Principles of Finance - The Role of the Financial Manager (Essay Sample)

Instructions:

Due to the increasingly complex nature of corporate finance, more and more corporations are tapping their chief financial officer to become their chief executive officer. The CFO brings substantial financial expertise to the position of CEO. However, there may be other reasons why the CFO is not necessarily the best person to become the CEO.
Please note that the CFO must have an external orientation: After all, the company is owned by its shareholders and if the company is to operate so as to raise the value of the shares it must consider not only the internal structure of the organization, its products, competitors etc., but it must consider the interaction between what the company 'does', and the way the 'market' evaluates its performance. It is the combination of the two that plays a role in affecting the market price of the shares and shareholders value. The individuals who must have an eye on this are usually the CEO and the CFO.
Please read the articles below, which are both available in Proquest. You need to be logged onto Proquest in order to access the links. If the links don't work you can look up the articles in Proquest using "publication search".
How a CFO can graduate to CEO
Corporate Finance; London; Jun 1999; Janine Brewis; from library portal via coursenet.
Abstract:
Positions of power within corporates are highly sought after, and today's chief financial officers and finance directors are increasingly becoming aware that they now have a realistic opportunity of becoming CEO. Part of the reason for the trend towards recruiting CFOs who can behave as strategic partners is that the investor community looks much more critically at the business performance and management strengths and weaknesses of corporates. This strategic positioning gives them an opportunity to buff up their image, and make themselves seen as a more credible candidate to take over the CEO role.
Do CFOs Really Make Good CEOs
Institutional Investor; New York; Aug 1989; Picker, Ida; from library portal via coursenet.
Abstract:
With the proliferation of corporate takeovers, leveraged buyouts, and restructuring in the US, it would seem that chief financial officers (CFO) hold the keys to executive wisdom. Recruiters report a growing trend of grooming CFOs for chief executive officer (CEO) positions, with some estimating that nearly 25% of top corporate leaders are former CFOs. Analysts, academics, and headhunters agree that the ideal CEO communicates well, is adept at managing managers, understands the company's product and operations, and provides a consistent vision. A recent survey by Management Practices Quarterly reveals that, of 83 new CEOs appointed in 1988, more than 18% came from operations-production backgrounds, some 23% had technical training, while only 14.4% had a financial background. D. Wayne Calloway, who became CEO of PepsiCo in May 1986, was formerly the company's CFO and is probably the best example of the valuable experience CFOs can bring to the CEO position.
Assignment Expectations:
Read the two articles above, look for newer articles on the subject by browsing the web and then write a two-page paper answering the following question:
Do you think finance departments are the best place to train future CEOs? Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years. Do these individuals have the CPA and/or CFA designations?
Include a discussion of both the pros and cons of hiring a CFO to be CEO. Try to cite at least three articles in your paper in support of your arguments in favor of and against hiring a CFO to be a CEO. Remember to include a reference list and to refer to the articles you use in the body of your paper.

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Content:

Running head: Principles of finance – the role of the financial manager

Principles of finance – the role of the financial manager
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Finance is life blood of a business and financial management is route to success. Recognition of financial managers/CFOs and their promotion to CEO position becoming quite common in business organizations.
Nowadays, CFOs are potently considered as backbone of an organization. On the other hand, current corporate finance scenario considers CFO as the best candidate for CEO position.
This essay will examine the role of the financial manager in an organization and how a CFO would be best candidate for CEO position.
The role of financial manager:
In the old days, duty of finance employees/managers was to book receipt and payment transactions only. With the passage of time financial transactions had been standardized and streamlined to make business activity presentable and understandable.
However, in current corporate finance scenario the things are completely changed. Now there are lots of things to consider before initiating business investments and transactions such as market competitors, market trends, internal and external capabilities, product development/ product production, and making marketable products.
These duties are performed by CFO of a company such as injecting finance to the research and development department and forecasting the expenses as well as profits (Cyriac and Bryan, 2004).
Do you think finance departments are the best place to train future CEOs?
In the current corporate finance scenario the corporate and financial liabilities has made business management tougher. Chief Executive Officer (CEO) represents the Board of Directors (BOD) and considered as the head of business entity. He/she not only supposed to manage business/finance, make sure profits but also requires dealing with corporate and other laws of the land.
A qualified Chief Financial Officer (CFO) who has designation of CPA and/or CFA already qualifies for all pre-requisites of doing business. Therefore, I definitely think that finance departments are the best place to train future CEOs (Brewis, 1999).
Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years:
Craig Kinyon is CPA and President and CEO of Reid Hospital & Health Care Services in Richmond, Ind. His qualification, hard work, consistency and experience have given him glory to govern the organization.
Phyllis Cowling, FHFMA, CPA, president and CEO for United Regional Health Care System in Wichita Falls, Texas. She has worked with number of CEOs. Her experience and education make him capable to work as CEO (William, n.d).
Do these individuals have the CPA and/or CFA designations?
Both of the above mentioned professionals are Certified Public Accountant (CPA). In addition Phyllis Cowling qualification also includes Fellow of the Health Financial Management Association (FHFMA). Their education is one of the big constituents that make them eligible of becoming CEO.
Pros and cons of hiring a CFO to be CEO:
The pros lead the race when it comes to pros and cons of hiring CFO to be CEO. Further details are mentioned below:
Pros of hiring a CFO to be CEO:
CFOs are well educated and well experienced to manage a business entity
CFOs possess good clutch on financial management
CFOs possess good knowledge of corporate laws
CFOs are good planners
Cons of hiring CFO to be CEO:
CFO may lack human resource management
CFO may lack marketing tactics
CFO may lack production procedures

At the end of treatise we have examined the ground realities of a business. On the other hand, the case studies of the CFOs who are transited to CEO position make it clear that CFOs can manage business better then others. Ther...

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Principles of Finance - The Role of the Financial Manager (Essay Sample)

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