Corporate Finance Division: Core Responsibilities

Can we take a step back and start from the actual finance function itself and the core responsibilities of that function within an organization?

One of the things I like about the function is that it is very diverse. The core responsibility and at the heart of the finance function are numbers. That means the finance function has to produce both statutory accounting numbers, you need to make sure the accounting is right. It has to provide other management information to help direct the company. It is responsible for external reporting to investors and other stakeholders in the company. That's the core.

What's really important in finance is making sure you have the team and capacity to deliver those numbers. That's at the heart of it. Then more broadly, using those numbers to help understand and manage the business leads you into a number of other responsibilities. And I think the core of the CFO role is to be a strategic partner to the CEO and to the board in understanding the business, help direct it, understand what the capital market pressures are, and reflect those back into financial policy and the strategy of the company.

How would you split those two responsibilities between the CEO and the board? Do you see them as separate?

Well, they can be. Certainly in the UK, where generally the CEO and CFO are the two executive directors, there's a very explicit expectation that the CFO will certainly act as an advisor and strategic partner to the CEO, but also has a responsibility - I always think of it as church and state - to report independently to the board. So the board, the audit committee of the board, and indeed regulators put particular obligations on the CFO about the integrity of the external reporting, and in the case of the board, to make sure that they understand anything in the business that may not be going as is being presented in the board.

Ideally, if there are differences between the CEO and the CFO, they are worked out outside the boardroom and the team presents a unified front following the CEO's lead. In instances where there's a divergence between the CEO's view of the business and what the CFO perceives to be going on, then you communicate usually through the audit committee, or in extreme cases to the regulator, about trends or facts about the business that aren't otherwise known.

Is the CFO completely independent of the CEO in the responsibility around the accounts and the quality of that to the board and the audit committee?

No, it’s overlapping. For one thing, a CFO reports to the CEO, so the CEO is the CFO's boss. But as I said, there's this unusual situation in which you both work for and your appraisal and so forth are done by the CEO, but there is this additional responsibility. It's only rarely that it ever becomes an issue. There's enormous power in the reporting function that may not require a direct confrontation with a CEO.