No one becomes a CFO without possessing the commensurate finance skills. No one thrives as a CFO, however, without having much more. As Scott Simmons, vice president of Crist Associates, a Chicago-based recruiter, puts it: "No company wants just a really good finance person anymore; they want someone who can go beyond that." But exactly what are those other essential skills? What capabilities, talents, and expertise should be in a CFO's toolbox no matter what industry or company he works for or challenges she may face? To hear CFOs tell it, "toolbox" may be the wrong metaphor: magician's bag of tricks is more like it. There's nothing easy about mastering the soft skills they say are essential, and which seem to boil down to clairvoyance, X-ray vision, and the ability to bend time. Ultimately, however, there is a common theme. "Once you get past the technical skills, it's all about people — communicating with them, developing them, empowering them, and listening to them," says Charles H. Noski, retired CFO of AT&T and Northrup Grumman. "If you do those things well, it will contribute to your success as an executive, whether you're a CFO or not." Patience, experience, and a solid dose of intuition can help you round out your financial acumen with the following tricks of the trade. Time Benders Stephen D. Young, CFO of time-management consulting firm and accessory-maker FranklinCovey, tells his staff to stop producing any information they deem unimportant and "see if anyone notices." That advice has led to a 40 percent reduction in the volume of data reported over the past two years. For example, "rather than having a budget-versus-actual analysis sliced five different ways, we slice it two different ways, and rather than have 15 different inventory reports we have 10," Young says. Young also takes a merciless approach to his E-mail inbox. He glances at it several times a day but doesn't respond to any messages until the end of the day unless they are clearly urgent. That establishes a very high bar — Young says he leaves about 60 percent of his messages unopened. Frank Gatti, CFO of ETS, also relies on a strict E-mail hierarchy. "Not all E-mails are of equal importance," he says. Aside from those sent by his CEO, "investors and bondholders come first. Respond quickly even if you don't have all the facts, just to let them know you'll get back to them when you do." Managing Up "You need to know what your CEO's hot buttons are: what's important to him, what is he being judged against, what's his value system?" says Tony Panos, a consultant who developed and teaches a class on managing up for one of Cornell University's extension schools. "Anything you suggest should fit into that. You should demonstrate how you are helping him meet his goals." But what about managing up to a dictatorial CEO? The advice is the same, Panos says, but he recommends looking a bit deeper for motive. "People who are dictatorial tend to have some level of fear driving them. Start by looking at what those fears are and how you can mitigate them." The Art of Saying No One way is to "help people feel like they're coming to a decision together," says Bright Horizons Family Solutions CFO Elizabeth Boland, by giving them the facts and the potential risks rather than a final answer. Richard Fearon, CFO of Eaton Corp., says that listening can make all the difference. "You just need to hear the idea through so that no one feels shortchanged," he says. In a well-managed company, he adds, the CFO won't have to play the heavy very often, because bad ideas will usually be weeded out before they get to his door. Sometimes, of course, the CFO will have to say no. The toughest situations, in Boland's view, are those in which the lack of revenue potential "makes it really evident that a proposal is not even worth talking about." She counsels patience. "We try to talk through all possible revenue opportunities," she says, "before saying it won't work." When all else fails, says Fearon, you simply turn the tables. "I just ask what the person would do if he or she owned 100 percent of Eaton." Vetting Vendors That means digging deep on references. Ideally, have a technical person on your staff find out exactly how a consultant handled, say, a software conversion at the reference's company and what complications ensued, says Bright Horizons's Boland. Then ease into the relationship slowly, signing up for only a short project to start. Build in time for unexpected problems. Setting out detailed, measurable expectations can help guide the relationship. "You don't want to micromanage what you've outsourced, so you need to have the right reference points to measure them against," says ETS's Gatti. He recommends asking the vendor for an easy-to-read dashboard showing early warning signs for problems, along with more-detailed weekly or monthly reports. Finally, realize that managing vendors now carries the additional burden of being responsible, at least to a degree, for the quality of their internal controls. "It's bad enough trying to monitor your own internal controls," Stephen Bainbridge, a law professor at the University of California, said at a recent symposium. But overseeing another company is "more difficult and more expensive." Develop X-ray Vision "We participate in or lead some of the most complex decisions an enterprise can make, so one of our jobs is to see the consequences of all those paths that others can't see," says The Hartford's Johnson. And that, says Robert Mittelstaedt, dean of Arizona State University's business school