FEI Members and Prospective Members
Greetings from Washington, D.C. The only good thing about travel
is that I get to focus and write FEI Express! I'm writing this as we conclude
our Committee on Corporate Reporting meeting. We had a good meeting with Lynn
Turner of the SEC during the session, as FEI made our views known on a variety
of subjects like the IASC, SAB 101, auditor independence and FAS 133. On the
last subject, Lynn noted that they expect 9/30 10Qs to comment on the possible
impact of 133 on financial statements. So heads up out there.
Now, I'm off to Las Vegas on Saturday for the FEI Technology
Forum. We'll have some real-time highlights available next week. We've got a
group of 20 members playing golf on Sunday. I should mention that I almost had
my first hole-in-one last week, two inches away.
Our Committee on Corporate Reporting filed a
response to the
SEC's proposed auditor independence regulations. Our response is consistent
with previous FEI positions, in that we believe that shareholders and the audit
process are best served if a company can use its external auditor for other
services like systems design, consulting and internal auditing services. Buying
the best possible service at the cheapest cost benefits a far greater number of
shareholders than the number of shareholders hurt by the rare occurrence of
comprised independence. My own read of the situation is that the best practice
among our companies is for the audit committee to review the assignment of
non-audit work to the external auditors and approve it only if they are
comfortable with the checks and balances in place. Some audit committees decide
they want the additional check of a different firm doing this work. Some are
comfortable with the controls in place. Either way, the audit committee is the
place to make this decision, not the SEC.
Stock Buyback Work of the FEI
Dave Taggart, Treasurer of Coca-Cola, Kate
Stevenson, Treasurer of Nortel Networks, Mike Conley, CFO of McDonalds and Jack
Runkel, VP of Investor Relations of Heinz, all participated in a great
discussion to assess the preliminary results of a study by Dr. Nikhil Varaiya
of San Diego State University. The study measures the impact of buyback
programs on stock price performance over time. It finds that the greatest
benefits accrue to small cap companies that have been under-performers in
recent periods. Both small cap and large cap companies that repurchase shares
show substantial increases in earnings per share growth in the periods
following the end of the repurchase program. This reflects the widely held
belief that management of repurchasing firms recognize that investors are
undervaluing their shares and potential performance.
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Regarding the business combination project in which the elimination of pooling
is proposed, the Board is actively assessing the feasibility of leaving
goodwill on the balance sheet subject to an annual impairment test. Companies
may also have the option of amortizing it if they deem it appropriate.
It is still early and it's a difficult issue, but this is an important
development and desirable outcome to many. Stay tuned.
The consolidations project plods ahead with no similar breath of
fresh thinking. Much to FEI's chagrin and after concerted efforts to
communicate and get the Board to listen to reason, they appear to be forging
ahead with the "control" framework and the presumptive situations that require
consolidation. At this point, I encourage our members to really study the
proposal, because it is going to change the entities you consolidate, and deals
you're doing today need to be designed to take the new proposed rules into
consideration. I think you'll find this to be another FAS 133 surprise when you
assess the answers.
Annual Report to
FEI made significant progress toward its goal of creating
a more dynamic and contemporary organization. Much has been accomplished: new
applications reached an all-time high, our presence on the Internet is
flourishing, attracting more and more finance executives, and we remain a
respected, influential force on behalf of our members. Today FEI is poised to
extend its reach, using technology to magnify our role as the voice of
corporate finance. We've posted a short review of the year and our condensed
financial statements for Fiscal 2000 on our web site at:
We had an interesting conference call this week with
Tom Dougherty, Partner, Skadden-Arps. The subject was Hot Topics in Corporate
Governance and Financial Reporting. One area we talked about was analyst
forecasts and company involvement. Tom said that companies have three
choices when an analyst sends a draft report to management for comment: 1)
decline to review any part of the report; 2) review only the historical and
factual information and correct it if needed; or 3) comment on the entire
report including the analyst's forecast. Tom's suggestion (as is the
recommendation of most conservative attorneys) is that companies should not
review the reports at all. I pointed out the reality that surveys show again
and again that most companies DO comment on the analyst projections. Further
challenges of actual practice include the pressure to get analyst coverage and
have the markets accurately value your stock. Tom pointed out that most people
don't realize that the SEC considers any forecast that you have modified or
changed in any way to be a forecast of the company. He recommends that
companies not comment on the forecast of others. And if you are going to
comment, publish your own forecast and take advantage of the safe harbor rules
available by including the appropriate language with that forecast. A
twice-a-year practice of giving a top line and EPS forecast with the safe
harbor language would seem to be both a practical and smart thing to do.
Avoiding other comments on the forecasts of analysts while correcting their
historical information also seems to make sense. Some companies, like Pfizer,
publish their own forecast on a periodic basis.
I'd love to hear your thoughts and practices on these views. Send
me an e-mail at firstname.lastname@example.org.
If I receive enough useful input, I'll report it in an upcoming Express.
