One CFO's transition maintaining credibility and integrity.

Puzzlement or suspicion may be the first reaction from the investment community when a company announces that its CFO is retiring, especially in these days of heightened scrutiny of publicly traded companies and the public fears that such an announcement may be a precursor to bad news.

It is crucial that a retiring CFO works closely with the CEO to carefully structure a framework and process that is sensitive to these potential issues. Even routine announcements must deal with the omnipresent skepticism so prevalent in today's alarmist business environment.

While there are a myriad of company-specific factors to be considered, there are five key elements in a successful CFO transition process:

1. Make sure there is sufficient time for an effective transition.

2. Begin planning the communications and transition process early. Develop a comprehensive process that deals with all constituencies and factors.

3. Initiate clear, timely and candid communications with stakeholders to ensure the company's and your own continuing credibility and integrity.

4. Finance and corporate governance practices should be in top order so you can concentrate on succession rather than making fixes.

5. Your CEO must be fully committed to directing the process.

As I formulated my own plans for retirement, I was determined that my company, USEC Inc.--the world's leading supplier of enriched uranium fuel for commercial nuclear power plants--would have sufficient lead time to develop and implement a process creating the best possible outcome for our key constituencies. I first began discussing retirement with CEO William H. Timbers last fall. The audit committee and the full board of directors were also involved. I shared with them the fact that I was flexible about timing in order to ensure that there would be no gap in the company's financial stewardship, but I did indicate a desire to retire sometime in the summer. All agreed that the timing had to be flexible to ensure an optimal transition.

When I made the decision to retire this past March, Timbers directed the development and implementation of the transition process. He began discussions with an executive search firm and helped prepare the job specifications. Internally, very few people were included in the planning process. The general counsel was informed, and the vice president of corporate communications, director of investor relations and our outside public relations and investor relations counselors were brought in and asked to work together to recommend a communications plan, draft a press release and prepare a "roll-out plan."

USEC rigorously utilizes a roll-out plan format, and this one would be especially important. Such a plan identifies what will take place, the timetable, who is involved, what constituencies and individuals are to be contacted, who will contact them, when this will take place, what the messages are and how to collect and feed back file responses of those notified. While there may be benefits from early outreach to key constituents, the press release is the starter's gun for beginning the notification process, and is the preferred mechanism for broad public disclosure.

The press release was issued March 4 after trading closed on the New York Stock Exchange, where USEC is listed. In addition to a Business Wire release, we also utilized automated distribution systems, specifically blast fax and email, to send the release to pre-selected lists. Recipients included insiders such as auditors, credit rating agencies, and bankers, as well as shareholders and bondholders. Importantly, my direct staff, all people in finance, senior management and all headquarters employees were notified by me in face-to-face conversations, and an executive search firm was engaged to begin a nationwide search.

In addition to myself, the CEO and other key management and communications people were calling each person specified on their roll-out notification plan. We stayed into the evening calling, speaking to, leaving messages for and responding to questions from shareholders. Our media relations and investor relations team took calls and responded promptly to inquiries from the financial and trade press, as well as investors, and I remained available to personally answer questions where appropriate.

We received high marks for following this process. The financial community has been particularly complimentary about how our announcement was conducted, and has pointed to several factors crucial to ensuring the positive reception:

* My reasons for retirement were understandable and reasonable.

* The company clearly stated that it had no reservations about nay performance, credibility and or integrity.

* I clearly stated that I had no reservations about the company's performance, credibility and or integrity.

* We promised that at no time would there be a gap in the company's financial stewardship.

Of course, communications plans can only do so much--credibility can best be achieved by having a good and easily substantiated story to tell. Fortunately, the company had built a solid corporate governance base and could demonstrate strong financial stewardship. These factors substantially add to investor and other constituencies' confidence when a CFO retirement is announced.

In five years as a government corporation, USEC had compiled a track record in corporate governance that enhanced our credibility. We had been subject to oversight and due diligence from 13 federal agencies and 15 congressional committees. In our 1998 privatization via an initial public offering--the largest privatization of a federal government operation--there were seven managers and 50 firms in the selling syndicate.

We carried our rigorous governance and financial practices into the private sector. When the NYSE and the Securities and Exchange Commission issued broad new regulations, we were already in compliance with most of the revised rules. And when Institutional Shareholder Services (ISS), a nationally recognized firm that analyzes proxy statements for America's institutional investors, reviewed our corporate governance in March 2003, USEC rated better than 99.9 percent of the companies in the Russell 3000 and all of the companies in its industry group.

The company's financial credibility was enhanced by several elements that also supported the objective of a smooth transition from one CFO to another. The board of directors changed the company's fiscal year to a calendar year in late 2002, which necessitated two full audits in a six-month span. Our growing reputation as a corporate governance leader and two absolutely clean audits gives USEC a strong appeal in its bid to attract the best CFO candidates. It also goes a long way toward eliminating investor concern that the retiring CFO is bailing out or that there are undisclosed problems.

In preparing for my own departure, I concluded it comes at the right time in USEC's evolution--and this is an important part of the transition story. USEC has achieved the three principal goals that management initially set: to build a sound business structure for the new federal corporation, to successfully transition to the private sector and to complete a business restructuring. USEC is now preparing to embark on its next phase--growth and diversification--and it is important to have stability at the CFO position throughout this long-term process.

Lessons learned: 1) If the departure of a CFO is amicable, begin the planning process early and make sure there is enough time for a successful transition. 2) Always keep your key constituencies in mind and think about your actions from their point of view. 3) Communicate clearly, candidly and credibly with key audiences.

This is one process that the CEO needs to manage personally. Our CEO is running the search and conducting the initial interviews, and keeps the audit committee and the board informed about this process at each board meeting.

While there are many different transition cases and scenarios, I believe these guidelines will produce the desired results. They certainly have in USEC's case. When the process is done, you will know if you have been successful: Your stakeholders, and the markets, will let you know.

Henry Z. Shelton is retiring as CFO of USEC Inc. (www.usec.com) in Bethesda, Md. USEC was created in the early 1990s as a government corporation with the mission to restructure the government's uranium enrichment operation and prepare it for sale to the private sector.