W&M's Gibbs Accounting Society member Sammy Hamididdin interviews Dr. Cynthia Glassman
Sammy Hamididdin (SH): Thanks very much for coming to the Mason School of Business at the College of William and Mary - and for agreeing to be interviewed! Can you tell us a little bit about your career and your background? Why did you choose to study economics?
Cynthia Glassman (CG): I went to a liberal arts college - Wellesley -- and was planning to be a math teacher. I took math freshman year, I took calculus as I recall - it was extremely theoretical and I really didn't like it. At the same time, I was taking economics. Wellesley was very smart: they had one of their best professors teach a special class for freshmen only. We didn't have upperclassmen in the class with us, which could be intimidating, and we had one of the best professors. As a result, I decided to major in economics. Economics is still, I believe, the biggest major at Wellesley.
SH: So it was a good professor that swayed you in that direction.
CG: It was partly that, but also that obviously I was mathematical. Also, my dad was a doctor but his dad had lost a lot of money in the depression -- not in the stock market but in 2nd mortgages. And my father had no sons to talk to about business - things were different in those days -- so he talked to me about the stock market and taught me how to read the stock pages and he got me interested in business as well so it was the combination of hating calculus and really enjoying this class.
SH: You have worked in a variety of different fields throughout your career -- reading your bio was fun. But I'm curious to know which position you enjoyed the most.
CG: Obviously they've been very different, and I have enjoyed them all in different ways. I think the one that stands out -- or that will stand out by the time I'm finished -- as the most enjoyable was the SEC. That's because that's where I made policy: I did what I thought was right, and I had nobody second guessing what I was doing. I had a staff that worked for me, a dedicated staff-all the commissioners did-and it was a really, really interesting time. But all of my jobs have been very interesting in different ways.
SH: Did you enjoy the public more than the private sector or the private more than the public?
CG: I enjoyed them both.
SH: What are the major differences between them?
CG: There is a difference, though much of the difference that I've seen is really in small versus large. I was at two small consulting firms and a large consulting firm, and I've been at a small agency and a large agency and there's more difference between the small and the large than the public and private. But there's something very, very gratifying about being in public service and making a difference. Being a consultant and helping clients was also gratifying -- knowing that you made a difference to their business. But making a difference from the national policy perspective in what I do or have done really, I think, is very important. I would encourage the students here to think about public service at some point in their careers.
SH: Can you tell me a little bit about what you do in your current job as Under Secretary of Economic Affairs? How is it different from being an SEC Commissioner?
CG: As Under Secretary I wear four hats. I oversee the Census Bureau, which has 15,000 employees currently in 15 offices. They do all kinds of demographic and economic surveys throughout the decade, and then in the decennial year they do the full count of the population. We've been gearing up for that since I've been there. At that point they will have 500 offices and over half a million employees - at least at their peak - so needless to say the gear-up for that has been challenging and very interesting learning - doing -- all the things in an oversight capacity that it requires in terms of budgeting, planning and other issues.
The second thing I do is oversee the Bureau of Economic Analysis. That's a much smaller group - about 500 people. The professionals there are economists. It is a small agency, but they do something very important which is measure the gdp (gross domestic product) and gdi (gross domestic income) and many of the major statistics series that we use to judge how the economy is doing.
Third, I am the "board rep" to the Pension Benefit Guaranty Corporation on behalf of the Secretary. That's a corporation that guarantees the pensions of defined benefit pension plans of private companies. Right now they have assets upward of $60 billion. The board is made up of the Secretaries of Commerce, Treasury and Labor, with Labor being the Chair. Each of the board members has a board rep, and we act on their behalf.
And then my fourth role is Economic Advisor to The Secretary. The Chief Economist reports to me and I have a staff of economists. We do analysis of what is going on in the economy and I keep the Secretary up to date on what's going on in the economy. I report to the Secretary and to his deputy.
This position is appointed by the President and confirmed by the Senate. As Commissioner of the SEC and acting chair for a short time, I was also appointed by the President and confirmed by the Senate. There, the commissioners vote on all the rule-making and all the enforcement action. The Commerce role is more a management role; at the SEC it was more a policy role. I started right after Enron and was there during the implementation of all the rules for Sarbanes-Oxley and the market timing cases, so it was very interesting time. We had numerous rules that we voted on but we also dealt with all the enforcement actions-of which there were thousands when I was there-and the number of enforcement cases was a big surprise to me. We dealt with the enforcement actions in closed session once or twice a week with about twenty cases at a time (rulemaking was in open sessions) typically once or twice a month. Preparation for those took more lead time and more preparation time. It was very busy.
SH: What do you remember as your biggest challenge in implementing Sarbanes-Oxley?
CG: We were given 60 to 90 days to write all of the rules required by the Sarbanes-Oxley Act. Think about normal rule making: it takes months and even sometimes years. But we had these deadlines. What was terrific was that it pulled everybody together. The staff would come around to our offices and brief us everyday on where they had gotten on a certain rule, get our feedback, and go back and try to incorporate all of our different views. The reason they did that one by one was something called the "Government in the Sunshine Act," which actually was one of the challenges - a continuing challenge. Under the "Government in the Sunshine Act," in an agency with a commission like the SEC or the Fed, or the others where you had multiple people voting on issues, a majority of us could not get together to talk about any of the issues that we were dealing with in private. We had to be in the sunshine. So the five of us could not sit down all together and hash out our differences on these rule-makings. Our counsels could, and the staff could come to us and iterate among us. And that's what happened. They'd come to us and I'd give them my views and then they'd go to the next office down the hall and get their views and ultimately iterate to a consensus. But that actually was one of the biggest challenges we had: we had limited time and we couldn't sit down in a room and talk to each other unless we did it in public. And obviously, you don't really go public until you have agreement on where you want to be. So it was a challenge, but we did it. I think we did a pretty good job of capturing the spirit of the law and doing it in a way that made sense for the companies and investors. The only exception to that -- and it was less the law or our rule and more the implementation -- was for the internal control requirements. But that has been changed for the better. All in all, I think we did a really good job in a limited time with the constraints imposed on us by the "Government in the Sunshine."
