The FD role is the finance ladder’s highest rung, but the truly ambitious don’t stop there. Steve Giles explains how to reach the corporate summit as CEO or chairman
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This article was first published in the September 2018 UK edition of Accounting and Business magazine.
Despite great change in the world of corporate governance, the fundamentals of business leadership have altered little over the years. Enterprises continue to be run by boards of executive and non-executive directors, who are collectively responsible for sustainable success and set the tone at the top on which good governance depends. The basic division of responsibilities also remains the same: the CEO runs the business, the chairman runs the board.
And then there’s the FD (or CFO). The key roles of CEO, chairman and FD each require different strengths, experience and management styles. So how easy is it for FDs to become a CEO or chairman? Two examples of different career paths are:
- Martin Sorrell. Not an accountant, Sorrell holds an MBA and was group FD of Saatchi & Saatchi until 1984. He left to acquire WPP, turning it into the world’s largest advertising and PR group through acquisitions.
- Douglas Flint. An accountant, Flint was a partner at what is now KPMG before becoming group FD of HSBC in 1995. He became bank chairman in 2010 and served in this board leadership role for seven years.
Today, financial acumen is a highly valued quality, and opportunities have never been better. Research consistently shows that finance, rather than sales or marketing, is now the most common route to the top for CEOs. Around 50% of CEOs of FTSE 100 companies have a finance background, and approximately 20% are qualified accountants. This is not surprising given the global financial crisis and continuing uncertainties.
Investors and boards want CEOs who can both develop a strategy and understand the financial implications of business decisions. Finance and strategy are linked, as Emmanuel Faber, chairman and CEO of food company Danone, memorably remarked: ‘Finance without strategy is just numbers, but strategy without finance is just dreaming.’
The role of a modern FD is a demanding one – it is a huge step up from financial controller. Requirements include commercial awareness and a good knowledge of the business, excellent communication skills, and resilience and reliability under pressure. Of course, technical skills and strong business ethics are baseline requirements – they go without saying.
The relationship between the FD and the CEO is crucial. They often make a good team because of their differences. The UK corporate governance code describes the purpose of corporate governance as ‘to facilitate effective, entrepreneurial and prudent management that can deliver the long-term success of the company’. The creative tension embodied in that definition might broadly describe a healthy relationship between the CEO and the FD. Good teams comprise different kinds of shrewdness – colleagues don’t agree all the time.
Becoming the CEO is an enormous challenge for an FD, not least because it means stepping outside the comfort zone of finance and finance function management. The CEO’s job is not simply a more powerful opportunity to optimise the financials. Essential components are leadership and strategy development. The CEO must learn about all the specific areas of high-level expertise demanded by the business. Motivating and communicating are crucial tasks – the CEO should encourage and champion great work by all disciplines, building good relationships with the whole team.
Finance professionals looking to become CEOs need to invest time and effort into planning their careers so that their skills and experience are aligned with their aspirations – see the box for key areas to address.
Certain aspects of the CEO’s role cannot be learned – for example, entrepreneurial spirit and a strong appetite for risk-taking. These qualities were central to Sorrell’s success at WPP, although he was exceptional. Many FDs are by inclination and training more cautious. For them, a more comfortable transition would be a move to chairman.
Taking the chair
The chairman is pivotal in creating the conditions for overall board and individual director success. He or she sets the agenda, style and tone of meetings to promote effective decision-making and constructive debate. Attributes of an outstanding chairman include:
- integrity and promoting the highest standards of corporate governance
- strong cognitive abilities
- personal authority and presence
- long-term perspective, a sense of purpose and resiliency
For many finance professionals, Flint’s career progression to the chairman’s role will represent a more realistic aspiration than the CEO route.
Steve Giles is a consultant, specialising in governance, risk and compliance
CPD technical article
"Around 50% of FTSE 100 CEOs have a finance background, and approximately 20% are qualified accountants"