The Changing CFOPrepared for the

CFO Alliance-NY Breakfast Roundtableby

Professor Howard P. Tuckman, PhD

GRADUATE SCHOOL OF BUSINESS

“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

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. MetcalfeEndowed 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

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 (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

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

• 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 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

• 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

• 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

• 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

• 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

• 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