TOP CFOS - America’s Best CFOs

Our annual survey shows that when the going gets tough, the tough CFOs really do get going.

Chief financial officers have long had to perform double duty, keeping tabs on day-to-day number-crunching and financial reporting while working with chief executive officers and other members of top management to develop long-range strategic visions for their companies. With the collapse of the subprime mortgage market last summer and the worsening credit crunch, many CFOs are finding themselves saddled with yet another responsibility, that of economic strategist: They need to help their companies navigate the economy’s shoals and keep jittery investors abreast of fast-changing conditions. As a result, an already difficult job has become even more challenging.

“Everybody’s got a plan — until they get hit,” says Nike CFO Donald Blair, quoting former world heavyweight boxing champion Mike Tyson. For the Beaverton, Oregon–based shoe and sports apparel company, the first hit came in the form of the slowdown in U.S. consumer spending that began last summer, as the mortgage crisis was unfolding. Nike responded to sluggish sales with a 5 percent price cut on its athletic shoes and Brand Jordan sportswear; the lower prices immediately prompted higher unit sales and contributed to the company’s 11 percent year-over-year gain for first-quarter fiscal 2008, which ended August 31.

Since then the hits to U.S. businesses have been coming fast and hard, even as earnings remain strong for some companies. Housing prices have been falling and ended last year down 8.9 percent, on average, from 2006 — the sharpest decline in 20 years, as measured by Standard & Poor’s Case-Shiller U.S. national home price index. The loss of home value not only further eroded consumer spending, which the Commerce Department said increased just 1.9 percent in the fourth quarter, but also contributed to a 40 percent surge in personal bankruptcies last year, according to the Alexandria, Virginia–based American Bankruptcy Institute.

All of this negative economic data has not been lost on CFOs, many of whom have serious concerns about the country’s fiscal health even as they express confidence in their own companies’ abilities to weather the storm. According to Michael Cangemi, president and CEO of Financial Executives International, a Florham Park, New Jersey–based association of financial executives, optimism levels among CFOs with regard to the U.S. economy hit a three-year low of 56 percent in the fourth quarter, down from 63 percent in the third quarter. However, these same CFOs were more sanguine about their own companies’ outlooks, with 70 percent expressing optimism in fourth-quarter 2007, down just 2 percent from the third quarter.

Being able to respond to sudden economic shifts without losing sight of long-term objectives is one of the hallmarks of a successful CFO. “It’s no longer just recordkeeping and financial transactions,” says Cangemi. “The job now is so broad, and good CFOs are the ones who have multiple skills.”

Consider Procter & Gamble Co.’s CFO, Clayton Daley Jr. He acknowledges deterioration in the current economic environment but is confident the Cincinnati-based consumer products manufacturer will thrive. “People are going to buy laundry detergents, hair care and paper products no matter what,” he says. “The demand for our products is relatively constant.” P&G has responded to rising costs of commodities and fuel by raising its prices by roughly 6 percent — not so much that loyal customers are driven to change brands. “So far that’s been managed very well, although the competition is never trying to make your life easy,” Daley says.

Rising wheat and soybean prices and transportation costs are similarly affecting Battle Creek, Michigan–based packaged food preparer Kellogg Co., prompting CFO John Bryant to amend his earnings projections. “Our guidance now includes significantly higher incremental commodity, energy, fuel and benefits inflation, of more than 65 cents per share, versus our earlier estimate of more than 40 cents per share,” he says. Last year Kellogg reported diluted earnings per share of $2.76, up 10 percent from the $2.51 reported in 2006; the company predicts earnings per share in the $2.92-to-$2.97 range this year. “Despite the commodity volatility, we remain confident in our ability to deliver another year of sustainable growth,” says Bryant.

