404 of the Sarbanes-Oxley Act, on internal controls. Since then he has been on a campaign, working through the American Electronics Association (AEA), to overhaul a rule he believes is "bad for the country."
Another fed-up CFO is Andy Thrower, of Spartanburg, South Carolina–based Contec Inc. For nearly a year, Thrower has lobbied the Financial Accounting Standards Board to change what he considers a flawed accounting standard — FAS 150 — concerning the accounting for mandatorily redeemable shares. Issued in May 2003, the standard means private companies like Contec would have to count such shares as liabilities and, according to Thrower, "mess up their balance sheets."
Davern and Thrower are members of a tiny fraternity: activist CFOs. These executives usually limit their activity to influencing accounting and regulatory policy, but a few have chosen to enter the political sphere. Not surprisingly, they tend to work at companies "that see the benefits of using public policy to advance a corporate agenda," says Grace Hinchman, senior vice president of Financial Executives International (FEI), citing CFOs Jim Schneider of Dell and Andy Bryant of Intel, who have been outspoken on the subject of expensing stock options. These companies, say Hinchman, "see the benefit of using the right C-level executive to deliver the most effective message." With the CFO, she adds, "companies [can present] a much more granular view of the financial implication of the story."
Typically, CFOs prefer collective activism, through trade organizations such as FEI or the American Institute of Certified Public Accountants, or industry groups such as the AEA. Others such as Davern — who now also sits on the Securities and Exchange Commission's Advisory Committee on Smaller Public Companies — are going right to the source with their opinions. And while there is no single motivator, some finance chiefs regard it as almost a personal duty to speak out on behalf of their company or their profession. Says Andy Thrower, "After a quarter of a century in this profession, I just thought it was time to give something back."
Driven by a Passion
Thrower began his campaign to change FAS 150 by working with the standards subcommittee of the Committee on Private Companies for the FEI (he now chairs the subcommittee). Subsequently, he joined the FASB Small Business Advisory Committee as well as the Financial Accounting Standards Advisory Council. And partly through his committees' efforts, the effective date for the standard was deferred indefinitely.
Thrower's activism was also driven by a passion for financial reporting and accounting theory. In a small company like Contec, he says, "you really don't get to apply the theory" on a broad basis. Through his activism, he has been able to share his knowledge and experience with others. As for the time commitment, Thrower reckons he spends at least five hours a week just reading background materials for the committee work.
Davern, who secured the blessing of his company's board before accepting the position as chairman of the AEA's committee to reform 404, began his activism in October 2004 by meeting with fellow industry CFOs to discuss their gripes with the regulation. He moved on to writing a white paper about the problem, then began meeting with regulators at the Government Accountability Office (GAO) and the Public Company Accounting Oversight Board (PCAOB). All told, Davern estimates he has spent anywhere from 500 to 700 hours on the 404 issue.
But he says it's been worth it. The GAO is now conducting a study on the impact of 404 on small companies, notes Davern, and the PCAOB has expressed concern over how the rules have been applied.
Both Thrower and Davern have been pleasantly surprised at the reception they've received. "Washington always seemed like a black box to me," says Davern. But the government regulators "were much more receptive" than he had anticipated. "They will talk to you, they will listen, and they are very interested in what is happening on the ground floor," he says. Thrower feels the same way about the give-and-take with FASB. "There's a process here," he says.
On the flip side, however, Davern says he was "disappointed with how little the bureaucracy understood the consequences of their action [Section 404]." And Thrower, who has moved on to studying the impact of international accounting issues on private companies, says neither FASB nor the accounting profession as a whole "has done a good job" of educating small companies about how the conceptual framework of accounting has changed over the years.
On the Public Stage
If CFOs who get involved in public policy are few, finance chiefs who take their convictions to the political arena are even more rare. Anthony Williams, the mayor of Washington, D.C., is probably the prime example. Williams served as the district's CFO for three years before being elected to the top slot in 1998.
Recently, Gary Dodds, CFO of Accent Magazine Inc., a Portsmouth, New Hampshire, publisher of a regional home-and-garden magazine, announced his candidacy for a seat in the House of Representatives from the 1st Congressional District of New Hampshire. For him, entering the public arena is as natural as balancing the books. "I've been running for public office all my adult life," says the 41-year-old Dodds, who previously served on the school board and planning board of Rye, New Hampshire, as well as other local political organizations.
Dodds's motivation to step up to the national level, however, has to do with his anger toward the Bush Administration. "I don't like where this Administration is taking this country," he says. "I don't think anyone can say we are better off than we were four years ago."
Running as a Democrat, Dodds has a few concerns that are common to all CFOs. "We need to modernize our health-care system. What we have now works only for the privileged and the healthy," says Dodds, who contends that having a doctor and a pharmacy available 24/7 would eliminate many emergency-room visits. On the issue of federal spending, he insists that $60 billion can be immediately stripped from the Pentagon's budget. "We don't need to fund for the Cold War any more," he says, adding that "this government doesn't understand the concept of zero-based budgeting."
In Dodds's case, juggling political ambitions with his CFO role is doable, he says, since he needs only four to five hours of sleep a night. But for other activist CFOs, there are limits to how active they can be. Davern, for example, says his public-policy days will most likely end in April 2006, when his term on the SEC advisory committee expires. "I've made a commitment to do my best until then," he says. "At least I can say I've gotten past the complaining stage."
Lori Calabro is a deputy editor of CFO.
What It Takes
The attributes of effective finance activists.
- Corporate public-policy agenda
- People skills
- Working knowledge of the topic or issue
- Ability to translate complex financial information for a lay audience
- Ability to adjust that message for different audiences
- Dose of charisma
- Intangibles: trustworthiness and credibility
Source: Grace Hinchman, FEI
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