The Chief Financial Officer by The Economist

Author:The Economist
Language: eng
Format: epub
Publisher: PublicAffairs

Disagreements over strategy, rather than outright illegality, are much more common between CFOs and CEOs. At most companies, these disputes take place behind closed doors, with the top two executives presenting a united front in public. Michael Clarke, finance chief at ADAS, a UK environmental consultancy, describes his approach with the CEOs he has worked for over a long career at listed and private companies, large and small:

If there were any issues where we disagreed with each other, we disagreed outside board meetings. I remember the feedback from one director was, “I wish they wouldn’t look as though they had pre-prepared everything prior to the meeting or would argue from time to time.” What the directors didn’t see was the arguing.

Of course, the CFO’s subordinate position to the CEO can make these arguments a somewhat delicate affair. But the growing power and influence of CFOs gives them a lot more leverage in these discussions than before. Moshe Banai and Philip Tulimieri, professors at Baruch College’s Zicklin School of Business, reckon that a “partnership of equals” is now emerging at many companies:

The global corporation to which business is evolving will be led by a duopoly: two equal partners, with equal accountability, authority and access to the people, processes and technology of the business will now run the organisation. They would be simply the obverse and reverse of the same coin – they would be interchangeable and complementary parts. They would speak with the same voice to the stakeholders and be equally charged with achieving the corporation’s strategic objectives.

In this arrangement, the CFO and CEO “complement each other so well that it will be seamless to all but the inner circle of subordinates,” Banai and Tulimieri conclude.

Indeed, open clashes between the CFO and CEO are rare, and almost always end badly for the finance chief. Joe Kaeser was one of the few to buck this trend in July 2013. A 33-year veteran at Siemens, a German conglomerate, the CFO of six years saw his counterpart in the executive suite, CEO Peter Löscher, ousted after a series of quarterly profit shortfalls and missed revenue targets. According to reports, the finance chief was not necessarily a bystander, as detailed by Der Spiegel:

Siemens has always had confident CFOs. But Kaeser has been so openly critical that some at the company have already eyed him with suspicion in the past. Others call him authentic. Kaeser himself says: “It’s time for the CEO to tell us where we’re going. The CFO’s job is to ask how we’re going to get there.”

Exactly two weeks after this conversation, everything had changed. Löscher was ousted and Kaeser was chosen as his successor. When asked whether he played a role in Löscher’s ousting, Kaeser was circumspect:

All I have done is occasionally point out that such targets need to be backed up with substance. That should be perfectly acceptable, in a company led by an executive board that encourages open debate. A key role is played in this respect by the chief financial officer, because it is his task to inspect allocation of funding.

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