You’re Fired

What's the truth behind the rash of recent CFO exits?

Eric Mattson seemed to like nothing better than schmoozing analysts and meeting with big shareholders. But as CFO of $4.5 billion Baker Hughes Inc., the story he had to tell was wearing thin, as the Houston oil-and-gas-services company consistently lagged behind its peers and struggled to digest a recent $6 billion acquisition for which, most agreed, it had overpaid. He surely knew that.

But Mattson, who joined Baker Hughes as an assistant treasurer in 1980, didn’t realize that his welcome was wearing thin as well. Last May, he resigned unexpectedly immediately following his return from one such investor-relations foray. His departure, Mattson told the Wall Street Journal, was “amicable,” but analysts didn’t buy it.

“It appeared to everybody that it came without much warning, and almost [seemed] arbitrary,” says Geoff Kieburtz, an analyst at Salomon Smith Barney. “For somebody who had been at the company as long as Eric had, it was viewed as a bit harsh and as something other than a resignation.” (Mattson did not return several messages left at his Houston home.)

Whether Mattson left Baker Hughes because he wanted to, or because he had to, he was not the only CFO to recently depart from a troubled company under murky circumstances. In the past year or so, the finance chiefs of such prominent companies as Maytag, Mattel, IBM, Service Corp. International, and Venator Group also resigned their posts for reasons that many suspect had to do with more than the purported desire to pursue other interests.

Although executive recruiters say demand has never been greater for finance chiefs, the real CFO headhunters these days are the unforgiving investors, the insolent analysts, the menacing regulators, the reinvigorated boards, and, in some cases , the finger-pointing CEOs. Just as the role of the CFO has taken on new prominence in the corporate landscape — bringing with it more power and more pay — the perils have also reached new heights.

“The job is much more treacherous,” agrees Bob Falcone, who resigned as CFO of Nike Inc. in January 1998, amid suspicions that he was forced out as the shoe retailer struggled with numerous strategic and financial issues. “It’s hard to say who’s to blame, but there are plenty of unplanned exits.” E. Peter McLean, a managing partner at executive search firm Spencer Stuart, concurs: “Even if you are not solely responsible for some piece of bad news, you are more at risk of taking the fall.”

While CFOs have always been held accountable for corporate performance, these days pitfalls abound. Thanks to an aggressive campaign by the Securities and Exchange Commission to curb earnings management, a slew of new accounting pronouncements, and the unbridled expectations of a long-running bull market, CFOs have been on the firing line like never before. The faintest hint of an accounting problem sends stocks spiraling down and has plaintiff lawyers swarming. Lower-than-expected earnings trigger the same response. Meanwhile, the SEC has called on the board audit committee to take a more activist role in reviewing the financial reports, and most CFOs have their fingerprints all over the deals that companies increasingly rely on to expand strategic opportunities and grow revenues. It makes for a volatile mix that leaves little room for mistakes or second chances.


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