CFO BEYOND

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CFO and beyondThe possibilities and pathways

outside nance

2012


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CFO and beyondaddresses the unprecedented demand for CFOsto serve in roles on top of their job as nanceleader, and as an onward step. In this editionof our CFO series, we explore some of thesepossibilities and pathways, providing insightinto the appetite for CFOs in these other roles,and how those who have gone before havenavigated the transition.

CFO and beyond The possibilities and pathways outside fnance


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In this reportThe basis of the study 2

Executive summary 4

Should serving CFOs take on non-executive positions? 14

The bene ts of a non-executive position 19

The disadvantages of a non-executive position 20Finding the right position 22Giving back through charitable roles 24

Possibilities post-CFO 26

CFO to CEO 29From listed to private equity 32Non-executive directorships post-CFO 34

How to maximize your chances of securing a place on the board 38

Eight steps to preparing for a place on the board 41The board of the future 43Diversity on boards 44

Leading CFOs and beyond: where did they go next? 46-55

Survey demographics 56

The CFOs role 58-61

Contacts and other CFO titles 62-64

Unprecedented demand for CFO experience on corporate boards 8

The drivers of demand 11


4/682 CFO and beyond The possibilities and pathways outside fnance2 CFO and beyond The possibilities and pathways outside nance

Survey of 800 CFOs globally, including: 1

Group CFOs: 36%

Regional and divisional CFOs: 64%

All major sectors

53% of companies over US$1b annual globalrevenue

Respondents from Europe, Middle East, India andAfrica (EMEIA): 64%, Americas: 21% and Asia-Paci c: 15%

1 The survey was conducted by the Economist Intelligence Unit. See page 56 forfurther detail on survey demographics.

Research into group CFOs of 347of the worlds largest companies: 2

All companies have global annual revenues overUS$5b. 60% are in the Fortune 500

Companies headquartered in:US: 102, UK: 50, France: 40, Germany: 35,Italy and Spain: 30, Scandinavia: 30,China: 30, Australia: 30

We looked at:

The career paths of group CFOs in role in 2002(class of 2002) over the past decade, and

Compared them to their counterparts, if different,in the same role in 2012 (class of 2012)

2 The research was based on data from BoardEx, a global online database holdingbiographic information on executives based on publicly available information.

1 2

The basis of the studyThis study is based on three main elements: a survey of 800 CFOs fromaround the world, a study of the career paths of group CFOs at 347 of theworlds largest companies over the past decade, and a series of in-depth

interviews with leading CFOs, governance experts and academics.

We are very grateful to all those who participated in this study and, inparticular, to those nance leaders and experts who shared their insightsin a series of interviews.

1 2


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3Interviews with leading CFOs, governance experts and academics: Robbie Barr , COO, Terra Firma Carl Berquist , Executive Vice President and CFO, Marriott International Robert Blain , CFO, Cirque du Soleil

Ritchy Drost , CFO, European Broadband Operations, Liberty Global Richard Emerton , Managing Partner, Board and CEO Services, EMEA, Korn/Ferry Kevin Farr , CFO, Mattel David Grigson , Chairman, Trinity Mirror Faisal Al Hajri , CFO, Qatar Foundation Steve Hare , Head of the Portfolio Support Group, Apax Partners Andy Hines , Lecturer and Executive-in-Residence, University of Houstons Graduate Program in Futures Studies Andrew Kakabadse , Professor of International Management Development, Cran eld

University School of Management Birgitta Kantola , Independent Director, Stora Enso Christophe de Margerie , CEO and Chairman, Total Philip McHugh , CFO, Barclaycard Chris Pierce , CEO, Global Governance Services Michael Sen , CFO, Sector Healthcare, Siemens Bhavesh Shah , Vice-President Asia-Paci c, Johnson & Johnson N.P. Singh , COO, Sony Entertainment Network Susan Stautberg , President, PartnerCom Corporation Kees Storm , Chairman of the Supervisory Board of KLM and Anheuser-Busch InBev,

Vice-Chairman of Unilever, and a member of the Supervisory Board of AEGON Dominique Thormann , CFO, Renault Lawrie Tremaine , Executive Vice-President and CFO, Woodside Ashley Whipman , Director, Robert Half Management Resources

3


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In 2002 just over a third of top tier CFOs hadnon-executive roles. Ten years on,nearly half have them.