Such confident performance has created big fan bases for Blair, Bryant and Daley. They rank as the top CFOs in their industry sectors (Apparel, Footwear & Textiles; Food; and Cosmetics, Household & Personal Care Products, respectively), according to Institutional Investor’s annual survey of portfolio managers and investment analysts. The magazine surveyed 675 investment professionals at some 350 of the world’s most influential money management firms and asked them to identify the best financial executives in the sectors they follow. The ranking of the top CFOs in 56 industry sectors appears on page 70; profiles of six of the best executives and their strategies for coping with current market conditions appear on the following pages. For more information, including the survey’s methodology, please visit our Web site,

Howard Atkins, CFO at Wells Fargo & Co. and the top-ranked executive in the Banks/Large-Cap sector, credits a combination of patience and discipline with helping his San Francisco–based financial services firm minimize its exposure to credit-related losses. In 2005 and 2006, when many big banks began leveraging their balance sheets by buying or sponsoring collateralized loan and debt obligations, covenant-lite large corporate collateralized bond obligations and other structured investment vehicles, as well as high-risk assets that included subprime mortgages, Wells Fargo resisted the temptation to follow suit. “We did not think the risk was being priced correctly, and it was really not appropriate to take on a lot of risk,” says Atkins. “As a result, our capital ratios in ’05 and ’06 went up when everyone else’s went down.” Moreover, Atkins notes, many of Wells Fargo’s competitors exhausted their hybrid capital issuance capacity to buy back their common shares. “They leveraged their balance sheets by issuing less expensive capital to buy back more expensive capital, but in the process of thus adding leverage, they weakened their capital structure,” he explains.

In July, as the mortgage market was imploding, Wells Fargo announced that it would stop issuing subprime loans and sharply reduce the number of home equity loans made through brokers.

“Atkins has proven himself to be the best CFO in his industry, due to a superior instinct for managing his balance sheet for interest rate and credit risk at a particularly tricky cyclical inflection point,” says one fund manager. “Most of his peers have stumbled here.” In the fourth quarter Wells Fargo took a $1.4 billion write-down for credit-related losses, far less than rivals such as Citigroup and Merrill Lynch & Co., which wrote down $18.4 billion and $16.7 billion, respectively.

Kellogg’s Bryant also wins praise from investors for his deft maneuvering in challenging times and for keeping shareholders informed of developments every step of the way. Twice last month the company reaffirmed its outlook for the year, predicting earnings-per-share growth of 5.8 percent to 7.6 percent despite rising commodities prices and a volatile U.S. economy. Bryant says Kellogg can achieve its goals by raising prices (which it did last month, by 3 percent on average), improving its product mix and expanding into growing markets such as Asia and Latin America.

Bryant says the company has allocated more money to advertising in an effort to raise awareness and spur sales; last year, for the first time, Kellogg spent more than $1 billion on advertising worldwide, up 15.7 percent from 2006. “We have increased our presence with more-targeted communications,” Bryant said in a January conference call with investors. “Advertising is an essential part of our business model, and we have even more investment plans for 2008.”

Nike is also working to raise its global profile as the U.S. economy falters. Blair says the company has been shifting its focus to foreign markets in an effort to maintain its status as the world’s biggest shoe and sports apparel business. Domestic revenues accounted for 37 percent of Nike’s 2007 total, down from 44 percent a year earlier, and that figure is likely to decline further thanks to the company’s growing dominance in China and its October deal to acquire U.K. athletic footwear and apparel maker Umbro for $582 million.

Nike has high hopes that China will become its second-biggest market by next year (it is currently fourth), ahead of Europe but behind the U.S. Revenues in China have been growing at a rate of 50 percent per year since 2003, and the company predicts sales in excess of $1 billion this year. Although not an official sponsor of the 2008 Olympic Games in Beijing, Nike is sponsoring 22 of China’s 28 participating teams, has hotshot hurdler Liu Xiang endorsing the brand and in August opened a flagship store in the Chinese capital. Revenues surged 35 percent in second-quarter 2008, which ended November 30.

Investors are impressed. “Blair has brought the right balance of discipline to the creative organization, and he is very well regarded both externally and internally,” says one money manager. “He has helped to produce consistent results.”

