A couple of weeks ago I noted, via Dealbreaker, that the legal risks from signing off on controls might explain why it was taking so long for Citi to find a new CEO. Now comes news from Forbes.com that a considerably less troubled firm, Google, is taking longer than it expected to fill the CFO slot vacated in August.
Now why should that be? After all, you get to work with brilliant people, in a company that’s rapidly taking over the world. Forbes says “[i]ndustry experts offer a few clues.” But here are some hints, many from the Forbes story:
- A corporate culture that encourages "experimentation and risk-taking and shrugs at long-term planning."
- Top managers that are entrenched by dual-class stock and make all major decisions.
- The inability to control risks "at a place that's growing like a weed. . . in a spirited, and indulgent, environment." The story quotes a CFO as saying: "CFOs are supposed to say, 'Damn it, you have to follow the rules.' The CFO takes away the punch bowl."
- "The financial incentives for joining Google in 2008 with its stock price in the stratosphere are less compelling than during its pre-IPO period when Reyes [the exiting CFO] joined.” So it's all risk and no reward.
Some might say that this indicates that SOX is working. The CFO job is a sensitive one and should carry legal risk.
However, a company like Google is likely to be able to recruit somebody at the top of his game. There’s no reason to assume such a person would deliberately compromise his reputation and risk liability in order to let the chief executives take all the candy. The problem under SOX is that a CFO has to worry about what he doesn’t know – that’s what Butler and I have called SOX’s “litigation time bomb.”
It’s reasonable to speculate that Google might have to settle for somebody with fewer high-level opportunities and career prospects than would have been the case in the pre-SOX days. If so, that obviously doesn’t help shareholders.
Of course I realize that just by saying this I’m encouraging disrespect for the law.
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