CFO and beyond The possibilities and pathways outside nance44 CFO and beyond The possibilities and pathways outside fnance


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1Executive summary

In our earlier study, The DNA of the CFO ,3 weshowed that most nance leaders see their jobas a career destination and not a staging-post tothe job of CEO. It is a paradox, therefore, thatunprecedented demand for their unique skill-set

outside of the nance role both as acomplement to their serving position and asan onward transition makes them arguablythe individual with the most career optionsin the corporate hierarchy.

Not all will be drawn by this interest in their skillsfor roles outside of the top nance job. Many willunderstandably consider the job to offer all theopportunity and interest that they need. And yet,more and more CFOs are exploring the options

open to them, and many are using the experienceof these additional roles to enhance theirperformance as CFO.

This study, in our series that focuses on what itis to be a CFO, looks at some of the possibilitiesand pathways open to CFOs today. We explorethe options for CFOs to take on non-executivedirectorships on corporate, charitable and culturalboards, as an addition to their nance role. Wecover the opportunities for CFOs to transition to

the role of chairman, CEO and to move from publicto private ownership. We look back at how thecareers of the leading CFOs from 2002 haveunfolded over the past decade, and we lookforward to how board composition will evolve inthe decade to come. This is for CFOs who areinterested in the experiences of others within theircommunity, and for future nance leaders whoneed to plan now for a career in the long term andthe broadest sense. The future of the nance

leader has never been so full of possibility.

3 The DNA of the CFO: a study of what makes a chief nancial of cer ,Ernst & Young, 2010.

As companiesgrapple with theaftermath of the

nancial crisis anda two-speed globaleconomy, theywant leaders whocan providecomfort andcon dencein an uncertainworld. The CFO isarguably bestplaced toprovide it.


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Executive summary

6 CFO and beyond The possibilities and pathways outside fnanceCFO and beyond The possibilities and pathways outside fnance6

Unprecedented demand for the CFO skill-set oncorporate boards

The appetite of shareholders and boards for CFOs to serve oncorporate boards is big, and getting bigger. Seventy-nine

percent of the 800 CFOs surveyed for this report agree thattheir nancial expertise means that they are more in demandthan ever for board-level roles. Analysis of how boardcomposition has changed in the worlds top companies overthe past decade supports this view. In 2002, 36% of CFOs fromthe worlds largest companies held non-executive directorships.A decade later, this proportion has increased to 46%.

As companies grapple with the aftermath of the nancialcrisis and a two-speed global economy, they want executiveand non-executive leaders who can provide comfort andcon dence in an uncertain world. The CFOs uniquecombination of analytical, technical and strategic capabilitiesmeans that they are arguably best placed to provide it.Regulatory pressure has also increased demand for nancialexpertise. In some countries, that knowledge is not onlyvalued on corporate boards, but mandatory.

CFOs and their employers recognize the bene tsof a board position

Despite the demands of the role, many CFOs still choose toallocate some of their time to non-executive or voluntary rolesalongside their core job. More than a quarter of CFOssurveyed have already taken on an additional job and 40%would consider it in the future.

