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Jun 15
2010

How to keep bonuses from ruining your company

Posted by SherylNash01 in incentive compensationcheatingcareer/managementbonuses

SherylNash01

As everyone knows, incentive compensation is a two-edged sword: Such pay can incentivize the wrong as well as right type of risk taking. That is, the prospect of a bonus may motivate employees to game the numbers instead of improving a company's actual returns. The latter is obviously a plus for a business, the former a negative to the extent it fools management into overpaying for poor performance.

Now a new study shows the risks of such compensation schemes is greater than the rewards.

Jun 14
2010

The "dark side" of independent directors

Posted by SherylNash01 in outside directorscorporate governancecareer/management

SherylNash01

Governance activists have argued for years that companies are better off when a majority of their board members are outsiders.

And in the aftermath of the accounting scandals at the beginning of the millennium, listing standards on US exchanges were changed to require boards contain a majority of outside directors. In addition, Section 407 of the Sarbanes-Oxley Act required public companies to disclose whether their audit committees include at least one member who is a financial expert, and if so, whether the person is "independent" of management.

Jun 10
2010

CFOs demand CPAs test the ban on IT consulting

Posted by SherylNash01 in Untagged 

SherylNash01

Certified Public Accountants are increasingly being asked to solve information technology problems for clients and prospective clients, according to a survey by the American Institute of Certified Public Accountants.

But that raises a potential conflict of interest of the sort that led the Securities and Exchange Commission to keep auditing and IT consulting separate. The pressure for auditors to help provide IT solutions will persist nonetheless, says the AICPA.

Jun 08
2010

Financial reform would do more than expected to limit executive pay

Posted by SherylNash01 in financial reformexecutive compensationcompensation commiteeclawback provisioncareer/management

SherylNash01

The financial reform bill passed by the Senate would do a lot more than require a say on pay from shareholders. And its other provisions could do much more to limit excessive compensation for top management, experts say.

The Restoring American Financial Stability Act of 2010, recently approved by the Senate and now part of conference committee discussions with the House, would not only provide for a shareholder vote on executive compensation disclosures, which is non-binding in any case. The bill would also require that each member of the company's compensation committee be an independent member of the board.

Jun 02
2010

Trust your investment gut?

Posted by SherylNash01 in risk managementmaking decisions, intuition, instinct, career/management

SherylNash01

Hurdle rates and other metrics based on a company's cost of capital go only so far in making investment decisions, as every CFO knows. That means effective allocation requires at least a bit of gut instinct. But how to apply it?

Contrary to some notions, instincts of this sort are not uninformed, knee-jerk reactions, most experts say. Instead, they reflect an abiding knowledge that needn't be brought consciously to bear on a decision but instead can be relied on without second thought. But what's the difference?

May 30
2010

The three biggest risks you face

Posted by SherylNash01 in risks, IT Security, government regulationsFCPAcareer/managementbribery

SherylNash01

What will cost CFOs' the most sleep in the second half of the year? Risk experts say corruption abroad, information security and government regulation are most likely to keep you awake.

The US isn't the only  country cracking down on bribery and other forms of corporate corruption in foreign markets. Consider the UK, where a new law takes effect later this year. Like the Foreign Corrupt Practices Act of the US, it applies to any company doing business in the country, but the UK law is broader and easier to trigger, experts say.

May 28
2010

Treating investor schizophrenia

Posted by SherylNash01 in risk managementgrowthcorporate investor relationscareer/management

SherylNash01

The competing demands of growth and risk management have never seemed more in conflict than they are today, according to an informal poll of corporate investor relations directors by the Corporate Executive Board, www.executiveboard.com/finance/. These IR folks say investors are demanding that companies not miss out on growth opportunities even as they worry that firms have not done enough to shore themselves up against the recession's emergence.

A contradiction? You bet. As economies start to recover at very different rates, investors want to know how managers plan to take advantage of those recovering quickest, while not being exposed to those posing the most risk. Yet those economies may often be one and the same.

May 26
2010

Crackdown on cronyism adds risk to foreign M&A;

Posted by SherylNash01 in foreign M&A;FCPAemerging marketsdue diligencecareer/management

SherylNash01

Companies looking to grow through acquisitions in emerging markets may have more risk to discount: the likelihood of prosecution for bribery arising from such deals seems to be growing. And that suggests they need to do more due diligence on such deals or pay less for a target than they would otherwise.

As we reported earlier,  the Department of Justice and SEC initiated 40 Foreign Corrupt Practices Act related actions in 2009, up from 33 in 2008. Criminal and civil corporate fines this year already exceed $400 million, a pace that would exceed the $645 million that companies paid last year.

May 26
2010

Business isn't waiting for Washington on climate change

Posted by SherylNash01 in Sustainabilityclimate changecareer/managementcarbon emissions

SherylNash01

Nearly one in five US companies expect to reduce carbon emissions in the next two to five years, according to a survey by PricewaterhouseCoopers. The survey found that 16 percent are bracing for that possibility, while 13 percent expect new climate regulation and 11 foresee new legislation in this area. And twelve percent expect to improve energy efficiency in general.

"Although federal climate change legislation is uncertain in the short term, there are plenty of government and private sector initiatives driving companies to start reducing emissions now," said Kathy Nieland, leader of the Sustainability and Climate Change practice at PricewaterhouseCoopers in a prepared statement.

May 24
2010

Sustainability reporting is more than an exercise

Posted by SherylNash01 in Untagged 

SherylNash01

Everyone understands the importance of keeping track of your assets and liabilities. Ask firms to issue a sustainability report, though, and often you will be met with confusion.

Despite all the talk, and shareholder pressure, regarding environmental, social and governance concerns, many companies remain deeply skeptical about the need to issue reports on these issues, says Kimberly Gladman, director of research and risk analytics for The Corporate Library, in a new research paper, Ten Myths About Sustainability Reporting. She hopes to help separate fact from misconception here.

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