Being a CFO and other topics

Not just finance, hobbies too ….

Month: May 2016

Business Entertainment

Once I made it to the CFO rank, the offers from potential vendors for business entertainment significantly increased. This is something that happens as a matter of course with the position and it brings its own challenges with it. You also will do more entertainment for potential clients or lenders. Again, an area that you need to be careful with, especially with the FCPA and other rules to be followed (UK anti-bribery Act as an example, but most countries have their own rules. The rules on the books in China, for example, are quite strict).

I have one basic rule about accepting business entertainment. If it could influence my decision to purchase something, then I decline. The two different ways that could happen is excessive cost or something illegal. If it would be embarrassing to have the entertainment public, then it can be used to influence you.

I have a few other rules of thumb, but not influencing my decision is the main one.

When it comes to meals and bottles of wine that I would have, if the restaurant is a place I would go to and the wine is what I would feel comfortable paying for if I was personally paying for the meal, then I am ok with it. I will only accept sporting event tickets if the giver is coming with me. If the person wants to give tickets and not be there, I usually suggest that they be given to lower level staff and I would not take them. I just make it plain that I am passing the tickets on so the staff know it is coming from me.

If I get a gift basket that has food and wine that is too expensive, I just share it with people at the office. You can always send it back if it is really over the top, but it is not so easy and can be considered to be quite insulting in some countries.

All of the above is, of course, if the company policy allows it at all. I have influence over the rules and they should never be ridiculously tight (some places like Walmart have famously tough rules there), but you do need rules with fairly low limits to discourage undue influence.

It is very hard in countries like China to avoid receiving and giving gifts. Because you are likely to be governed by the FCPA, you need to be very careful to ensure you know who is receiving the gift and if they are a government officer. This is quite tricky as the government runs or owns many companies and parts of the economy. The local bank branch manager may be considered to be a government official. Same thing for hospital administrators and other businesses. Even if you think you are following the FCPA, the actual written laws in China are very strict. They are generally not enforced, unless the government decides that they now will enforce them. So make sure this is well understood and controlled.

Business entertainment does serve a vital purpose in that it allows you to spend time with key vendors like your bankers outside of formal meetings at your offices (or theirs). If you are going to be relying on their advice and work, it certainly is important that you get more information than just a rehearsed pitch in your office. A meal gives you a lot more time to get to know them and what you learn outside the office can give you some clues on if you should use or trust them. If you are reasonable and careful in the entertainment you accept, you also are sending a signal to them that it is the results and their cost that matters, not if they can get yiu Super Bowl tickets.

Business entertainment does not only have to be with external vendors. You can take your staff or key people in other departments out as well. At times you can break an internal impasse by taking the discussions out of the office. Obviously you should not abuse this (policies like the most senior person pays helps to reduce abuse), but the occasional meal with people from inside your company can help a lot more than another meeting reviewing a spreadsheet. Sporting events are harder to justify, but some beers and cheap bleacher seats at a baseball game are not expensive and a good way to reinforce the workplace bonds. Business entertainment also gives you a chance to relax the formal chain of command that many feel pressured to follow inside the office. I have received quite a few good suggestions from my staff over a meal after work. Suggestions that were not forthcoming inside a work conference room.

If you are entertaining internal staff, you need to make sure it is in a fair and professional atmosphere that does not exclude your staff of the opposite gender. Usually, I prefer a larger, mixed group in that case as it can reduce gossip, but if you treat everyone with respect and as fellow employees, not dating material, your reputation will be good and there will be less need to have public “chaperones”.

I do tend to watch how much I drink when I am out at a business entertainment event. I don’t drink that much anyways, but as the CFO you need to set an example. As fun as it may appear at the time, getting drunk just isn’t wise and you risk others drinking to excess with you and then later getting behind the wheel in a car. You are responsible for your company, do not forget that you are responsible for your staff as well.

That is not to say that you should not drink at all. Some countries like Korea, Japan and China seem to feature drinking a lot as part of the expectation of a business meal. Regardless of expectations, I always have been careful to not overdo it. You also need to be more careful when fighting jet lag as drinking really does not help and may make it worse.

Email Addresses

Like most CFO’s, I work with outside consultants, some that run their own shops. Far too often I get emailed by them from their personal email and the email itself if not reflective of the professionalism they are supposed to project. Sccrmom86 is probably descriptive of something, and I assume the 86 is your year of birth, but when you are proposing to do $50K of IT services, I bet you can do better.

I acknowledge that this is often just a matter of taste. Every once and a while, I get a comment about my Hotmail email address. One of the main reasons why I use it instead of Gmail is that it is not blocked in China and Gmail is. Some people seem to think that Hotmail is some form of “inferior” email, which I find quaint. This is partially from the viral release method that Google used and partially because Hotmail was one of the first mass public email systems. When it first came out, the web-based HTML (HoTMaiL was how they spelled their name) that was not connected to an ISP was new and bold. But because it is from an older time before the more modern Internet and because it was used by spammers and neophytes to the web, it gained an aura around it. Not quite as bad as, but something that triggers a reaction.

I have been using a Hotmail address since 1997. I am not 100% sure if that is before or after Microsoft bought them that year.. My very first internet email address was on Genie and I can find it in the very early 1990’s via Google search. I had an @home address and a Comcast address. I had moved and lost access to my internet provider email address and that is why I decided that I wanted an address that did not link to an ISP and that is why I picked hotmail.

Google ran a very clever campaign when they introduced gmail – it was invite only at the start and each user received a limited number of invites, so it was rare to get one. The actual email system was quite robust compared to most out there because it incorporated Google search. This created extra hype around having a address even though it was just an address. Like Beverly Hills or other famous places to live, took on an extra cachet. Now, of course, anyone can get a address and Google gains so many emails to mine and search in return for providing the “free” service. Google has built a big business hosting email for companies, many no longer own their own servers, it is done by Google.

I have a Gmail address and was in the process of switching over to it as my main email with my Hotmail being used to sign up for things on the web (to steer spam that way) when Google stood firm against the Chinese government and started to get blocked by them. Today, if you do not turn on a VPN, it is hard to get Gmail inside China.

I also had discovered something interesting. I had used my Hotmail address for years to sign up for every drawing or other registration that was out there. I had thought that the email would get flooded by spam and what I have discovered is that Hotmail has a very good background system to filter out the spam. I had to use my Hotmail email address as my personal one inside China if I wanted to consistently receive emails when they were sent instead of time shifted to when I turned a VPN on. Microsoft has also rebranded Hotmail to to match with their email client.

What this experience taught me is to disregard the immediate reaction I feel towards the domain. Silly or inappropriate addresses still trigger a reaction, but the domain not so much. means that the person used dial-up Internet and maybe was the real person behind Sleepless in Seattle (you got mail). Dial-up means they were early to using the Internet and have a long history behind them.

It also has caused me to recognize the power of brands and their reputation. The fact that the domain name in an email address, which is a pretty pedantic item, can still cause an emotional reaction is a sign of the power of branding and the importance of your reputation.

Finally, I much prefer emails from businesses that tie into the name of the person. It makes it much easier to remember and use than initials or some description. You can tag your title and address in the signature block of your emails, no need to make it part of the actual address. If your address is just your initials, it might be shorter but it makes it harder to remember.

All of this advice is for business related emails. Personal email addresses are different and can and should reflect your personality. Be careful if you use several aliases that actually go into your personal email box, as you don’t want to accidentally send out a personal email address to a business contact. Also be aware that applying for a job is not personal and I suggest using a more professional email address.

How to say goodbye

“We’re gonna teach ‘em how to
Say goodbye!” – Hamilton “One Last Time”

Every CFO job has its beginning and every CFO job has its ending. There are important things to consider when starting in a new role, but often little thought is given to how to end your role when you move on to your next job.

There are two circumstances in which you leave your job – voluntarily and involuntarily. As a fact of life, better opportunities may come along and you may decide to take them. Or you may simply decide to retire or take a break. Or maybe personal or family issues will come up and you can no longer do the job in the way you think it should be done. All of these will result in you leaving your job.

Another simple fact of life as a CFO is that you are vulnerable. If there is a change of control there is a high chance you will be let go. If the CEO changes, you can easily be let go. If any one of the thousand mistakes that could happen in your financial statements happens and you do not catch it before it goes public, you probably will be let go. If the business struggles and targets are missed and your boss is under pressure to do something, you can get let go.

No matter what, leaving is one of the main reasons why you have an employment contract. Your rights and pay over termination should be well spelled out. Norms different by country and industry, but you can probably find example employment agreements in SEC filings around the time the CFO was hired and you probably should have a lawyer review your agreement and they can give you advice.

Leaving is always emotional. Even if leaving on your own terms, you may feel that you are owed something more. If you are being let go, it takes a will of iron not to let emotions get to you and even then you are probably just masking your feelings. You need to let that emotion go. You are a businessman, and you have a responsibility to all the employees in the company.

Now if you discover fraud or some egregious issue and after you out the problem they fire you, then maybe you can sue. The unfortunate fact is that even if you win, you are unlikely to be hired by another company. The CFO is supposed to protect the company, not sue it. If you are getting what is in your contract, then you don’t really deserve something else, and you need to be mature and accept it.

In my career, I was only impacted in a way that was not mutual once, and that was via a CEO change. The CEO needs to have the CFO they want, the partnership is too important and that is why the contract exists.

Normally you are leaving on your own terms because you want to, but you still have a responsibility to where you are leaving. You do not want to do it poorly and hurt the staff that has been loyally working for you. You don’t want to hurt the company as it only reflects back on you.

Give your boss as much warning and time as is reasonable. It can be dangerous to they’ll them before you have accepted another offer, but be fair about your start date. If you are just wanting to step down and pursue other things, then you may even be able to set a date further into the future with the provision that if they find someone sooner they bridge your pay until the original agreed upon day.

Be positive in your discussions with your staff. Many of them may be emotional about you leaving. You are still their CFO, even if you are emotional you need to tell them to think with their heads and give it a few months and judge on the new CFO, not their feelings for you. You would not want to start a new job and then have your new staff quit immediately. Of course, they are all adults and can make their own decisions, but try not to inflame their feelings. I have tried to model the excellent bosses I worked for early in my career and genuinely care about my staff, even if I have high performance expectations. Make sure you say a proper goodbye, you never know when your paths might cross again.

Wrap up and hand over the projects you are working on. Clean out your office so the new CFO does not move into a mess.

When talking to outside investors and the press, be professional and positive. Even if they AR electing you go, there is no advantage to disparaging your old place you worked as it reflects poorly on you. It is easier when you are leaving on your own terms, but make sure you praise your staff and their ability to execute. They are the people that actually were doing the work for you, so it is right that you express gratitude when you leave. Reassure outside investors that the business is as strong and valuable as the company has been expressing. The CFO leaving does cause some concern and if there is no real cause for alarm make sure that message is delivered.

Finally, leave on the best terms you can with your former boss. There are a bunch of selfish reasons to do that, like good reference responses in the future, but this is another place where you should reflect on the opportunity you were given. They trusted you enough to hire you and you probably worked long and hard on key projects together. You faced investors as a team and answered your Board’s tough questions. I don’t think it will be hard to say thank you.

Saying goodbye is hard. I hope I don’t have to do it many more times in my career.

Playoff Hockey

Anyone on my Facebook or wechat feed knows that I am a long time ice hockey fan.  I grew up in Montreal and have been a Montreal Canadiens (Habs) fan all my life.  I live near San Jose and also cheer for the San Jose Sharks as my local team.  I have quite a few acquaintances that are not Canadian or from areas where hockey is popular and I thought that I would write this blog entry to talk about why I love hockey and play-off hockey in particular.

Like many professional sports, the hockey season is divided into a preseason, regular season and playoffs format.  The intensity and quality of play varies.  The preseason games are the most random.  The players are coming off a several month layoff and the team management tries out new, younger players.  Other than the players trying out, there is no real incentive to play extremely hard and win.  For a true fan of the team and the game, getting to see the prospects play and the chance to evaluate them is fun.  For someone newer to the game I have a hard time recommending that you pay any attention to the preseason games at all.

The regular season is long – 82 games.  The entire purpose of the regular season is to narrow down the 30 teams to 16 for the playoffs.  These games actually count for something.  Any individual game may not make as much a difference, but the points scored by the players do count for their statistics and the hunt for playoffs spots makes some games at the end of the season even more intense.  Teams play the teams in their own division more often than teams in the other divisions.  The additional games help build intensity and rivalries as hockey is a physical game that allows for one player to body check (hit) other players.

Regular season games are much more entertaining than preseason games because they do matter.  You can see emotions from prior seasons carried over and new emotions grow from the current games.  For the teams that are further away, you at least get to see them for a game and may only see them again playing against your team in the Stanley Cup finals.  For someone like me that has moved across the continent, the Habs only play the Sharks twice a year so if I want to see them close to my current home I can only see them once.  So even if that game is not particularly important to either team, it is important to me and I try and attend the game if possible.

If you are new to hockey and want to see a game live, in the arena, regular season games are much less expensive to get tickets for and you can often find tickets available or find tickets via a brokerage service like or Ticketmaster’s resale service.  The selection of available seats is better and you will have a better chance to pick where you sit.  My general recommendation is to sit around the blue line where the team you will be cheering will be attacking twice.  You want to sit further away from the ice rather than closer.  The closer you sit to the ice, the harder it is to follow the game if you are not used to it.  The seats also go down in price the further you are from the ice.  You probably do not want to sit as high up as you can as the players will seem a lot smaller, but seats in the top section near the bottom (closer to the ice) of that section can be quite good.  The other advantage to sitting further away is that it is easier to see play in all corners.  If you sit close to the ice you’ll have difficulty in seeing into every corner.

Most regular season games are played hard by each team and you’ll see the regular players, the “top talent” in the games because they do count.  If you watch the game live, you’ll also get to see what the fans are like, how loud they are, what players get cheered for more and how they feel about the team them are playing against.  In my case, the Habs are a very popular team that has been around since the National Hockey League started, so no matter where I am when I go see them play, there will be other fans like me wearing their jersey and cheering them on.  I really like the fans in the “Shark Tank”.  They are excellent hockey fans and are good proof that even a team in California can attract a local and knowledgeable fan base.

Once the regular season is over and the playoffs begin, the intensity rises to an even higher level.  Everything is reset.  Other than home ice advantage, the regular season results no longer matter.  Each series is best of seven (need to win 4 games and the series ends once 4 games are won by one team).  The regular season overtime rules are no longer used.  In the regular season, overtime is a maximum of 5 minutes and 3 on 3 hockey with a shoot-out afterwards if a goal is not scored.  In playoff hockey, the overtime is 20 minutes, 5 on 5 hockey, and the game continues with as many overtime periods as needed until a goal is scored.  In hockey, a “golden goal” rule is used and the team that scores the first goal in overtime wins the game.

With the best of seven format, your team is playing the other team over and over and the first few sets of matches are with teams you have already played a lot during the season.  With a higher emotional level, and the higher intensity of play, each team will hit the other more and harder.  That means players will remember from game to game who hit them and if a hit was questionable or illegal under the rules, it will reflect in an emotional response.  There are plenty of cases where the lowest ranked team (ranked 8 as the 16 are divided in half by league) have beaten the top rated team in the playoffs.  There are also plenty of cases where a team that is behind 0-3 in a series has come back and won 4-3.  A game 7 is usually the most intense as the whole series rests on one game.

One tradition for hockey players is to stop shaving during the playoffs.  So as a team goes deeper and deeper into the playoffs, beards get longer.  Hockey is very physical and players often get hit in the face.  The deeper the team goes into the playoffs, the more damage you can see on the faces of your team’s players.  Hockey players are always tough and play injured, but the playoffs bring this out even more.  I have seen countless cases where a player is cut on their face and needs multiple stiches to close the cut but they do not miss a shift.

Another great tradition in hockey is at the conclusion of the series, as intense and as nasty as the games might have been, the players all line-up and shake each other’s hands.  The losers congratulate the winners and wish them luck the next round.  They do not forget and some of the emotion will carry over to the next season, but they are sportsmen and end the series with a handshake.

I am a hockey fan and I think it is a fun sport to watch, but even if you are not as interested, playoffs hockey is special.  If you have never seen a playoff game before, try and watch a game on TV and see if you like it.  You might even find yourself writing your team’s name as a status update when they win like I do.

Work / Life Balance

I wish I had better news, but if you are wanting to be a CFO of any sort of larger company, it will be next to impossible to maintain any sort of reasonable work/life balance. It actually does get better in the sense that you have more control over your schedule and can plan around important family dates, but that really does not help as much as you would hope it would.

The primary accounting schedule that focuses on quarter ends is the same even as CFO. Your intensive work is delayed about a week from earlier in your career as you probably are not directly involved in the preparation of the first draft of the numbers, but once they are available you will be reviewing them and working on the earnings release. This also activates the forecast refresh cycle as you try and dial in the guidance you will release with the earnings release.

The quarter end crunch tends to be even more condensed because of prepping for the Board meeting. You will be a key presenter at the meeting and quite often you are explaining proposed company action with the need for aboard approval. As much as you may think that you are saving time by not preparing the raw numbers, reviewing them to ensure there are no errors and preparing the explanations and message is actually more time consuming and you also need the fairly final numbers before you can close it off which means you get even more crunched by any delays.

The quarterly reporting cycle in intense, but at least it happens with the same timing from year to year. If you are just having a normal year, the only other time pressure that will push your work over the top is travel. Very often you will fly on a weekend day so you can arrive on or before the Monday start of your work week. Phone calls and emails help, but you’ll be traveling to your major sites at least once a year to meet your staff there and do business reviews. You’ll also be traveling for investor relation events and non-deal roadshows. These are more instances where you will have an illusion of control over timing but actually less ability to control it than you would like.

You have to plan travel around your quarterly earnings releases and Board meetings, so the window is more condensed. Although you can pick and choose which IR events you attend, there will be major events that you really should be at with fixed dates so you do not have as much flexibility on them. Major overseas travel takes even more time on planes and causes jet lag issues as well. You are likely to be less effective in the first few days you are back and often that means going to bed earlier which takes away family time.

Again, this is somewhat manageable as you can usually control the dates of internal meetings and move them to a time that is more convenient for you. It still takes time for the travel and the follow-up, but if there is an important birthday or school event, you can plan around it.

The other time requirement is staff coaching and development. I personally never encourage too much socializing in the office and I think that professional relationships can be damaged if overdone, but you absolutely need to spend some time getting to know your staff. So even if you are home, you can be sure that there will be so,e evenings where you get home later because of this.

The real time devourers are M&A activity and capital market deals and other major financings. There is no escaping the central position for the CFO in those deals, and you have little control over when they happen. Capital market deals normally happen after you report and before it is too close to the next reporting period. So that spacing between the major reporting deadlines can be eaten up by a deal. If your company is active in the capital markets (one deal a year), then you can expect to lose a lot of personal time in one quarter. Again, you are not the junior associate lawyer, the manager at the auditor firm or the junior investment bankers that really get slammed with the detail work, but you will still be quite busy, as the documentation gets more final you will be the go to person for most final decisions and you’ll probably be running the deal. If the deal is a rated deal, then the rating companies are going to want to hear from the CFO and probably meet them in person. That means you.

Major financings like in the project world or bank debt also take a lot of the CFO’s time. They also tend to require more internal effort as the division of labor is quite different for those types of deals than one driven by an investment bank. So you are not quite so tied to the markets and probably do not have to do a deal roadshow but you will have to do a lot more review of the internal work performed.

The final and uncontrollable work demand that is likely to swing your balance quite a bit towards work is M&A activity. Even if you are the acquirer, you will not have that much control over when it starts and once the process is kicked off, you will likely be the center of it. You not only need to do due diligence, you probably will have to raise funds in a financing as well. So you will not only have to run the buying process, you will be running the funding process as well. M&A always has extra time pressure and you have to expect the unexpected. As a public company CFO you will be filing SEC documents as well if the purchase is large, so that is another task on your shoulder.

On top of all these additional activities, you will have your day job of leadership and managing the areas you are in charge of and where the company needs your attention.

You will not have good work life balance, but you need to manage it to make the most of the opportunities you do have. You need to be able to prioritize, schedule and take more add=vantage of the friend and family time you do have.

I have emphasized the importance of communication in many of my blog posts and it is even more important outside of work. You need to know what is coming up with your family and friends and you have to know what is important. When traveling, Facebook and similar social media (I recommend keeping a smaller and more personal friends list while serving as a CFO) can be used to keep up with the activities of your social circle and to let people know where you are and what is going on with you. It does sound a little sad, but you cannot spend as much time chit chatting to catch up, so social media can be helpful.

You also need to have frank conversations with your family about what is coming up or happening with work. They can also work with you to move around some activities so you can be there.

Finally, you will have to make a choice about some friends. You will only have so much time you can spend and you will be spending it a lot with your family. Maybe use this process to shed some friends that have turned out to be a negative source of energy for you. I also find that friends that also are as busy as you are more understanding.

As I said when I started, I wish I had better news, but you will struggle with this your whole career and you will not be alone.

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