The Frustrated CFO

Is Rupert Murdoch Really Responsible?

I get CNN's Breaking News emails.  I got one last week during Rupert Murdoch's questioning by the British Parliament's committee regarding the phone-hacking scandal that stems from News of the World and threatens to overtake the entire News Corp.  The email was dedicated specifically to his statement that he did not consider himself "ultimately responsible for the fiasco," and that these were misdeeds of the people he trusted.  In other words, he is blameless because he did not give direct orders and it was all his employees' fault.

Indeed, unlike Bernie Madoff he did not personally masterminded to rip off thousands of people; he did not instruct anyone to tap private phones and  bribe police officials.  For all we know he had no clue who poor Milly Dowler was until inquiries began.  News Corporation holdings include over 100 newspapers, magazines and TV stations.  He cannot possibly keep track of every single report they publish. 

He could not recognize (or so he says) most of the names of people working for him.  Also not surprising - News Corporation employs over 51,000 people worldwide.  We cannot expect him to know every single one of them.  I myself always argue that the Boss should deal only with the uppermost echelon of management. 

Yet, he does know Rebekah Brooks very well.  She's been making his scandalous rags Sun and News of the World profitable for nearly half of her life, climbing up the ranks with his personal support.  She knew how to deliver what was needed and he liked it.  In 1994, at 26, she hired techies to secretly wire the entire hotel suite for the interview with Princess Diana's beau.  And that was just a start.  Everything she did was ruthless, unsavory and amoral and Rupert Murdoch was promoting her for it. 

I wonder what kind of conversations this boss and this top exec had? 

RM: "Great job, great job, just watch yourself, don't get caught." 

RB: "I do what I can to please you, sir.  And don't worry - everything is under control, I hold them all by their balls."

RM: "That's my girl! Here's £3.5 million bonus.  Just don't tell anyone."

And that's makes him personally responsible.  He knowingly hand-picked this woman to be one of his top executives.  Journalism has seized to be an honorable profession long time ago, but Ms. Brooks' tactics go beyond levels of immorality we've learned to accept.  What kind of organizational environment he expected her to cultivate?  He knew exactly what he was doing, and I hope the British law enforcement will see it that way as well.

The reason this case is a good topic of discussion here is that business owners frequently display deliberate negligence in their executive staffing and still don't feel responsible for their employees actions. 

I know a national law firm specializing in consumer debt collections.  Most of the cases come in a wholesale form: debt-owners, such as credit card issuers and mortgage companies, outsource collection of delinquent balances to such attorneys.  This is very different from the regular law work when a counselor is face-to-face with his client.  This is bulk work - individual attorneys never meet the plaintiffs.  And that gives the principal partner the freedom to save on the quality of attorneys he hires.  He gets them straight out of fourth-tier law schools for salaries of office workers, he does not train them, he throws them into regional offices and lets them "swim or sink."  Meanwhile, thousands of cases get no attention and pass the statute of limitation.

There is no question in my mind that this is a violation of fiduciary duty to the firm's clients.  So, did Rupert Murdoch violated his fiduciary duties to the public by keeping Rebekah Brooks and letting her to do "her thing"?

Quote of the Day (House M.D.)

Wilson to House:

" You don't like yourself, but you admire yourself.  That's all you got, so you cling to it.  Being miserable doesn't make you special, it just makes you miserable."

 

 

 

 

 

 

 

A CFO and a Zoloft Pusher (Tragicomedy)

FADE IN

INT MANHATTAN'S FINANCIAL DISTRICT - DR. PUSHER'S OFFICE - 1 P.M.

MS. CFO, about 50, dressed in Navy silk business suit, accessorized with Salvatore Ferragamo scarf, shoes and bag, walks in.

DR. PUSHER, about 60, looks up from her desk, peers from behind large bifocals.

DR. PUSHER

Hello.  Ms. CFO?

Ms. CFO quickly glances at the impressively looking framed credentials lining up the wall, including the Psychiatric Board's certificate.

MS. CFO

Dr. Pusher! How nice to finally meet you!

Ms. CFO automatically extends her hand towards Dr. Pusher, who looks confused, seems not to know what to do with the hand in front of her face.  Ms. CFO snaps out of her business-meeting mode and starts withdrawing her hand just as Dr. Pusher decides to grab it.  Awkward handshaking occurs.

DR. PUSHER

Please, sit down.

