In this day and age, the corporate world is one of the booming industries in the country. Perhaps this is due to the fact that it is composed of the best individuals in the business. For instance, not all people could make it here due to the pressures involved and the high expectations both from the co-workers and from the society in general. Some say that being in the corporate industry alone is very nerve-wracking. But some also say that perhaps the most difficult area of a corporate industry is in corporate finance. This is because this section is where the financial activities of a corporation commence (“Corporate Finance”).
Corporate Finance is a particular section of finance dealing with the financial choices corporations formulate and the tools as well as analyses used to make these choices. The field as a whole may be separated among long-term and short-term choices and methods with the main objective being the enhancing of corporate worth by guaranteeing that return on capital surpasses cost of capital, without taking unnecessary financial risks. Aside from this area, there are other divisions and these are headed by certain key position holders, depending on the organizational structure of a corporation.
The organizational structure of a basic corporation is composed of the (1) Chief Executive Officer that sometimes serves as the President too, (2) Chief Financial Officer, (3) Chief Operating Officer, (4) Human Resource/Risk Management Officer, (5) Finance/Accounting Officer, (6) Contract Management Officer, among others.
Specifically, the Chief Executive Officer (CEO) is the highest ranking executive officer inside a company or corporation, who has accountability for over-all supervision of its day-to-day dealings under the direction of the board of directors (“Chief Executive Officer”). On the other hand, the Chief Financial Officer (CFO) is the senior supervisor responsible of the financial actions of an organization. His tasks include all finance-related resolutions within the organization. These include investment, financing and dividend policy, and frequently the company officer or director to whom the treasurer reports. (“Chief Financial Officer”)
More often than not, the CFO is promoted to the CEO position whenever such action is needed. This is because some believe that the CFO and the CEO have similar nature of work. Also, some argues that if a CFO was able to handle his work effectively, then the same thing could be expected if he eventually becomes the CEO of the company. But, is this the right move for any company to undergo?
CEOs generally perceive a CEO role as the final step on a career ladder. Yet for some, prior CEO roles were essential stepping stones to the current role as CFO. A few declare that the dexterities are mutual, but the weightings differ. Such as several of the general tasks of a CFO and a CEO are: both are all about public, methods and capital in a word execution. However, there is perhaps a difference in stress. The CEO is more the driver, the challenger, and the ingenious. On the other hand, the CFO task is more the facilitator, the solution-finder, and the examiner. Certainly, CEOs require logical talents and CFOs require foresight, but the weighting of those fundamentals is diverse in every function. Alternatively, the diverse functions of the two are: the CEO is more of an intellectual manager, patron supporter, all ears on public and standards, and very much the public surface of the corporation. Yet, the CFO’s function is about implementation, plan assistance, expansion facilitating, output and course alteration as well as conformity and risk supervision. (Moffatt)
In some instances, the CFO and CEO are not in good terms. Less dramatic are numerous other examples of growing strain in the CEO-CFO relationship (McAuley, 2005). It would also be advantageous if the CEO of the company would be a former CFO for he already understands what the role of the other is. Unfortunately, this might affect the transparency of the CFO to the job that he is suppose to do.
The Chief Financial Officer and the Chief Executive Officer are two of the most important positions in the organizational structure of a corporation. It is safe to say that the company would not work without these two. This is because in a corporate industry, the nature of the work being done focuses on money and other real assets, and the CFO and CEO are the key positions which are way more essential than the other in this kind of industry for they are all about money and assets. Specifically, most of the company’s functions are being conceptualized by the CEO. In turn, these plans are implemented by the CFO of the company together with other officers of the company. However, given this circumstance, it should not always be the case that the CFO will in turn become the future’s CEO. This is due to the fact that there jobs are different from each other. For instance, a CEO must be good in people-relations, but the CFO does not. Also, a CEO must have a vision on what he wants for the company to achieve, unlike the CFO who only implements the plans that the CEO came up with.
As a summary, it can therefore be concluded that it would be advantageous if the CEO of the company is a former CFO. Based on the articles cited earlier, CFOs already know a thing or two on how to do the CEO’s job and that serves as their edge over other company officials. Also, they oversee things that the company values therefore, enabling them to know the problem at hand and possibly come up with appropriate solutions to them. Lastly, the visions of the CEO are not that different from that of the CFO’s, hence, the interest of the company will be well served.
On the other hand, if it is not a corporate financing company, then the CFO is not the best choice to be the next CEO. For instance, in a Public Relations Firm, the next best CEO would be the Human Relations Officer for he is already acquainted and trained to do the job. Therefore, a former CFO CEO has an advantage in some cases, but not always as seen in the given example.
Chief Executive Officer [Electronic Version]. Retrieved May 1, 2007 from www.powerhomebiz.com/Glossary/glossary-C.htm.
Chief Financial Officer [Electronic Version]. Retrieved May 1, 2007 from https://www.marketplace.lloydstsb.com/doc/glossary/organisation.html.
Corporate Finance [Electronic Version]. Retrieved May 1, 2007 from wordnet.princeton.edu/perl/webwn.
McAuley, T. (2005). CFO vs CEO [Electronic Version]. Retrieved May 1, 2007 from http://www.cfoeurope.com/displayStory.cfm/3713744.
Moffatt, D. Visionaries and enablers: CEO and CFO leadership styles [Electronic Version]. Retrieved May 1, 2007 from http://www.ceoforum.com.au/article-detail.cfm?cid=6350.