The Wall Street Journal CFO Network annual meeting, held June 11-12 in Washington D.C., came at an interesting time. U.S. President Donald Trump was meeting with North Korea Leader Kim Jong-un in Singapore, and the G7 Summit had wrapped up with a controversial tweet just days before. Trade and global relations are important issues for CFOs, as are accounting standards, blockchain technologies, cybersecurity, and more.
These and other topics were covered during the fascinating, two-day event, featuring panelists from both the public and private sectors. Here are eight takeaways from the meeting, which was sponsored by Workday.
Not everyone agrees on the benefits of economic stimulus efforts such as corporate tax cuts. Kevin Hassett, chairman of the White House Council on Economic Advisers, is bullish on a continuing strong economy: “We don’t see any downturn on the horizon,” he said, and expects “three percent growth sustained out past the next couple of years.” This was in response to a question by a Wall Street Journal editor about a recent prediction by former Federal Reserve chief Ben Bernanke that economic stimulus efforts would soon negatively impact the economy.
Revenue recognition isn’t easy. In an electronic poll, the audience of CFOs were asked which of four accounting standards is the most difficult to implement. Revenue recognition took the lead with 46 percent of the vote, barely beating out lease accounting at 43 percent. The other two, credit losses and hedging, apparently don’t cause as much pain.
CFOs need to be involved in preventing and acting upon sexual harassment in the workplace. That includes providing HR professionals with a direct line to report allegations to executive leadership while ensuring they have legal protection if they do so. “You want your HR professionals to tell you the truth—don’t sugarcoat,” said Debra Katz, a partner at Katz, Marshall & Banks, LLP. She added that workforce training should “move away from risk reduction to instilling the values of a good culture.”
Blockchain technology offers great promise, but more needs to be done. Blockchain technology will address one of the biggest problems of finance—too much duplication. “If you can have a shared ledger, everyone sees it in real time,” said Michael Casey, co-author of “The Truth Machine: The Blockchain and the Future of Everything.” He said that to develop a broader infrastructure for blockchain, “the CFO will have to become more collaborative with external CFOs; this is a ‘we,’ not an ‘I’ question.” According to an audience poll, 35 percent of respondents said their companies are already using blockchain technology. Caitlin Long, former chairman and president of Symbiont, said the percentage is likely higher in the finance, logistics, and healthcare industries.
Not all CFOs agree with the current administration’s tough stance on trade. In an audience poll, 58 percent said U.S. trade policy is headed in the wrong direction, while 42 percent said it is not. Peter Navarro, director of the National Trade Council at the White House, made one thing clear: The Trump Administration will stay tough on trade. He referred to “unfair” trade practices by China, Europe, Mexico, and Canada, and said tariffs and investment restrictions against China scheduled for later this month are intended to slow down a growing trend of the Chinese acquiring American companies that are developing “emerging industries of the future” such as artificial intelligence, blockchain, and robotics. Carla Hills, chair and CEO at Hills & Company International Consultants and lead architect of the original NAFTA agreement, countered that some CFOs will be “adversely affected” by the tough stance. Since NAFTA, “we’re richer and more productive because we opened our markets,” she said.
CFOs are divided on whether private capital is better than public capital. While private capital markets have leapfrogged public markets to become the most popular way for companies to raise cash in the U.S., just 36 percent of poll respondents said that was a good thing, while 33 percent said it was bad and 30 percent were neutral. Yet if companies do choose to grow through private rather than public capital, they should follow many of the same precautions of public companies. “You must have more rigorous communications and investor relations policies,” said Anna Pinedo, partner and co-head, global capital markets group, Mayer Brown LLP. “Even if an IPO is a long way off, you need to think about how information is managed.”
The chief security officer role is increasingly critical. Among audience members polled, 65 percent said security chiefs are involved in the key decision-making processes at their companies. Phyllis Schneck, managing director and global leader, cyber solutions, Promontory Financial Group, said more needs to be done. “We really need to make this role much more central,” she said. “We’re seeing that person be an interface to the board, advise with IT or the CIO, and take much more of an active role in what a company is about and what it does,” she said, adding “that’s a hard skillset to find.”
Only time will tell if the historic meeting between Donald Trump and Kim Jong-un in Singapore will be fruitful. “For me, the real issue was not about the handshake,” said Jake Sullivan, senior fellow, Carnegie Endowment for International Peace. Kim Jong-un “very consciously and explicitly said this is just a repeat of what he said to [South Korea] President Moon a few weeks ago, which is we will work toward denuclearization.” The level of “mistrust and cynicism” between the U.S. and North Korea remains high, he said. “It doesn’t mean we won’t eventually get there, but that didn’t come out in the summit.”
For more on the event, see The Wall Street Journal’s coverage.