Ms. CFO sits down in front of the desk.

MS. CFO

How was your time off?

DR. PUSHER (looking at her monitor)

Oh, how do you know?

MS. CFO

I've been waiting for this appointment for three month.

DR. PUSHER (still looking at her monitor)

Mmm.  Ok...  Well...

Dr. Pusher looks straight at Ms. CFO

MS. CFO

My anxiety is out of control.  I have panic attacks that feel like heart attacks - my heart start pounding and my entire left side hurts   It even resulted in some atypical EKG's.  So, my physician and the cardiologist, they both suggested...

DR. PUSHER

What do you do?

MS. CFO

I am a Chief Financial Officer.

DR. PUSHER

Is it a stressful job?

MS. CFO (with a bitter smirk)

Just a tad...  I need to manage this anxiety.  I cannot afford to spend energy on battling with it.

DR. PUSHER

What about depression?  Do you ever feel sad, low?

MS.CFO

Who doesn't?  Look what's going on around us?  But I can deal with it.  I can summon my will power for that - I grip myself by the hair and make myself function, no matter what.  It's the anxiety - it makes me feel like I cannot breath, and I want to be able to tame that.

DR. PUSHER

Will power - shmill power...  Do you ever think of killing yourself?

MS. CFO (sounding slightly agitated)

Hey, if this world goes into the shitters...  If there are no jobs for people like me anymore, nor for over-educated young ones like my son and his friends, and the government cannot even cut social security checks to my parents, and the savings disappear into paying insurance premiums, so that we could see doctors like you...  Of course I would consider it.  There are worst things that can happen to a person than dying.

DR. PUSHER

Good, very good.

Ms. CFO looks astonished, seems to be lost for words.

DR. PUSHER (CONT'D)

I am going to give you a prescription for Zoloft.

MS. CFO (shocked)

Zoloft?  Isn't it like a major antidepressant with a strong habit tendencies?  You are supposed to take it every day, and if you go off, you can experience terrible withdrawal symptoms?  Isn't its effect on panic disorder only secondary?  I don't really want to take something that heavy, and every day, and for... depression of all things!

DR. PUSHER

It's my favorite drug - I prescribe it to everyone.  And you are very talkative - maybe you should see a therapist, while taking Zoloft.  A therapist will help you to prioritize.

MS. CFO

I am famous for my prioritization skills.  What do you mean, "you prescribe it to everyone"?  What if it does not help with my anxiety, but I will be hooked and get sick if I stop using it?

DR. PUSHER

Oh, you should not stop.  I'd rather you being anxious than thinking about killing yourself all the time.  What's a little bit of heart pounding and left-side pain, ah?  Just take the prescription and I want to see you again in two weeks.  We may need to adjust the doze.  I have other patients waiting for their prescriptions.

Dr. Pusher hands Ms. CFO the prescription across the table.  Ms. CFO takes it, gets up and leaves the room, still holding the piece of paper in her hand.

INT RECEPTION AREA IN THE MEDICAL OFFICE - 1:15 P.M.

Ms. CFO determinedly walks towards the elevators.  As she reaches them and presses the button "Down,"

RECEPTIONIST (off site in a slightly raised voice, so that she can be heard)

Do you need an appointment for the next time?

MS. CFO (without turning her head, almost to herself)

No, I fucking don't.

She tears up the piece of rectangular paper and drops it into the garbage can between the elevator doors.

FADE OUT

Author's Note:  This little sketch is based on a true story related to me by one of my friends.

Tragicomedy - a work containing elements of both comedy and tragedy, or as I always say, "It would be funny, if it wasn't so sad."

Vincent Van Gogh, At Eternity's Gate, 1890

Quote of the Day

" Human nature is the only subject that doesn't date."

                                     William Faulkner

The Frustrated CFO Takes Lessons from Robert McKee

Human beings are like sponges - the second we are born we start acquiring general knowledge of things from everything around us.  It is a natural process. 

When it comes to intellectual knowledge, however, we tend to make our own choices.  Some people read Pynchon, others prefer Sports Illustrated.  Some go to see Black Swan, while others would never miss a new Transformers installment. 

It gets even more selective for specialized knowledge -  higher education, professional publications, technical books, etc.  Even with the subjects of human psychology, relationships, our understanding of the world around us (all frequently featured in The Frustrated CFO's posts), people are more likely to go for books written by "specialists." 

