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FEI Newsletter Archive

In This Issue:
FASB/SEC Update
Audit Effectiveness Report
Leading the Revolution
Appointment of IASC Trustees
Accounting Students Dropping Dramatically
Senate Acts on Tax Shelters
Presentations from the FEI Conference
New Offer to FEI Member Organizations from Arthur Andersen
E-Business Security Assessments, Insurance Thru the Web
Hot Tech Issues for Financial Executives
New from FEI … The FEI Yellow Pages!
Pictures from Financial Leadership Conference
Santa Clara Valley Golf Tournament
Consider a Fulbright
Upcoming Conference Calls
New Member Highlight
Job Opportunity

FASB/SEC Update
The SEC's SAB 101 on revenue recognition is causing increasing heartburn in the field. We are hearing from members that longstanding accounting policies are changing as a result of the pronouncement. The breadth and depth of the changes are very controversial and some are lobbying Congress to rein in the SEC's forays into accounting standard-setting. The SEC will shortly publish a list of Q&As on SAB 101 that should clarify and hopefully ease some of the concern.

The FASB continues to deliberate all the issues of the business combinations project in consideration of the comments received. Most significantly, they have recently stated that all issues are on the table, including leaving goodwill on the balance sheet and testing it for impairment.

Audit Effectiveness Report
The Public Oversight Board Panel on Audit Effectiveness has just published their findings. It's an important development and a hot subject with the SEC. The key points of the report are that the audit profession is sound, but that to improve the reliability of financial reporting they suggest that auditors undertake more "forensic" auditing activity targeted at detecting fraud. This will be a big deal to FEI members. More audit work means higher fees. Whether or not the number of fraudulent cases warrants increased costs systemwide has NOT BEEN demonstrated.

The Panel will hold hearings in July, and comments on the report are requested by July 12th. Send 'em a letter!!! Here is a link to the report.

Leading the Revolution
Author and leading strategist Gary Hamel spoke at our annual conference two weeks ago. He is a riveting speaker who challenged our members to recognize that incumbency has never been worth less and that insurgents are creating most of the new wealth. He noted that the top business school students go to work for companies that are insurgents and that in fact it's the second-tier students that go to work for the investment banks these days. Insurgent companies don't simply compete on the fringes anymore.

Unlike many of our other speakers, Gary warned that the day of value building through cost savings, merger synergies and efficiencies is over. He argues that business concept innovation is the required path to wealth creation. Strategies that are different, diverse and not infected by the standard thinking around an industry or product lead to such business innovation. He admires most the "grey-haired revolutionaries" that constantly reinvent themselves and their strategies. He observes that one-time visionaries rarely reinvent themselves.

One metric he encouraged was the amount of wealth created per employee. He suggested you compare your company to your peers and companies you admire. Also ask yourself who in the company is responsible for fundamental shifts in strategy - don't appoint the CEO. Also look for ways to give young people access to experimental capital within your business.

Appointment of IASC Trustees
The new International Accounting Standards body recently announced the members of the Board of Trustees. Paul Volcker was named Chairman. Importantly, representatives from industry and financial executives totaled 7 out of the full 19 members. Overall, the balance of geography and interest groups seems to bode well for the future of this important body.

Accounting Students Dropping Dramatically
Over the last ten years the new initiates into Beta Alpha Psi have dropped by 15%. This trend reflects the overall decrease in young people interested in accounting and finance as a profession. At our recent Committee on Corporate Reporting meeting, we had a presentation from Bernard Milano of KPMG about initiatives to stimulate early interest in the profession. Bernie also highlighted several initiatives aimed at minorities which I felt were important. If you are interested in this subject (many members express concern in this area), I encourage you to drop Bernie an e-mail at bmilano@kpmg.com. He can give you more detail on the various programs and how you can help.

Senate Acts on Tax Shelters
On May 24th, the Senate Finance Committee unveiled a bipartisan proposal to stop the proliferation of abusive corporate tax shelters. The proposal includes a wide range of ideas, including improving the quality of legal opinions; setting higher standards of professionalism for tax practitioners; doubling the penalty on large corporations, to 40%, for engaging in abusive tax shelter activity; and requiring corporate Chief Financial Officers, instead of Chief Tax Officers, to sign the tax returns, thereby making the CFO accountable for transactions disclosed on the return.

