CFOs The Natural Choice for Chief Executive: Study
Executive pay has been under increased scrutiny by regulators. The Securities and Exchange Commission recently said it wants more analysis of how much companies pay their top executives and why along with a more concise presentation of the compensation data. But now criticism of executive pay is emanating from an unlikely place: the C-suite itself, according to a recent CFO.com report. A new survey conducted by the National Association of Corporate Directors (NACD) finds that even most corporate leaders feel CEOs fail to justify their salaries. But that may be good news for the CFO. That same survey shows that the finance chief is widely considered to be the natural choice to take the top job.
The NACD polled 791 people who have served on the board of a public company and nearly 70 CEOs or presidents, CFO.com reports. Two-thirds of respondents say CEO compensation relative to their performance is “somewhat high” or “too high.” About 33% say CEO compensation is in-line with their performance, while only 2% thought compensation was “too low. More than half of those polled cite a lack of real performance objectives and evaluation for the perceived overcompensation.
These views however may be good news for CFOs. Traditionally, a CFO performs all functions of a Controller or supervises a staff that does those tasks. The Finance Chief also structures and negotiates complex financing, including both debt and equity, and aids in strategic decision-making. Today, however, the bar has been raised substantially for the CFO. Investors demand growth and precise forecasts. Executive search firm, A.E. Feldman says that professionals seeking CFO jobs must be able to transition from director of value preservation to partner in value creation.
CFOs who have achieved these goals have apparently become valued players. According to CFO.com, the NACD survey finds that the Finance Chief has most often become the natural choice to take the job of Chief Executive. “Functionally, besides current and former CEOs, the experience respondents sought the most for their boards was that of a finance specialist, such as a CFO; with external audit experience in third place,” NACD said in its report on the survey. Additionally, more than half of those polled say their board has a formal CEO succession plan.
