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CEOs-in-waiting: the CFO’s expanding role

14 July 2014 by Carlos Martin Tornero

US beverage corporation PepsiCo, German electronics multinational Siemens and Rupert Murdoch's FTSE 100 media company BskyB; all have in common that their respective chief executive officers (CEOs) were appointed directly from their roles as chief financial officers (CFOs).

Although some surveys indicate just around 5% of CEOs get to the top straight away from their CFO roles, a background as finance chief is a decisive factor to rise through the ranks and eventually take the helm at an organisation.

A prominent example was that of Indra Nooyi when she was promoted CEO of PepsiCo in 2006. More recently, Joe Kaeser and Jeremy Darroch were CFOs immediately before their appointments as CEOs of Siemens and BskyB respectively.

The flip side of a better-respected CFO role, as strategic business leaders, is an increased number of responsibilities and higher expectations.

According to the US Institute of Management Accountants (IMA) Minneapolis chapter president Timothy Dallmann, there is greater dependence on the CFO role at a time of economic recovery, expanding regulations and downsizing of organisations.

"The theme and calls from the Board of Directors and CEO's to do more with less, has led to a dependence on the CFO to work out the real life details of how to accomplish this theme," Dallmann told The Accountant.

Dallmann highlighted that while the CFO's role is always important, the information they provide is even more relevant during a downturn in the economy.

"As the economy recovers, either a gradual increasing of expenditures or taking advantage of opportunities like M&A requires an intensified role and a greater amount of expertise to provide the financial and associated analysis to the decision makers," Dallmann added.

The expanded role of the CFO was one the main topics discussed at the annual conference of the US management profession recently held in Minneapolis.

Speaking with The Accountant IMA chief executive Jeff Thomson said this is also an educational challenge as the gap between what the CFO team is expected to do and their skills set and preparation is increasingly widening.

The Association of Chartered Certified Accountants president Martin Turner, who attended the conference, underlined how the CFO role has changed in the last two decades from a technical role, dealing largely with transactional issues, to a more strategic one.

"Today is about risk management, policy, strategy, the development of the company, the sustainability...The role of the CFO has developed towards the future of the organisation," Turner told The Accountant.

He continued: "Stakeholders don't want to know what you have done in the last year but what you are going to do in the next five. There is more pressure in companies to react to those questions. CFOs have to be at the front line to answer such questions."

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