cfo survey

8/6/2019 CFO Survey

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Challenges, ConCerns, and Calls for a stronger VoiCe:

A Survey of Select Fortune 500 CFOs

ConduCted by Institute o Management Accountants in Cooperation with Caterpillar Inc.

8/6/2019 CFO Survey


A Survey of Select Fortune 500 CFOs | 1

Table o Contents

i. l ic, rom David Burritt, CMA, CFO o Caterpillar Inc.

ii. sv f:

. Expectations o the CFO Team

. Internal Barriers to Success

c. View o the Current U.S. Finance and Accounting Regulatory Environment

. View o the New SEC Advisory Committee on Improvements to Financial

Reporting (CIFiR)

. Willingness to Take the Next Step

iii. t C o, by Paul A. Sharman, ACMA, President and CEO,

Institute o Management Accountants (IMA®)

about Caterpillar inC.

For more than 80 years, Caterpillar Inc. hasbeen making progress possible and driving

positive and sustainable change on every

continent. With 2007 sales and revenues o

about $45 billion, Caterpillar is the world’s

leading manuacturer o construction and

mining equipment, diesel and natural gas

engines, and industrial gas turbines. The

company also is a leading services provider

through Caterpillar Financial Services,

Caterpillar Remanuacturing Services,

Caterpillar Logistics Services, and Progress

Rail Services. More inormation is available

at www.cat.com.

about iMa®

With a worldwide network o more than60,000 proessionals, IMA is the world’s

leading association dedicated to empower-

ing accounting and nance proessionals

to drive business perormance. IMA

provides a dynamic orum or proessionals

to advance their careers through Certied

Management Accountant (CMA®)

certication, research, proessional

education, networking, and advocacy

o the highest ethical and proessional

standards. For more inormation about

IMA, please visit www.imanet.org.

To those interested in the uture o

the accountancy proession:

It’s no secret that today’s nancial climate has created a dizzying array o regulatory

and reporting requirements or U.S.-based multinational companies. Faced with

these requirements, CFOs at U.S. multinationals are charged with preparing a myriad

amount o inormation, some o which has dubious value or investors—and perhaps even

or the organizations and regulators themselves.

While many U.S. multinationals are contending with similar reporting and regulatory

challenges, what isn’t clear is whether they agree on an appropriate course o action in re-

sponse. To nd out how top nancial managers really view the current situation—

and what steps they’re willing to take to nd a solution—Caterpillar Inc. and the Institute

o Management Accountants (IMA®) conducted this study o nancial executives at some

leading U.S. multinational corporations.

More specically, this study sought to:

1. Identiy common expectations o the CFO unction and barriers to the successul

perormance o these duties.

2. Assess the state o complexity o the U.S. nancial reporting system and how it

acilitates or inhibits shareholder value creation.

3. Discover i business leaders believe they have a voice in the r egulatory arena—

or even i they want one.

4. Gauge the level o interest in securing a stronger “seat at the table” as contributory

participants in the regulatory process.

To answer these questions, 30 U.S.-based multinational public companies were targeted or

interviews, o which 17 agreed to participate. All companies except one were listed in the

most recent Fortune 500, and seven were in the Fortune 100. In terms o the size and scope

o the participants, they collectively employ 1.4 million people and reported gross revenues

o $811 billion in 2006. All interviews were conducted either in person or over the phone:

A CFO participated in 84% o the interviews directly, while the remaining 16% o inter-views were with a Chie Accountant and/or Controller.

We think you’ll nd the survey results compelling, not only rom what they reveal about

the current state o aairs, but also about the level o commitment o leading CFOs and

their willingness to take a more active role in the regulatory process.

Thank you or your interest in this study and in the evolving state

o the accountancy proession.

dv b, CMa

Chie Financial Ocer

Caterpillar Inc.

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2 | A Survey of Select Fortune 500 CFOs

Although respondents hailed rom a variety o dierent

industries—manuacturing, technology, energy, consumer

products, and others—the survey ound a striking similarity

between what top management expects rom the CFO team.

O the 17 respondents, more than 80% (14 out o 17) noted the

ollowing three primary expectations:

Enterprise Risk Management: The CFO team must demonstrate

leadership in holistically identiying and managing risk—including

nancial, operational, strategic, and environmental risk—that

aects the organization’s ability to achieve its strategic and

perormance goals.

Financial Reporting: The CFO team must ensure that nancial

disclosures, including statements, notes, and MD&A, are timely,

correct, reliable, and relevant to preserve and grow investor wealth.

Business Partner: The CFO team not only must assure integrity

in controls, risk management, and nancial reporting, but it also

must help to infuence strategy via analytics and decision support,

working closely with operations.

