Lerach-McCloskey-Moulton SDFEI Panel - Financial Executives ...

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Lerach-McCloskey-Moulton SDFEI Panel - Financial Executives ...

Volume 2002-No. 8 OCTOBER 2002

President’s

Corner

Russell H. Packer

Shoreline Partners, LLC

SDFEI President

Fellow Members:

We appreciated the excellent

presentation in September by Dana

Koppers from Marsh on D&O Insurance

in the current environment

and we are off to a good start for

our program year. The announced

panel program for October (at

right) will be a timely extension in

the arena of corporate governance.

At the last meeting, we recognized

and thanked each of our

Sponsoring Partners as well. They

are Baker & McKenzie; Bowne of

San Diego; Comerica Bank;

Deloitte & Touche LLP; Ernst &

Young LLP; KPMG LLP; Marsh;

Resources Connection; Robert Half

International (RHI); Thompson-

Rose Interim Professionals; and

Union Bank of California. We

thank them for their support.

We appreciate the value our sponsors

bring in, widening the circle of

resources available to our group of

senior financial executives in San

Diego. The contacts we make with

these sponsors, the prospective

members they bring to our meeting,

and the program support they provide,

strengthen our entire financial

executive community.

I was pleased to attend FEI’s

Western Area Leadership Board

meeting in September.

(continued on page 3)

San Diego Chapter

NEWS

Have You Been “Lerached”? Hear . . .

Lerach-McCloskey-Moulton SDFEI Panel:

Corporate Governance in Post-Enron Era

What can your company do to mitigate

the risk of a shareholder lawsuit

(also known as a “Leraching”)? Come

hear SDFEI’s distinguished blue-ribbon

panel speak on “war stories” and likely

changes to corporate governance in these

post-WorldCom/Adelphia/Enron times at

SDFEI’s October 17 meeting-dinner in

the La Jolla Marriott Hotel.

Panelists are William Lerach, partner

from the law firm Milberg Weiss Bershad

Hynes & Lerach, LLP; Michael

McCloskey of the law firm of Gordon &

Rees LLP; and John Moulton, Partner at

Deloitte & Touche LLP.

Panel-talk will focus on new corporate

reform law — the Sarbanes-Oxley Act of

2002 — recently enacted by Congress to

protect investors by improving corporate

disclosure and stiffening penalties for

fraud. Time will be set aside for questions-and-answers,

so Members attending

the session should plan to pitch their best

“curveball” to this distinguished panel!

Bill Lerach is recognized as the leading

securities lawyer in the United States. He

and Milberg Weiss have been lead plaintiff

in over 60% of all class-action lawsuits

in the U.S., filing hundreds of securities

class action lawsuits and recovering

billions of dollars for their clients — allegedly

wronged shareholders.

Mr. Lerach has been the subject of considerable

media attention and is a frequent

commentator and author on securities

and corporate law.

Mike McCloskey’s practice specialty

and his extensive trial experience include

the litigation of state and Federal securities

fraud, insider trading, unfair business practice

claims and actions under the Consumers

Legal Remedies Act typically in the

class action context. He is a former partner

at Baker & McKenzie.

John Moulton, as leader of Deloitte &

Touche’s Technology, Media & Telecommunications

group, works with some of

San Diego’s most complex technology

companies. Mr. Moulton has substantial

M&A experience and, over the last three

years, has been responsible for structuring

and overseeing financial due diligence on

nine acquisitions with a total market cap of

$1.6 billion.

For the Chapter Dinner October 17, you

may register online at www.fei.org. Go to

the San Diego Chapter page, click on

“Meeting & Event Schedule”, look for

“Details” on this meeting, click on the

“Details” button, fill in the blanks and

submit the registration electronically. Or

… a form is enclosed. FAX it to SDFEI

at 619.231.5958. See you there!

SDFEI October panelists (l.-r.) Lerach,

McCloskey and Moulton.


2

ARE BUSINESS SCHOOLS TO BLAME

FOR CORPORATE FRAUDS?

