CFOs and Beyond
CFOs are in unprecedented demand for non-executive directorships on corporate boards. Still, many find it inappropriate or simply impossible to take on an additional part-time role. But such an experience could also enhance their own job performance.
Amongst the 800 finance leaders surveyed for Ernst & Young’s recent report, CFO and beyond, 79 percent agree that CFOs are in more demand than ever for board-level roles because of their financial expertise. A similar proportion thinks that the CFO’s skills and experience make him or her highly transferable into roles outside of finance. CFO and beyond is based on a worldwide survey of 800 CFOs, a study of the career paths of group CFOs at 347 of the world’s largest companies (annual revenues over USD5 billion) over the past decade, and a series of interviews with leading CFOs, governance experts and academics.
Research conducted for CFO and beyond found that, over the past decade, there has been a significant increase in the proportion of board members with a finance background. In 2002, for example, just 8 percent of board members at 347 of some of the world’s largest companies were either serving or former CFOs. A decade later, that share has climbed to 14 percent. This shift is even more evident on the audit committee. In 2002, just 19 percent of audit committee chairmen were either serving or current CFOs. But by 2012, the proportion had risen to 41 percent.
There are three main reasons why finance leaders are becoming more commonplace on corporate boards. The first is the macroeconomic environment. With growth trajectories continuing to diverge between developed and rapid-growth markets, financial markets still highly volatile and banks facing acute funding pressures, serving and former CFOs have the knowledge and expertise that companies need to navigate a complex economic context and help them make the right strategic decisions.
A second factor is the changing nature of the finance leadership role. Over the past decade, CFOs have assumed a much broader, more strategic set of responsibilities, and this has significantly broadened the contribution that they are able to make to nonexecutive positions. The core technical and finance skills that once dominated the role are now just one small part of the knowledge and experience that finance leaders must possess. As a result, boards and nomination committees increasingly see CFOs as playing a much wider role than simply being an expert in financial reporting and finance. Regulatory factors have also had an impact.
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