Should you worry about the future of the profession?
Where was corporate finance 60 years ago? In better shape or in worse shape? Where will it be in another 60 years? Every financial executive has an opinion, so, in celebration of Financial Executives Institute's 60th anniversary this year, we invited several FEI members to talk about how they've watched corporate finance and financial management change during their careers. And those careers have stretched from nine to 50 years.
We got a range of responses. The biggest change in the profession? Without a doubt, automation. Six of the eight executives said computers and technology have indeed affected and will continue to affect the role of the financial executive. One even named the developers of the computer as the most influential people in business in the last five decades - "I can think of nothing else that comes close," she says.
Other predictions for the future:
* A shifting of responsibility for health care, retirement pay, and the environment to the government. * Banks numbering 3,000 to 4,000, instead of today's 13,000. * A stock market that is too volatile for investors with less than $1 million. * The demise of the loud, pretentious corporate leader. * Work-at-home employees as the norm. * The need for financial executives who are well read, well traveled, versed in doing business on a global scale, and whose main purpose is to develop well-rounded subordinants.
As you may expect, the eight executives worry most about regulation (referring to it as "crushing" and "strangling"), health care, national and international competition, the changing mindset of employees (and how they can adapt to it), and politics. Most agree that the qualities that made a financial executive good at coping with these problems in the past will make an executive good at it in the future: Topping the list are integrity and good old-fashioned smarts.
Finally, not long ago, a retired member of the Institute commented that he's saddened by a younger generation of financial executives who show a declining interest in socializing with colleagues. We asked our executives what they thought about that statement. Off the record, one called the socializing "schmoozing" and said today's financial executive must rely on more objective information for decision-making, not cocktail talk with a limited group of peers. On the record, one of the eight - whose ages run from 31 to 84 - shares the retiree's disappointment, calling the trend "a pity"; one believes the move away from networking isn't exclusive to the young executive; and one says for him it's a practical trade-off: He either socializes or picks up his children from daycare.
Enjoy reading what your fellow financial executives have to say. We believe their open and thoughtful answers to our questions proves they've spent many hours considering the future of the corporate financial management profession - even before we asked. Have you?
ALFRED W. COOK Retired as Controller and Director of Administration from General Mills AGE: 67 YEARS IN FINANCIAL FIELD: 50 FEI CHAPTER: Baltimore JOINED FEI: 1955
MOST INFLUENTIAL IN HIS CAREER: Professor B. Greidinger of New York University Graduate School. "He opened up the concept of having a financial career in a large, public corporation." MOST INFLUENTIAL IN CORPORATE FINANCE: Presidents and their administrations. "The Reagan administration purportedly |freed' the economy from its regulatory shackles, but caused us to reach today's excesses and national financial problems for which the current recession is a partial corrective." WHERE HIS TIME WENT IN 1970: Involved in overseas acquisitions; installing financial controls in acquired operations; and internally organizing international division management. WHERE HIS TIME GOES NOW: In retirement, handling in-house administration of a small, private company. WHERE HIS TIME WILL GO IN 20 YEARS: "I might truly be retired!" THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Integrity and ethical behavior * Thorough professional training * Conservative financial management tempered by flexibility and vision MOST IMPORTANT QUALITIES IN THE PAST: "They do not and should not [differ from those important now and in the future]."
"To me, the most amazing change in corporate finance has occurred during the last 10 years. Sound, conservative financial management has been replaced by a no-holds-barred approach of financing anything and doing so with |new products' that are nothing but glorified variants of equity and debt instruments. This has resulted in the current savings-and-loan debacle, major bank problems, the coming insurance company difficulties, and the general damage done to many individual investors and lenders.
"The trend will continue until the providers of needed venture/risk capital determine that they no longer are willing to assume the risks involved. When that happens, we will resume normal development as a nation, but we will be doing so starting from a lower economic base - the level we reached as a result of the inflation and recession adjustment that's beginning to be felt now.