Even as many of the CFOs in this year’s survey are trying to come up with ways to sustain growth in a turbulent economic environment, Cognizant Technology Solutions Corp.’s Gordon Coburn, the No. 1 CFO in Computer Services & IT Consulting, faces a very different challenge: maintaining control over a company in the throes of explosive expansion. The Teaneck, New Jersey–based outsourcing-services provider is experiencing a surge in demand as U.S. companies ship parts of their operations overseas to lower expenses. Cognizant’s fourth-quarter revenue jumped 41 percent year-over-year, to $600 million, and Coburn predicts first-quarter 2008 sales of at least $640 million. Such rapid growth is not without its challenges, however.

“How do we keep what’s good about Cognizant? By continuing to follow the strategy that we have been — reinvesting in the long term and empowering business heads,” says Coburn.

The latter strategy is also favored by Thomas Staggs, CFO of Walt Disney Co. and the No. 1 finance director in Entertainment. “I’m lucky that I have great people in the key positions that report to me,” he says. “They keep me from being a victim of my own breadth of responsibilities.” In addition to overseeing the Burbank, California–based company’s worldwide finance functions, Staggs is responsible for corporate strategy and development, brand management, acquisitions, corporate alliances and investor relations.

With the news that the company has been reporting recently, the investor relations portion of Staggs’ job has been a breeze, and the good times are not likely to end anytime soon, he says. Thanks largely to rising attendance at its resorts and theme parks and successful films such as Ratatouille and Pirates of the Caribbean: At World’s End, Disney reported record earnings of $4.7 billion for fiscal 2007 (ended September 29), a year-over-year increase of 38.2 percent; diluted earnings-per-share growth was 37.2 percent. “The pace of business to us looks pretty good,” Staggs said in a conference call with analysts last month. “We feel like we’ve got the ability to respond if necessary, but right now we’re feeling pretty optimistic about where things go from here.”

That sentiment appears to be shared by most of America’s Best CFOs.

Howard Atkins, Wells Fargo & Co.

Age: 57 Year named CFO: 2001

Number of employees: 159,800

Earnings: $8.1 billion

Compensation: $3.6 million

Stock options: $2.8 million

Atkins: “A great CFO acts a little bit like the conscience of the organization.”

One voter: “Atkins’s proactive sales of low-yielding securities have helped him maintain the bank’s high level of profitability, and he has also managed the mortgage-servicing portfolio superbly by hedging this asset well. Peers have stumbled in both of these areas.”

Howard Atkins uses two words to describe the Wells Fargo & Co. approach to doing business — “patience” and “discipline” — and that approach helped protect the San Francisco–based financial services firm from sustaining greater damage in the meltdown of the subprime mortgage market and subsequent credit crisis. Wells Fargo announced in July that it would stop issuing loans for subprime mortgages, as the market was showing signs of collapse, and would curtail the use of brokers for home equity loans. The bank took a $1.4 billion write-down for credit-related losses in the fourth quarter, far less than many other banks.

“To date, the financial services industry has announced over $100 billion in credit reserve builds in asset write-downs,” Atkins told analysts and investors in a January conference call. “While we were not immune to the adverse economic environment, we largely avoided many of the problems and costly write-downs that other large financial institutions incurred.”

As a result, Wells Fargo is currently much better situated than its peers. “One opportunity the challenging environment provides is the potential to do more acquisitions,” he says. “Because of our strong balance sheet, we are in a strong position to take advantage of well-priced transactions.”

That does not mean the company is about to go on a buying spree. Wells Fargo remains committed to its strategy of focusing on niche opportunities that meet the bank’s criteria for accretion and returns, Atkins says. In the fourth quarter the bank completed its $7.4 billion purchase of Northern California’s Greater Bay Bancorp, the third-biggest acquisition in Wells Fargo’s history, and in January it agreed to buy the banking operations of United Bancorp. of Wyoming, with $1.7 billion in assets.

