Competitiveness, complexity and financial executives ... intertwined.

I replace my automobile approximately every three years. Recently, after examining alternatives, I leased the same model for the fifth time. I am obviously a happy customer. I believe strongly in Peter Drucker's theories regarding the purpose of a business and how it should be managed.

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In essence, business is about satisfying a customer's need. I declared quickly, upon accepting the Chief Executive Officer position at FEI, that I would take the customer/member satisfaction approach to running the business side of the organization. Consequently, I am focusing on new products and services to expand membership and increase member satisfaction.

In addition to the business side of FEI, providing member and chapter services, we manage the significant professional issues and socio-economic contributions we make as a not-for-profit organization. Indeed, as part of their initial mission, our founders included the idea of working with the government to improve the general economy.

U.S. competitiveness offers a good example. I represented FEI at a very prestigious dinner and conference in Washington, D.C., organized by Secretary of Treasury Paulson on that subject. Clearly, FEI is actively participating in efforts to deal with the major issues facing financial executives, and high on that list is complexity.

In May, I attended and participated in two conferences addressing financial reporting. In addition, I attended a meeting at the Securities and Exchange Commission related to the emerging issue of financial reporting using eXtensible Business Reporting Language (XBRL).

At the conferences, my presentations covered the issue of complexity of financial reporting. I also spoke about FEI's position on the competitiveness of U.S. capital markets. While preparing for this discussion, making presentations and listening to other speakers on these subjects, I began to see just how interconnected the issues of competitiveness and complexity are for financial executives.

The use of XBRL-tagged financial reports will greatly improve their value for analysis. However, there is a cost, especially during the initial implementation period. This initiative also draws on already strained resources dedicated to financial reporting.

Regarding complexity of financial reporting, FEI has taken a leadership position by offering a four-point program to ensure the competitiveness of U.S. capital markets (the program can be found at www.fei.org, under "financial reporting"). Our position paper has been referenced in leading business journals and used in interviews by The New York Times. In addition, our call for a blue-ribbon panel to study the issue of complexity has been gaining momentum (for more on this subject, see "Washington Insights" in the May issue).

Another challenge we face reflects a different form of complexity: the diversity of our members and related constituencies. Since the founding of FEI more than 75 years ago, the roles of financial executives have continued to grow. Driven by expanding business functions, large corporations now have multiple levels of financial executives addressing their business. Essentially, the controller position that was the key customer for the original FEI has grown, both up and down the organization chart.

Controllers are supported now by specialists in financial reporting, financial systems technology experts, consolidation experts and others. Furthermore, the complexity of business has transformed the CFO position into that of strategic partner to the CEO, and overall chief manager of financial and other business functions. This is quite a different landscape than existed in FEI's formative years.

The expansion of the term "financial executive" is leading to a broader focus at FEI to address their varied issues and needs. For example, while complexity in financial reporting may require more staff for the controller's function, it adds to the serious issue of competition for the strategic CFO. FEI is well-positioned to reach out to these various financial executive levels and to provide diverse input through our network of relationships with standard-setters, regulators and other groups affecting American business.

For our smaller company members, and, indeed, small U.S. businesses in general, the issues of complexity are much more intertwined and, I believe, critical. Complexity for smaller companies with smaller financial staffs has a greater impact on the business. There, the CFO may be wearing many of the hats that are divided among separate departments in larger companies. Consequently, facing a new financial reporting standard, running a few hundred pages, can become a major distraction from participating in operating the business.

Needless to say, that can be a significant competitive issue. Here, too, FEI is quite involved in the discussions with regard to smaller companies, much of that through our participation on FASB's Small Business Advisory Committee.

As you can see, the issues of complexity of financial reporting are subsets of the macro issues of overall business complexity and the competitiveness of American business, as well as our capital markets. These won't be easy issues to resolve, but FEI will have a say in whatever happens.