Other major concerns mentioned by the participants included

growing shareholder value and developing talent.

These ndings reveal that the CFO team not only oversees “the

numbers,” but it also works at the highest and most important

levels o the organization to help shape the strategic direction and

uture o the enterprise.

The survey

found a striking

similarity

between what

top management

expects fromthe CFO team.

“At the end o the day, we must make sure that all o

the company is using one version o the truth.

–thoMas hofMann, Cfo, sunoCo”

ec Cfo tm

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4 | A Survey of Select Fortune 500 CFOs A Survey of Select Fortune 500 CFOs | 5

I expectations o the CFO team include serving a valuable role

within the organization, what internal barriers hinder the

successul accomplishment o these responsibilities?

To learn the answer, respondents were asked, “What are the top

three internal challenges you ace in delivering on your organiza-

tion’s expectations o your team?”

Slightly more than 50% o respondents (9 out o 17) noted issues

around human capital. While some simply said “stang,” others

elaborated by citing challenges related to recruitment, achieving

diversity, employee development and training, and sta retention.

The human capital challenges also spurred discussion o related

internal barriers, including contending with new technology to ree

up employees to spend more time on interpretive tasks, resource

allocation, and the ability to manage change.

The results underscore a clear need within U.S. multinationals or

properly trained, motivated, and committed nance proessionals—

those that are knowledgeable about the technical aspects o the nance

unction and that have strategic and decision-support expertise.

My biggest internal challenges include hiring and retaining talentand identiying evolving technologies to ree up our team to spend more time on analytics.

–roy teMplin, Cfo, whirlpool

“ ”

top internal

barriers

to suCCess

• Stafng

• Recruitment

• Achieving diversity

• Employee development

and training

• Staff retention

• Evolving technology

• Resource allocation

• Ability to manage change

i b scc

8/6/2019 CFO Survey



We all know the press wields enormous power, so it’s not surprisingthat when respondents were asked i they could say one thing

or a eature in a national accounting periodical, some o their

gravest concerns emerged.

Overwhelmingly leading the list were concerns about the nance and accounting

regulatory environment’s complexity. In act, all respondents either mentioned it

individually or in conjunction with shareholder value.

Among the more notable responses:

“The current environment is complex, and with the pressure o large penalties

or technical noncompliance, what has resulted is a system that does not

produce valuable inormation or investors or board members.”

“Accounting has moved rom ocusing on guiding shareholder value to just

applying rules rigidly.”

“The things we do or compliance bog us down, and the end product is a lack

o relevant inormation.”

When asked later to quantiy the current state o complexity in U.S. nancial

reporting on a scale o 1 to 5 (with 1 being the least complex and 5 being the

most), respondents gave a staggering average rating o 4.4.

Repeatedly, respondents expressed the view that the complexity o the regula-

tory process and standards was their greatest impediment to preserving and

growing investor wealth. In act, several r espondents said that it was “unair

and wrong” to produce a product that does not help the typical investor. Said

one pointedly: “The answers are there and correct, but the nancial statements

are a disservice to the average user who does not know what they mean.”

Not only was the value to investors questioned, but so was the

time drain on the organization itsel. Many respondents said that

keeping up with and synthesizing rule changes, clarications, and

the like on regulatory pronouncements, guidance, and standards

was a huge, nonvalue-adding task—especially when regulators are

unorgiving when it comes to technical noncompliance with overly

complex standards and rules.

Similar rustration was expressed with the way standards are set.

More than one respondent said, in eect, that there were “too

many theorists setting standards” and that r egulators need to be

more seriously engaged with the business community about what it

takes to interpret, implement, and sustain standards.

“”

The joke goes, why, when 10 commandments are sucient,

do we need 178-plus accounting standards?

Things may be getting a bit out o control.

–tiM pistell, Cfo, parker hannifin

I you could describe yourview o the current nance

and accounting environment

in the U.S., what’s the most

important point you’d make?

100% of respondents noted

“CoMplexity” and/or its

laCk of Value for shareholders.

V C u.s. fc

acc r evm

8/6/2019 CFO Survey



Given their rustration with how standards are set,

respondents echoed these sentiments when asked about

the strength o their voice in aecting regulations,

guidance, and standards in nancial reporting.

When asked to rate their current voice on a scale o 1 to 5 (with

1 being the weakest and 5 being the strongest), the average response

was a disappointing 2.0. In act, only one respondent gave an

answer above 3.5.