"Corporations will have no choice but to interact more with regulatory bodies, because the current trends of less retirement protection, less health care protection, and more environmental problems make it impossible to adhere to our philosophy of total individual independence.
"Private enterprise has demonstrated that it cannot master the issues of health care, retirement pay, and environmental protection. Health care costs are continuing their skyrocketing pattern, while private insurers cover only the healthy. Pension funds are being invaded by corporations when those firms believe that pensions are temporarily overfunded or when parent corporations have no other place to get funds. Lip service is given to environmental problems, and compliance is limited to what local and national authorities have begun to impose.
"Thus, these areas will become the domain of government, whether business is in favor or not. In most developed countries, they already are under government guidance or control, and this has solved many of the problems.
"Other aspects of financial management also will deeply affect us: First, a unified tax system will evolve over the longer term, with states assessing a percent of the federal tax (as some states already are doing). As one of the lowest taxed countries in the world, the U.S. will inevitably see taxes increase substantially. The current deficits cannot be sustained indefinitely.
"Second, there now are more than 13,000 banks in the U.S. This is an unaffordably costly system and over the next few decades simple economics will bring this number down to a few thousand, thus reviving our efficiency and cost-effectiveness.
"And, third, internationally we are becoming weaker but continue to be a major player because of our absolute size and military might.
"None of these developments will require major changes in our education and training programs, but they will put future financial executives to herculean tests."
JEROLENE A. DREFS Corporate Controller WPP Group USA, Inc. AGE: 55 YEARS IN FINANCIAL FIELD: 25 FEI CHAPTER: New York City JOINED FEI: 1977
MOST INFLUENTIAL IN HER CAREER: Virgil Hollis and Bob Bracci, both formerly of Sherwin-Williams. "They took a chance on me when there were very few women in accounting and management positions. These two gave me my first big break, as well as some sound financial and managerial training." MOST INFLUENTIAL IN CORPORATE FINANCE: Those who developed the computer and introduced it to business. "I can think of nothing else that comes close." * Educators, the SEC, and fellow professionals serving on accounting and finance committees. WHERE HER TIME WENT IN 1970: Managing accounts payable and general ledger departments, a financial analysis team, and developers of computerized employee data base; preparing footnotes to annual report; serving on a committee to prepare annual report, 10-K, and 10-Q; keeping company abreast of new accounting pronouncements. WHERE HER TIME GOES NOW: Consolidating North American units; managing accounting and financial statement preparation for two subsidiaries; managing all computer needs; interfacing with public accounting firm; administering personnel and corporate office. WHERE HER TIME WILL GO IN 20 YEARS: "I doubt that I'll be actively employed, although my mother worked until she was 71. If I am, I'll be self-employed and working as a consultant to industry." THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Good negotiating skills * Strong people skills * Sound understanding of the international marketplace and culture. "Financial executives must be committed to running a well-managed, highly motivated staff with frequent interface to all aspects of the corporation." MOST IMPORTANT QUALITIES IN THE PAST: "They really shouldn't be very different, but I think you'll find they are. In the past, in booming economies, many sins went unnoticed. |Deadwood' would often be tolerated. Loud, bombastic personalities were often tolerated as leaders. Staffers were loyal and remained at one company for a long time. I don't think these qualities will be around in the future. The fierce leaders will be replaced by team builders and negotiators, and the loyalty once found will be gone."
"Major changes in corporate finance in the last five or six decades revolve around the continual improvement in productivity and accuracy via the continual development of office automation. I can now do an extremely complex consolidation in a matter of minutes that would have taken weeks before.
"What's ahead? More of the same. . . Automation will continue strong. We will constantly be seeking ways to improve productivity and cut costs.
"Corporations will interact with regulatory bodies much as they have in the past. If an issue affects a company, then that firm will get involved. I don't see any proactive initiative developing on the part of individual companies or their lobbying agencies.