and board member at two public companies, requires being "analytic enough to constantly think about 'what-if' scenarios." After all, CFOs "are better versed than anyone about the financial implications of any of those risks," he says. Many CFOs are analytic by nature, of course, but Johnson says that what really helps hone a CFO's powers of perception is trouble, and the more the better. "Until things go very wrong in ways that were completely unanticipated, you don't develop those skills," he says. And he should know. Having helped clean up fraud at Cendant and worked with companies in bankruptcy as an investment banker, Johnson has seen his fair share of crises. He actually reads forensic audit reports of disasters at other companies to help keep him on his toes. Legal Ease The last thing any company needs is a lawsuit. But in Corporate America, they come with the The real issue is risk avoidance, and there are some simple safeguards, says Cynthia Jamison, national director of CFO Services for Tatum LLC. For example, "Have routine legal forms that are used for 'usual' business [that is, customer contracts, NDAs, option agreements, and so on]. Then, whenever something is out of the ordinary, or someone requests a substantial change to normal policy, call a lawyer." Bill Stephan, the former CFO of Harborside Healthcare, added another layer of protection. "We had a policy that no field personnel could enter into contracts." Instead, the company, an 80-location nursing-home operator, mandated that only the CFO and the in-house counsel were allowed to sign. But Stephan avoided bottlenecks by pledging to turn around any documents very quickly — often in the same day. Having a good working relationship with your counsel — whether inside or outside — can be a safeguard in itself. In fact, says John Iino, a partner at Reed Smith LLP and co-chair of the firm's Corporate & Securities practice group, lawyers are most efficient "when they are kept close to the internal decision makers." Only then, he adds, can they help companies "draw the line between legal compliance and financial compliance" in such areas as executive-compensation disclosure. Stephan worked close enough with his inside counsel, in fact, that he became adept at spotting legal red flags. Of course, there are times when outside counsel must be called in. This is especially true, says Jamison, "if you are in a defensive posture — say, a customer threatens to sue or you get subpoenaed for a court appearance." That's when the CFO's skills come in handier than ever. "It's just like managing anything else," says Stephan. "You want someone who is working in your best interest. And you want to avoid anyone with a tendency to overlawyer or who's just out to win points." If you don't, you'll regret it when the bills come in, he adds. Street Talk But honing your skills as a public face of the organization requires a bit of homework. Before his company went public in March, Steffan Tomlinson, CFO of Aruba Networks, listened in on some 20 conference calls and kept a log of questions asked by analysts so that he would know just what to expect when Aruba held its first call. From that, he learned that "tone and tenor mean a lot, especially over the phone," and "how you answer questions about competitors is telling." He says that when executives on one of the calls he listened in on stumbled over certain questions, their company was soon described by an analyst as faltering. Frequent calls, road shows, and meetings can be a grind, but Boland of Bright Horizons says it's critical to stay focused. "You get very routine about how you do your presentations and what you think people want to know," she says. "Try to hear what they're really asking." If the audience is internal, be prepared to forgo finance jargon in favor of plain English. "I've worked with many CFOs who aren't CPAs but became CFOs because they were able to synthesize financial information into something useful," says Bruce R. Evans, a managing partner at private-equity firm Summit Partners. Offer a few select bar charts and graphs when possible, instead of tables of numbers. And don't talk too much. "Even when the work behind something is extremely complex," says Gatti, "your audience really just needs to know the headlines." Leading by Example It is a delicate balance, says Joseph E. Esposito, recently retired CFO of Concord, Massachusetts-based SolidWorks Corp. "You have to demonstrate that you are a leader, but without interfering." That means offering the guidance and counsel of a top executive, he says, but letting your employees do their day-to-day jobs. Boland echoes that idea: "As CFO, you've got the title and authority to be involved, but you have to make other functions feel like you're an assistant, that you're there to make them look good." There are times, however, when the pressure is such that a CFO must step into the fray. Esposito has found that a particularly effective approach is to jump in as a short-term project leader. As a CPA, he says, there have been many times when he's been able to lead a technical project, such as dealing with stock-options accounting, and that when he has done so it has come as a big relief to his staff. "To them, something like that is just a big pain in the neck," he says, "since many have never seen it before and may never see it again." At the same time, sometimes it's the little things that count. For ETS's Gatti, for example, leading by example means getting his expense reports in on time so that he can encourage others to do the same.