But the truth is that the nature of human interactions and the principles of emotional response to life do not change from industry to industry and from trade to trade. They are universal and I have learned long time ago that the knowledge of things pertaining to human experience can come to us from anywhere.  There is a reason I frequently present my topics by referring to books, TV programs and movies - the best examples of these art forms pursue the truth of life; that is why we can relate.

Those who have seen Spike Jonze/Charlie Kaufman's "Adaptation" may remember the screenwriting guru character played by Brian Cox.  Well, he is a real person - one of the best theoretician's of creative writing in the world Robert McKee.  After several decades of writing for theater and television, Mr. McKee found his true calling in formulating a set of fundamental principles for compelling storytelling, which became the framework of his world-touring STORY seminar.   He also compiled them into a bestselling book by the same name.

I happened to know a young screenwriter who attended McKee's seminar twice and described it as a life-changing experience - not just as a writer, but as a human being.  You see, Robert McKee teaches how movies should be written so that they penetrate straight into the audience's soul.  So, inevitably he touches on the subjects that reach far beyond cinematic matters.  That, together with the fact that his films recommendation list pretty much matches my own roster of favorites, persuaded me to buy his STORY book.

What can I tell you?  This is a very brilliant man.  Anyone who loves movies should read this book...  And everyone who considers himself a student of human nature should read this book.  It is impossible to convey all the wisdom Robert McKee generously shares, but his study of "the principle of antagonism" is particularly invaluable.  

He goes beyond the conventional knowledge that antagonistic conflicts are at the basis of existence (and a story, of course).  He concludes that there are three primary antagonistic forces for any positive value, progressing from contrary to contradictory to "the Negation of the Negation," which, unlike in math where two negatives make a positive, is "a force of antagonism that's doubly negative."  

He further constructs illustrative charts for such values as love, truth, consciousness, wealth, communication, success, bravery, loyalty,  justice, wisdom, and freedom.  I find the last three absolutely universal and applicable to many conflicts we encounter both in our professional and personal lives.  They are reproduced below.  It's mesmerizing: you look at them and it's like a reel of your life's events, fitting perfectly into these diagrams, unspools in front of your eyes.

Quote of the Day

"What's on your mind, if you will allow the overstatement?"

                                                        Fred Allen

New CFO's Essential Knowledge Prerequisites

When you start as a CFO, the first thing to do is to get your bearings - to assess your position relative to your surroundings.  As quickly as you can you must grasp general ideas about typical characteristics of your environment, your own role and purpose, expectations of others, as well as primary routes for channeling your talents and efforts.  But as soon as you are done with that, comes the time to get down to the level of firsthand details and study the specific aspects of the business.   You need to draw a detailed map that will help you on your journey as a financial leader.

This is a mandatory activity for a recently hired head of finance, new to the company.  It is a good idea for someone who has been with the company for a while in a lower position and just been promoted – new vantage point may provide you with the better vision of your company.  Even if you’ve held the top post for a few years, but never got around to do this and feel that incomplete picture prevents you from excelling, maybe now is a good time to go back to the drawing board.

This is your R&D stage, necessary for proper functional design.  Your research will help you to improve future performance.  Every CFO and controller must acquire an exhaustive understanding of his employer’s business. There is no doubt, that compilation of, what I call, the big picture is the key element in your strategic responsibilities. However, it is just as important for day-to-day hands-on management.  In the absence of thorough knowledge of all operational and organizational features, it is impossible to construct budgets, define tasks, or determine reporting requirements.

At the very least, your information-gathering activities should be focused in the following four areas:

Study of Corporate Structure

Economic complexity pushes businesses into multiple levels of diversification - wider product ranges, additional services, new geographical and demographic markets, related industries, outsourcing, foreign productions, etc, etc.  As companies pave new ways, their corporate structures adapt accordingly: branches are created, subsidiaries are formed, and satellite offices are opened.  Today, a $10 million service company may turned out to be a surprisingly complicated organism.  This affects nearly every accounting and financial function: local taxation, inter-company transactions, principles of consolidation, financial statements disclosures, banking facilities – just to name a few.

Study of Operational Flow and Value Chain

During your orientation stage this study has immediate practical applications.  It is a prerequisite to identifying accounting cycles, classifying assets and liabilities, pinpointing cost centers, determining analytical and financing needs, etc., etc.  There are transactions happening at every stage of the operational flow that give rise to accounting events.  Without full comprehension of the value chain you run a danger of oversights and errors.