"Health care will remain a problem. It's probably one of the costliest puzzles faced by business and one whose answer seems to be to cut benefits or increase the cost to the employee. I believe it's one of the most important areas that we as businessmen must address - not only from the cost point of view, but from the humanitarian point of view. I fear that we may be reaching a point at which adequate health care will not be available to many people who have worked all their lives but have been forced out of their jobs due to consolidations and cost cutting. The solution will not come easy. Health care providers will not willingly assist in holding down costs or in coming up with creative solutions to this problem.
"International competition will be stiffer than ever. The opening up of the European communities is bound to have an impact, and we will continue to face strong competition from the Japanese. Of major concern to me personally is the difficulty faced by American companies attempting to market their products in Japan.
"Education? I don't think the educational background required for a financial executive will change in the near term. A need for sound foundations in accounting and finance, combined with a strong understanding of computers and other developments in automation, goes without saying. It's important for a financial executive to be well rounded in all aspects of global business, well read, and well traveled. Especially important is for up-and-comers to work in as many different disciplines as possible when they start on their financial career paths. That tends to serve individuals well when they reach senior management. It gives them the background to make knowledgeable and reasoned decisions.
"As for the sociability of today's financial executive, the younger members of my staff do seem isolated from their peers at other companies. They don't seem to be |joiners.' It's a pity, because I personally feel that I gained valuable insight into many financial areas through my membership in various professional associations. And the knowledge that there was a |buddy system' out there, one that I could call on for an answer to a specific question, was comforting.
"My worries about the future don't deal specifically with corporate finance, but they're more general worries. I'm most concerned about the large number of displaced workers and how our economy is going to absorb them. In other economic downturns, people who lost their jobs felt it was temporary. I've been approached lately by many good people who for one reason or another have lost their jobs; as I try to counsel them, I find the alternatives narrowing."
DR. JAMES H. FILKINS Professor of Finance University of St. Thomas, St. Paul, Minnesota AGE: 65 YEARS IN FINANCIAL FIELD: 22 FEI CHAPTER: Twin Cities JOINED FEI: 1978
MOST INFLUENTIAL IN HIS CAREER: Robert G. Lynch, dean of the Graduate School of Management at the University of Dallas. "He had tremendous vision and creativity." * His wife. "Without her patience and perseverance, I couldn't have made the transition from the country-club set to the life of a graduate student." MOST INFLUENTIAL IN CORPORATE FINANCE: Ralph D. Ebbott, a retired FEI member. "He invited me to join FEI, which was a way I could bring validity to our finance program at St. Thomas." * Dr. Barnard J. Kilbride, former chairman of the finance department at Notre Dame. "He and I depreciated the Gold Dome at Notre Dame one day looking out his office window, to determine the effect of using depreciation as a pool to replace an existing asset." WHERE HIS TIME WENT IN 1970: Finishing his dissertation and, at 47, "preparing for my second career." WHERE HIS TIME GOES NOW: Working on a new finance major at St. Thomas. THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Ability and willingness to think, to make decisions without algorithms and formulae, to understand systems conceptually * Understanding of the interactions of the firm as well as the national and international systems * Refusal to be surrounded by "yes" men * Ability to really listen to ideas other than your own * Interest in the future MOST IMPORTANT QUALITIES IN THE PAST: Technical knowledge * Short-term orientation. "I blame the analysts for much of this. And going along with the boss helped. I knew many senior and executive vice presidents who wanted confirmations, not real opinions. Thus, Filkins' Law: An organization takes on the characteristics of its chief executive officer."
"What has changed in the last five decades? In finance, new controls have been added to fine tune the system. The average investor can invest in vehicles other than passbook savings accounts. S&Ls and insurance firms have changed. The new banking bill, as it was presented to FEI's Committee on Government Liaison, of which I'm a member, can bring about change.
"The market has changed from being open to small investors to trading huge blocks by computer. In my opinion, small investors have no business in the market. They get crushed by the large fund trading. In fact, the market is probably too volatile for the investor with less than a million dollars. And I believe elements of this situation have caused the recent problems in the brokerage business.