There is a great deal of personal and professional bene t forthe CFO taking on supplementary positions, includingexposure to different organizations and perspectives on thechallenges dealt with by management and non-executives.Experience in a different sector is seen by many of those wespoke to as particularly valuable, with the opportunity to gainnew knowledge and transfer best-practice across sectors. Forthose CFOs that are fortunate enough to serve on the boardof a very large, well-respected company, there is also a haloeffect, whereby the organization on which a CFO serves in

their executive role also bene ts.

but lack of time is a major constraint

More than 40% of CFOs think that it is inappropriate for themto take on part-time roles. For many, the demands of their coreresponsibilities are simply too great and the risk of overstretch

too signi cant. As corporate governance legislation becomesmore stringent, the time required to be an effective non-executive director is increasing. Despite CFOs appetite to takeon non-executive roles, there is a growing mismatch betweenthe amount of time they feel able to dedicate to such a role on average around four hours a week and the timerecommended by corporate governance best practice to ful llthe role appropriately. The UK Walker Report, for example,recommends between 30 and 36 days per year. Therefore,success for the CFO seeking an extracurricular position dependson two factors: choosing the right role and timing it well.

CFOs and future nance leaders need to take along-term view

Among our respondents, those who identi ed themselvesas long-term planners were signi cantly more likely to havetaken on supplementary roles than those who are more careeropportunistic. The guidance from recruiters, and fromserving and former CFOs who have successfully secured boardroles, is to start planning early. To start positioning yourselffor such a role at the time you want it may be too late,especially when boards are looking for an increasingly speci cskill-set.

Our research shows that CFOs have started to securenon-executive directorships at a younger age. Whencomparing group CFOs of some of the largest companies inrole in 2002 with those in role in 2012, we notice that thelikelihood of the latter group to hold non-executive roles ismuch greater across all age groups. But, the difference ismost marked with those under 50 years old.

Candidates need to prepare for shifts in boardcomposition

Part of planning is anticipating future change. Over the next

decade, boards will increasingly value knowledge of rapid-


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growth markets, analytics and social media, as structuralshifts in the global economy and ever greater use oftechnology impact business practice. And, as boards becomemore diverse in terms of gender, background and experience,

opportunities will open for some, while for the 5560 year oldmale that typically dominates boards today, gaining access tothe boardroom may become more competitive.

Its not all about business

The part-time position that the 800 CFOs surveyed nd mostappealing is not, in fact, a business role, but board member ortrustee of a charity or cultural institution. Furthermore,respondents claimed that making a positive contribution tosociety was a key motivation in taking on a supplementaryrole. As well as having the potential to be highly ful lling,

trusteeships for charitable and cultural institutions are greatnetworking opportunities, and give younger CFOs, who arenot yet ready for corporate board positions, valuableexperience of the dynamics of group decision-making.

While in an executive capacity, CFO remains adestination role for the majority most considersome kind of role beyond CFO

Our earlier study, The DNA of the CFO ,4

found that themajority of CFOs either intend to remain in their current roleor move to another CFO role. Our ndings for this report areconsistent with this. We found that, after a decade, 62% ofthose who were large-company group CFOs in 2002 are eitherstill CFOs or left the role as their last executive post. Only 15%have transitioned to the role of CEO or CEO and chairman, 4%to chairman and 3% to COO.

However, 82% of the CFOs we surveyed for this studyexpressed an interest in some kind of role post the job of CFO,which either means that more will pursue executive options

outside of the CFO domain in the future, or, more likely,explore non-executive or non-corporate roles. What is evidentis that for most, the skills they hone as CFO will be used insome capacity. As well as addressing the transition to anon-executive position, this report will look at what it takes totransition to the role of CEO, chairman, and from public toprivate ownership as a CFO of a PE portfolio company.

4 The DNA of the CFO: a study of what makes a chief nancial of cer ,Ernst & Young, 2010.

Although every role has unique requirements, our research suggests that there are eight key ways for CFOsand future nance leaders to make better career decisions and maximize their attractiveness for executiveand non-executive positions:

1. Develop a coherent CV2. Take on roles outside nance and even

business

3. Build networks4. Build relationships across the business

5. Build your personal pro le6. Gain international experience7. Dont get stuck at headquarters

8. Start planning earlyWe explore these in more detail on page 41-42.

Eight steps to prepare for a place on the board

The appetite of shareholders and boards for CFOs to serveon corporate boards is big, and getting bigger.