By Jone Pearce

Are business schools responsible for the current rash of corporate

scandals? Is it our fault that executives with MBAs lie, cheat and

steal? President George W. Bush recently said: "Our schools of bus iness

must be principled teachers of right and wrong and not surrender

to moral confusion and relativism.”

But are we really responsible for preventing corporate corruption?

Yes, to some extent. We teach organizational skills that are useful to

anyone who wants to get something done -- relieve poverty, deliver

health care, steal money, or kill people. We must also teach how to

apply these skills in a broader, rather than a strictly utilitarian, context.

In this sense the scandals have a silver lining:

They spur us to examine what we are doing, however inadvertently,

to contribute to the moral disassociation we are seeing. After all, what

we do is talk about, analyze and explain business processes.

Business schools can take this unique opportunity to reinforce corporate

ethics and social responsibility in our educational and extracurricular

offerings.

Some examples: The Social Responsibility Initiative at UC Irvine

pairs MBA student teams with non-profit organizations to develop

marketing plans, pricing studies, or strategic planning processes. The

MBA Challenge for Charity brings together MBA students from USC,

UCLA, Stanford, UC Berkeley, the University of Washington and UC

Irvine to compete to raise money for the Special Olympics. And UC

Irvine is offering a fall quarter course on the Enron case, analyzing it

from various angles, including accounting, strategy, law and ethics.

But business schools face our own cooked-books scandal. There is

widespread concern that some schools fudge their numbers to get

higher business-publication rankings. The rankings topic is controversial

and fraught with anxiety for all of us in business schools. Rankings

can impact school reputation, enrollment, faculty recruitment, and

career placements of graduates -- even the dean 's job security.

We need to do more than preach ethics to our alumni in the corporate

boardrooms -- we need to practice what we preach by honestly reporting

our own numbers and publicly attesting to their accuracy. For example,

two of our directors and I have signed a statement attesting to

the accuracy of our school's books, patterned after the statements recently

required of major American corporate executives. The statement

is posted on our website, www.gsm.uci.edu/go/attest.

By following the same standards of honesty that we now demand

from corporate executives, business schools can accept that the buck

starts here.

ABOUT THE AUTHOR

Dr. Jone Pearce is interim dean and professor of organization and strategy at University

of California, Irvine, Graduate School of Management, and president of the Academy

of Management. Her field is organizational behavior, with research centering on how the

institutional context affects individuals' behavior and their affective reactions to the workplace,

often proposing and testing the mediating role of social processes. She is author

of "Organization and Management in the Embrace of Government" (Erlbaum, 2001).

Professional Development . . .

Increasing Profits

In Today’s Economy

SDFEI’s Professional Development Seminar

series begins October 17, 4:00pm, at La

Jolla Marriott Hotel, with a presentation by

Acorn Systems executive vice president Chris

Fraga and vice president Pete Henderson, according

to SDFEI leader Nikhil Varaiya of

San Diego State University. The Acorn firm

develops software to manage profits. Concepts

to be covered:

“In these economically challenging times,

it's no surprise that more companies are looking

to recover lost profits. What is surprising,

however, is how few companies are able to

grasp where their profits are won and lost.

Typically, a company's customers, orders,

and products that rank within the top 20% in

terms of profitability account for 200% of

their overall profits. The bottom 20% of the

business loses the company back down to

100% of profits.

Stemming these losses can have a dramatic

impact on profits, over and above what could

be achieved by increasing revenue alone. Doing

so, however, requires the development of

an effective cost management system.”

Hear more at the October 17 seminar!

More Professional Development . . .

Ernst & Young Updates

SDFEI at PD Seminar

Kicking off SDFEI’s Wednesday November

20 chapter activities, “Corporate Reporting”

and a tax law update are set at

4:00p.m. in the La Jolla Marriott. Presenters

will be experts from Ernst & Young

LLP.

Details are forthcoming on the professional

development program (which offers

CPE continuing education credits) from

Nikhil Varaiya of San Diego State University,

SDFEI’s Vice President for Professional

Development.


Chapter Growth Continues . . .

SDFEI WELCOMES NEW MEMBERS

Financial executives are joining SDFEI. Recent New Members are:

JOHN DILLEN

Wireless Knowledge, Inc.