"I suspect that we'll continue to fine tune the system, but it's like trying to hit a moving target. A friend of mine, Bob Perry, the CFO of a Cincinnati firm, described the system as a pendulum, swinging from one extreme to another because corrections are always overcorrections.
"Many new accounting standards, ostensibly created to help analyze the numbers, only confuse the issue. For instance, I've never agreed with inflation accounting. Let me have the numbers and I'll find the inflation rates and make the adjustments myself. If the ordinary reader can't do this, he can't evaluate the numbers anyway. And I don't agree with FASB Statement 76, on defeased debt. It allows a presentation of information that is essentially misleading.
"Today, financial managers are much more comfortable with computers that generate ponderous amounts of data. They're more comfortable with terms like IRR and NPV, which were almost unheard of in the 1950s.
"Regulation will no doubt become more and more burdensome and expensive. It's a function of big government, and it would be very difficult for the system to change. Too many people have too much to lose, and these are the same people who are charged with orchestrating the changes.
"Health care costs are beginning to be ridiculous. A 30-minute CAT scan costs $499. Why? Probably because the equipment costs a quarter of a million dollars and isn't used that often - ergo, a high cost per use. I'm sure that there will be a solution, although it may not be a good one. I only hope that it's not something like a national health plan. I can think of nothing that is better because the government became involved. I hope the industry will try to police itself before that happens.
"I think that education for financial officers should include finance, accounting, economics, and math at least through calculus and statistics. It must include communications, public speaking, writing, and interpersonal dynamics. Students don't want to be forced to take the ancillary courses necessary to round their education. I think the successful school of the future will integrate the thinking courses with the practicing courses, so that students learn conceptual information, not little cells of information that are never tied together for them.
"As for any changes in the way financial executives today interact socially, I don't think the change is just in young people. I think it's pretty much universal. Everyone seems wrapped up in himself, so much so that when you do run into a thoughtful person, you say, |Wasn't that nice?'" LARRY A. HARTOG CFO Kentucky Manufacturing Co. AGE: 31 YEARS IN FINANCIAL FIELD: 9 FEI CHAPTER: Louisville JOINED FEI: 1990
MOST INFLUENTIAL IN HIS CAREER: Asa Hord, a partner at Deloitte & Touche in Louisville. "He gave me a sense for the soft side of the profession: negotiating, working the numbers, understanding people issues." WHERE HIS TIME GOES NOW: Managing and providing general direction for the company. WHERE HIS TIME WILL GO IN 20 YEARS: No change THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Organization skills * A "desire" to have a broad knowledge of corporate management * Ability to persuade one's peers MOST IMPORTANT QUALITIES IN THE PAST: No change, "except today the lack of the qualities I listed above has a greater impact on advancement."
"More and more, our future in corporate finance will test our ingenuity in solving certain issues that affect society. I strongly believe that any meaningful solution to the health care and environmental issues will come from Corporate America. Financial executives will be asked to develop the ideas that will make this feasible, while keeping their companies in business - that's no small order.
"As a result, corporate financial executives of the future will be trained in issues other than finance. They'll be called upon to provide some leadership in the corporation to help resolve non-financial issues. Financial executives will find more attentive ears for what they have to say than they have in the past. And I believe financial executives of the future will find their work very fulfilling.
"As for the changes in sociability of the younger generation of financial executives, I'm sure it has a lot to do with the fact that, in dual-income households, the matter often comes down to either picking up your children at daycare or having some social time with one's peers. Needless to say, this may make it appear that my generation of executives is less social than previous generations."
