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From the Great Depression to the 'great recession'.

IN THE DARKENING DAYS OF LATE 1931 IN a world teetering on the brink of economic collapse, eight corporate controllers met in New York City to light a candle. Banks were closing, businesses foundering, unemployment soaring, the Dow Jones average one-tenth of what it had been--and nary an indicator offering hope.


The economic breakdown, at its core, had financial causes. Something wasn't working right. How had a decade of peace and prosperity led to this? Why had the nation's best and brightest financial professionals been unable to see it coming? And how were they going to stop it, fix it and prevent it from happening again?

To these controllers--then the senior financial executives in their organizations--the times clarified that the science and profession of finance needed improvement. Finance had not kept up with the modern economy. It needed standards, theories and benchmarks. The profession needed education and ethics. Business needed to recognize the link between economics and profit. The government needed to know how best to nurture a healthy economy.

Thus was born the Controllers Institute of America. Membership expanded quickly and by April 1932, membership reached 100 and doubled by the end of the following year. For the next several years, membership more than doubled each year, even as the number of functioning companies declined and the country experienced economic upheaval.

President Herbert Hoover's attempt to solve the problem by cutting spending failed to produce the confidence he intended. As the 1932 election approached, he resorted to emergency lending to failing banks. To ease unemployment, he funneled some money into public works. But stop-gap measures weren't working.


In 1933, Hoover handed President Franklin Roosevelt a seemingly intractable problem. Roosevelt came into office with a presumption that the country needed a chief executive with unprecedented emergency power. Congress did not resist as the federal government declared a nationwide bank holiday. Within three days, Congress passed the Emergency Banking Act; within a week, the U.S. Treasury Department was performing triage on banks, allowing some to reopen while shut-ling down others before they failed.

Recognizing the systemic failure of the banking system, Congress passed the Glass-Steagall Banking Act, erecting a financial firewall between commercial and investment banks. Depositors were assured their deposits were safe. Commercial banks were prohibited from investing or underwriting corporate securities. Investment banks couldn't accept deposits.

Far from turning around, the economy was getting bedrock support from the federal government and Roosevelt pushed for legal infrastructures. The Agricultural Adjustment Act stemmed the collapse of farms. The National Industrial Recovery Act allowed trade associations to agree on "codes of fair competition," which helped them stabilize prices and production and also gave unions and workers new self-protection powers.

Early in 1934, the Gold Reserve Act moved all gold from the Federal Reserve to the U.S. Treasury. The prix fixe of a troy ounce of gold was jacked up from $20.67 to $35, effectively devaluing the dollar to the point where American products could be exported at prices affordable to foreign currencies.

In 1931, the Institute (as it was known) published the first issue of its new professional magazine, The Controller, in which the lead article tackled widely debated questions about gold in "Why Should We Not Return to [the] Gold Standard, with Limitations?"

The issue's Editorial Comment bore words that applied to controllers then as much as much as today: "The extraordinary growth of modern business, the need for efficient control and correct methods; together with the constantly increasing complexity of corporate activities, has laid upon controllers marked responsibilities."

Over the next seven decades, the United States economy would recover and become exponentially more complex, requiring ever more efficient methods of control. A sentence from the January 1935 issue of The Controller could have appeared in January 2009: "During the past five years, most businessmen have had reason to doubt the theories and principles of business conduct which previously served them as dependable guides, and many concepts have perforce been changed."


In other words, financial executives are in perpetual (and arguably self-perpetuating) need to keep up with a perpetually changing financial environment. The only constant is the responsibility they bear, not only to their companies but to the safe and solid functioning of the economy in which they work.

As economic events of the last five years--in the 21st century--have shown, the profession of financial professionals is one of far-reaching importance. Its efficiency, effectiveness and ethical conduct mark the difference between economic growth and failure.


The Past Five Years

FEI celebrated its 75th anniversary in 2006. Though Enron and WorldCom were behind us, businesses were still grappling with the repercussions of complying with the Sarbanes-Oxley Act of 2002. Richard A. Schrader, currently chairman of Parsons Brinckerhoff, assumed the chairmanship of FEI. Marking the anniversary he rang the closing bell at the New York Stock Exchange and inaugurated the FEI Hall of Fame.

The economy was booming. Few saw storm clouds on the horizon. Schrader's main concerns were the internal working of the organization--governance and membership issues. He identified a multi-faceted problem in that 20 percent of the membership was very active while the other 80 percent participated little in leadership and activities. A consistent problem, but Schrader formalized the debate and presented it to the board of directors, knowing the solution would not be simple enough to resolve on his watch.

"My contribution was to elevate the debate, get it out in the forefront, and make sure that my successors kept it going," Schrader says. The organization also faced declining membership, a problem shared by many organizations, and Schrader charged the board to work on that, too. By 2011, the decline turned into a modest increase.

In 2007, M. Alexis Dow, CPA, came to the chair with a special challenge: to find a new president for FEI. The search she initiated eventually led to the selection of current President and CEO Marie N. Hollein.

But her biggest challenge, she recalls, was change. "When the business environment is facing necessary pressures and high unemployment," she says, "financial executives rely on FEI for up-to-date information on legislative changes and accounting and reporting issues, continuing education and incomparable networking experiences--tools they need to excel in their positions as leaders influencing our economy."

Joseph C. DiLorenzo, chief operating officer of Plymouth Rock Studio Holdings, became chairman in 2008, just as the American economy was starting its crumble. Having promoted diversity of membership in the Boston Chapter and through the national headquarters, he focused on that issue and on ethics.