Every CFO has to deal with a CEO, and figuring out how to make the boss happy is a skill no aspiring finance chief can be without. "The CEO connection is the single most important thing a CFO must understand and maintain," says David Johnson, CFO of The Hartford Financial Services Group. While a sound strategy will depend on myriad interpersonal factors, Johnson says he thinks a critical element is candor, which is key to becoming a trusted adviser to the CEO.
CFOs are often labeled as the original "Dr. No," and in fact they may be more likely than other senior executives to put the kibosh on ill-advised plans or projects. But many CFOs agree that a thumbs down, or any form of unwelcome news, can be delivered professionally and with a little less sting.
Third-party consultants, contractors, and service providers have become essential in this era of increased regulation and outsourcing. And thanks to Sarbanes-Oxley, not only has "reliance on third-party vendors reached a new extreme," says Jeff Burchill, CFO of FM Global, but so has the complexity of deciding which firms to hire. In the past, the decision was based largely on who was the low bidder. But now that public-company CFOs face a potential personal liability regarding the quality of financial reporting, "price may not even come up," Burchill says. Consequently, CFOs often have to be "personally involved in the selection process," he says.
The CFO is in a unique position to have a window into every aspect of a company, but that's no substitute for real vision.
Increasingly, a wide range of stakeholders want direct access to the CFO. Knowing what communication techniques work with which audiences can help finance shine, both within and outside the company.
As the head of the finance department, the CFO must lead and inspire — and know when to get his hands dirty.
Thứ Tư, 10 tháng 9, 2008
The Essential Skills
Market structure
In economics, market structure (also known as market form) describes the state of a market with respect to competition.
The major market forms are:
- Perfect competition, in which the market consists of a very large number of firms producing a homogeneous product.
- Monopolistic competition, also called competitive market, where there are a large number of independent firms which have a very small proportion of the market share.
Oligopoly, in which a market is dominated by a small number of firms which own more than 40% of the market share. - Oligopsony, a market dominated by many sellers and a few buyers.
- Monopoly, where there is only one provider of a product or service.
- Natural monopoly, a monopoly in which economies of scale cause efficiency to increase continuously with the size of the firm.
- Monopsony, when there is only one buyer in a market.
- The imperfectly competitive structure is quite identical to the realistic market conditions where some monopolistic competitors, monopolists, oligopolists, and duopolists exist and dominate the market conditions.
| Quick Reference to Basic Market Structures |
| Market Structure | Seller Entry Barriers | Seller Number | Buyer Entry Barriers | Buyer Number |
| Perfect competition | No | Many | No | Many |
| Monopolistic competion | No | Many | No | Many |
| Oligopoly | Yes | Few | No | Many |
| Oligopsony | No | Many | Yes | Few |
| Monopoly | Yes | One | No | Many |
| Monopsony | No | Many | Yes | One |
These somewhat abstract concerns tend to determine some but not all details of a specific concrete market system where buyers and sellers actually meet and commit to trade.
The correct sequence of the market structure from most to least competitive is perfect competition, imperfect competition,oligopoly, and pure monopoly.
The main criteria by which one can distinguish between different market structures are: the number and size of producers and consumers in the market, the type of goods and services being traded, and the degree to which information can flow freely.