John Dillen is chief financial officer for Wireless Knowledge and a

founding member of the company. In this capacity, Dillen is responsible

for all areas of the company's financial management as well as overseeing

the operations of the company's human resources, IT, and legal departments.

He brings to his position more than 14 years of financial experience in

companies focused on wireless technologies. Prior to joining Wireless

Knowledge, Dillen served as manager of financial analysis for Qualcomm

Incorporated from 1992 to 1998. During that time, he covered a range of

responsibilities supporting the Consumer Products Division, the Omn i-

TRACS Division, international finance/tax, and manufacturing finance.

Before joining Qualcomm, Dillen served as a senior financial analyst at

General Instrument's VideoCipher Division.

Mr. Dillen holds a B.S. in business administration from Georgetown

University.

KAREN GILMORE

Medunite, Inc.

Karen Gilmore currently serves as Vice President-Finance and Controller

for MedUnite, Inc., a healthcare technology company.

She has 12 years experience in financial leadership with several dynamic

companies in the healthcare and information technology industries including

EduPoint, Pacificare, Futurekids and Madge Networks. She also served

two years as an accounting professional with Coopers and Lybrand.

Ms. Gilmore is a certified public accountant and received her bachelor of

Science in Business Administration from California State Polytechnic Un iversity,

Pomona.

PAUL SULLIVAN

YMCA of San Diego County

YMCA CFO Paul Sullivan graduated from Washburn

University in Topeka , KS as an accounting major where

he earned a Bachelor’s Business Administration (BBA)

degree. In college he was recognized as a CPA Scholar,

Wall Street Journal Scholar and School of Business

Scholar.

He brings over 14 years’ of successful YMCA move- Mr. Sullivan.

ment experience that includes experience as a branch executive director as

well as CFO for the Seattle YMCA and Chief Financial Officer for the past

six years at the Houston YMCA. In addition, he has been a CPA since

1983 and has four years’ experience in public accounting and two years’

finance experience in a Fortune 500 company.

Mr. Sullivan and wife LeAnn have three sons, Cory and Shane, who are

cadets at the U.S. Military Academy, and Andy, 13, an eighth grader.

Leading Indicators Index

Sees Downward Movement

The University of San Diego's Index of

Leading Economic Indicators for San

Diego County fell 0.8 percent in July. A

sharp increase in initial claims for unemployment

insurance (a negative for the Index)

and big drops in building permits and

local stocks led the move to the downside.

There was also a moderate decline in the

outlook for the national economy.

The only positive component was help

wanted advertising, which rose sharply during

the month. Consumer confidence was

virtually unchanged, although with a slight

negative bias.

Leading Economic Indicators - 0.80%

Building Permits - 1.25%

Unemployment Insurance - 2.38%

Stock Prices - 1.56%

Consumer Confidence - 0.06%

Help Wanted Advertising + 1.33%

National Economy Outlook - 0.65%

July’s decrease was the fourth in a row for

the USD Index, and was the largest onemonth

decline since September 2001.

(cont’d from page 1)

President’s Corner

These Boards are comprised of representatives

from each chapter in one of six areas in the

United States. The Western Area includes all of

the western states, with significant representation

from the various chapters in California.

For our chapter, one of the primary benefits of

these meetings is to benchmark best practices.

My sense from a roundtable discussion of me mber

practices was that our chapter is doing very

well in two critical elements: membership

growth initiatives and sponsorship program.

In membership, we have moved from about

150 Members — a level at which we had been

for several years — to 171 as of June 30, which

is the end of the annual measuring period.

Although most chapters have had sponsor

programs for some time, we developed a set of

Sponsoring Partners in only two years that is as

high a quality group as any.

You will see a strong lineup of Professional

Development Seminars and chapter programs

for the rest of the year, and I look forward to

your active participation. It’s your chapter!