Atkins declines to take credit for the success of Wells Fargo, preferring to let the results speak for themselves. Last year the company reported record revenue of $39.4 billion, up 10.4 percent from 2006. Although the bank’s 2007 net income ($8.1 billion) and diluted earnings per share ($2.38) were down 4 percent from the previous year, Wells Fargo beat the Street’s expectations by reporting smaller declines than analysts anticipated. “Having discipline and patience and these results — they reinforce each other,” Atkins says.

This focus has not gone unnoticed by the investment community. “He consistently reminds investors that Wells Fargo is in the business for the long term — and capital, operational and mergers and acquisitions decisions are made toward that long-term goal,” says one money manager.

Donald Blair, Nike

Age: 50 Year named CFO: 1999

Number of employees: 30,200

Earnings: $1.5 billion*

Compensation: $2.8 million*

Stock options: $778,415*

Blair: “Business is a team sport, and if you have the right team supporting you, you can be tremendously effective.”

One voter: “Under Blair asset turns have improved significantly, which directly translated into higher free-cash-flow dollars per diluted share, which is the ultimate metric by which to judge public companies.”

The swoosh is still there, but Nike looks a whole lot different than it did in 1999, when Donald Blair was named chief financial officer of the Beaverton, Oregon–based sports apparel giant. Blair reorganized the finance department into three broad subgroups: planning, controlling and expert functions (tax, internal audit and investor relations). “There is power in aligning the organization this way, by putting strong leaders in place and building a depth of financial excellence,” Blair says.

Communicating the company’s financial successes and long-term goals, Blair says he strives to provide “clarity and consistency” for shareholders and employees alike. Nike aims for dependable high-single-digit revenue growth, earnings-per-share growth in the midteens and an increasing return on invested capital. For the seven fiscal years ended in May, Nike averaged annual revenue growth of 9 percent, annual earnings-per-share growth of 18 percent and an increase in return on investment from 14 percent to 23 percent. Revenue for the second quarter of fiscal 2008, ended November 30, grew year-over-year by 14 percent, to $4.3 billion; net income rose 10 percent, to $359.4 million.

In February 2007, Nike announced an aggressive expansion plan to increase annual revenues from $15 billion in 2006 to $23 billion by 2011. It is refocusing on its core business of Nike brand apparel and sports equipment, as well as more profitable units like Converse and Cole Haan, and jettisoning less successful subsidiaries, such as its Starter line of sportswear, sold in November.

Blair expects 2008 to be a banner year for Nike, thanks in part to the Beijing Olympics. Although not an official sponsor of the games, Nike is sponsoring most of China’s 28 competing teams and is already the country’s No. 1 sports apparel retailer, with sales of $600 million last year. It expects to top $1 billion this year.

* For the fiscal year ended May 31, 2007.

John Bryant, Kellogg Co.

Age: 43 Year named CFO: 2006

Number of employees: 26,500

Earnings: $1.1 billion

Compensation: $950,000

Stock options: $1.8 million

Bryant: “I’ve got a good bench.”

One voter: “He is extremely knowledgeable and a forward thinker.”

John Bryant gives more credit than he takes for the recent successes of Kellogg Co. Since 2004, when former CEO Carlos Gutierrez launched a turnaround at the Battle Creek, Michigan–based cereal and snack food manufacturer, the company has returned more than $3.3 billion to shareholders, increasing its dividend per share by more than 20 percent and repurchasing nearly $2 billion in stock. (An additional $650 million is earmarked for stock repurchases this year.)

“The business has done well because of the actions of a lot of people,” says Bryant, a native of Australia who joined Kellogg in March 1998. Since July he has been both CFO (a post he first held in 2002–’04 and then starting again in 2006) and president of North American operations. “The business does better through the CFO doing less,” says Bryant, who believes in empowering the division heads who report to him.

