Finance experts eye opportunities, legislative hurdles By Aubrey Henretty
11/1/2005 - With the U.S. economy's increasingly global focus, in a world with fewer and fewer commercial barriers, finance experts convened to take their industry's pulse during a daylong event sponsored by the Kellogg School of Management.
The 2005 Kellogg Finance Conference, held Nov. 2 at the James L. Allen Center, brought together a host of business leaders and finance scholars who addressed topics ranging from hedge-fund mergers to globalization to the Sarbanes-Oxley Act of 2002.
The conference, whose theme examined the “Face of the New Economy,” offered Kellogg School professors, students and alumni the chance to interact with senior finance practitioners, sharing insights and best practices.
One panel discussion, moderated by Kellogg School Professor Linda Vincent, explored the many facets of Sarbanes-Oxley (SOX), parsing its nuances for conference participants. The conversation considered the costs and benefits of federal accountability standards from both theoretical and practical perspectives. Ensuring a vigorous exchange were panelists Chuck Landes, vice president of professional standards and services for the American Institute of Certified Public Accountants; David MacLennan, vice president of Cargill Inc.; Catherine Neel, vice president and treasurer for NII Holdings; and Nancy Salisbury, senior associate chief accountant for the Securities and Exchange Commission.
With the exception of Section 404, which describes audit and restatement requirements in detail — a practice nearly all panelists agreed was “onerous” — most considered the net effect of SOX a positive one. The legislation, they said, has helped individual companies identify internal weaknesses while also benefiting the larger business world by restoring some of the public trust lost in the aftermath of the accounting scandals that overwhelmed firms such as Enron in the past five years.
Chicago Mercantile Exchange CEO Craig Donohue '95 echoed this sentiment in a keynote address following the Sarbanes-Oxley panel. “In general, I can tell you it's been a positive experience for us,” he said, adding that the legislation has helped the CME find ways to conduct business “much more efficiently.”
His discussion focused on CME's metamorphosis from its humble “pork-belly” beginnings to the pioneering global financial exchange it is today. Donohue, a graduate of the Kellogg Executive Master's Program, attributed much of his company's success to its extensive electronic trading resources, now available to clients all over the world nearly 24 hours a day.
The topic of globalization arose repeatedly throughout the day, including during another panel surveying the economic outlook for the U.S. economy. Panelists included Brian Wesbury '89, chief strategist for Claymore Advisors, and Kellogg Finance Professor Debbie Lucas, who debated with enthusiasm and candor.
“The idea that we can all spend out homes — you know, use it as an ATM — is just wrong,” Wesbury said, going on to repeat the adage that “for every debtor, there is a saver.”
“A saver in Beijing,” Lucas quipped.
Wesbury replied that it didn't matter where in the world the saver resided, so long as the lending and saving that fuels the economy could continue.
Wesbury and Lucas, with panelists Ian Larkin, principal and managing director at American Capital; Jon Schulman, senior vice president of KeyBank; and moderator Janice Eberly, the J. L. and Helen Kellogg Distinguished Professor of Finance and chair of the Finance Department, discussed a variety of macroeconomic factors. Among these were the ailing Social Security and Medicare/Medicaid systems and the trend toward strengthening concentration of wealth in assets rather than bank accounts, which has been growing faster than the GDP for several years, according to panelists.
This trend bodes well for the conference's afternoon keynote speaker, Mark Sutton, chairman and CEO of UBS Americas. He discussed his experience in the growing but still “highly fragmented and highly competitive” business of wealth and asset management, which is “driven by household financial assets.”
Key to Sutton's rise through the finance profession, he said, was his effort to expand his expertise and horizons. Admitting that he “knew more about UPS than UBS” when the latter company merged in 2000 with his then-employer, PaineWebber, Sutton proved himself a quick study. He stressed that the greatest business opportunities are usually granted to “those people who are willing to raise their hands” and lead in dynamic circumstances.
Adaptability was an attribute shared and encouraged by nearly everyone who spoke at the conference. Whether stretching to accommodate new accountability standards, overseas business hours or technology, speakers agreed that staying current with respect to tools and industry trends is crucial to the success of any business.
The importance of leveraging deft business reflexes in a changing world was perhaps most concisely expressed by Donohue in the day's first keynote: “We've got to be part of it,” he said. “We can't let it happen to us.”