Investors seeking room to move
While the news will generally be welcomed as giving extra scope for foreign investors to acquire equity stakes of these attractive targets and thus increase M&A activity and foreign capital in the market place, there are clear arguments that, in principle, Vietnam’s WTO commitments mean there should be no cap on foreign ownership for many of these companies. As a result, concerns grow that important WTO commitments are being eroded unwittingly at best or, at worst, deliberately by complex and unclear legal mechanisms.
The minister’s announcement of the increase, it is not yet known how the announcement might be codified in law, followed a formal directive from the prime minister (Official Letter No. 319 dated March 3, 2008) to the State Bank and multiple ministries outlining 19 measures aimed at reining in the double-digit inflation that has hit investor and consumer confidence and affected the stock market in recent months.
In Official Letter No. 319, the prime minister instructed the Ministry of Finance (MoF) to research and make a submission to the government on regulations on the percentage of foreign investors’ ownership of securities in unlisted companies. The prime minister expressly states in Official Letter No. 319 that the percentage should not be higher than that applicable to listed companies (currently 49 per cent). That requirement follows the prime minister’s earlier decision (Decision No. 3567 dated November 8, 2007) that foreign ownership of public unlisted companies should follow the rules applicable to listed companies.
The government Office subsequently issued Notice No. 63/TB-VPCP on March 11, 2008 in which Nguyen Sinh Hung, permanent Deputy Prime Minister, approved in principle the increase to 40 per cent maximum foreign ownership of unlisted public companies except for those in sectors “separately regulated by the government”. What this final qualification might mean in practice is open to considerable debate.
While the change might have been valid in November 2007, there are good arguments to suggest it should not be generally applicable after January 2008. Notably, Vietnam’s WTO service sector commitments setting out a clear roadmap on foreign ownership of service-sector entities, expressly state that the previous 30 per cent limit on foreign ownership of existing Vietnamese service-sector entities (treated differently than establishment of new service-sector entities) will no longer apply one year after Vietnam’s WTO accession (i.e. - January 11, 2008).
In addition, the minister’s announcement would appear to contradict a new government decree implementing the Law on Enterprises (Decree No. 139 dated September 5, 2007).
Decree No. 139 provides, in effect, that all organisations and individuals (regardless of nationality or place of establishment) may acquire unlimited stakes in existing Vietnamese entities except for the following cases which are subject to their own particular rules: (i) companies listed on the stock exchange; (ii) companies operating in sectors governed by specialised laws (e.g. - civil aviation, lawyers, education, publishing); (iii) state-owned enterprises undergoing equitisation; and (iv) companies in services sectors specifically regulated by the WTO service-sector commitments. While the exceptions are not insignificant, the general principle set out in Decree No. 139 is that there is no general cap on the permitted equity that a foreign investor may acquire in an unlisted company, including public unlisted companies.
Despite the apparently clear wording of Decree No. 139, foreign investors have faced significant difficulties in practice acquiring majority shares of unlisted companies, including private unlisted companies. Licencing authorities have either declined or delayed the paperwork necessary to give effect to such acquisitions, leaving investors frustrated and the status of private contractual documents open to doubt.
In doing this, the licencing authorities have argued that there are currently no detailed implementing guidelines for Decree No. 139 and that the decree guiding Vietnam’s WTO commitments, many months in the drafting, still has not been issued.
With such a climate of uncertainty, the MoF, in conjunction with the State Securities Commission (SSC), faced with a directive to address the issue, appear to have adopted a bizarre half-way house between the previously applicable 30 per cent cap on acquisitions of Vietnamese entities and the clear 49 per cent cap applicable for listed entities.
In doing so, the MoF appears to have taken a step not in compliance with Vietnam’s WTO commitments and in conflict with the spirit and principles of Government Decree No. 139 issued only months ago. Whether this has been knowingly and deliberately done or is a simple oversight borne from a special view taken of unlisted public companies, one apparently not otherwise supported by law, is not known. Regardless, it must be hoped this does not create a precedent for other state agencies to erode Vietnam’s WTO commitments by issuing regulations for ‘special’ industries or business areas.
