OfficeMax: CFOs in Short Supply at Retailer.
Case Study of the Impact of Sarbanes-Oxley Act ("SOX")

On January 12, 2005, OfficeMax Inc. (OMX), the office products retailer, announced the resignation of new chief financial officer Brian Anderson. The firm also said it will delay the release of fourth-quarter earnings until the completion of an internal investigation that has turned up evidence of accounting problems. Anderson resigned after being on the job for 2 months. Former CFO Ted Crumley will return on an interim basis while it looks for a permanent replacement.

The probe is being conducted by the firm's audit committee. OfficeMax confirmed vendor's claims that some of its employees fabricated supporting documentation for approximately $3.3 million in claims billed to OfficeMax in 2003 and 2004. Four employees have already been fired in an ongoing internal investigation.

Prior to accepting the CFO position at OfficeMax, Anderson was the CFO at Baxter International. In 2002, he was named in Fortune magazine's "Top Fifty Most Powerful Black Executives in Corporate America".

OfficeMax did not elaborate on Anderson's departure but I can hear Kenny Rogers voice as he sings "you have to know when to hold them....know when to fold them.....know when to run...". Anderson clearly was not a gambler.

With the Sarbanes-Oxley Act now holding CEO's and CFO's fully accountable when signing off on financial statements (quarterly 10-Qs and annual 10-Ks), it should not be a surprise to anyone. Is it possible that the new CFO recognized bigger issues than he was lead to believe before accepting the position? If so, it would be understandable for him to cut his losses and resign rather than be held criminally responsible for any accounting problems and potential lawsuits for irregularities that may have occurred prior to his arrival.

Any potential candidate for the CFO position is going to be apprehensive accepting a position after the previous executive left after 2 months. OfficeMax needs to show candidates, shareholders and employees that the firm is serious about reinforcing their corporate policies. Implementing additional internal controls such as more management oversite and cross referencing purchase orders with payment request authorizations would be the place to begin. If not, other senior management will be expected to leave.


© 2005 Nelson Chin.

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