Let us know what you think about the Senate's proposal to have CFOs sign the company's tax returns. Do you think that this will actually prevent the use of tax shelter transactions? FEI's Committee on Taxation is drafting a response. Send your comments to Grace Hinchman, FEI's VP of Government Relations, at ghinchman@feidc.org.

CIEBA Ends Its Affiliation with FEI
As you may know, as of June 1, the Committee on the Investment of Employee Benefit Assets (CIEBA) ended its 15-year affiliation with FEI. This decision by CIEBA gives FEI the opportunity to rethink the appropriate mission for its benefits-related technical committee: the Committee on Benefits Finance (CBF). As a result, FEI has expanded CBF's charter to include policy issues covering benefit asset management as well as benefit design concerns. In this expanded role, CBF can better leverage FEI’s overall visibility and effectiveness.

I have asked Frank Becker, Chairman of CBF, to establish a task force that will work through the summer to establish a structure and agenda for a CBF Subcommittee on Asset Management (SAM). Your input is welcome. If you're interested in participating on the task force or have a particular expertise you wish to contribute please contact Grace Hinchman, FEI’s Vice President of Government Relations, at ghinchman@feidc.org or 202/457-6203.

Presentations from the FEI Conference
The reviews from the recent Chicago conference were outstanding. Most of the presentations from the annual conference can be accessed in our download library. Our new editor of Financial Executive, Jeff Marshall, also summarized some of the action and it follows here.

In his presentation, "Cracking the Value Code," Arthur Andersen country managing partner Steve Samek traced the exponential growth of knowledge and its impact on creating value. Human knowledge, he said, is doubling every 18 months, far faster than a millennium ago, when that process took centuries. This is bringing instability and "discontinuity" to business models, which are quickly being made obsolete.

Samek said we are now in the "Knowledge Age," which began precisely on Oct. 15, 1995 - the day that Microsoft's market capitalization surpassed that of IBM. But this new age has brought an inability to value new and untested business models, creating tremendous stock gyrations. He presented a template showing five distinct "asset" classifications for "new economy" companies: physical, financial, customers, employees and suppliers, and organization. Successful companies leverage several of these, he argued; building a model on one or two may not be sustainable.

Judith Sprieser, executive vice president of Sara Lee Corporation, spoke about a dramatic new venture in the consumer packaged goods industry. That venture, which began organizing in March, is known as eCPG.Net - a network of consumer packaged goods companies around the world linked by a common e-commerce platform. Sprieser is acting head of the fledgling operation, which hopes to incorporate and have a chief executive in place by early June.

As Sprieser described it, eCPG.Net will be revolutionary in a number of ways. It will link erstwhile competitors in an open, global, standards-based system intended to improve what has been a fragmented and inefficient supply chain. Transaction data will be owned by individual companies, but aggregate information will be owned by the consortium entity. The architecture would connect the supply-side and demand-side markets, she said, noting that the packaged goods industry had taken its lead from cooperative e-commerce moves among leaders in the automobile business.

Successful companies need to identify where they can extract real value along the value chain, argued David Morrison, vice president and director of Mercer Management Consulting, in his talk. It's no longer effective simply to rely on gross margins, he said; corporations need to understand their operating environment and priorities and understand what creates opportunity.

Morrison, a co-author of The Profit Zone, offered several examples of companies he said successfully found where they could maximize profits. Coca-Cola did so in the 1980s by realizing that the vending and fountain areas were far more profitable than supermarkets, and by reorganizing to take over the bottling and logistics systems that it once had little control over. For Disney, on the other hand, rich rewards were to be had in spin-offs from successful movies like "The Lion King" - videos, toys, puzzles, sweatshirts, etc. And Charles Schwab realized it could capture more value by setting up new designs, such as a fee-based planner channel, to augment its basic self-service discount brokerage model.

New Offer to FEI Member Organizations from Arthur Andersen
Just in time for your SEC training needs! Last month, I described Arthur Andersen's recently released Internet-based series of multimedia, interactive training courses on the SEC registration and reporting process. This is an excellent way to provide consistent, high-quality training to new staff or those in need of a refresher on a new SEC filing - without the added cost of travel. As an introductory offer to FEI members, when your organization makes an initial purchase of any course(s), Arthur Andersen will provide your organization with one additional course of your choice (of equal or lesser value) at no charge. For more information about the courses and the introductory offer, visit http://www.financialexecutives.org/cpe_aa.htm.