Of equal concern is that the rules for acquisitions by foreign investors of Vietnamese entities continue to be clouded in uncertainty and complexity. What happens when a local company meets the criteria for a public unlisted company but already has more than 40 per cent foreign ownership? Is the new 40 per cent cap applicable to companies that meet the criteria but have not registered with the SSC as public companies?
This article is intended for information purposes only and should not be interpreted as legal advice. For further information contact Giles Cooper at GTCooper@duanemorris.com.
By Giles Cooper & Hoang Minh Duc, Duane Morris Vietnam LLC.
Banking exhibition to enhance banks’ competitiveness
The 8 th ‘Banking Vietnam’ exhibition and conference will be held in Hanoi from May 21-23 and Ho Chi Minh City at a later date, announced the organising board in Hanoi on May 7. As the sector faces a time of strong growth and fierce competition, Banking Vietnam 2008 will focus on enhancing competitive capacity for banks through application of latest informatics technologies in banking management and customer services. The four main agenda items at the international seminar will be banking security, core banking and banking business administration, risk management and IT application in payment activities. These are pressing matters for Vietnamese banks to increase their competitive advantages and run business profitably, said Head of the Informatics Technology Department of the State Bank of Vietnam Ta Quang Tien. A document of sponsorship was signed between the Banking Vietnam Organising Board and two major sponsors, IBM and the Bang Huu Technology Joint Stock Company (Amigo-Technologies) at the press conference. Banking Vietnam has been organised annually by the State Bank of Vietnam and the International Digital Group (IDG) since 2002. Ensaga: Vietnam Business Update and Analysis. For more analyses and news about doing business and investment in Vietnam, please visit http://en.saga.vn/ . Register FREE with http://en.saga.vn/ and meet with Vietnam's largest online business community, including topnotch industrialists, entrepreneurs, professors and professionals. The Banking Vietnam exhibitions are an important event on the industry calendar, drawing the participation of a large number of commercial banks and top Vietnamese and foreign services suppliers.
Equity Research: the need for domestic expertise
The VN index has dropped from over 1000 to under 500 within few months! How could that happen? Actually, the right question is rather: over the period starting January 2006 until early 2007, the VN index has outperformed the regional index (MSCI Asia excluding Japan) by about 100%, are their any valid arguments to explain such a bullish trend? A market anomaly, most would say, unsurprisingly it was corrected. From outside Vietnam, observers would probably put forward a contagion effect following the subprime crisis to explain such a dramatic drop of the Vietnamese market index. Vietnamese, however, know they also have to blame themselves. Now, the next question is: how to turn this crisis into an opportunity? It is true that foreign direct investment jumped by nearly 70% to $20 billions last year, but the 8.5% growth of the Vietnamese economy last year was essentially driven by domestic demand largely fed with a lending spur. The price to pay today is inflation, calling for a tightening of the monetary policy, also raising the issue of the foreign exchange policy, to cool down an overheating economy. Victim of its eagerness to grow and catch up with its regional ASEAN partners, Vietnam may now have to accept a short term slowdown to remain on track for a brilliant future. As soon as this downward trend was anticipated, it was perceived as an alarm bell on the stock market, it was time for a severe correction. Among others, one possible explanation for this “stock market fever” probably lies in the well developed IT skills in Vietnam, and a natural enthusiasm for all its use. Numbers of online trading sites are now available, creating a sort of unformal OTC market, allowing for quick decisions at any time…and quick profits. Unfortunately, without proper regulatory oversight, this kind of environment is likely to become a realm of opportunistic behaviours where information asymmetry and manipulations dominate. However, it also reflects the lack of proper information available for investors due to a series of factors – such as the ambiguity of published financial information, the shortage of qualified auditors and financial analysts – In other words, due to a lack of it the market creates information – rumors are typical of that – to drive up prices and provide opportunities for speculative gains. The stock market downturn is a good opportunity to put an end to that situation and take the necessary actions conducive to the efficiency objective. The remedies are well known: improved corporate