Study of Organizational Chart and Functional Distribution

If the previous section is about processes, in this one we survey people and their positions.  I don’t have to convince anybody that it is important to figure out the chain of command and designation of responsibilities within your employer’s organization – you just need to know who’s who.  It goes beyond just knowing your peers with whom you discuss company-wide issues and inter-departmental relationships.  You have to know people along the value chain – those, who are in charge of cost and profit centers, have relationships with suppliers, vendors and customers, maintain your facilities and receive your mail.   

Study of Existing Policies and Procedures

If you became a CFO or a controller in a company that already has policies in writing and documented procedures in place, even if they are deficient, consider yourself very lucky.  You can study the existing papers, outline blind spots and pinpoint weak or erroneous steps. It is easier to enforce changes, if employees are already comfortable with an idea of adhering to a recorded set of rules.

On the other hand, you must be prepared to deal with a complete lack of anything in writing.  Important thing to remember is that it does not mean policies and procedures don’t exist.  They are there like an oral folklore of an ancient tribe, passed from generation to generation.  It would be a big mistake just to ignore the traditions and try to impose a new order.  You have to uncover and learn them first.   

Excerpted from my forthcoming book "CFO Techniques: A Hands-on Guide to Keeping Your Business Solvent and Successful" (Apress, December 2011)

Quote of the Day

"Progress might have been all right once but it has gone on too long."

                                            Ogden Nash

The Frustrated CFO Is Looking for a Litigator to Defend an Employee - Part II

...Continued from previous post (published on June 30th)

Unfortunately, even with all this tremendous efforts, business continued to contract.  First of all, the economy was unraveling: the global credit crunch was at its peak  in 2009 and consumers did not have money to pay their debts.  Secondly, the new government regulations helped debtors not to pay and settle at a fraction of the value instead.  In this conditions the bosses decided to go on the other side of the business - to open a set of new companies operating in loan modification and debt restructuring sector.

They have approached MJ with this idea and promised her that she would continue to carry out all financial executive responsibilities in the new business as well.   While still taking care of the old business, she helped them to set up all new companies.  Of course, there were not enough capital to start it up at a full speed.  The two businessmen approached MJ and asked her for a  $150,000 120 days personal loan to help the new business to catch a breath.

Dear readers, please don't judge my friend.  Let me tell you that MJ is one of the most brilliant people I've ever met.  She fully understood the risks.  However, it was clear to her that if she refused, they would have fired her right away: these are average entrepreneurs we frequently discuss - just like the rest of them, they let their emotions run their brains.  This was (and, as we know, still is) a very bad time to be an out-of-job CFO approaching 50.  It was also inconceivable  to think that these two people, whom she helped to survive, would cheat her out of her personal savings.  So, she landed the money to the new law firm. 

Ninety days later, one month before the loan was due for repayment, they fired her using an independent consultant, locked her out of the offices and built a Chinese Wall between themselves and her. 

Now, out of job and out of money, she tried to work with the attorney they appointed to deal with her on their behalf.  She was told that they could not repay her money in full on the agreed due date.  All kinds of unacceptable installment deals were suggested to her with various crazy conditions.  Of course, their lawyer employed all the tricks up her sleeve to drag the matter as long as she could - the delaying tactics were unmatchable.  And as soon as she agreed to one of their installment plans, the communications stopped altogether.  

Meanwhile, all the aggravation of her predicament and anxiety affected her health - she had an acute cardiac episode and ended up on a surgeon's table.  Her condition is managed by several medications now, but it was concluded by her doctors that she must not deal with this tragic matter directly.

So, MJ is looking for an attorney to represent her in order to get these amoral bastards to pay her back.  By the way, she has a multi-page list of misdeeds, violations, and frauds these people has committed against their business partners, clients, etc., etc. 

The most heartbreaking thing is that this woman has immigrated into the US as a political refugee 20 years ago with $90 in her pocket.  She has built herself up from ground zero only to be robbed of her hard-earned money and thrown out on the street by two ruthless monsters who still enjoy all of their businesses, multi-million dollar residences and summer houses in the Hamptons.

If any of my readers know an attorney who might be interested in this case, please email me at [email protected]. 

Note: the law firm that borrowed the money has presence in PA, NJ and NY.