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August 17, 2002
Kris Chellam, chief financial officer of Xilinx Inc., a Silicon Valley semiconductor company, noticed the nurse had a worried look on her face as she took his blood pressure during his annual physical.
"The market was being thrashed, with CFOs in the spotlight," Chellam said, recognizing that the nurse was concerned that her patient, a CFO, might be under particular stress. He saw she was visibly relieved to report that all was well.
He remembered the event with a sort of gallows humor. "We hope we don't become an endangered species," he said with a chuckle.
Amid widespread allegations of corporate wrongdoing, accounting fraud and self-dealing, chief financial officers, the overseers of corporate America's books, are under a harsh spotlight.
Some CFOs say they feel like deer caught in headlights, because companies with squeaky-clean financials nevertheless can be tarred by association with wrongdoers or merely by being in the same industry. Not even financial officers at companies that have quickly and confidently certified their financial statements, such as Intel Corp., Qualcomm Inc. and Xilinx, can feel safely inoculated against the fallout of others' scandals.
"You feel like you're on a tightrope and any little mistake will be magnified," said Andy Bryant, CFO of Intel, who said he found it "stressful."
"Did I like it better in the old days? Yes. I'm not a person who likes the spotlight. I want to go back to the quiet days, doing my job, quiet and professional," Bryant said.
But the image of CFOs being arrested isn't helping. Last week, Scott D. Sullivan, former chief financial officer of WorldCom Inc., was charged with securities fraud, handcuffed and led by FBI agents to a Manhattan courthouse, surrounded by TV cameras. His attorney said his client would fight the charges, which he called "a rush to judgment."
Two weeks ago, the former chief financial officer at Adelphia Communications Corp. was among the former executives at that company charged with securities, wire and bank fraud. Federal officials allege the CFO aided the covering up of a systematic looting of the company by his father, the company founder, and other family members.
"CFOs are at the center of the storm because it's all about the books," said John Challenger, chief executive of outplacement firm Challenger, Gray and Christmas, whose practice focuses on senior executives, including CFOs.
William Keitel, CFO of San Diego-based wireless communications company Qualcomm, said he worries constantly about saying something in today's volatile markets that could inadvertently hurt his company's share price or investor confidence.
"Now any hint of an accounting problem can have an impact on stock, whether there is a problem or not," he said. "It puts me in the spotlight."
CFOs are facing heightened scrutiny from almost every corner, bombarded by tough questions from investors, employees, analysts and regulators. Under new rules imposed by regulators and legislators, CFOs at all public companies will have to join chief executives in signing notarized statements certifying that they take personal responsibility for the veracity of the financial numbers they are reporting.
They are also the officials most responsible for calculating the effect of other proposed legislation and accounting rules, such as a requirement that they should report stock options as expenses rather than just noting them in their financial statements.
CFOs "are feeling a little bombarded, frankly," said Phil Livingston, president of Financial Executives International, a trade association for top financial executives, including CFOs. "They are worried by the crisis in confidence, by the taint. They are wringing their hands pretty bad."
But Livingston said recent events have also given CFOs new clout when they raise concerns about financial matters with analysts and shareholders who have tacitly pressured them to approve fancy financial footwork to boost profits each quarter, and from chief executives who have ordered them to do so, or who made it too easy or lucrative to resist.
"The silver lining is that if the CEO comes to you and says, "Do this,' they'll be able to say, "Does the name Enron mean anything to you?' " said Julia Homer, editor-in-chief of CFO Magazine. "It's empowering."
Yet CFOs may be more vulnerable.
Outplacement expert Challenger said 106 CFOs lost or left their jobs at large public companies in the second quarter of 2002, up 18 percent from the 90 who changed jobs in the first three months of the year.
Challenger said many CFOs have told him they think they are being "scapegoated" now when they were only doing what CEOs, directors, analysts and shareholders seemed to be demanding.
"When you're in that position, you can't help but feel you're being unfairly targeted, by shareholders pushing aggressively for higher and higher returns in the late '90s, when we were all hoping our 401(k)s would keep skyrocketing 20 percent or 30 percent or more each year," Challenger said. "Shareholders forced companies to focus on share price and be aggressive about it."
The online version of CFO Magazine echoed that lament in a recent article headlined, "The New Patsies?"
Some CFOs noted that more of their colleagues are being prosecuted than higher executives.
While WorldCom's Sullivan has been charged, for example, the firm's former chief executive, Bernard J. Ebbers, has not been, though prosecutors have indicated they may bring charges against him.
Still, what Sullivan is alleged to have done is wrong, Xilinx's Chellam said, and he said he considered it appropriate that he be prosecuted.
"If he did what they said he did, put him in jail and throw away the key," he said.