OREST MATKOWSKY Vice President-Finance Mattel Canada Inc. AGE: 33 YEARS IN FINANCIAL FIELD: 11 FEI CHAPTER: Toronto JOINED FEI: 1990
MOST INFLUENTIAL IN HIS CAREER: Ian Bradley, president of Mattel Canada Inc. "Ian shows great leadership and people skills. He allowed me to expand my responsibilities beyond finance into areas such as customer service, sales, and marketing." WHERE HIS TIME WENT IN 1980: Cost accounting and preparing financial statements in a manual environment. WHERE HIS TIME GOES NOW: Forecasting financial performance and improving sales and marketing information systems. WHERE HIS TIME WILL GO IN 20 YEARS: Mapping out a corporation's direction for three to five years, taking into account technology, competition, and the workforce, "eventually leading to a president or CEO position." THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Expanded knowledge, allowing the executive to have a say in all corporate decisions * Ability to interact with customers and to identify opportunities * Good understanding of the external and internal environments MOST IMPORTANT QUALITIES IN THE PAST: Ability to prepare accurate financial statements * Ability to improve the accounting system for more useful information * Minimal understanding of issues faced by other departments
"More than ever, the financial executive has to understand and anticipate the external and internal environments his corporation faces so that he can at least maintain, if not increase, his corporation's competitive edge.
"For example, in the last 12 months in my industry, two mid-sized national retailers have been purchased by a larger retailer, leaving 80 percent of the toy business in the hands of 10 retailers. We have also seen the emergence of wholesale clubs. If federal and provincial governments continue to increase taxes in an attempt to reduce their deficits, the Canadian consumer will further reduce his spending, leading to more consolidation in the retail industry, or he'll go across the border to make his purchases.
"Gone are the days when the retailer would give you large, upfront orders. Today, we receive smaller, upfront orders and must depend on strong marketing programs to generate repeat sales. A majority of the retailers have implemented, or are in the process of implementing, electronic data interchange and automatic replenishment systems. Suppliers have had to react by improving their data collection systems to better match product supply to product demand and to identify opportunities and reduce risks.
"More financial executives are being asked to meet with buyers and the retailers' senior executives at trade shows and business reviews in an attempt to come to an understanding about issues important to the retailers.
"This type of understanding, planning, and exposure should make many financial executives strong candidates for president and CEO positions.
"As for employees, their attitudes are changing. Less important are salary increases due to high marginal tax rates. More important are summer hours, flex time, additional vacation days, pensions, and health care."
BILLIE K. RAWOT Vice President and Controller Eaton Corporation AGE: 40 YEARS IN FINANCIAL FIELD: 18 FEI CHAPTER: Northeast Ohio JOINED FEI: 1979
MOST INFLUENTIAL IN HER CAREER: The senior financial officials at Eaton. "The experience base of these individuals is vast. Exposure to them broadens my own knowledge and skills." MOST INFLUENTIAL IN CORPORATE FINANCE: The Big Eight, the SEC, the FASB, key MBA programs, FEI, major investment banking firms, and academic researchers. WHERE HER TIME GOES NOW: Developing strategic analytical tools for operating management; developing financial and accounting professionals in the company; developing company-wide accounting policies and guidelines. WHERE HER TIME WILL GO IN 20 YEARS: Developing well-rounded financial professionals, "because analytical tools will be externally developed at a very fast pace and internal policies and guidelines will be finely tuned by then. Financial professionals will be very significant contributors at all levels of operation." THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Critical-thinking abilities, to quickly determine financial value (lower costs, increased market share) of all operating and business strategies * Ethical outlook. "The financial executive will continue to be the senior public reporting representative and, as such, will set the tone for all reporting behavior." * Development and training skills, "to properly guide the development and career growth of less experienced financial professionals who will lead the organization in the future." MOST IMPORTANT QUALITIES IN THE PAST: "The qualities that are more important now are qualitative, interpersonal skills with less emphasis on quantitative skills, since most quantitative analysis can be done by computer."
"The most significant change in corporate finance in the last five or six decades has been the processing of financial information. Through the development of the computer and computerized financial and accounting applications, the role of the financial executive has significantly changed from that of information-gatherer to information-synthesizer.
"Because the issue of gathering financial information is no longer a concern of the financial executive, but rather a given, the most successful executive will be the one who acts more as a contributor, adding to the financial information. Since the financial executive will continue to be the management representative most experienced in financial analysis, he should lead the charge for a more efficient operation and organization.
