The Role of the CFO: An Analysis

693 Words3 Pages
The role of the CFO has become increasingly important, and this has led to a situation where CFOs are increasingly being tapped to become CEOs. Taub (2003) notes that this trend started around the time of the corporate scandals like WorldCom and Enron, and the increased scrutiny that was being placed on the accounting function in particular by regulators. Durfee (2005) argued that the role of the CFO is critically important for a lot of firms, given the way that CFOs have a focus on shareholder value and on the relevance of derivatives and other financial management techniques to the profits at a lot of companies. That Sarbanes-Oxley places the CFO and CEO in unique positions of risk with respect to the integrity of the firm's financial statements is another factor that encourages firms to seek out new CEO candidates from the ranks of financial managers. Brewis (1999) notes that investors may have more confidence in a company if the chief executive has a financial background. Frauds are more easily detected and therefore less likely to occur, thereby safeguarding shareholder value. It has been noted that as of 2008, around one-fifth of all CEOs in the US and UK had once served as CFO, so there remains some resistance to the idea, but clearly there are also enough companies that value the financial function strongly enough to bring in an experience finance professional to the top job (Dobbs, Harris and Rasmussen, 2008). However, Picker (1989) noted that in the 1980s, it
Open Document