Directors & Boards: Reader Profile

Home |

Subscriptions |

Articles Archive |

Current Issue |

Back Issues |

Shopping

Advertising |

List Rental |

Editorial Calendar |

Background |

Reader Profile

Barbara A. Klein
Senior VP and CFO
CDW

Editor's note: Each month, we ask a Directors & Boards reader to comment on critical issues facing directors today. If you'd like to participate in this section in the future, please email Scott Chase.

What is your opinion on the recent U.S. Chamber report that calls for public companies to stop issuing earnings guidance?

The study suggests that if companies stop issuing earnings guidance, they will     place a greater emphasis on long-term value creation, since they will be less pressured to meet short-term earnings targets. This, in turn, should benefit investors and further the interests of the U.S. economy.

The relationship between earnings guidance and the market’s short-term focus has been a popular topic for several years. In thinking about the market as a whole, the investment community is particularly driven by short-term results, as many portfolio managers and sell-side analysts-and their clients-are focused on quarterly performance. Even if earnings guidance was a thing of the past, investors might still measure a company’s results based on the sell-side analysts’ consensus estimates and the media may continue to report whether a company “beat” or “missed” the consensus.

The goals of the study are good and companies should focus on long-term valuation. But whether companies provide guidance or other pertinent information on their business, the market will still be focused on quarterly results. Breaking the short-term cycle focus would require cooperation from all market participants.

Do you think that public companies should move away from the quarterly guidance with one earnings per share number to annual guidance with a range of EPS numbers?

All companies should first articulate their strategy and objectives to investors.Then companies should do what is right for their particular circumstances with respect to any guidance they provide. For example, some companies, such as those with longer sales cycles, may have greater visibility regarding revenue and the ability to more accurately estimate future earnings. Some companies may be more transaction-oriented with less visibility regarding revenue and earnings. However, simply providing an EPS range may not adequately capture a company’s complex valuation drivers.

Companies that elect not to provide guidance could consider providing other types of information, such as financial and operating metrics and objectives to assist investors’ decision making.

What is the practice in your own company?

In 2003, CDW chose to discontinue providing earnings guidance. The reason for the change was so that management could spend less time managing earnings     guidance and more time managing the business. We also understood that our investors are very interested in the progress of the business, so we started reporting monthly sales results. On a quarterly basis, we provide stated objective ranges for gross margin and operating margin. In addition, we discuss our long-term investments, industry drivers affecting our business, and progress against our strategies and objectives.

CDW consistently ranks high on the corporate governance quotient. What factors have contributed to this?

CDW has always had a strong commitment to conducting business with the     highest ethical standards. We know that the trust of our customers, business     partners, coworkers, and shareholders is a critical element of our past and     continued success.

CDW has a code of business conduct and a set of values referred to as the “CDW     Way”. Examples of the values include that we keep our commitments, we treat     others with respect, and we listen. The code of business conduct provides guidance on ethical and legal issues that the company may face and includes references to other resources for guidance to coworkers on specific situations.

CDW also has an ethics helpline, operated by an independent third party, for coworkers who would like anonymous and/or confidential guidance on questions or concerns regarding an ethical, compliance, or legal issue. CDW’s board of directors has a corporate governance committee and one of its responsibilities includes reviewing the company’s corporate governance guidelines and practices.

Given all the regulatory changes/pressures, how do you think the role of the CFO has evolved (or should evolve) in recent times?

The role of the CFO has certainly been impacted as a result of changes in the regulatory environment over the past few years. While CFOs have always had to be concerned about internal controls and compliance with all applicable standards and requirements, the time and expense required to document and test internal controls increased significantly. In addition, the CFO and other members of the senior management team need to spend more time on new certifications relating to internal controls and reporting procedures.

The other aspects of the role of the CFO and expectations of the CFO, however, continue. A CFO must be a strong business partner, participate in developing strategy, build a strong team, measure and interpret business results, manage risk, and be effective communicators with analysts and investors, among some of his or her responsibilities. So, CFOs must continue to balance all of their responsibilities while also be aware and knowledgeable of trends and developments in their professions and respective businesses and industries.

Barbara A. Klein is senior vice president, chief financial officer and executive committee member of CDW, a Fortune 500 company and a leading provider of technology products and services for business, government and education.

Klein is responsible for financial planning and analysis, accounting, treasury, tax, risk management, internal audit, investor relations and strategy.

Klein joined CDW in 2002, bringing more than 20 years of financial and leadership experience to the management team. Previously, she served as vice president of finance and chief financial officer of Dean Foods Company. Prior to Dean Foods, Klein served as vice president and corporate controller for Ameritech Corporation. Additionally, Klein held senior management positions at Pillsbury and Sears, Roebuck and Co.

Klein, a certified public accountant graduated magna cum laude from Marquette University with a Bachelor of Science degree in Accounting and Finance and a Master of Business Administration degree from Loyola University. She is a member of the American Institute of CPAs, the Illinois Society of CPAs, Chicago Network, the Financial Executives Institute and Chicago Finance Exchange. Additionally, Klein serves on the Board of Directors of Corn Products International, Inc. and on the Board of the Tax Assistance Program, an organization that provides free tax return preparation for low-income families.