"International competition will continue to increase at a very significant pace. In the face of this intense competition, every member of the operating management team will need to contribute significantly. They must scrutinize all issues. Even such remotely related areas as regulatory reform and health care will have to be folded into an international picture.
"Health care and its related costs will remain a problem for American industry only as long as companies can afford to pay the bill. Once the burden becomes anti-competitive, either within an industry or globally, corporations will burrow out from underneath the responsibility for health care. When the responsibility then shifts from the corporation to the individual, we'll need a more socialized approach to the distribution of health care.
"The changing workforce will significantly affect management responsibility, including the financial executive's, in the future. A competitive company will have to make sure it's the employer of choice for the most qualified employees in the marketplace. That will be done by understanding the needs of the changing workforce from a family and social standpoint as well as recognizing the significant need for training and education.
"Today's - and tomorrow's - financial executive must be a well-rounded individual. Having a skills set of basic financial tools and accounting policies isn't enough. The executive needs to be cognizant of all the factors affecting his environment: the market in which the company operates; the global and sector economies; geographic environments, rules, regulations, and politics; technological advancements; and resource scarcities. After attaining the basic skills set, financial executives need to get a broad education and training in all of the above.
"My biggest worry about the future of corporate finance is the potential crush of regulation. It seems more and more energy and resources are being spent both conforming and reaching to regulatory intervention. That is not to say that all regulation is not needed, but rather that regulation should be intelligent, resourceful, and not anti-competitive in a worldwide marketplace."
W. BERNARD THULIN Retired as Assistant Vice President from C&P Telephone Cos. and retired from the State of Virginia AGE: 84 YEARS IN FINANCIAL FIELD: 22 FEI CHAPTER: Central Virginia JOINED FEI: 1951
MOST INFLUENTIAL IN HIS CAREER: An assistant treasurer at AT&T. "He inspired my interest in financial theory, which led to my getting an MC degree at age 62 and teaching financial theory graduate courses at the University of Richmond." MOST INFLUENTIAL IN CORPORATE FINANCE: FEI and its predecessor, the Controllers Institute of America. "The Institute has had considerable influence on the trends in corporate finance since CIA was formed in 1932." WHERE HIS TIME WENT IN 1970: Retired 26 years ago from the Bell System, retired 16 years ago from work with the State of Virginia. "Twenty years ago, I was executive secretary of the Virginia Commission on Higher Education Facilities." WHERE HIS TIME GOES NOW: Keeping abreast of stock market changes; working occasionally as a private investment advisor. WHERE HIS TIME WILL GO IN 20 YEARS: Continuing as a private investment advisor. THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Integrity * Knowledge * Leadership MOST IMPORTANT QUALITIES IN THE PAST: No difference
"Corporate finance has broadened its interests to include the overall objectives of the company: financial health, personnel, government relations, and management development. Sixty years ago, the chief accounting officer was primarily an experienced accountant who was expected to supervise the accounting employees in their detailed work without much regard for the overall and long-range objectives of the company.
"In the future, financial officers will have to accept corporate goals in general and translate those goals into accounting terms. They will have to understand the objectives and restrictions of regulatory officers and meld that set of objectives with the corporate set with as little friction as possible.
"Health costs will continue to be a big problem, and corporations will have to limit their acceptance to only those costs that apply to a majority of the employees. For instance, organ transplants should be outside the company's responsibilities.
"I expect the global view will become more important in setting company objectives. Research and development will tend to focus on worldwide inventions and changes in communications technologies.
"With more one-parent families and greater commuting distances, it will be important to have employees who can work at home, or at least work at decentralized locations. The days of huge numbers of workers in a single factory are over, and more work will be subcontracted.
"Corporations will be asked to underwrite more of the costs of higher education, even for nontechnical, liberal arts programs.