governance, an appropriate regulatory framework, transparency. But, as far as transparency is concerned, providing investors with sufficient reliable information is not enough, one need also to reduce “bounded rationality” by enhancing the capacity of market players to analyze and use this information to take or recommend rational well documented decisions. So doing, one can expect stock prices to reflect corporate fundamentals rather than wishful thinking. Equity research, though evolving, is based on a core of well accepted concepts, models and tools that global financial institutions tend to disseminate through their networks of branches, subsidiaries and partnerships. However, when applied to emerging markets one needs a domestic contribution to integrate all kinds of intangible elements that purely technical experts may not be able to identify. Providing adequate training programmes to meet this need for domestic expertise is therefore essential. His research activities were first in the field of insurance and risk management. More recently he has also developed an expertise in the field of energy management with a particular focus on international project finance. Presently he is co-director of a specialised master in « energy management » launched in partnership with IFP school (Institut Français du Pétrôle) and BI Norwegian School of Management in Oslo
Dr. Professor Patrick GOUGEON is a member of the finance department of ESCP-EAP where he occupied several positions in the past, in France as well as abroad. In Asia in particular, as the Director of the School of Management at the Asian Institute of Technology (AIT, Bangkok, Thailand), then back to Paris as the Director of MBA programmes. He has also contributed to the development of various international programmes, such as recently the MEBF (Master in Economics of Banking and Finance, Hanoi & Hochiminh in Vietnam, an ESCP-EAP/Paris Dauphine joint programme) with the position of academic co-director.
Washington Mutual tumbles 30 percent to 17-year low
By Jonathan Stempel and Dena Aubin
NEW YORK (Reuters) - Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz) shares sank 30 percent to a 17-year low and the perceived risk of its debt soared on worries the largest U.S. savings and loan will not find a buyer or raise enough capital to combat soaring mortgage losses.
The stock closed down 98 cents at $2.32 on the New York Stock Exchange, and are down 44 percent in the last two days. It fell earlier to $2.30, the lowest since January 1991, according to Reuters data.
Analysts attributed the decline in part to anxiety that potential buyers might walk away because of a pending accounting rule requiring they value the assets of targets at market prices, and perhaps the need to raise capital.
They also pointed to Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz), which said earlier on Wednesday it plans to sell a majority stake in its asset management unit and spin off commercial real estate, and posted a $3.93 billion quarterly loss. The shares of Lehman, Wall Street's fourth-largest investment bank, fell 7 percent.
"Lehman failed to find anyone to invest capital. With Washington Mutual potentially needing some in the future, the market is taking the opportunity to punish that company," said Jaime Peters, a banking analyst at Morningstar Inc in Chicago.
Washington Mutual did not immediately return a call seeking comment.
Earlier this year, it raised $7.2 billion from investors, including private equity firm TPG Inc TPG.UL.
On Monday, the thrift ousted the longtime chief executive, Kerry Killinger, and replaced him with Alan Fishman, the former chief of Brooklyn, New York's Independence Community Bank Corp.Economy, culture wars vie for election spotlight
By Andrea Hopkins - Analysis
LEBANON, Ohio (Reuters) - With jobs disappearing, banks failing and the housing market a mess, Democrats were certain the U.S. presidential election would be all about the economy. Suddenly all anyone talks about is faith, family and female voters.
Call it the Sarah Palin effect.
The surprise choice of the little-known Alaskan governor as running mate by Republican presidential nominee John McCain for the November 4 election has turned the campaign debate into something else entirely.
Opinion polls show the economy the top concern with the two main presidential candidates running neck and neck.
Democrat Barack Obama has tried to paint his rival McCain with the same blame he heaps on Republican President George W. Bush for causing rising prices and stagnant incomes.
Alaska Gov. Palin, who would be the first female U.S. vice president, has made a big splash in the 12 days since her selection as McCain's running mate.
Women with children debate Palin's ability to run for office while raising five children. Conservatives applaud her anti-abortion credentials. Newspapers run interviews with family, friends and pastors attesting to Palin's fundamentalist Christian faith.