3


4

FEI SAN DIEGO CHAPTER

Newsletter Editor: Paul Pierpoint

Post Office Box 13054

La Jolla, CA 92039-3054

Phone: 619-231-5953

Fax: 619-231-5958

Email: pierpoint2@cox.net

Website: www.fei.org

SDFEI MEETINGS CALENDAR

MEETINGS AT MARRIOTT LA JOLLA

(except April 2003 Meeting)

October 17, 2002

Professional Development Seminar 4:00pm

“Increasing Profits in Today’s Economy”

Chris Fraga and Pete Henderson,

Acorn Systems, Inc.

Reception 5:30pm

Dinner and Program 6:30pm

“Corporate Governance

in a Post-Enron/WorldCom Era”

November 20, 2002 (a Wednesday)

Professional Development Seminar 4:00pm

“Corporate Reporting & Tax Law Update”

Reception 5:30pm

Dinner and Program 6:30pm

“Real Estate Today: An Analysis”

Sanford R. Goodkin, Goodkin & Associates

December 2002

No Meeting Scheduled

January 29, 2003(a Wednesday)

Board of Directors 4:00pm

Reception 5:30pm

Invited: Robert Herdman, 6:30pm

SEC Chief Accountant

February 20, 2003

Professional Development Seminar 4:00pm

Reception 5:30pm

Dinner and Program 6:30pm

March 20, 2003

Professional Development Seminar 4:00pm

Reception 5:30pm

Dinner and Program 6:30pm

April 16, 2003(a Wednesday)

Board of Directors 4:00pm

Student Scholarship Awards Night 5:30pm

(at University of San Diego)

May 15, 2003

Board of Directors 4:00pm

Reception 5:30pm

Deal of the Year Award Dinner 6:30pm

June 2003

No Meeting Scheduled

FEI Forum . . .

Microsoft, Cisco Are Confident

Challenging 260 financial executives to overhaul their strategic

thinking, FEI’s Forum on Finance and Technology opened September

19 in Las Vegas. Microsoft CFO John Connors discussed

the state of technology and Microsoft’s future, noting that

at a time of negative growth for personal computers, Microsoft

now finds itself forced to “grind out” growth.

He noted specific challenges the company faced this past year,

including the launch of products like Xbox, the video game system,

that were costly and are not yet profitable. Connors said the

software giant has been redesigning its internal organization to

become more decentralized. In fact, it has created seven distinct

business units with separate profit-and-loss centers.

The Microsoft CFO called the first 10 years of this century “the

digital decade,” saying that Microsoft is making a huge bet with

its .NET architecture, which will allow programmers to develop

applications for the Web more rapidly and more systematically.

“Developer productivity is a key competitive advantage for any

company,” Connors said, reciting four principles to which Microsoft

is committed: 1) using small groups of its best people,

both in functional areas and in information technology; 2) standardizing

templates and policies; 3) buying and implementing

packaged software; 4) receiving support and mandates from executive

leadership, giving top-down direction for getting applic ations

funded.

Next day at the Forum, John Chambers, Cisco Systems CEO,

discussed the state of the technology industry and Cisco’s place

in it. He claimed to be an optimist about productivity; in fact, arguing

that the very top companies have the ability to grow at

10% to 15% a year. Web-based applications and the “network

economy” that has emerged have created a new paradigm that

will improve growth prospects. “Permanent” annual U.S. productivity

growth of 3 percent may soon be possible, he added.

Chambers cited three distinct “waves” of e-enablement and

their potential impact on productivity. Only 10 percent of U.S.

companies, he argued, have moved past the first wave, which involves

developing e-marketing, e-commerce, and electronic enablement

of finance and human resources. And only 3 percent

have completed more than 50 percent of waves 1 and 2 (the latter

including e-procurement, sales force automation and supply

chain management). Chambers said Cisco is making more investment

in e-applications than ever, and he wants to see at least

a 50 percent increase in productivity in the next few years.

The Cisco CEO retraced the company’s decision to downsize

dramatically and to understand whether the market or its own

practices were responsible for the sharp downturn that began in

2000. Responding appropriately to a market transition such as

the one that hit the high-tech industry is vital, he said, adding,

“Change only works when you have a culture that accepts it. A

superior corporate culture is one of three keys to success, the others

being speed and a superior brand.”

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