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I read with great interest your article outlining NASA’s financial-management challenges (“NASA, We Have a Problem,” May). As chairman of the House Government Reform Subcommittee on Efficiency and Financial Management, I have spent the last year examining financial-management practices across the federal government.
The article makes a very important point: we in Congress must resist the temptation to ignore management issues. Unfortunately, unless there is the appearance of errors that are so large that they are shocking — as was the case with NASA’s $565 billion in adjustments — financial management at government agencies does not make headlines. In fact, while the CFO Act was being debated in Congress, someone said it was about as exciting as sorting cranberries. That may be true, but in reality there are few matters more urgent than ensuring that the federal government is well managed.
As elected representatives of the people, we have a responsibility to use taxpayer dollars in the most efficient, most effective manner possible. Only by better understanding how these dollars are spent and managing the federal government in a more transparent, results-oriented way, can we begin to govern with accountability.
I applaud CFO for giving NASA’s financial-management efforts the attention they deserve. I hope that your writers will continue to follow the work being done in Congress to focus on financial management across the federal government.
Rep. Todd Russell Platts (R-Pa.)
A Fan’s Notes
I really enjoyed your article on the financial status of Major League Baseball (“Squeeze Play,” April).
As a compensation professional, I have always felt that MLB has rewarded the wrong behavior. High batting averages, for example, do not directly tie to increases in revenues. The Cubs, it seems to me, have figured this out to some degree. By keeping good players for long periods of time, they build fan loyalty, and fan loyalty puts “butts in seats.” Good attendance does directly drive revenues. I have long felt that paying players for off-season public appearances would be more helpful for the financial health of the game than paying for more home runs.
I agree that baseball is a “self-regulating monopoly conglomerate.” It is obvious that it is the franchise system that does not work. The franchise owners are the ones who create out-of-control spending situations that unbalance the playing field and create tremendous losses across the board. Wouldn’t it make sense for baseball to purchase back all of the teams and manage the entirety of baseball from a central financial entity? You can certainly have baseball people appointed to manage the talent/teamwork components of the teams (as Frank Robinson and Omar Minaya are doing now in Montreal), but move all of the fiscal responsibility to MLB.
With each team as a captive entity, salary caps and luxury taxes become irrelevant. MLB could go to straight revenue sharing and give the players x percent of the total revenue stream. I believe they get about 72 percent of net revenues now. Make it 75 percent, and move on. Fans just don’t want to hear about player salaries anymore. Let the players’ union distribute the funds as appropriate, and keep the money issues out of the newspapers.
The major benefactors of this move, in my opinion, would be the fans. Competition could become balanced again, which would drive up revenues in areas where fans have “given up” to some degree. It is inexcusable for Pittsburgh and Detroit to have fallen so far off the level of prominence they once held. These were premier franchises and now have become flops, even with new ballparks.
Mark A. Mapes
Director, Human Resources
Sense of Pride
I am writing in regard to your article “Acquired Tastes” (New Deals, April). I am the CFO of Cerwin-Vega Inc., a loudspeaker-system manufacturer based in California. I can attest to the discomfort in not being able to tell your staff of impending changes you know about. I would also like to share the pride I have in my small staff.
In early 2002, the family that previously owned this 50-year-old company decided that it could no longer effectively manage the company, and that it needed to be put up for sale. I was the only executive working with the consultants that helped the family make this assessment. Once the plans were known within the company, my staff, knowing they could not have positions once the company was acquired, continued their hard work for the next five months.
When the sale process was going very slowly and the creditors were growing restless, the decision was made to make a general assignment of the assets for the benefit of creditors. More layoffs occurred, yet my staff was mostly kept intact. We continued to assist the potential buyers with their due-diligence work while 260 of the 325 employees were systematically laid off. In October 2002, when the assets were acquired by our new parent company, my staff and I were asked to join the new entity.
The start-up was a difficult process, and now, 18 months later, we are faced with the elimination of our jobs in order to cut costs within the entire group. I was informed of the decision (which I totally support) two days prior to informing my staff that after two years of hard work seeing the company through a bankruptcy, sale, and rebirth, we were losing our jobs. I did not sleep those two nights.
My staff took it as well as could be expected. They were given four months’ notice and were offered small severance packages. Over the last few months, they have continued to do their work with approximately the same degree of effort and productivity as before. There are less than four weeks left before the transition is complete, and they still stay late to complete the close, work with the auditors, and get the data and files in a condition suitable for transfer to our parent’s finance and administration staff. I feel an immense sense of pride in the people I have worked with over the past six years since becoming the CFO.
KRK Systems LLC
Members of the Stanton Group
Simi Valley, California
Questioner vs. Cheerleader
I read with interest your article on behavioral finance (“Watch How You Think,” January). It gave wonderful advice to CFOs to remember one of their significant roles: that of questioner rather than cheerleader. This doesn’t mean the CFO must be a naysayer. It only reminds us all that due diligence and disclosure is the best course of action, no matter how short the time line to close.
CRESA Partners Capital Markets
A Story of Recovery
I would like to commend you on your exceptional article “Adelphia Comes Clean” (December 2003). I am a risk-management consultant from a Big Five spin-off, as well as an undergraduate college student (yes, I failed to get my degree when I should have… .). I recently wrote a short paper for school in which I used the Adelphia scandal as an object lesson in poor corporate governance. I described the ethical challenges it raised, as well as lessons that could be gleaned by other organizations through observations of Adelphia’s postbankruptcy activities. During the course of my research, I found many articles that described the fall of Adelphia, but few that described its recovery very well — yours was the best. It’s nice to hear some good coming out of such bad messes. I do wish Adelphia, Tyco, and MCI all the best with their recovery efforts.
In the article “The Doubt of the Benefit” (Spotlight, April), we quoted AFLAC senior vice president of marketing Warren Steele as stating that he believes less than 10 percent of the company’s corporate customers treat their voluntary benefits programs as ERISA plans. While Mr. Steele did say that, an official at AFLAC notes that the comment was not a statement of fact, and that Mr. Steele does not know the exact percentage.