Module- Case: THE ROLE OF THE FINANCIAL MANAGER
Assignment Overview
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 click ‘ADDIONAL LIBRARY RESOURCES' under the title of Online Library in the TLC Portal in order to access the links.
How a CFO can graduate to CEO
Corporate Finance; London; Jun 1999; Janine Brewis
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
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.
Module Overview
What is a financial manager and how does s/he fit in to the overall corporate structure? We begin by assessing the role of the financial manager in the modern corporation.
Managers, in general, guide the organization. They make sure that things get done. Combining organizational resources - people, material, transportation, and the like - managers make sure that everything comes together in a way that meets the company's objectives.
Management has been defined as "the process by which a cooperative group directs the actions of others towards a common goal." Others see it in terms of organizational objectives; coordinating resources; planning; and directing, controlling, and managing people. Of course, they are all right. These are all essential elements to the role of management in the modern corporation.
A manager must have excellent interpersonal skills, be able to create and disseminate information, be a solid decision maker, and more. As if this skill list was not demanding enough, changes in the 21st century make the role of the manager even more challenging.
The role of the financial manager, in particular, has very specific demands. The financial manager sees everything and is involved, to some extent, in everything. We will be looking at the issue of what I would call "epistemic privilege" in the modular case-based analysis.
The role of financial manager covers two different operations:
• Capital Financing
• Operational Financing
The financial manager must be concerned with the monies necessary in order to get the operation up and running, and expanding. This is the matter of capital finance.
On the other hand, the financial manager must also be concerned with financing ongoing activities. This we call operational finance.
The former is discretionary. A company can move in different directions and move into new projects at its own discretion. However, operational finance is a must. Meeting payroll, paying taxes, servicing equipment, and so on, is a mandatory element of any business. The lack of this mandatory operational capital is the number one reason companies go bankrupt.
Most people see the financial manager as simply a treasurer. However, the financial manager is an integral part of the overall management team. In some sense, s/he is the cynosure. In this module we will be assessing the role of the financial manager in the overall corporate structure.
Attachment:- Article-1-and-2.rar