"I'm not at all worried about the future of corporate finance. It will change, but financial officers will be able to change with the times, as they have in the past. Broad-gauge groups of corporate officers will meet the challenges ahead. One of the most important goals is that our objectives be accepted in the political arenas. Companies cannot underwrite all the objectives of politicians. We shall have to court and educate politicians at all levels and translate our objectives into political terms to achieve this. The biggest challenge we face is not to get into a |them and us' relationship."
KARL F. SLACIK Retired as Sr. Vice President and CFO from Levi Strauss & Co. AGE: 62 YEARS IN FINANCIAL FIELD: 40 FEI CHAPTER: Southern Florida JOINED FEI: 1973
MOST INFLUENTIAL IN HIS CAREER: Harold Geneen, former chairman and CEO of ITT Inc. "During my seven years at ITT, I learned to respect, admire, and, to some extent, adopt his style of management." MOST INFLUENTIAL IN CORPORATE FINANCE: Walter Wriston. "He changed the entire nature and thrust of commercial banking." WHERE HIS TIME WENT IN 1970: Internal control and product costing. WHERE HIS TIME GOES NOW: In retirement, solving general management problems; financing; managing investor relations. WHERE HIS TIME WILL GO IN 20 YEARS: Managing government relations. THREE MOST IMPORTANT QUALITIES FOR TOMORROW'S FINANCIAL EXECUTIVE: Integrity * Professional expertise * People skills MOST IMPORTANT QUALITIES IN THE PAST: Same, "only the qualities are more in demand now."
"Since I received my accounting degree 40 years ago, the world of corporate finance has turned over a thousand times. Today, the life of a financial executive is more interesting, more challenging, more rewarding, and certainly more unpredictable. The old cornerstones of corporate finance - controllership, treasury, auditing, and tax - remain in name, but their substance and shape are different.
"Take treasury. Not so many years ago, this was a gentlemen's game, most frequently played out over cocktails and dinner with your banker, who was probably on your board. The financing vehicles were few, your options limited, and an understanding was concluded with a handshake.
"Today, the environment is cutthroat instead of gentlemanly. Relationships tend to be as old as the last deal, which is closed not by a handshake but by a battery of lawyers. And the banker picking up the dinner check may well be a female. (One of my daughters is a vice president of one of the country's largest banks. I never would have anticipated that 20 years ago.)
"The relationship among independent accounting firms has changed dramatically, too. In an article entitled "The CPA Jungle" in a recent Wall Street Journal, the author noted, |People who once acted like members of a quiet gentleman's club have become so anxiety ridden' - another comfortable relationship has turned into a crucible.
"Pushing back the frontiers of finance and financial management has inevitably disrupted old habits and created new pressures and challenges. But it also has shaken us out of our industrial lethargy and professional complacency. In turn, it has contributed to enhancing America's competitive position, by optimizing how we use our capital resources and our industrial capacity. As financial executives, we now have the opportunity to go beyond reporting what has happened - and even beyond reporting what may happen. We now can make things happen.
"Our challenge is to ameliorate the excesses of recent years without reverting to counter extremes or regulatory strangulation. For example, the sensationalist media and demigods in Washington have condemned junk bonds. Nevertheless, the basic premise of creating a new source of funding for smaller and less creditworthy companies is a fantastic development. It promotes the growth of many new businesses, expands research, encourages innovation, increases employment, and improves the economy in general. Those who criminally abused this new instrument deserve to be just where they are, but the fundamental idea was good.
"My concerns for the future? Unlike the governments of most countries that actively assist business, our government appears to prefer an adversarial relationship. Fortunately, regulators have not yet killed the goose that lays the golden egg, but they probably will continue the attempt. As a result, I anticipate a reversal of the recent mini-trend toward deregulation. If this is true, financial managers will face a new wave of regulatory reporting (taxes, SEC disclosures, environmental regulations, affirmative action, ad infinitum). I urge all financial executives to streamline their operating systems and upgrade their computer capabilities to accommodate this growing avalanche."
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|Title Annotation:||Special Report; financial management|
|Date:||Sep 1, 1991|
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