"I believe financial executives have a responsibility to provide a level of confidence that the tarnished image in the investor community over the past few years was caused by a select few and that the actions of most financial executives are those that provide a feeling of confidence and integrity," he says.

The turnaround in membership has been in process for years, but it was under the 2009-10 chairmanship of Gerald R. Urich, director, external reporting and compliance at The Hershey Co., that FEI revived its strategic plan and expanded an effort to open membership to more financial executives, by creating the category of associate member.

"I am most proud of the expansion of member diversity across our 74 U.S. chapters," Urich says, "as well as moving forward with a robust strategic plan, and managing through very challenging budgetary constraints resulting from a decline in membership reflecting the very difficult economic conditions."

Serving as chair as the world economy was threatened with financial collapse, Urich recognized the responsibilities of financial executives and FEI that reach beyond those of a given corporation. He says these include "communication to regulators, standard setters and appropriate government agencies to express feedback and concerns about possible measures to stimulate the economy and regulations to be established that would purportedly address transactions and lack of policies and oversight that resulted in the near meltdown of financial markets, with devastating economic consequences."

Despite the general economic distress, current chairman Brian B. Ruttencutter, chief financial officer of Cumming Group Inc., has been using the momentum of his predecessors to push FEI forward.

"The future for FEI looks bright," Ruttencutter says. "We are reaching out to the international community. We are becoming more diverse and will continue to do so to better reflect the demographics of our profession. We continue to play a central role in the development and application of U.S. GAAP and IFRS. We have an ever-growing impact on the direction of tax policy domestically. We are developing better ways to serve the various interest groups represented by our membership [including the new associate member].


"We will have a best-in-class Web site, social networks and electronically-connected communities," he says. "We will evolve our governance structure to better meet the needs of our growing membership and our profession generally. We will generate the resources to accomplish these goals and many others not yet even dreamed about."

When marking the first anniversary of the Institute in 1932, its president Frank J. Carr delivered his message to members: "What the institute may be five or ten years from now is something which we cannot predict ... We believe that it will be a powerful and important organization."

FEI began as a dream 80 years ago during the financial nightmare of the Great Depression, and the dream remains, always a challenge but always work to do.


1931-33 Frank J. Carr * 1933-34 Daniel J. Hennessy * 1934-35 J. Calvin Shumberger * 1935-36 Rodney S. Durkee * 1936-37 Paul J. Urguhart * 1937-38 Henry C. Perry * 1938-39 Roscoe Seybold * 1939-40 Oscar N. Lindahl *1940-41 Verl L. Elliott * 1941 -42 John A. Donaldson * 1942-43 T. C. McCobb * 1943-44 John C Nalor * 1944-45 Edwin W. Burbott * 1945-46 Edwin E. McConnell * 1946-47 John H. MacDonald * 1947-48 C. E. Jarchow * 1948-49 K. Y. Siddall * 1949-50 William Herbert Carr * 1950-51 Vincent C. Ross * 1951-52 Charles Z. Meyer * 1952-53 Edmund L Grimes * 1953-54 George W. Schwarz * 1954-55 C. R. Fay * 1955-56 Robert N. Wallis * 1956-57 Dudley E. Browne * 1957-58 James L. Pierce * 1958-59 J. McCail Hughes * 1959-60 Roger A. Yoder * 1960-61 Frank S. Capon * 1961 -62 A. L. Boschen * 1962-63 Steve H. Bromar * 1963-64 L. Keith Goodrich * 1964-65 C.J. Kushell * 1965-66 Carl M. Blumenschein 1966-67 William R. Thomas * 1967-68 L. C. Guest Jr. * 1968-69 M. S. Simpson * 1969-70 Herb Blevins * 1970-71 C. M. Allen * 1971 -72 Charles C. Hornbostel * 1972-73 W. Ernest Jssel * 1973-74 Fred W. Miller * 1974-75 Edward J. Mack 1975-76 J. O. Edwards * 1976-77 Daniel F. Crowley * 1977-78 W. Drew Leonard * 1978-79 E. A. Vaughn 1979-80 Paul J. Dunphy * 1980-81 Warren J. Robertson * 1981 -82 Robert C. Thompson * 1982-83 Charles R. Allen 1983-84 John F. Ruffle * 1984-85 P. Norman Roy * 1985-86 C. Eugene Ray * 1986-87 R. Hartwell Gardner 1987-88 William L. Lamey Jr. * 1988-89 Ronald Mead * 1989-90 Herbert A. Phillips Jr. * 1990-91 Robert M. Patrick 1991 -92 John R. Edman * 1992-93 C. J. Christie * 1993-94 E.H. (Al) Creese * 1994-95 James N. Clark 1995-96 Penelope A. Flugger * 1996-97 Frank J. Borelli * 1997-98 William U. Parfet * 1998-99 James J. Abel 1999-2000 Fred A. Allardyce * 2000-01 Bryan Roub * 2001 -02 David A. Young * 2002-03 Ridge Braunschweig 2003-04 Dr. H. Stephen Grace Jr. * 2004-05 Mary Jo Green * 2005-06 Robert J. Walker * 2006-07 Richard A. Schrader 2007-08 M. Alexis Dow * 2008-09 Joseph G. DiLorenzo * 2009-10 Gerald R. Urich * 2010-11 Brian B. Ruttencutter

Eighty years and going strong, FEI is even more immersed in representing senior-level financial executives on the ever-more complex global economic and financial issues that are critical to all businesses and industries.

Glenn Alan Cheney ( is a Hanover, Conn.-based freelance writer who contributes frequently to Financial Executive on finance, business, accounting and financial reporting subjects.
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Author:Cheney, Glenn Alan
Publication:Financial Executive
Date:Apr 1, 2011
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