BY KATE BERRY
More CFOs are jumping ship these days.
Chief financial officers recently resigned from several Southern California companies that have disclosed earnings restatements with the Securities and Exchange Commission.
One company that’s seen plenty of upheaval on its financial executive front is Autobytel Inc. in Irvine.
Autobytel, in the midst of a multiyear financial restatement and facing delisting from Nasdaq, recently said that its controller is leaving. The resignation of Matthew McDowell follows former chief financial officer Hoshi Printer’s resignation in November.
The company, which connects car shoppers with dealers via its Web site, has missed the deadline for filing its 2004 annual report because of stricter rules required by the Sarbanes-Oxley accounting reform act, the company said.
Autobytel plans to restate results going back to 2002 because of a “material weakness” in its internal controls, according to a filing with the Securities and Exchange Commission.
The company has asked Nasdaq for an extension to May 15 to get its filings in order. Otherwise, Nasdaq will delist the company from the exchange.
Printer, who stepped down when Autobytel announced the restatement, has remained a consultant to the company. Autobytel hasn’t named a CFO replacement.
Meanwhile, a company in Anaheim, New Horizons Worldwide Inc., said it delayed its annual report filing after losing its chief financial officer and controller late last year.
New Horizons, which operates information technology training schools, said its current financial staff didn’t have enough time to put together the reports needed to meet Sarbanes-Oxley’s internal controls requirement.
Several weeks ago, Los Angeles-based Nara Bancorp reassigned its CFO to a non-accounting position after the bank discovered that a $600,000 payment to its former president and chief executive , for car expenses and country club dues , was not accounted for properly.
Other Southland companies losing their CFOs of late include Commerce-based 99 Cents Only Stores and Calabasas-based Countrywide Financial Corp.
The rash of resignations can be attributed at least partly to federal regulations passed in 2002 to weed out accounting problems at public companies. The central issue involves compliance with Section 404 of the Sarbanes-Oxley Act, which was designed to hold executives accountable for financial fraud.
Many say new requirements are creating a sea change in the accounting profession, whose reputation took a beating after high-profile scandals at Enron Corp. and WorldCom Inc.
“CFOs are spending less time running the business and more time on compliance and controls,” said Rodney Carter, senior vice president and chief financial officer at Petco Animal Supplies Inc. in San Diego. “Some people are saying life is too short and others are trying to do the right thing. I think everyone is trying to understand the risks and rewards, and what the trade-offs are.”
The new SEC rules were created so companies themselves would catch material weaknesses in their own accounting practices.
The piles of paperwork and hours required to meet the new requirements have created upheaval among the CFO ranks, essentially making the job far less appealing and more difficult. By some estimates, turnover among CFOs has jumped dramatically in the past two years.
“The pressure is enormous,” said Lorraine Hack, a former chief financial officer and member of the financial officers practice at executive search firm Russell Reynolds Associates. “A lot of CFOs are just opting out, saying they don’t want to do this anymore, it’s just not that much fun and has lost its appeal.”
Hack said two factors driving turnover among CFOs are the pressures of complying with Sarbanes-Oxley and the competitive drive to beat quarterly earnings.
In the past year, turnover in the ranks of Fortune 500 company financial professionals, which include chief financial officers, controllers and treasurers, increased 23 percent. Resignations increased 21 percent from 2003.
Part of the increase in turnover was attributed to promotions. More CFOs are being sought out for chief executive jobs because of the desire by directors to have financially savvy executives leading their company.
Chuck Eldridge, a practice leader in the financial officer’s unit at Korn Ferry International’s office in Atlanta, said he has seen a surge in demand for internal auditors and CFOs.
“Everybody wants the CFO as a strategic business partner but now there’s this heavy element of technical accounting abilities,” he said. “Another reason is that a lot of the weight and burden is on the shoulders of CFOs because if there’s a financial restatement, a CEO is not going to fire himself. It’s just an accumulation of events leading to a really tough job in today’s market.”
Kate Berry is a staff writer for the
Los Angeles Business Journal.