SH: Given your unique perspective, how do you view the coming transition of accounting standards from US GAAP to IFRS?
CG: Conceptually I think it's really important for companies and their investors to have one set of accounting standards. Companies are global; investors are global. It just makes sense. And I do personally think that the more principles-based standards, which IFRS is, is the preferred way to go -- when the principles are based on the economic substance of the transactions that are being reported. Now having said that, I realize that the transition will take awhile for a variety of reasons -- not the least of which is that US companies don't have all the elements that will be required in IFRS readily available at this point. They're going to have to change their own internal information capture before they're able to comply with IFRS. There's also transition in schools. The accounting professors are going to have to learn it and obviously the students are going to have to learn it. So it's going to take some time. But I think conceptually it's the right way to go. It's just a question of how smooth the transition will be.
SH: And what kind of impact do you think the transition will have on the relative terms of the investors?
CG: Well ,I think it's better for firms and for investors ultimately despite some bumps and hurdles along the way. But at the end, if investors can compare companies' performance more easily and if companies only have to comply with one set of standards, that's going to benefit everybody.
SH: We talked about Sarbanes-Oxley: the environment has obviously changed a lot in the last ten years. To what extent do you feel corporate governance has changed in the last ten years? How has it affected the accounting profession?
CG: There's no question the corporate boards are paying closer attention to what companies are doing - partly because of what's happened in just a normal reaction to the market and market forces and partly because of the requirements under Sarbanes-Oxley by the SEC and by the exchanges. So now there are audit committees with audit experts, there are compensation committees, and nominating committees so that the chairman and CEO are not nominating the Board members. The boards are becoming more diverse. They are becoming more expert and more engaged. I hear that it takes a lot more time to be on a board than it used to and if you're on the audit committee, it's double the time of the other board members. So they're taking it much more seriously and adding much more value to the companies.
SH: Which of the accounting issues that you have worked on were most interesting to you?
CG: The stock option accounting was very interesting because of the discussion about whether stock options are really an expense to the company or just a dilution of the shares. That was a very interesting and ongoing conversation. At the time, I had a lot of people coming through my office who thought they should be expensed and other people/companies who didn't think they should be expensed. And again the IFRS issue. Those discussions started while I was still there - discussions about which standard was better, how we could convert, when we could convert. And the reconciliation issue (reconciling IFRS to GAAP) was also really interesting
SH: When did you decide to get a PhD? And was it the right choice for you?
CG: Well, I went back to college sophomore year and I decided not to be a math major - I was going to be an economics major - and then I decided that after I graduated I'd be a computer programmer. So I spent the summer after sophomore year learning how to program -- this is 1965. I programmed Fortran, Algol, and Basic. And the summer after junior year, I worked for the chief economist at GE; I was doing some economics and some programming. That's when I realized what I really wanted to do was economic forecasting and I needed a PhD for that. I applied for both MBA programs and PhD programs. I ultimately decided on a PhD, and soon after I got to graduate school I realized I didn't really want to do economic forecasting but really liked microeconomics, so I focused on micro and basically that's what I've done until now. I am focusing on the macro economy in this position at Commerce but up until this time I have really focused on the micro economy.
SH: Did you realize a PhD was the right choice for you then or did you realize it was the only choice if you were going to do microeconomics?
CG: After junior year I decided that to do what I wanted to do I had to get a graduate degree. That was not that usual for women at that point. And when I got to Penn, where I got my PhD - the University of Pennsylvania -- there were about 60 people in the first year of the grad program, which was large at the time. Four of us were women.
SH: Did people make reference to that? Or was it generally accepted?
CG: There was one professor whose name I have repressed, who was visiting from another university, but who taught one of the required classes. He made the women sit in the front row and ignored us for the whole semester.
SH: I'm glad to say that will never happen again.
SH: Given today's highly integrated job functions, if you had to give some advice to accounting students looking to diversify their course loads, what types of classes would you recommend taking?
CG: Well, I'd tell them absolutely to take economics - micro and macro - and finance. One of the really important things for accountants to be able to do is to understand the risks that the companies are taking so they better evaluate the numbers and what they mean. In this day and age you can't possibly understand the risks without understanding the economics of it.
SH: This dovetails with a question I've been curious about: how is the public information you oversee in your current job, how does it get processed to make decisions?
CG: The data that the census collects is used in a number of ways. They put a lot of it up on their own website for use by businesses, state and local governments, foreign governments... investors use it - that's just the basic data. But it also goes into EA's estimates for GDP and the other measurements, so it's used in a variety of ways for decision making. The business data is very important to the businesses as well as to the government. Then the most basic thing is that the census data are used to apportion the House of Representatives.
Addendum: Dr. Glassman left the Commerce Department in January 2009 at the end of the Bush Administration. She is currently a member of the Board and The Audit Committee of Discover Financial Services, a Trustee of the SEC Historical Society, and a consultant.