E-Business Security Assessments, Insurance Thru the Web
Marsh is offering e-business security assessments and the opportunity to apply for related insurance coverage on the Web at http://www.netsecuresite.com. Assessments are free.

Hot Tech Issues for Financial Executives
FEI and Computer Sciences Corp (CSC) are once again conducting our annual IT survey, an extremely popular tool for our profession which provides valuable insights about the selection, use and management of technology in business. In addition to the statistical report that will be developed and shared with the membership, an in-depth discussion of the survey's findings will be presented at FEI's Forum on Finance and Technology 2000, Sept. 18-19 at the Four Seasons Hotel in Las Vegas. FEI's Committee on Finance and Information Technology (CFIT) organizes this annual event and has worked closely with CSC to ensure that the survey addresses the most critical IT issues facing finance. The online survey takes about 15 minutes to complete. Access it here. All respondents will receive a $100 discount off the price of attending the Las Vegas conference. To learn more about the conference agenda, click here.

New from FEI … The FEI Yellow Pages!
The FEI Yellow Pages are designed to help you find the resources you need for your business. Or, to help you market your talents to FEI members. All FEI members are entitled to one free entry. All others can post entries for $749 each for one year. Be sure to check out this great new service. We're still in launch mode with this product, so the offerings are thin right now, but we will be aggressively marketing the concept to members and b2b providers in the corporate finance arena. Be sure to let us know how you like it.

Pictures from Financial Leadership Conference
Here are some pictures I took (photography a long-time passion of mine thanks to my Dad - if you want to critique my shots, send Dad an e-mail at lnltennis@aol.com) at the recent FEI conference in Chicago. Some from a hired gun, too (Eric Smith of Chicago). View the pictures here.

Santa Clara Valley Golf Tournament
Mark Wilson of August Capital and great FEI member led the charge for the Santa Clara Valley's recent golf outing at the Palo Alto Hills Golf and C.C. Greg Overholtzer (old Cal-Berkeley classmate of mine and SCV Chapter member) was kind enough to take some pictures of the fun. This event was a fundraiser to bolster the chapter's scholarship fund. Many local sponsors were kind enough to contribute and participate. Thanks to all for the good efforts!

Consider a Fulbright
Recently I received information about the Fulbright Scholar Program for faculty and professionals. Fullbright is offering more than 116 awards in Business Administration for lecturing and/or doing research abroad during the 2001-2002 academic year. For more complete information, visit their web site.

The award listings and application materials are downloadable, or you can request printed versions from apprequest@cies.iie.org. U.S. citizenship is required.

The Fulbright Scholar Program is sponsored by the United States Department of State, Bureau of Educational and Cultural Affairs, and administered by the Council for International Exchange of Scholars (CIES).

Upcoming Conference Calls
We have averaged 500 people participating in our recent teleconference discussions on FAS 133. In addition, 250 participated in the recent call on measuring and managing stock option dilution. These calls are growing in significance and popularity. FEI members get fax notices of these events (SO JOIN IF YOU ARE NOT A MEMBER!!!!). Also see our site for upcoming calls. Got a request for a topic??? Send me an e-mail at plivingston@financialexecutives.org.

New Member Highlight
We average 175 new members a month, and we try to highlight one or two each issue of Express. Sorry we can't get to all of the new members, but welcome and thanks for joining. Congratulations to Rocco Sansone, Senior Vice President, Marsh USA Inc., in Honolulu, and to Robert Burgstahler, VP, Finance & Administrator, 3M Corp.

Job Opportunity: VP/Corporate Controller
(FEI Job #4718) Based in the Southeast, for a $1.5 billion public manufacturing company, will report to the EVP/CFO and will manage a critical component for the corporation's financial services function with direct responsibility for all transactional processing, and financial accounting and reporting. Minimum of 5 years experience in a Big 5 firm and 10-15 years experience in accounting, internal control and reporting with a major manufacturing enterprise, as well as strong PC literacy. BS/Accounting and CPA required. MBA desirable. If interested, please fax resume to (212) 399-7082.

To view more jobs, please visit the FEI Career Center.

That's all for now,

Phil