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• January / February
• March / April
• May / June
• July
• August
  • Powers of attorney: A different perspective
  • Managing e-mail: A modern-day necessity (Part 2 of 2)
  • Refocus on professional ethics
  • MACPA members approve bylaw revisions
  • Tarola connects Grace values to financial reporting
  • Forget the rules and start over
  • Restructuring, inside and out
• September
• October
• November
• December

Tarola connects Grace values to financial reporting

By Bill Sheridan
MACPA Electronic Communications Manager

Enron. Allfirst. Adelphia. WorldCom. Xerox. Each new accounting scandal becomes a lesson in anger management for Bob Tarola.

"I'm pretty much incensed by what I see," he said. "Whether it's creative accounting or just bad accounting, the compromising activities — both in the preparing world and the auditing world — have been such a surprise to me. I've been in this profession for nearly 30 years and I've never seen anything like it."

He hopes never to again — at least not at W.R. Grace & Co., the Columbia-based chemical and materials giant where he works as senior vice president and CFO. In the past few months, Tarola and his financial team have taken a unique series of proactive steps. The goal: to solidify confidence in Grace's financial information among the public — and within Grace itself.

Shortly after Enron's collapse rocked the business world, Tarola — shaken by the public's sudden lack of trust toward corporate America and its accountants — decided to take matters into his own hands. He took the code of ethics developed by Financial Executives International, an association of leading global companies, and tailored them to Grace's mission. Then, he asked Grace's entire Financial Services Leadership Team to endorse and sign the code. Finally, he presented the document to the Grace Board of Directors "as evidence of our commitment to excellence."

The code promises that all Grace Financial Services leaders will:

• "act with honesty and integrity, avoiding actual or apparent conflicts of interest in personal and professional relationships;
• provide constituents with information that is accurate, complete, objective and relevant;
• comply with rules and regulations of federal, state, provincial and local governments, and other appropriate private and public regulatory agencies;
• act in good faith, responsibly, with due care, competence and diligence, without knowingly misrepresenting material facts or allowing one's better judgment to be subordinated;
• respect the confidentiality of information acquired in the course of one's work except when authorized or otherwise legally obligated to disclose;
• share knowledge and maintain skills important and relevant to constituents' needs;
• be recognized as a responsible partner among peers and in society;
• achieve responsible use of and control over assets and all resources employed or entrusted."

The move came as a pleasant surprise to Grace's directors.

"They hadn't asked for something like this; we simply volunteered it," Tarola said. "Even though we may think we have sound accounting practices and a good organization, we have to go the extra mile to reassure others that we do.

"Boards (of directors) are very, very nervous right now," he added. "I view it as my job to ease their minds. My immediate next job is to reassure the users of our financial statements."

Setting expectations

The code was a natural extension of a project Tarola and Grace's IR leader, Bridget Sarikas, had been refining ever since Tarola joined Grace in 1999. Tarola's goal from the beginning was to develop a competency- and performance-based way to review and reward Grace's top-level finance professionals. This "expectations and review" system is tied directly to Grace's five core values:

• people and teamwork;
• customers and performance;
• integrity and ethics;
• agility and speed;
• innovation and creativity.

By combining these values with four "finance competencies" — business advisory skills, people development skills, relationships with colleagues / customers, and problem solving — Tarola has a tool to fairly evaluate the jobs that Grace's finance professionals do and offer them guidelines for reaching the next level.

"People are acknowledging that they have a professional responsibility to the company — and to themselves — to improve their skills and contribute more to the company," Tarola said. "This gives them a roadmap they didn't have before."

Grace's finance competencies were developed, in part, through the use of customized training from the MACPA and its affiliate, the Business Learning Institute.

The obvious similarities between Grace's system and the CPA vision are no accident. "Almost all the issues the vision contemplates, we are contemplating as well," Tarola said. "(The Grace system) wasn't a result of the CPA vision, but they are very much linked in terms of consistent objectives."

A matter of integrity

The review system, the code of ethics, effective communications with employees (like the company-wide Grace Visions newsletter and the CFO Exchange e-newsletter for Financial Services) — together, they have helped clarify expectations among Grace employees of their jobs and their responsibilities to the public.

And it doesn't stop there. The company has even set up an internal hotline that employees can use to report potential problems. The hotline serves as a reminder of perhaps the most important expectation of all — that everyone at Grace will do the right thing.

"It's not just signing up for a code of ethics," Tarola said. "It's also the processes we have in place —l including the process of setting expectations and reviewing performance — that give people high confidence that what they're seeing in the way of financial information is a true, fair view."

And the accounting scandals? The solution, said Tarola, lies at the heart of every CPA.

"I don't think anyone in public practice or private industry should lose sight of what they are first — an accounting professional who has a responsibility to follow and honor a code of ethics. To me, that has to be the bottom line — honoring your personal integrity and your commitment to your profession."