I joined 25 members of our NY CFO Council for dinner this
week with Paul Volcker, new trustee chairman of the International Accounting
Standards Committee. He described the overall structure of the new body, the
process the trustees are going through to select the standard-setting Board
members, and their approach to raising the 10 million pounds needed to fund the
first year of operation. Paul is personally chairing the fundraising committee
and will be calling on the Big Five and corporations to provide financial
support. Companies will probably be asked to contribute an amount relative to
some size measure. He recognized the letter we sent him recently expressing
concern over board member selection. In our conversation, we emphasized the
need for the trustees to act independently and select strong board members that
won't be bullied in the process. We also encouraged him to take whatever time
is required in making the selections. He was very receptive to our input and
queried our views on some specific candidates that have already surfaced.
The Wired Treasurer: Problem
Solving on the Internet
The Internet is the critical medium that
will change the future of treasury activities. But as the market continues to
buzz about the Internet and its limitless possibilities, treasury professionals
wonder, "How can this benefit my company?"
SEI Investments will present a teleconference (Sept. 28 at 12 noon
ET) on a case study that investigates this convergence and will discuss its
implications for the future. At the end of the session, participants will be
- Understand how the Internet will "reinvent" treasury management
in the near future.
- Identify concrete strategies for integrating Internet
technology into daily treasury operations.
- Evaluate their progress in anticipating the emergence of
To sign up for the teleconference, go to:
The New Economy and Financial
At the New York University Stern School, Professor
Baruch Lev is performing a survey of financial officers regarding their views
of the adequacy of the current financial reporting model. Both he and I would
greatly appreciate it if you could jot your thoughts on this important issue
and fax/email it back me at email@example.com or 973-898-9456.
Baruch and one of his Ph.D. students are collaborating with FEI's Research
Foundation on a project entitled "Quantitative Measures of the Quality of
Financial Reporting." We hope to assess financial reporting in an objective,
quantitative manner to provide some overall context for the future development
of policy in the area. Baruch and I go way back to my days as a graduate
student at UC Berkeley. His class in Financial Statement Analysis was standing
room only on most days. Download the 1-page questionnaire at:
E-Treasury Success Story from
As you may know, SEI Investments is an FEI
Strategic Partner. One of their web businesses,
recently launched a new treasury tool called the Optimizer. There's a
compelling story on the site about how one of their clients used this new
analytical tool to reduce risk and increase efficiency within their
organization. I know many of you are looking for more time to focus on
strategic initiatives instead of being weighed down by managing your treasury
staff and operations. New types of tools like the Optimizer are great for just
that. TreasuryPoint.com is offering a 30-day risk-free trial of the Optimizer.
To read the full-text story about their client,
Helping Small Businesses Grow
TM OnLine is a searchable database of U.S.
small businesses that wish to export their products, and for foreign firms and
U.S businesses seeking U.S. business partners or suppliers for trade related
activity. TM OnLine will also be used by the SBA to recruit for foreign
trade missions and to provide time-sensitive trade leads to registered
companies. To learn more, visit:
Effect of Purchasing Cards and
American Express and Ernst & Young recently
released a study, The American Express Purchasing Process and Automation
Study, that examines the processes companies use to purchase operating
goods and services to determine their associated costs. The Process
Study found that significant opportunities exist to lower these costs and
also identified best-in-class practices to achieve cost savings.
Using on-site case studies of nine corporations, Ernst & Young
benchmark data, and a market research survey of 50 companies, The Process
Study found that companies can save up to 95% in purchasing process costs
by integrating a purchasing card program with an e-purchasing system. This
strategy, coupled with best-in-class policies, can reduce a company's
purchasing process costs from an average of $90 to as little as $4.44 per
transaction --providing savings in all steps of the purchasing process,
including payment, reconciliation and data integration.
To learn more about Corporate Purchasing Card solutions and
expense management strategies that can help save your company money, visit the
American Express web site at
http://www.americanexpress.com/corporateservices1. To have
an American Express representative contact you, please visit
Live Audiocasts from FEI's
Forum on Finance & Technology
Unable to attend the
conference? The following presentations will be broadcast live and available
via webcast (and archived after the event):
- Larry Downes, co-author of the best seller, Unleashing the
Killer App, explores "killer apps" and how to be an exploiter rather than a
Tuesday, Sept. 19, 9-10 a.m. Pacific Time
- John Connors, CFO of Microsoft, presents, "Enabling
Technologies for the Finance Function of the Future" offering insight on how
Microsoft provides knowledge workers around the world with key business
information such as revenue, people and cost metrics in real time.
Tuesday, Sept, 19, 10:15-11:15 a.m. Pacific Time
To listen to the webcast, simply log on to:
http://www.videonewswire.com/FINANCIAL/091900/. The events
will be archived for 60 days.
Congratulations to Stephen Herzog, Treasurer, Ford
Plantation, in Richmond Hill, GA, and to Michelle Book Gowdy, Controller,
Triplett Companies, in Johnston, IA.
Job Posting: CFO
highly recognized, profitable $200M division of a $1 billion nationally
recognized corporation, experiencing its highest growth in the area of
e-business, seeks a CFO. The individual will manage the strategic and tactical
direction of the accounting/finance function. In addition, the person will be
responsible for mergers, acquisitions and e-commerce start-ups. Must have 10-15
years of financial/accounting experience, including a minimum of 7 years in a
management capacity, and strong M&A background in a global environment. The
individual MUST come from a publishing, automotive or other related high tech
industry. Please respond to Rick Taylor, Ratliff Taylor Executive Search,
To view more jobs, please visit the
FEI Career Center.
That's all for now,
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