Keeping the CEO Out of Jail

eLABorations: CEOs who are now legally accountable for funny business on their watches will want accurate information

In this period of intense bottom-line scrutiny, we hear a lot about IT decision makers deferring all new IT investments save those that present the most rock-solid return-on-investment case. Indeed, unless a project can promise to pay for itself practically before its deployed, IT managers at most companies might as well save their PowerPoint slides.

Thats not to say, however, that you should abandon all hope of getting approval for new IT projects and devote yourself to Cobol maintenance for the remainder of your career. In fact, events on Wall Street and in the halls of Congress have recently provided perhaps the most compelling ROI case for enterprise IT projects since Y2K: keeping the CEO out of jail.

The parade of accounting malpractice fiascos—think Enron, Worldcom and now AOL—has prompted Congress to propose holding CEOs directly responsible for any false financial statements made to the Securities and Exchange Commission. Legislation now before the house would carry a maximum $5 million fine and 20-year prison term for CEOs found guilty of allowing accounting funny business on their watches.

If that doesnt get the attention of your CEO, nothing will. And you can bet that, if theyre going to be held personally responsible for financial statements, many CEOs will want to be 100 percent positively sure that the reports theyre receiving are complete, accurate and up-to-the-minute.

And Im guessing they wont be satisfied with simple validation exercises intended to show that consolidated financial figures are good. CEOs are going to want up-to-date, accurate data on the financial implications of their companies core business processes: supply chains, product development, customer satisfaction, etc. That way, when they explain to analysts and regulators why their companies are doing better or worse than expected, they have real business intelligence to back it up.

Unfortunately, as anyone whos ever worked on a large data warehouse project knows, most CEOs today still dont have complete, consistent and accurate visibility into all of the key operations running in every corner of the business. Despite years of ERP deployments, too many operational systems are still narrow stovepipes, unable to integrate with other systems to give an enterprisewide view.

This is no secret to most IT managers. Many CEOs know it also. But the CEOs have been willing to live with the situation as long as it was someone elses problem to explain. Now, it looks like its going to be the CEOs problem to explain.

So youre likely to see a lot of emergency C-level meetings called to review the accuracy of corporate reporting systems. Already, in fact, there are signs of this. When ERP giant SAP this week reported dismal financial results of its own, CEO Hasso Plattner blamed slow second-quarter software sales on "the sudden rise of uncertainty in [corporate financial] reporting." That uncertainty, said Plattner, "really hurt our business."

Once the fear and uncertainty gives way to resolve, however, Ill bet Plattner and other vendors of ERP and business intelligence software will begin to see an upsurge in orders from enterprises intent on getting better financial and other reports. CEOs will see to that.

Do CEOs have a lot to worry about? Contact Jeff Moad at