Not that Bryant himself has not been busy. He directed the integration of cookie maker Keebler Foods Co., which the company acquired for $3.6 billion in 2001; oversaw the implementation of Kellogg’s volume-to-value strategy, devised to increase revenues by shifting resources to higher-margin products (now known as the company’s sustainable-growth strategy); and decentralized the finance division in 2003 so that those employees were deployed throughout each unit of the company. Now he and Kellogg must find ways to maintain earnings and revenue growth in tougher economic times. Last year Kellogg reported a 9.9 percent year-over-year increase in net revenue and a 10 percent increase in earnings per diluted share, from $2.51 to $2.76; last month the company forecast 2008 earnings per share of $2.92 to $2.97, despite increased costs for grain and shipping coupled with a slowdown in consumer spending. CEO A.D. David Mackay told analysts in January that Kellogg would achieve its goals by raising prices, boosting advertising and driving deeper into foreign markets. That month the company announced it had acquired Russian cereal manufacturer United Bakers Group to strengthen its position in Eastern Europe and Russia.

Money managers are confident that Bryant will keep them up to date on further changes at Kellogg. “He is very articulate in helping investors understand the vision of the company,” says one.

Gordon Coburn, Cognizant Technology Solutions Corp.

Age: 44 Year named CFO: 1998

Number of employees: 55,400

Earnings: $2.1 billion

Compensation: $1.6 million*

Stock options: $3.5 million*

Coburn: “If you empower business heads, they will do incredible things.”

One voter: “While Coburn is very Street-friendly, he isn’t afraid to make decisions that aren’t popular with the Street.”

Holding down two jobs at once requires Gordon Coburn to be very flexible, as does the fact that two thirds of his employees live and work in India, half a world away from his office at company headquarters in Teaneck, New Jersey.

For the past decade Coburn, who also is director of the Information Technology Association of America, has been chief financial officer at Cognizant Technology Solutions Corp., an information technology consulting firm and outsourcing-services provider for a wide array of businesses — notably those in financial and health care sectors — across Asia, Europe and North America. In January 2007, Coburn added the title of chief operating officer to his business card.

Since being spun off from Dun & Bradstreet Corp. in 1996, Cognizant has grown rapidly; it has 55,400 employees today, five times the workforce it had when Coburn was senior director of group finance in 1996. Last fall he directed the company’s acquisition of Bridgewater, New Jersey–based software developer MarketRx for $135 million in cash.

During this growth stage, Coburn says he has been “focused on keeping the DNA and culture of the company consistent. I’m also very conscious of balancing the need to remain nimble both to our clients and our employees.”

It has been a successful balancing act so far. Revenues jumped 50 percent last year, to $2.14 billion, including a year-over-year increase of 41 percent, or $600 million, in the fourth quarter, ended December 31.

Also in that busy fourth quarter, Cognizant completed a $105.4 million stock repurchase program authorized by its board of directors in September. It closed the year with more than $670 million in cash, “leaving us with the flexibility to invest in our people, services and infrastructure,” Coburn says. The company expects revenues to rise 38 percent, to $2.95 billion, in 2008 and plans to expand its workforce by 30 percent, to 72,000, to keep pace with rising demand for outsourcing services such as order fulfillment, customer assistance and other functions, as businessses look for ways to reduce their operating costs. About 80 percent of Cognizant’s clients are U.S.-based companies.

Meantime, investors admire Coburn’s consistency. Says one portfolio manager, “I have spoken to him for almost a decade, and he has maintained the same demeanor and accessibility from the time the company was a tiny player to a Standard & Poor’s 500 index constituent.”

* For the fiscal year ended December 31, 2006.

Clayton Daley Jr., Procter & Gamble Co.

Age: 56 Year named CFO: 1998

Number of employees: 138,000*

Earnings: $10.3 billion*

Compensation: $7.6 million*

Stock options: $1.3 million*

Daley: “This is not an easy job, and it is not getting any easier, because the whole world has become a more volatile place.”

One voter: “Daley gets to the point and runs a tight ship.”

Procter & Gamble Co. CFO Clayton Daley Jr. expects to finally accomplish a major goal in 2008: “to bring the Gillette acquisition that we did a few years ago successfully to the finish line.”

