They don't usually grab the headlines. That's reserved for the Chairmen and the Managing Directors of India Inc. But their work critically impacts the public and investor perception of the companies they work for and the corporate honchos they serve. Time was when the Chief Financial Officers (CFOs) were merely bean counters-the backroom boys who totted up the payments and receipts neatly in their journals, ledgers and whatever else they called their books of accounts, presented the final figures to their bosses in the corner rooms and occasionally invested any extra or idle cash in the inter-corporate or other markets.

But economic liberalisation, the increasing globalisation of the Indian business environment and the consequent complexities have brought these gentlemen to the forefront of the corporate growth story. Today's CFO (synonymous with Executive Director, Finance, in many, though not all, companies) has to wear many hats. As the Business Today survey on India's Best CFOs shows, they are now the pointsmen for corporate governance issues, they have to ensure that their companies' accounts not only adhere to accounting rules prevailing in the country, but also to the US GAAP (Generally Accepted Accounting Practices) if they are listed abroad. And as the various examples in our survey show, they are also playing key roles in mergers and acquisitions (M&As), including, increasingly, cross-border ones, fund raising and liaising with Indian and global credit rating agencies and analysts.

Simply put, it is not longer enough for CFOs simply to be doing what everyone else is also doing. To make a difference, they have to think out of the box to come up with solutions. An obvious example is Tata Motors' CFO Praveen Kadle's decision to write off Rs 1,200 crore of bad debts with money from the company's share premium account. Such financial engineering had never been attempted before and, expectedly, faced stiff resistance from both domestic and foreign shareholders. But the company backed its CFO and the results are there for all to see.

How companies are rated by analysts and credit rating agencies also depends crucially on the CFO's ability to communicate with various stakeholders. This is critical, as the difference of just a notch in credit rating can mean a difference of several basis points in the interest rate companies have to pay on loans. Just how important this function is can be gauged from the fact that Infosys CFO T.V. Mohandas Pai spends an average of 75 days each year travelling across the world meeting key institutional investors and analysts.

So, while the Chairmen and MDs of India Inc. will, doubtless, continue to hog the limelight, it is heartening to note that the largely unsung backroom boys are at last beginning to get due credit for all the midnight oil they burn for their bosses. May their tribe continue to prosper.

Economics Of Expectation

Buffett: And his law of decreasing returns

Over the years, investing guru Warren Buffett's annual letter to the shareholders of his investment firm Berkshire Hathaway has become the most widely anticipated speech, perhaps second only to the American President's State of the Union Address. Not surprisingly, then, Buffett's 2006 letter is not just cleverly written, but scary and ominous. At the heart of his letter is an ominous message, which he calls the "fourth law of motion", and he explains what it is: "For investors as a whole, returns decrease as motion increases." In other words, investors in American equities are earning less and less with newer sets of asset class and money managers arriving on the scene. Most of his ire is directed at hedge funds and private equity investors, who not just take a fixed fee (usually 2 per cent of the fund raised) but a "carried interest", which is typically 20 per cent of the profits above the promised return. Buffett's central argument is that in the years to come, returns to investors in American equities will diminish. Before he wraps up his letter, he delivers the final staggering thought: If the Dow were to rise as it did in the 20th century, going from 65.74 points on December 31, 1899, to 11,497.12 end of 1999, it would need to touch 2,011,011.23 by December 31, 2099. And as he points out, six years into 2000, the Dow has not gained at all. (Actually, it fell below 8,000 in 2003; so it's not true that it has not gained.)

This edit writer would not for a moment pretend to know more about investing than the Oracle of Omaha. But if American equity investors are looking at alternate assets such as hedge funds and private equity, it is precisely because their staple isn't fetching the sort of returns they expect. And so what if the managers of such funds take a cut, as long as they deliver the goods? But the more important point is about expectation itself. It is unlikely that the Dow will hit the 2-million mark by the turn of this century. So will investors flee from equities? Unlikely, too. What's more likely is that investors will correct their expectations. Why? Because all expectations are relative. When oil rose from $13 a barrel to $30, people thought it was expensive; but today at $63 a barrel, consumption hasn't dropped and neither do people really think it is expensive. Why? Because relative to the $100 a barrel price it is expected to touch some day soon, oil today looks cheap. That, then, is the beauty of the human psyche. It hopes for the best, but is ever prepared for the worst. So, Mr Buffett, don't expect investors to "minimise investment returns". As long as there's hope of earning better returns, they'll put their money where their heart is.

Arbitrary And Ill-advised

The board of control for cricket in India (BCCI) is now getting greedy and overreaching itself. It wants mobile phone companies to pay for the right to send short messaging service (SMS) updates on the ongoing India-England series. The board has served a legal notice on telecom operators, asking them to refrain from sending SMS updates to their subscribers without its (BCCI's) prior permission. The crux of the matter: it's a lucrative income stream for telecom companies and BCCI wants a share of the pie; the board is targeting annual revenues of Rs 400 crore from this source.

The question quite simply is: can the organiser of a public event claim exclusive right to disseminate news about it? And, following from this, can it charge the news disseminator for the right to carry the news? Common law, precedents and common sense would seem to suggest that the answer on both counts is a definitive no. After all, television channels and radio bulletins routinely carry news updates on cricket, and, for that matter, all major sporting events of interest to their target audiences. To have different standards for telecom companies, which have also emerged as major purveyors of news, would defy any parity of reasoning. And where does one draw a line? If the BCCI succeeds in its ill-advised move to regulate and charge for cricket updates over SMS, it might tomorrow want to restrict the coverage of cricket matches only to those news channels and publications that are willing to pay for it. Again, parity of reasoning suggests that this is not as far fetched and outlandish as it sounds. The sheer arbitrariness of BCCI's legal notice apart, there could be a broader constitutional issue involved here. The Indian Constitution guarantees the freedom of expression to all citizens, organisations, bodies, corporates and institutions subject to certain restrictions. It can be argued that the BCCI, by trying to restrict the free and unfettered dissemination of news about a public event, is in breach of the Constitution. Incidentally, Indian law does not distinguish between public and private events, but even if it did, a cricket match would definitely not qualify as a private event.

The BCCI's move can also set a very bad precedent. If it succeeds, politicians, political parties, companies and organisations can, in future, keep troublesome or non-pliant media organisations, journalists and analysts away from their rallies, meetings and events, thus, making a mockery of the concept of a free press and the freedom of information.

But there's hope. The cellular operators have refused to be browbeaten by the BCCI brass. They've decided to fight it out and, prima facie, seem to have a strong case. Civil society will watch the outcome of this battle with great interest.