Although respondents perceive their current rate o infuence as low,

it was encouraging that when asked to rate on a scale o 1 to 5 the

benet o having a stronger voice at the regulatory table—with

leading regulators such as the SEC, Public Company Accounting

Oversight Board (PCAOB), and Financial Accounting Standards

Board (FASB)—respondents gave an average response o 4.0 (with

only one response below 3.0). Clearly, respondents would greatly

benet i regulators listened to the business community beore deciding

on new standards and regulations.

Strengthening that voice, o course, is the purpose o the SEC’s new

Advisory Committee on Improvements to Financial Reporting (CIFiR).

Yet judging rom the survey results, while it appears that leading CFOs

believe this committee is well intentioned, they also expressed healthy

skepticism about whether timely, cost-eective, transormational, and

sustainable changes can actually be implemented.

When asked point-blank i they believed the SEC CIFiR would

represent their company’s interests and issues to reduce complexity

and produce correct, relevant, and reliable nancial disclosures or

investors, more than hal (53%) said “no,” only 35% said “yes,”

and 12% said they were not sure.

V n seC av Cmm

imvm fc r (Cifr)

Similarly, when asked to consider whether the SEC CIFiR would

produce any “meaningul or transormational change,” nearly

90% responded with either “no” or great skepticism.

These results indicate that although they clearly desire a more

active voice in the regulatory arena, leading CFOs doubt the ability

o a body like the SEC CIFiR to aect the changes necessary to

solve their complexity concerns.

It should be noted that this survey was conducted while the SEC

CIFiR was in its early stages o activity. Since the IMA/CFO

interviews were conducted, CIFiR has made considerable progress.

As CIFiR releases proposed recommendations or exposure, we

anticipate urther reaction by CFOs. Indeed, discussions with SEC

sta indicate they look orward to receiving CFO participation in

the exposure process and welcome their comments.

No

53%

Yes

35%

Not Sure

12%

100

75

50

25

0

Do you believe the SEC CIFiR will

represent your company’s interests and

issues to reduce complexity and

produce correct, relevant, and reliable

inancial data or investors?

Do you believethe SEC CIFiRwill lead to anymeaningul ortransormationalchange?

yes

12%

no

88%

8/6/2019 CFO Survey



In general, respondents were interested

in pursuing a more active dialogue

with regulators i the opportunity

became available—but with some important

conditions.

More than 75% o respondents said they would

be willing to participate in additional orums and discussions

only i it was a valuable platorm with participants who wanted

to listen and make change.

Clearly, then, these leading CFOs are interested in pursuing

regulatory advocacy at some level, but only i the regulatory

community seriously engages with the business community.

I that were to happen, there was a general agreement that

such a dialogue could be instrumental in creating some major

and sustainable changes, such as reducing unnecessary,

value-eroding complexity and regulatory processes.

w

t n s

Would yoube willing toparticipatein ollow-updiscussionswith regulators?

no

24%

yes

76%

The Challenge and the Opportunity

by paul a. sharMan, aCMa

president & Ceo, institute of ManageMent aCCountants

On the negative side, this survey reinorces what anecdotal and

documented evidence has demonstrated or quite some time:

Complexity in regulatory processes and standards is perhaps

one o the gravest problems acing U.S. public companies today.

What’s also discouraging is that even attempts to address this

concern in the orm o a new SEC Advisory Committee are being

met with skepticism and caution.

Fortunately, that isn’t the whole story. On the positive side, we’ve

got leading CFOs willing to take a more pronounced role at the

regulatory table and work with regulators to provide investors

with higher quality and more understandable nancial results.

I’m encouraged that these leading CFOs are so concerned about

the value o the inormation they provide to their shareholders. I also

know that these individuals care greatly about how the problems

o accounting complexity hinder their organizations’ successul

accomplishment o critical economic goals. Frankly, that’s what

it’s all about. We must remind ourselves that the most important

purpose o accountancy is to acilitate business perormance and

economic development. This is achieved through transparent,

honest, and orthright disclosure o a company’s nancial peror-

mance, without which all capital market participants ail to achieve

the common objectives o economic growth and prosperity.

I urge regulatory bodies and CFOs at some o this country’s largest

companies to capitalize on this willingness to engage in a dialogue.

To the regulators: Create orums or business leaders to participate

in the regulatory process. Talk to them, listen to their concerns, and

work with them to create a system o nancial reporting that works

better or all o us.

Finally, I want to thank all o the participants who gave their time

and valuable opinions to this survey. Your voice matters—and I

trust that it will be heard.

It appears that we have some good news and some bad.

8/6/2019 CFO Survey


12 | A Survey of Select Fortune 500 CFOs

8/6/2019 CFO Survey


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