Bristol-Myers Squibb Co.'s $275 million write-down on auction-rate securities partially collateralized by subprime mortgages was more than just the biggest loss by a nonfinancial company related to subprime investments: It has become the stimulus to reopen the debate on whether corporate treasuries should operate as a cost center or, on the other end of the spectrum, a profit center. Jeff Wallace, managing partner at Greenwich Treasury Advisors, sums it up: "Is it treasury's job to take trading risks to bolster the bottom line, or should it be assuming a more conservative posture of preserving capital and keeping the company's cash liquid and available?"

That question is reverberating in e iboardrooms and C-suites around the country, as directors and executives question their roles as cash managers. The pendulum has swung back and forth over the years on the issue–for instance, taking a sharp swing towards the conservative after the bond default by California's Orange County. With the cash buildup in the years since 9/11 and the Enron Corp. debacle, treasurers have been increasingly placed between the need to manage risk and the equally compelling requirement to produce a better return for shareholders. When economic times look rosier–and the need for a cushion seems less, the impetus has been to more actively invest these liquid assets either by sinking money back into the enterprise in R&D, capital investment or M&A; bolstering the stock price through higher dividends or stock repurchases; or investing in slightly more risky short-term investments. "These [strategies] all play into the overarching theme of trying to derive increased value for the company," says John Tus, treasurer of Honeywell International Inc.

One of the options that many companies pursued in the quest for better yield was the same auction-rate securities (ARS) that Bristol-Myers lost its shirt on. Although ARSs have been safely traded for years and few have led to a Bristol-Myers-type meltdown, the drug company's loss has some finance departments reconsidering the risks. Among the nonfinancial corporate names already reporting balance sheet hits from the subprime meltdown are Ciena, Lawson Software, 3M and U.S. Airways. The losses were more restrained than Bristol's–$13 million for Ciena or two cents on earnings per share for Lawson–either because the company's didn't invest as much or move faster to liquidate when subprime started looking shaky.