Backbone and leverage. The successors to Shields and
Yarnell?
Actually, CFOs say there's nothing funny about backbone and leverage --
particularly if don't have either. Yet grit and clout are crucial to survival --
particularly when a chief executive starts to push for better numbers than a
finance chief feels comfortable booking, according to a number of veterans of
failing companies. And make no mistake: That's not an uncommon scenario. According to an
exclusive CFO.com poll, 41 percent of 312 respondents said they have engaged in
aggressive accounting practices to improve their company's reported financial
performance. In another poll, about one in five of 226 respondents admitted
they've misrepresented their company's performance with aggressive accounting. Ironically, the economic downturn seems to have decreased the leverage
finance chiefs possess -- at a time when they most need to be able to hold their
ground against unreasonable requests. The relative scarcity of good CFO jobs
makes it harder for finance executives to vote with their feet, explains Joel
Getzler, president of Getzler & Company, a New York-based turnaround
consultancy. At companies where CEOs push for aggressive bookkeeping, a scrupulous finance
chief might be torn between producing the desired numbers or delivering a true
picture of the company's situation. And entrepreneurial chief executives often
don't want to see desirable revenue reports disputed, says Getzler. "The
CFO is under tremendous pressure to help make profits be there," he adds.
Pressure Gauge Still, it's unclear how much of an effect cautionary accounting tales will
have on CEOs if profits plummet and their own jobs are suddenly at risk. In that
event, suggests Getzler, friends in high places might be better career insurance
for a CFO. For instance, he says, he knows of a finance chief at a major insurance
company who was able to sharply disagree with the CEO on a matter before the
board. That's because the CFO was friendly with the chairman and had "major
lines of communication with board members on the auditing committee,"
Getzler adds. Since the CFO had routinely talked to board members, he avoided the
appearance that he was going over the CEO's head, Getzler says. The result? The
CFO still has his job. Smoky Signals Another sign of corporate inertia is the lack of honest, regular post mortem
meetings, says Laura Resnikoff, an associate professor at Columbia University.
It's also a bad portent if the meetings amount to a rubber-stamping of existing
procedures by a group of "good old boys," she says.
Adds Resnikoff: "Part of what happened in Enron is taking to the nth
degree this wanting to fit in."
Then again, the abundant bad news about Enron and other financial scandals might
give CFOs the ammunition to defend their positions. "It gives CFOs a much
better environment for saying that this whole idea of financial reengineering is
not getting us anything," says one finance chief who did not want to speak
on the record. "A lot of CFOs that felt they were pushed too far have a lot
of vindication."
To mitigate career risks during tough economic times, CFOs need to be alert to
warning signals about their own standing, as well about the company's culture,
experts say. Here are some bad signs: