Beyond the numbers crunch: America's Best CFOs
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Beyond the numbers crunch: America's Best CFOs

CFOs used to run the books -- now they increasingly help to run the company. Here's the best of a new breed of CFOs who've put aside their calculators to take on companywide strategic responsibility. Sure, the burdens are bigger, but so are the rewards -- and the odds of moving up to CEO someday.

Click here to see the ranking.

As one of Wall Street's top media analysts in the 1990s, Susan Decker spent a lot of time thinking about corporate strategy. So when one of the companies she covered -- Yahoo! -- recruited her for its top finance job in 2000, it was clear that the Internet portal wanted Decker to do more than just handle the books.

Today, in addition to overseeing about 800 of the Sunnyvale, California, company's 7,600 employees, Decker is part of a five-person internal strategy team, along with chief executive officer Terry Semel, chief operating officer Daniel Rosensweig, co-founder Jerry Yang and technology chief Farzad Nazem, that sets Yahoo!'s course.

"That's really the value-added that I brought to the equation, since I wasn't experienced specifically in being a CFO," says the 41-year-old veteran of investment bank Donaldson, Lufkin & Jenrette, which is now part of Credit Suisse First Boston. "I knew the management team well. And I knew the industry well. So I really did join partly to help them think through strategic issues with respect to the business model."

Decker, in other words, isn't your traditional chief financial officer. She's one of a new breed rapidly transcending the boundaries that once defined the finance officer's job. These newfangled CFOs still oversee all the classic functions, like financial reporting, internal controls, audits, managing balance sheets and dealing with Wall Street. But they are drawing on their financial acumen -- and their comprehensive knowledge of their companies' operations -- to play a pivotal role in making critical business decisions. Many, in fact, are starting to fill the role once occupied by chief operating officers.

This transformation of the finance officer's job has been in progress for some time, but several factors have hastened the process over the past couple of years. Perhaps the most important: a sweeping change in the responsibilities of the CFO's boss, the CEO, whose brief has become much more complex in the wake of post­Enron Corp. corporate governance reforms, aroused shareholder activism and a daunting business environment. At the same time, many companies have shed or scaled back the traditional COO position as they aim for flatter management structures.

Chief executives increasingly realize that CFOs, whose reach extends into all quarters of a corporation, are well positioned to assess company performance, recommend improvements and coax and cajole rivalrous divisions to work together. Another fortuitous development: Companies in the past five to ten years have been adopting so-called enterprise-resource-planning software that automates the reporting and bookkeeping functions that once bogged down financial executives. Consequently, CFOs have been freed to apply their expertise not merely to preserving shareholder value but also to creating it.

"CFOs have spent the past decade or so moving from being bookkeepers to being business partners," says Vinay Couto, a vice president at consulting firm Booz Allen Hamilton in Chicago who has studied CFOs. "In the past year or two, we've seen that trend accelerate to the point where a growing number of CEOs are asking CFOs to step even further outside the traditional bounds of their positions and be responsible for pushing the business forward in a very active way."

Of course, this broadening of CFOs' horizons occurs just as they have been taxed with a flurry of new financial reporting mandates. The Sarbanes-Oxley Act, passed by Congress two and a half years ago in response to accounting scandals, requires public companies to document and certify the effectiveness of their internal financial controls, in one of the law's most controversial provisions, Section 404. That sounds straightforward enough, but compliance has turned out to be a multimillion-dollar headache for the typical company -- and the burden of getting it right has fallen squarely on the shoulders of the CFO. Finance chiefs have had to examine in great detail every task related to receiving, counting or disbursing money and establish a record of how it is all done. Plus, they must establish through tests that their company's customary ways of handling internal accounts lead to an accurate portrayal of its financial condition.

Meanwhile, catching no break, CFOs now have to contend with newly energized directors. Members of corporate audit committees, especially, are questioning results and demanding details more than ever. The motivation behind their heightened due diligence may be as transparent as the Securities and Exchange Commission would like companies' books to be: Recently settled shareholder lawsuits alleging accounting fraud against Enron and WorldCom required outside directors to pay tens of millions in damages out of their own pockets.

CFOs have themselves taken note that some of their peers are in jail while the CEOs who were their bosses continue to defend themselves in court by insisting that they were in too Olympian a position to know anything of the supposed frauds going on down below. What's more, CFOs can't help but be mindful that they are now required to certify the financial statements they file with the SEC, increasing their legal liability in the event that the numbers turn out to be off.

"Clearly, we live in a different world today in terms of the level of regulation and scrutiny," says Danny Huff, finance chief at Atlanta-based paper and forest products concern Georgia-Pacific Corp. "That has created a lot of additional costs."

Adds Robert Kelly, CFO of Charlotte, North Carolina­based bank Wachovia Corp.: "The requirements for the audit committee and reports to regulators have certainly escalated compared to four years ago. It's a much tougher job, and it's riskier."

This numbers crunch is grating on more than a few CFOs. Some express doubts in private about whether the new compliance regime will be of enough benefit to investors to justify the cost and distraction. Publicly, of course, they just grin and bear it. A number of CFOs, though, are leaving their jobs, opting for less taxing careers. Others are seeking fresh challenges. For instance, Thomas Madden left as finance chief of computer hardware distributor Ingram Micro last April to teach management at the University of California, Irvine.

Some of these defections may signal a significant changing of the guard. In a natural-selection process the most ambitious, driven executives are embracing the fresh challenges of the expanded CFO job while those who were content to operate within its narrower old boundaries are bowing out.

"There are a lot of CFOs out there that are controllers with fancy titles," says Laurence Stybel, a co-founder and partner at Boston-based executive search firm Stybel Peabody Lincolnshire, which specializes in placing corporate finance executives. "They know how to say no, and they're good at cost-cutting. But what CEOs want now are people who can think beyond cost controls and help grow the business. We're entering a phase of the business cycle where things are growing again, and CFOs have to change their stripes."

We know what CEOs want, but what do their ultimate bosses -- the shareholders -- demand? Judging by this magazine's second annual survey of investors and Wall Street analysts, they, too, are searching for CFOs of a different stripe. To be sure, the usual skill sets still score points, like being an honest, effective communicator and a good steward of a company's capital and cash. But many of the CFOs that investors admire most fit the mold of financial-executive-as-business-operator. (Institutional Investor surveyed about 950 portfolio managers and buy-side research personnel, as well as 400 sell-side analysts; based on voting that ended last fall, we present 168 top CFOs in 62 industry sectors. For a full list of winners, see page 67; for more on methodology, see the box on page 66.)

Yahoo!'s Decker earns top honors in the Internet sector. Investors appreciate her straight talk on performance and respect her for her CFO-and-beyond role. Decker is a no-nonsense judge of acquisitions -- a useful skill since Yahoo! bought 16 companies last year. She helped to make sure that the company pulled the trigger only on deals that would boost cash flow in the long term. Investors also praise her for disclosing Yahoo!'s progress against its own performance metrics (see box above).

Darren Jackson of Richfield, Minnesota, electronics retailing giant Best Buy Co., is judged tops in Retailing/Hardlines. The 39-year-old former Nordstrom exec joined Best Buy in 2000 and has completely made over its finance division. Jackson focused on expanding the role of "decision support" personnel, who work hand in hand with operating managers to evaluate business lines and recommend improvements.

Jackson has been at the center of Best Buy's "customer centricity" program, in which it has so far reorganized selling floors in 67 of its 600 stores to fit customer profiles -- young, male gadget freaks, for example -- rather than product groupings. Real-time tracking of profit-and-loss accounts at each of the pilot stores lets managers and even sales reps suggest bottom-line-boosting enhancements (see box, page 65). "Our job is to work directly with the business managers and source ideas for driving value in the organization," says Jackson.

Wachovia's Kelly is another CFO who knows how to manage a business, not just a set of books (see box, page 74). He held a number of line positions with Toronto-Dominion Bank, including head of retail banking and retail brokerage, before becoming Wachovia's finance chief in 2000. CEO G. Kennedy Thompson gave Kelly a big role in integrating Wachovia and First Union Corp. following the banks' 2001 merger.

"Most of my career has been in running businesses," says Kelly, 50, the first-place finisher in Banks/Large-Cap. "That's been very useful to me as CFO. It's a competitive advantage. I have fantastic people who are great at financial accounting and reporting. I try to focus on helping the businesses perform better."

Louis Lavigne Jr., CFO of biotechnology pioneer Genentech for the past 17 years, has long shown that he has what it takes to transcend his position's traditional definition. The investors who voted him preeminent in Biotechnology note that he is intimately involved in the launch of new drugs -- judging how risky the effort will be, what a new drug's return on investment might be and how much in resources to pour into the project (see box, page 76).

When Genentech's cancer treatment, Avastin, suffered a setback during clinical trials for breast cancer three years ago, Lavigne urged the company to test it against other forms of the disease. He was confident that the upside would justify the investment. Sure enough, last year the Food & Drug Administration approved Avastin for treating colorectal cancers. Today, its $200 million in annual sales make the drug a driving force behind Genentech's earnings growth. Lavigne, who is 55, steps down next month. "I'm looking for a slightly different pace," he says wryly, adding that he's interested in board positions at young, growing companies.

Georgia-Pacific CEO Alston Correll and president Lee Thomas have asked CFO Huff -- the highest-regarded CFO in the Paper & Forest Products sector -- to help GP revamp its business model. Since the company bought debt-laden Fort James Corp. in 2000, Huff has had to spend a big chunk of his time trying to clean up the combined firm's balance sheet. Now that he has done so (see box below), he can concentrate on working with Correll and Thomas to chart a course for GP to expand its relatively fast-growing consumer businesses -- which was the whole point of buying paper-towel and napkin maker Fort James.

"I plan to be spending a lot more time in the businesses and looking at strategic issues in the next few years," says Huff, 53. "That's one way, in addition to dealing with Sarbanes-Oxley, that the CFO role is changing."

Booz Allen's Couto, co-author of a forthcoming book, CFO Thought Leaders: Advancing the Frontiers of Finance, asserts: "In a lot of cases, the CFO can have better insight into day-to-day operations and performance than the CEO, who is dealing more and more with board issues, governance issues and other outside constituencies. As a result, CEOs are giving [CFOs] more responsibility and holding them accountable for moving the business to where it needs to go."

More responsibility for finance chiefs is getting them more pay. Compensation consulting firm Pearl Meyer & Partners reports that average annual cash compensation for CFOs of large-capitalization public companies rose to $1.04 million last year, a 3.5 percent gain over 2003's figure. Pay for large-cap technology CFOs, many of whom have had to work extra hard to upgrade financial controls in their fast-growing companies, skyrocketed to $659,000, an increase of 31.5 percent over 2003's level and 46.7 percent higher than 2002's. "Not only is pay for CFOs going up, but in a market that has been pretty soft for everything else, we've also seen the largest salary increases for all labor groups in corporations going to people in finance and accounting," says Joseph Rich, a Pearl Meyer vice chairman in Marlborough, Massachusetts.

What's more, CFOs today appear more than ever to be CEOs-in-waiting. Several finance chiefs have recently crossed the hall to the corner office. For instance, a year ago, TXU Corp., then a troubled electric utility, decided that the best person to lead its turnaround would be C. John Wilder, then finance chief of rival Entergy Corp. CEO Wilder's efforts resulted in a 178 percent gain in TXU's share price last year. (See "The Best CEOs in America," Institutional Investor, January 2005.)

Other CFOs are getting in position for bigger things. Last month defense contractor Northrop Grumman Corp. tapped Wesley Bush, the head of its space technology unit, to become CFO. Those who follow the company interpreted the move as anointing him heir apparent to CEO Ronald Sugar. Goldman Sachs Group CFO David Viniar, who also oversees the investment bank's operations and technology staff -- more than 40 percent of Goldman's 19,000 employees -- is reckoned by some to be a candidate to succeed CEO Henry Paulson Jr.

"For a finance executive," concludes Couto, "CFO used to be the pinnacle. Not anymore. You're going to see more and more of them go all the way to the top."

Darren Jackson


Age: 39

Year named CFO: 2001

Number of employees: 100,000

Earnings: $705 million*

Compensation: $1.15 million

Stock options: $2.19 million

Jackson: "People have different kinds of talents, and I'm a big believer in mixing those people and talents together to arrive at better outcomes."

One voter: "He looks at the finance function as a way to drive value for the company, not just as the guys who prepare the 10-Qs."

Over the past 39 years, Best Buy Co. has grown from a tiny start-up into the undisputed king of consumer electronics retailing, with $27.5 billion in annual sales. Its growth secret? Finding out what its customers want by meticulously analyzing their behavior and demographics. And Darren Jackson, the company's fresh-faced chief financial officer, is the person who turns those reams of data into profits.

When he became CFO in 2001, Jackson reorganized the finance division into four groups, separating nuts-and-bolts tasks such as financial reporting and transaction processing from more sophisticated functions like deal making and what Jackson dubs "decision support" -- using the company's extensive customer data to change the way Best Buy does business, for greater financial gain.

"We have to work with our business partners to evaluate alternatives that will drive value for the enterprise," says Jackson. "It's just expected that we keep the books well and deliver the financial reports. But if that's all we're doing, I would argue that we're failing."

As part of the reorganization, Jackson paired a group of finance vice presidents with line managers in each of the Richfield, Minnesota, company's business segments. Each team pores through customer research, then arrives at steps they can take to maximize profitability.

This approach took on a new wrinkle after the chain adopted an experimental "customer centricity" program in 2003. Under the pilot, Best Buy crunched consumer data, identified several types of customers -- from young, male gadget freaks to women who buy less impulsively -- and organized the selling floors in 67 of its 600 stores by customer segments rather than by product groupings. Finance executives were also teamed with line managers in each of these customer segments, working to boost the profitability of each.

This new, less-centralized structure has allowed financial and operating executives to unearth new techniques for growing the bottom line. One example: The company has sales associates -- known as "blueshirts" for their customary attire -- who are better educated about financial principles. "If you walk into one of those 67 stores," says Jackson, "and ask a blueshirt, 'What is ROIC?,' he'll be able to tell you it's return on invested capital. And he'll also be able to tell you the four key things he can do to help drive it."

Additionally, because each of the pilot stores keeps track of profit-and-loss accounts daily, with detail about customer segment sales and conversion rates, corporate officers and sales associates often cooperate to make decisions about adjusting inventory or deploying associates on a day-to-day basis to improve efficiency.

Such innovative techniques have been critical for Best Buy as it has matured into a big company. Revenues have more than doubled since Jackson became CFO four years ago. "The key is striking a balance between continually pushing the top line and finding other ways to grow value as the business becomes more mature," he explains. "When you talk to him, it's pretty clear that he's looking at himself as much more than a numbers guy," says one investor. "He's actually thinking more like a CEO in a lot of ways." -- J.S.

* Audited results for fiscal year ended February 28, 2004.

Susan Decker YAHOO!

Age: 41

Year named CFO: 2000

Number of employees: 7,600

Earnings: $840 million

Compensation: $1.2 million

Stock options: $59.7 million

Decker: "I knew Yahoo! from covering it, and I did join partly to help them think through strategic issues."

One voter: "She doesn't try to sell you. She's just incredibly candid, even blunt, about what's happening at the company and realizes you're smart enough to make up your own mind."

Susan Decker brings a unique empathy to what can often be an adversarial relationship between corporate CFOs and Wall Street. After all, the Yahoo! finance chief spent 14 years as a publishing-industry analyst and research director with Donaldson, Lufkin & Jenrette in New York before joining the Sunnyvale, California, Internet powerhouse in June 2000. Having been on the other side of many a conference call and Q&A session, Decker makes a special effort to be straight with the Street -- and to disclose financial information in a way that will be usable for analysts and investors.

"Sue lays the cards on the table very plainly, and that's a breath of fresh air," says one portfolio manager, noting that Decker stands out as especially straightforward and nonpromotional among her counterparts in Silicon Valley, who, he thinks, too often seem to be spinning results or hiding bad news. "Some CFOs play a cat-and-mouse game. You have to almost read their minds, because they make things a lot more complex than they need to be. It's as if they're trying to obfuscate things so that only people who are smart enough or work hard enough to go through all the trouble of finding out the truth will invest in their firms."

Decker has identified several metrics that Yahoo! uses to measure its performance internally, such as productivity per employee and revenue and earnings per registered user of Yahoo!'s online services, and she makes sure to share those numbers with the Street.

"I've seen a lot of companies that measure themselves differently from how they talk about themselves externally, and that creates confusion and asynchronous incentives," says Decker, who helped vet Yahoo!'s 1996 initial public offering for DLJ, one of its underwriters, and subsequently covered the stock. "So we try really hard to communicate both internally and externally the same kind of metrics."

But Decker does much more than keep the books and talk to investors. In addition to running the human resources, legal and investor relations departments, she is a key strategic adviser to CEO Terry Semel (who was ranked the top Internet CEO in a survey published by this magazine last month), particularly with respect to several acquisitions Yahoo! has made in the past few years. And Yahoo! has been on a tear. Net income nearly quadrupled during 2004, to $840 million, compared with the previous year. A Tufts University graduate who holds a Harvard Business School MBA, Decker also is a director of Pixar and Costco Wholesale Corp.

"Strategically, they've done a lot of things the right way in the last two or three years," says one survey voter, "and I think Sue has had a lot to do with that." -- J.S.


Age: 50

Year named CFO: 2002

Number of employees: 260,000

Earnings: $2.88 billion*

Compensation: $1.76 million

Stock options: $7.15 million

FitzPatrick: "Tyco was largely run previously as a holding company, more of a merchant bank than an operating company. We had to build a first-class operating company.''

One voter: "He's squeaky clean, very disciplined, very understated and cash-flow focused. He's probably exactly what Tyco needed."

David FitzPatrick had plenty of fires to put out when he joined Tyco International in September 2002. His predecessor, Mark Swartz, had resigned in disgrace along with former CEO Dennis Kozlowski shortly before FitzPatrick took over. The scandal had left Tyco a financial wreck: It lost a whopping $9.2 billion in the fiscal year ended September 30, 2002, compared with a $3.5 billion profit in 2001.

Building financial controls was an imperative but Herculean task: Kozlowski and his team had acquired more than 700 companies during a decade in power. Amid the turmoil more than $11 billion in debt was set to come due in 2003.

"It was an $11.3 billion brick wall," recalls FitzPatrick, who had left his job as CFO of defense contractor United Technologies Corp. for the challenge of rebuilding Tyco.

Before FitzPatrick could break through that wall, he had to soothe the nerves of investors and bankers who had been burned by Tyco. He led a tip-to-toe review of the Hamilton, Bermuda­based industrial conglomerate's accounting and governance procedures and released the results publicly at the end of 2002. Doing so helped him raise $4.5 billion in a January 2003 convertible bond offering and secure a $1.5 billion, one-year line of credit as part of a massive debt refinancing.

Addressing Tyco's balance-sheet woes allowed FitzPatrick to build a strong financial infrastructure. The CFO hired a group of finance professionals, including a new treasurer, chief tax officer, controller, investor relations chief and CFOs for two units: fire and security, and plastics and adhesives. The moves paid off: His team boosted free cash flow from $800 million in 2002 to $4.8 billion last year. Some $1.5 billion of the gain is attributable to cost savings wrung from consolidating purchasing across the company's subsidiaries, cutting real estate spending, implementing so-called six-sigma quality controls and demanding quicker payment on receivables. FitzPatrick expects to save an additional $1.5 billion by continuing these processes through next year.

"He acted speedily," says one portfolio manager. "He communicates his goals and objectives very well and is focused on the right things."

Tyco shares have responded, jumping to more than $36 last month, up from less than $10 when Kozlowski was indicted in June 2002. (He and Swartz have pleaded innocent to charges that they looted the company of $600 million and were contesting the charges in a New York courtroom last month.) Earnings have rebounded: The company posted a gain of $980 million in 2003 and $2.88 billion last year. Tyco is forecasting 2005 revenue growth of 4 percent to 6 percent, which it sees coming primarily from its health care equipment, security and fire-protection systems businesses. Tyco may even return to making acquisitions.

"We have been out of the M&A arena," FitzPatrick notes. "We have said publicly that we will look at getting back in no earlier than the second half of 2005." -- Randy Whitestone

* Audit results for fiscal year ended September 30, 2004.

C. Christopher Gaut HALLIBURTON CO.

Age: 47

Year named CFO:2003

Number of employees:100,000

Earnings: ­$977 million

Compensation: $653,334

Stock options: $550,000

Gaut: "We addressed concerns about our credit rating and liquidity and improved the confidence that people can have in our financial position."

One voter: "He took the company through a very difficult period, which speaks of his ability to manage a balance sheet through difficult times."

When C.. Christopher Gaut joined energy services and construction company Halliburton Co. two years ago, he knew he had his hands full. Two subsidiaries, DII Industries and Kellogg, Brown & Root, were each battling to emerge from bankruptcy and a mountain of asbestos litigation. KBR was also saddled with a contract to develop Brazilian oil fields that failed to progress on schedule, resulting in $762 million in pretax losses.

What's more, during the runup to the Iraq war, Houston-based Halliburton needed to raise $500 million to fund its growing business supporting U.S. troops there. The company has faced a firestorm of bad press over its connection with U.S. Vice President Dick Cheney, Halliburton's former chief executive officer, as well as accusations that it overcharged the U.S. government for fuel and soldiers' meals in Iraq.

Gaut, who previously was chief financial officer of oil-drilling concern Ensco International, maneuvered deftly, arranging a $2.77 billion trust that enabled DII and KBR to resolve their asbestos liabilities and emerge from Chapter 11 bankruptcy protection in December. Gaut funded the trust well ahead of time with proceeds from a $1.2 billion convertible offering in June 2003 and bond sales in 2003 and 2004. He raised the capital for Halliburton's Iraq contracts by arranging to sell its government accounts receivable and expanding the company's bank credit line.

The company retained its investment-grade credit rating, which helped keep its interest costs down and minimized downward pressure on its stock price. Halliburton's shares, flat for much of 2004, surged during the fourth quarter to end the year up 53 percent. They're up an additional 5 percent so far in 2005.

Gaut also helped to reorganize Halliburton into six operating divisions, cutting costs and strengthening the finance team in the process. As a result, operating margins in the energy services business increased in each quarter of 2004. For the year operating income climbed nearly 17 percent in 2004, to $840 million.

"We are over the hump," says Gaut, a Dartmouth College engineering graduate who earned an MBA from the University of Pennsylvania's Wharton School of Business. "We told people what we would do, and we went out and did it."

Gaut also wins praise from the market for setting specific financial targets and communicating clearly and regularly with shareholders and analysts about how Halliburton is measuring up.

"He improved the company's credibility on Wall Street," says Kevin Simpson, an energy strategist at institutional brokerage Miller Tabak & Co. -- Stephen Taub


Age: 52

Year named CFO: 1995

Number of employees: 22,150

Earnings:­$138 million*

Compensation: $1.15 million**

Stock options: $3.08 million**

Hayes: "To a large degree, the role of the public CFO is to act as a bridge between the financial and operational objectives of the company and what the Street's expectations are about those objectives."

One voter: "They ran the company to maximize the value of the franchise. Investors come and go, but there is always the Cox family, and they did a good job for both."

Wall Street didn't much like shares of Cox Communications last year, but it loved James Hayes, its chief financial officer.

The Atlanta cable giant's stock fell 26.5 percent from January through July 2004, at which point its founding family, frustrated with the company's market valuation, announced a $6.6 billion buyout to take the 43-year-old company private. The market and Hayes, who joined the company as an accountant straight from the University of Georgia in 1980, had seen it all before: Cox had also taken the cable unit private in 1985, ending two decades on the New York Stock Exchange, only to go public again ten years later. Hayes, who became CFO shortly before the 1995 IPO, managed last year's buyout admirably, say investors, who like the way he balanced the sometimes-conflicting interests of Cox's private and public shareholders.

Under Hayes, Cox was a leader in public disclosure of operating results by cable concerns, becoming the first to release specific figures showing the growth of cable system subscribers -- information that investors previously had been able to glean only from industry-newsletter estimates. "When Cox went public [in 1995], a lot of the cable companies hadn't proved the quality of their accounting," recalls one investor. "The Cox guys appeared to be squeaky clean, but it had to be proved, and that's what they did."

Hayes has adroitly managed Cox's balance sheet. One example: In 2000 he sold an early stake Cox had acquired in Sprint Corp. and used some of the $412 million in proceeds to acquire cable systems, giving the company scale to compete in a consolidating industry. It now boasts 6.6 million cable, Internet and phone customers.

Going private last year presented a special challenge. Cox Communications management had to remain neutral on the tender offer from Cox Enterprises, the family's holding company, acting only to provide information to public shareholders and a special committee of outside directors. Then, after the deal closed, Hayes had to repay a $3 billion bridge loan by selling bonds -- no small feat, considering that newly private Cox had already announced that it would discontinue filing public financial statements. But investors were confident enough in Hayes's veteran financial stewardship that the bond sale was more than four times oversubscribed.

"Balancing public and private shareholders is something I'm enormously proud of, even though the balancing act was difficult at times," says Hayes, an amateur pilot who likes to practice aerobatic stunts in his spare time.

Still, he's somewhat relieved to not have to deal with the responsibilities facing public-company finance chiefs in the wake of the Sarbanes-Oxley Act and other postbubble financial reporting regulations. Though compliance headaches weren't the main reason Cox went private yet again, they did make Hayes's life a lot more challenging.

"The good news is, we never really had anything to worry about," he says. "But the amount of behind-the-scenes work that had to be done so results could be certified was considerable." -- R.W.

* Audited results for 2003.

** Cox Communications went private on December 3, 2004; figure is from the company's April 2004 proxy statement.


Age: 53

Year named CFO: 1999

Number of employees: 61,000

Earnings: $623 million


Stock options: Undisclosed

Huff: "I plan to be spending a lot more time in our businesses and looking at strategic issues in the next few years."

One voter: "He had some serious issues to work through and did a good job getting the company past them."

Just two years ago Georgia-Pacific Corp. was reeling. The Atlanta forest products company had loaded up on debt when it bought Fort James Corp. in 2000, only to see its cash flow plummet over the next two years amid a slowdown in its core timber businesses. Worse, GP faced a raft of asbestos lawsuits related to a joint compound its construction products unit had manufactured. The company's shares shed nearly two thirds of their value during just six months in mid-2002.

None of that made chief financial officer Danny Huff's job easy. "We went through a tough period when the stock went under $10 a share and the spreads on our debt went through the roof," he recalls. "A lot of things converged at the same time."

Huff proved more than up to the challenge. Through a series of bond refinancings and a renegotiation of the company's credit line, he has over the past two years slashed liabilities by $2.4 billion, much of it high-interest paper inherited from Fort James, a maker of consumer paper goods. Those moves eased market worries about GP's ability to make interest payments and gave the company the financial flexibility to deal with its strategic and liability issues.

Huff's handiwork has GP humming. No longer faced with the need to raise capital, the company was able to scrap plans to spin off its building products business. That in turn allowed GP to continue to reap the benefits of a persistent U.S. housing boom. The construction unit churned out record operating profit of $263 million in the first quarter of 2004, compared with a loss of $17 million in the year-earlier period. During 2004 companywide net income nearly tripled, to $623 million, from the year earlier. And GP shares have rebounded strongly, up 24 percent last year. They were trading for about $34 late last month.

Liability worries persist, however. The company has settled some asbestos claims, but others are outstanding. Still, by tackling its other financial challenges, GP can now focus on growth.

In the coming year Huff will spend more time with the 78-year-old company's business-line managers on strategic issues, such as long-term revenue growth. To that end, GP is investing more heavily in its consumer products unit, which makes paper goods like Brawny towels and Dixie cups. Expanding that business should make the company less dependent on commodity products like pulp, paper and lumber and therefore less susceptible to economic cycles. That's a continuation of GP's move five years ago to sell off many of its timberland assets.

"We're trying to get away from nondifferentiated commodities and move up the value chain," says Huff. "That way, we have more control over our own destiny." -- Tim Catts


Age: 50

Year named CFO: 2000

Number of employees:96,000

Earnings: $5.21 billion

Compensation:$2.62 million

Stock options: $8.61 million

Kelly: "What creates shareholder value is doing the right thing. Shareholders who trust you will stick with you longer and invest more over time."

One voter: "In terms of disclosure, Wachovia stands out from the crowd. It has a CFO who elucidates and doesn't obfuscate."

How do you keep investors happy? "No surprises," says Wachovia Corp. chief financial officer Robert Kelly. "In that sense, we treat shareholders and customers the same way."

One key to Kelly's success: financial disclosures that analysts and investors rate as second to none. Kelly, the longest-serving CFO among those at the five biggest U.S. banks, believes that full disclosure begets investor satisfaction -- and a rising stock price. Wachovia delivered a 12.9 percent gain in 2004, second only among its big-bank peers to Bank of America Corp.'s 16.8 percent.

"The idea is to give our investors and analysts everything they need in a simple format," Kelly explains. "At the same time, we take care not to overload them. But philosophically, anything short of a full-disclosure policy just isn't the right way to go."

That wasn't the attitude when Kelly arrived in November 2000 at what was then First Union Corp. The Charlotte, North Carolina­based bank was the result of a jumble of more than 80 acquisitions over two decades. Analysts complained about the continual dilution of shareholder value and a lack of transparency in the bank's books. Two of First Union's most recent purchases -- CoreStates Financial Corp. and the Money Store -- were operational and financial disasters. G. Kennedy Thompson, who took over as CEO in April 2000, moved quickly to clear the decks: That June he announced a $3 billion write-off to close Money Store. Then he brought in Kelly, a Canadian native who had spent 19 years with Toronto-Dominion Bank, including five as CFO, to straighten up -- and open up -- the accounting.

"Bob came in and got all the business lines on the same internal reporting standard," recalls a buy-side analyst. "That was a tremendous accomplishment. It made apples-to-apples comparisons possible, and over time we could see how to justify the company's valuation. You can't say the same about some other banks' disclosures."

Kelly, who has a bachelor of commerce degree from St. Mary's University, Halifax, and an MBA from City University in London, had no inkling of the bombshell that Thompson would drop in April 2001 -- an agreement to merge First Union with venerable cross-state rival Wachovia, whose name would survive the deal. The $13 billion transaction closed the following September after Thompson stared down a hostile bid from Atlanta-based SunTrust Banks.

Determined not to repeat the mistakes of previous, poorly managed mergers, Thompson set a three-year timetable to consolidate the First Union and Wachovia operations. Kelly worked alongside David Carroll, the head of merger integration, to monitor and complete the job. "He did 99 percent of the work," the self-effacing Kelly says of Carroll, who in January took charge of Wachovia's brokerage and insurance businesses.

As it turned out, that megamerger was something of a warmup. In July 2003, Wachovia combined its brokerage business with that of Prudential Financial to form the third-biggest retail brokerage firm in the nation; and in November the bank bought $53 billion-in-assets SouthTrust Corp. of Birmingham, Alabama, for $14 billion. Wachovia is now the fourth-biggest U.S. bank in terms of assets.

"The key to making these deals work financially is to pay a price that is reasonable for both sets of shareholders, then make sure that they add shareholder value without negatively impacting customers," says Kelly. "That also means being transparent up front about what value we expect to add, providing clear metrics and reporting regularly." -- Jeffrey Kutler

Louis Lavigne Jr. GENENTECH

Age: 55

Year named CFO: 1988

Number of employees: 6,226

Earnings: $785 million

Compensation: $809,368

Stock options:$50.43 million

Lavigne: "We've used Sarbanes-Oxley as an opportunity to educate people in all areas of the company about their roles in financial reporting and governance."

One voter: "He's maintained financial discipline in a company that's grown incredibly fast."

Many chief financial officers have been wringing their hands when confronted with the burden of complying with a single, tiny section of the Sarbanes-Oxley corporate reform law enacted two and a half years ago. Not Louis Lavigne Jr., the finance chief at biotechnology giant Genentech. To him, the dreaded Section 404, which requires public companies to painstakingly document and then certify the validity of all their financial controls, presents an opportunity for the developer of prescription drugs to take a hard look at not only its financial reporting but also its business practices, and make necessary improvements.

"We have really engaged our people and encouraged them to take ownership of 404 compliance," says Lavigne, a Babson College graduate who holds an MBA from Temple University. "We wanted to use this as an opportunity to look at everything we're doing and ask, 'Is this the best way to approach this task or this process for a company that's now our size?'"

Genentech, based in South San Francisco, California, has been one of the country's fastest-growing companies over the past two decades. Revenues have skyrocketed from $40 million in 1983, when Lavigne became the company's controller, to $4.6 billion last year. In 2004 earnings grew by 40 percent, to $785 million, from the previous year.

Genentech has already extracted one tangible benefit from its internal-controls review: a reduction in the time between when orders for its drugs come in and when payments are received. Rather than have financial types handle the documentation and certification of controls in this area, Lavigne delegated the task to business managers, who streamlined operations so that Genentech gets paid more quickly.

Investors praise Lavigne, who also oversees Genentech's corporate relations and information technology divisions, for maintaining strict financial discipline in a company known for calculated risk-taking on drugs and therapies that other biotech firms walk away from.

"Lou is known for not overspending for products or for research. He's very fine-tuned in terms of watching every dollar," says one portfolio manager.

Soon, however, someone else will have to watch those dollars. Next month, Lavigne will retire after 23 years at Genentech.

"This is very much a 24-7 type of job, and I'm looking for a little bit different pace," he says. Already a director of disease-management-services provider LifeMasters Supported SelfCare, spinal-therapy company Kyphon and BMC Software, Lavigne also joined the board of Arena Pharmaceuticals last month and will probably seek to serve on a few more corporate boards after retiring. "I would like to be able to share some of the things I've learned strategically and financially, about being part of a growth story, with other developing companies," he says. -- T.C.


Age: 57

Year named CFO:2003

Number of employees: 34,000

Earnings:$4.40 billion*

Compensation:$1.07 million*

Stock options:$13.15 million*

Powell: "We want to give investors a full perspective into what's going on at Cisco."

One voter: "They pretty much give all the financial details that are reasonable, help you realize the numbers are clean and give you a little comfort."

For public companies dealing with Wall Street, Dennis Powell believes, there's no such thing as too much information. Two months ago, at a meeting with analysts and investors, the Cisco Systems chief financial officer spent hours painstakingly laying out how global economic growth, the pricing of semiconductors and a host of other factors would affect the network-equipment manufacturer's financial performance over the next four to five years. At a time when many corporations are cutting back on guidance to the market or sticking to carefully spun scripts, investors can't help but gush about Powell's approach.

"I've never seen another company do an analysis like this," says one portfolio manager who attended the December meeting. "Most companies won't talk to you about more than the next quarter."

Cisco has long boasted of its "virtual close" -- the ability to shut the books on a quarter in one day, saving time and improving analysis and forecasting. But Powell, an eight-year Cisco veteran who previously spent 26 years at auditing firm Coopers & Lybrand, has opened the envelope further since rising to finance chief almost two years ago. The December sit-down with analysts and investors, dubbed a "sensitivity analysis" by Powell, marked a first. With investors placing a high value on transparency in the wake of the recent wave of corporate scandals, Powell reasons that the most forthcoming companies should attract the most interest.

"If investors know I'm telling them everything I know when I know it," he says, "I think it does translate into a premium on the share price over time."

Cisco certainly could use the boost. The San Jose, California, company's shares have declined by 36 percent, to about $18 each, in the past year, on concerns about declining profit margins. Its market capitalization of $123 billion, while formidable, is a far cry from the height of the technology boom in 2000, when Cisco's value briefly eclipsed $500 billion, making it the world's most richly valued company.

Powell's not all show and tell. He has relentlessly driven down the company's operating expense ratio -- critical to boosting Cisco's profitability as it matures. The company faces continuing pricing pressure on its core routers and switches and has been moving into lower-margin areas such as home-networking equipment.

When Powell became CFO, Cisco's operating expenses stood at about 41 percent of its revenue. He persuaded line managers to embrace a target of 35 percent, which the company reached at the end of November, six months earlier than planned. Cisco achieved the reductions chiefly by holding the line on labor costs while continuing to grow revenues and maintain spending on priority areas such as research and development. Cisco's earnings grew by 23 percent, to $4.4 billion, during the fiscal year that ended July 31, on a 17 percent rise in sales, to $22 billion. -- Steven Brull

* For fiscal year ended July 31, 2004; earnings are audited.

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