Cincinnati-based P&G acquired Gillette Co. in 2005, in a $57 billion deal that created the world’s biggest consumer products company but has not yet resulted in the operational cost savings that had been expected. “Integrating a major company with yours has a lot of aspects to it in terms of integrating go-to-market, back office and purchasing,” Daley says. “There are a lot of building blocks that are critical in achieving cost synergies.”

Although Daley believes that the acquisition and integration have gone extremely well — “Gillette is broadly recognized as being on the way to being successful,” he says — he is reluctant to declare victory yet, given the challenges that the company is currently facing.

P&G stock was down 9.4 percent from the start of the year through February 29, as a result of market concerns about a slowdown in consumer spending in the U.S. and rising costs. “We’re a purchaser of a lot of raw materials — packaging and transportation — that have gone up in cost pretty dramatically,” Daley says. “It’s a major challenge.” P&G increased prices in January on many of its products by about 6 percent.

Going forward, Daley says, the company is more likely to shed assets than acquire: “When a business doesn’t deliver or is very inconsistent, it could be a candidate for separation.”

One business in the process of being spun off is Folgers Coffee Co. Folgers is sold almost exclusively in the U.S. and Canada and therefore is out of sync with P&G’s plan to build global brands — a strategy that is taking on renewed urgency given the faltering U.S. economy. But business is brisk in emerging markets, especially Africa, China and Eastern Europe. Emerging-markets sales accounted for 27 percent of the company’s total $76.5 billion in sales for fiscal 2007, up 12 percent over the previous year.

Investors are pleased with the way Daley keeps them informed of developments at P&G. “He communicates clearly and asks shareholders for their opinions,” notes one money manager.

* For the fiscal year ended June 30, 2007.

Thomas Staggs, Walt Disney Co.

Age: 47 Year named CFO: 1998

Number of employees: 137,000

Earnings: $4.7 billion*

Compensation: $9.1 million*

Stock options: $1 million*

Staggs: “A CFO needs to understand his or her company’s competitive advantages and how to sustain, extend and mine those advantages to create value over time.”

One voter: “He knows what he’s doing, communicates well with investors and inspires confidence.”

As any student of the Great Depression can attest, during times of economic turmoil, folks crave entertainment even more than they do in times of prosperity. That’s one reason Thomas Staggs is confident that multimedia giant Walt Disney Co. can weather any economic slowdown. The longtime CFO’s attitude — as well as the Burbank, California–based company’s results — inspire similar confidence among investors and Wall Street analysts.

“The longevity of our library is a particular strength,” Staggs says, referring to franchises such as Pirates of the Caribbean (the third movie in the series, Pirates of the Caribbean: At World’s End, had worldwide revenues of $960 million last year) and Toy Story, and TV shows like the wildly popular High School Musical and Hannah Montana. “The benefits that these franchises will continue to deliver to the company and the brand well into the future is a real value-creation story,” he says, adding that Disney’s challenge going forward is to continue creating content that can be franchised to extend its life beyond initial release.

In addition to overseeing Disney’s worldwide finance functions, Staggs is responsible for corporate strategy and development, corporate alliances and investor relations. “The best part of my job is being able to focus across industries and issues,” he says.

The company impressed Wall Street last month with its first-quarter results for fiscal 2008 (ended December 31), which exceeded targets thanks to high attendance at its Walt Disney World Resort theme park in Florida and growth in its ESPN sports cable network. The company reported net profits of $1.25 billion, or 63 cents per share — surpassing the average target of 52 cents per share forecast by the Street.

Staggs wins praise from investors for his communication skills and the company’s method of reporting financials. “Taking the mystery out of the numbers enables investors to make investment decisions based on fundamentals and facts instead of guesswork as to what are the key drivers of profitability,” explains one portfolio manager.

The CFO also inspires confidence among Disney’s board of directors. Last month they renewed Staggs’ contract through March 2013.

* For the fiscal year ended September 29, 2007.