Corporate reputations are best managed by the communicationsdirector, not by the CFO

The role of the chief financial officer has changed dramatically over the past 20 or 30 years. At one time, the vast majority of CFOs came out of the accounting profession. They were, in the words of former PepsiCo CFO Karl van der Heyden, "glorified controllers (it's a sign of the times that van der Heyden means that as a compliment).

The role of the chief financial officer has changed dramatically over the past 20 or 30 years. At one time, the vast majority of CFOs came out of the accounting profession. They were, in the words of former PepsiCo CFO Karl van der Heyden, "glorified controllers (it's a sign of the times that van der Heyden means that as a compliment).

But as the media began to devote more space to business coverage, and more individuals got into the stock market, CEOs were not the only ones who found themselves in the spotlight. CFOs became celebrities too. One of the most celebrated was Andrew Fastow of Enron, who two years ago received an award of excellence from CFO magazine.

The recognition received by Fastow makes it clear that the role of the CFO has expanded, and in some cases morphed into something new. Another former CFO, Robert Calderoni (now CEO of Ariba) recently told The New York Times, "There's two types of CFO ... those who focus on making the business better, and those trained to make the business look as good as it can. The second type - Fastow appears to have been one - concentrate on propping up share prices and managing earnings.

While there has been much talk about conflict of interest on Wall Street, where brokerage firms routinely receive lucrative assignments from the very firms their analysts are covering, there has been relatively little discussion of the potential conflict brought about by the new role of the CFO, who is expected to accurately inform shareholders about the company's performance and to maximize its share price.

But some observers are suggesting CFOs must eschew any role that involves promoting the company's stock price. Corporate attorney and Clinton confidant Vernon Jordan recently suggested to the PR Seminar that the only way for CFOs to restore credibility is to get back to basics. That has serious implications for the IR function. If CFOs are going to get back to basics, can they really continue to be responsible for investor relations?

There are some obvious pragmatic reasons why investor relations pros prefer reporting to the CFO rather than the chief communications officer, most of which have to do with prestige. But corporate reputations are best managed holistically - an approach that takes advantage of the synergies between constituencies - and avoiding the conflicting messages that can occur when each responsibility for each constituency resides in a different part of the company.

It has always made good sense from a communications standpoint for PR and IR to work together. Now it makes sense from a governance standpoint too.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.