CIFR chair Robert Pozen: committee seeks more than just to reduce complexity.

• Author: Heffes, Ellen M.
• Position: Financial reporting - Dialogue with Robert C. Pozen - Interview

Financial Executive's Editor-in-Chief Jeffrey Marshall and Executive Editor Ellen M. Heffes recently spoke with Robert C. Pozen, the chair of the recently formed SEC Advisory Committee on Improvements to Financial Reporting (CIFR), sponsored by the U.S. Securities and Exchange Commission. Pozen answered questions about a broad range of the committee's goals and workings. A former vice chairman of Fidelity Investments, he is chairman of MFS Investment Management, a mutual fund and institutional money management firm based in Boston, and technically represents the interests of investors on the 16-member committee. Excerpts from the interview follow.

FE: We're curious about what inclined you to accept the position of chairing this committee, and what in your own background really gives you a good position to take on this kind of responsibility.

RP: I started off, after graduate school, as a professor of law and finance at NYU [New York University], and I was at the SEC as associate general counsel. Later, I worked with Fidelity [Investments] as general counsel, then as managing director and ultimately as president and vice chairman. After I left Fidelity, I taught at Harvard Law School and worked on President Bush's Commission to Strengthen Social Security, and was also secretary of Economic Affairs for Mitt Romney when he was governor [of Massachusetts]. So, I guess it's fair to say that I got more involved with public policy issues.

I'm clearly not an accountant, and I've not been a CFO, either. I've been on the investment side, as a user of financial statements. Probably another thing that is relevant is that I've served on two audit committees of public companies, and still serve on Medtronic Inc..'s audit committee. I was also on the audit committee of Bell Canada Enterprises (BCE). So, I've had experience from the investing side and the audit committee side.

In addition, I've written and published several articles. One was about Section 404 of SOX [the Sarbanes-Oxley Act], in which I basically argued that the original approach was too detailed and not cost-effective--[and], I wasn't alone in that point of view. Another article I wrote for The Wall Street Journal dealt with why we were experiencing this great increase in financial restatements.

FE: Our readers have been calling for reducing complexity. It seems like that the name of the CIFR committee could be called "Reducing Complexity," but it's called "Improving Financial Reporting." Is there anything significant about that name?

RP: It is significant, because I think the mandate of the committee is broader than reducing complexity. One of the issues we are clearly focused on is reducing complexity from the point of view of preparers and CFOs, your audience. But, on the other hand, we also want to make financial reporting more useful to investors. That is consistent with the SEC's mandate.

So, if we were to look only at reducing complexity, from the preparer's point of view, we would be missing out on an important component. There are situations in which there are potential tradeoffs between the two, so the name of the commission reflects the dual [approach].

FE; How do you think about the term "complexity?"

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