May 02, 2005
Outback CFO Resigns, Blames Accounting Profession
Posted by Gordon Smith

Last week Bob Merritt resigned as CFO of Outback Steakhouse, citing the "increasingly negative regulatory environment in which we now operate" and his feeling that "the environment is not going to get any better anytime soon." He pointed to the "recent lunacy over lease accounting" as an example, and asserted that changing rules in this area represent a "complete failure of regulatory and other bodies that oversee financial accounting and reporting." Merritt asks, "if accounting firms can change their views on something like long-term lease accounting, setting off 150 restatements ... and then conclude that the companies have material internal control weaknesses, what's next?"

He claims that reporting about the restatements  "is a strong reflection of the growing presumption that all business people are dishonest." He wants to say more on this topic, but feels restrained by the forum. For the whole announcement, listen to the webcast of Outback's first quarter earnings conference call (go to the 1:35:05 mark for Merritt's announcement).

The more we hear about the problems associated with financial reporting, the more this looks like a problem for which fingers can justifiably point in all directions. Merritt takes aim at auditors and "regulatory and other bodies" (a reference that is probably intended to include FASB, Congress, and the SEC). Why stop there? Certainly Merritt's own colleagues -- America's CFOs -- also deserve a share of the blame. And while many corporate managers are being demonized unfairly, there are plenty of genuine bad actors in that crowd, too.

If corporate America were a trauma patient working through the stages of recovery, we might conclude that it has passed through denial and shock, but has not yet worked through anger to get to resolution. I am tired of the anger stage. I hope the accounting profession gives us all a heads up when they are ready to move on to resolution.

Thanks to reader Timothy Lacy for alerting me to this story.

UPDATE: Here is the full text of Merritt's statement.

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» Another SOX casualty from Ideoblog ...
"Gordon Smith at Conglomerate links to a story about the resignation of the Outback CFO who said: I'v ..." [more] (Tracked on May 2, 2005 @ 16:13)
» Outback Steakhouse CFO Quits Because of the Regulatory Environment from White Collar Crime Prof Blog ...
"Prof. Gordon Smith (Wisconsin) on the Conglomerate Blog has an interesting post about the resignatio ..." [more] (Tracked on May 3, 2005 @ 7:59)
» SOXout from ...
"Gordon Smith reports that the CFO of Outback Steakhouse has been knocked out by SOX:Bob Merritt resi ..." [more] (Tracked on May 3, 2005 @ 14:23)
» SOX and Lease Accounting from PointOfLaw Forum ...
"The blogosphere is talking about Outback Steakhouse CFO Bob Merritt's resignation over "the increasi ..." [more] (Tracked on May 3, 2005 @ 22:26)
» from Web Log ...
"Outback Steakhouse lost its CFO to due massive and burdensome regulations. People in my profession a ..." [more] (Tracked on May 5, 2005 @ 22:30)
» All Hail Sarbanes-Oxley from Web Log ...
"Outback Steakhouse lost its CFO to due massive and burdensome regulations. People in my profession a ..." [more] (Tracked on May 5, 2005 @ 22:31)
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