In what appears to be serious case of self-loathing, former Citigroup CFO, Sallie Krawchek has just taken a position to run the global wealth and investment division at Bank of America.
It’s rumored that Krawchek left Citi because she and Vikram couldn’t play nice, so apparently she thinks that working for a rarely sober Ken Lewis will be a much more manageable.
Former Citi CFO takes Bank of America job [AP]
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GM CFO: Today Is No Big Deal
Chris Liddell is thinking about the future!
“I’m not worried about today, I’m worried about the three months and the six months and the nine months” from now, GM Chief Financial Officer Chris Liddell said in an interview this morning on CNBC.
Liddell also had some frank talk about how GM can never go back to the bad, old days, when he said GM was a financing company with a car company “attached,” and the auto maker used its pension plan as a “piggy bank.” GM needs to have a “fortress” balance sheet to support its business plan, Liddell said.
So the intention is there but old habits die hard, amiright? Francine McKenna thinks so and makes a prediction:
My prediction: GM needs another accounting restatement before the 2012 election. This time it shouldn’t be retail investors who end up with the short end of this stick.
Any takers? November 6, 2012 is the over/under. We’ll take the overs (post-election day) and if we lose, we’ll take FM to dinner at the restaurant of her choosing.
If You Believe the AICPA, Hiring Is Looking Good
Sometimes we get job reports from certain mainstream media outlets that shall remain nameless that look a tad suspect but in the case of this info from the AICPA, I think we can safely rely on the findings.
Here’s the good news via the Journal of Accountancy:
On the demand front, hiring is back on the upswing after decreasing from 2007 to 2008. In 2007, the total number of accounting hires was 36,111. That dropped to 25,488 in 2008 but climbed to 33,321 in 2010. A large portion of that increase was in firms with fewer than 10 CPAs on staff. Firms of that size increased their hiring projections from 11,432 in 2008 to 16,342 in 2010 (see Exhibit 1).
In terms of the types of positions CPA firm new hires were recruited to fill across firms of all sizes, accounting and auditing still commanded a narrow majority at 51%; followed by taxation at 25%; other at 16%; and information technology at 8%.
The accounting and auditing share of new hires was down from 60% in 2007, with the declines coming from firms with 50 or more CPAs. Hiring of new CPA graduates likewise decreased for information technology (down 5 percentage points from 13%). Tax showed a slight increase (2 percentage points) with the strongest gains coming from firms with fewer than 10 CPAs, while the largest growth since 2007 was in the “other” category.
The percentage of overall firms expecting to hire the same or more new accounting graduates than last year also is up—to 89% from 74% when the question was asked in 2008.
Here’s the next obvious question: are we talking about real, created-from-nothing jobs or are we talking about covering massive staff turnover popularized in public accounting by serf-like working conditions and disappointing compensation? Because hiring the same guy in four different firms doesn’t add up the same as hiring four new accounting grads. Duh.
Oh, and something else – where’s 2009? It doesn’t appear in any of the included exhibits, nor is it mentioned in the Journal of Accountancy article even once. The full survey, available from the AICPA’s website, doesn’t specifically mention the exclusion of 2009 in the survey methodology. We aren’t one for conspiracy theories (yeah, right) but it seems suspect that an entire year would just disappear and fail to get a single mention. I mean it was only two years ago.
We’ll dig into the survey results in more detail later, maybe once we track down 2009. Though not specifically mentioned in the above charts, the entire 2009 Trends in the supply of Accounting Graduates and the Demand for Public Accounting Recruits report can be found here.
Pressure from CEOs More Likely to Lead CFO Shenanigans Than Monetary Gain
This story is republished from CFOZone, where you’ll find news, analysis and professional networking tools for finance executives.
A recent study, “Why Do CFOs Become Involved in Material Accounting Manipulations,” by researchers at the University of Pittsburgh and the University of Washington attempts to answer just this question. Their finding? Pressure from the companies’ CEOs, more than the possibility of financial gain, tends to drive the actions of crooked CFOs.
Of course, the researchers couldn’t actually divine the motivations that drove the CFOs who manipulated numbers. Instead, they reviewed a group of firms subject to SEC enforcement, analyzing the role of the CFOs, as well as the costs they incurred and any benefits they gained from their actions.
They found – not surprisingly – that the CFOs involved faced stiff penalties for their actions. More than half of the CFOs (54 percent) employed by the nearly 300 firms in the sample that were charged by the SEC for accounting manipulation were prohibited from serving as an officer, director or accountant with a public company in the future. About 48 percent of CFOs were fined as a result of their wrongdoing, with a median fine of $50,000. A small number – about 4 percent – also faced criminal charges. Clearly, monkeying with the numbers can be quite costly for CFOs.
On the other hand, the CFOs that engaged shady number crunching didn’t have significantly higher equity incentives than CFOs in the control sample. That means the CFOs involved in misstatements took on a lot of risk, yet couldn’t expect to come out much further ahead financially than their counterparts at law-abiding firms.
Conversely, the CEOs of firms in trouble exhibited both greater power and equity incentive than CEOs of control firms. For instance, these CEOs were more likely to be company founders and to serve as chair of their boards than the heads of the other firms. “This evidence is also consistent with the pressured CFO explanation; that material accounting manipulations are more likely in the presence of powerful CEOs,” the researchers write.
What’s more, CFO turnover jumped during the three years before the misstatements occurred. That suggests that at least some CFOs either left or lost their jobs because they refused to participate in the manipulation.
The SEC also seems to have taken note of the larger role that CEOs, rather than CFOs, typically played in the schemes. When the researchers examined 188 companies in which both the CFO and CEO were charged with manipulating numbers, they found that the SEC had charged 18 percent of CFOs with orchestrating the schemes. When it came to CEOs, however, 32 percent were charged – almost double the CFO number.
Moreover, when the SEC charged just the CFO with wrongdoing, 30 percent of them benefited financially. That’s a lot, but it’s significantly less than the 46 percent of CEOs who were charged and also gained financially.
Given these findings, are there changes that could reduce accounting shenanigans? To be sure, the research doesn’t mean that CFOs who cook the books can simply blame their actions on their bosses; clearly they could have acted differently, as difficult as doing so might have been. The findings do suggest, however, that one step to reducing the opportunity for wrongdoing would be to provide CFOs with greater independence from their CEOs. One way to accomplish this would be to expect greater participation from corporate boards or audit committees when it comes to hiring and evaluating their firms’ chief financial officers.