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00%Text gets inserted here

79%of CFOs agree thattheir nancial expertisemeans they are morein demand than everfor board-level roles.



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2It isnt news to report that CFOs make goodcandidates for the board. But what is interestingis the extent to which the demand for both servingand former CFOs to take on board roles isincreasing. In the current economy, shareholders,

boards and regulators want board members whohave the right skills, perspective and judgment.And, the CFO is uniquely quali ed for the job.

The languageof boards isthe language of

nance and value.Its a very easyenvironment fora CFO to t intoDavid Grigson, Chairman of TrinityMirror and former CFO of Reutersand Emap

Unprecedented demand for CFOexperience on corporate boards


12/6810 CFO and beyond The possibilities and pathways outside fnance

Unprecedented demand for CFO experience on corporate boards

The knowledge and experience that CFOs possess is highlyrelevant to the oversight role that boards perform. Thelanguage of boards is the language of nance and value, saysDavid Grigson, Chairman of Trinity Mirror and former CFO ofReuters and Emap. Its a very easy environment for a CFO to

t into and make a contribution, because the conversation isall about how the company can deliver something that will bebene cial to shareholders. This is the kind of value equationthat CFOs are constantly calculating.

The demand for both current and former CFOs on boards hasincreased dramatically in recent years. Seventy-nine percentof the 800 nance leaders surveyed for this report agree thatCFOs nancial expertise means they are more in demand

than ever for board-level roles. A similar proportion agree thatthe CFOs skills and experience make them highly transferableinto roles beyond nance.

Our research into changes to board composition shows that

the representation of both current and former CFOs on boardshas increased signi cantly over the past decade. In 2002, just8% of board members at the 347 companies studied wereeither serving or former CFOs. A decade later, that share hasclimbed to 14%. The difference is even more striking forspeci c board positions: in 2002, just 19% of audit committeechairmen were either serving or current CFOs; by 2012, theproportion has risen to 41% (Chart 1).

Chart 1. Percentage of boards comprised of either serving or former CFOs, 2002 and 2012

Source: desktop research into 347 large-company CFOs

9 18Chairmen who were

serving or former CFOs

8 14Serving or former CFOs on boards

2002 2012

147

Nomination committee chairswho were serving or former CFOs

19 41Audit committee chairs

who were serving or former CFOs

6Remuneration committee chairs

who were serving or former CFOs

14


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The drivers of demand

1. Changing regulatory requirements make nance

experience desirable, if not mandatory

In many countries, changes to the regulatory environment enacted since the corporate governance scandals at thebeginning of the century have increased the demand fornance expertise on boards. For example, since 2003, publiccompanies listed in the US must disclose whether they have atleast one nancial expert independent of management ontheir audit committees. If they do not have this expertise inplace, they have to explain why. In the UK, the CorporateGovernance Code states that the board should satisfy itselfthat at least one member of the audit committee has recent

and relevant nancial experience. Likewise, in Brazil, theComissao de Valores Mobiliarios (CVM) states that at leastone member of the audit committee should have recognizedexpertise in matters of corporate accounting.

In Australia, the 2011 Centro case served as a reminder forboards of their obligations in respect of nancial reporting.When it comes to the nancial report, directors must review,understand and challenge the nancial statements and besatis ed that they are consistent with their knowledge ofthe business, says Tony Johnson, Assurance ManagingPartner at Ernst & Young Australia. A board member with

deep and broad nance experience, like that of a CFO, canoffer valuable insights and play a leadership role in drivingboard effectiveness.

2. Macroeconomic environment bringsthe CFOs traditional skills to the fore

Since 2008, companies have faced a highly challenging

macroeconomic environment: growth trajectories ofdeveloped and rapid-growth economies continue to diverge,nancial markets are still volatile and banks face acutefunding pressures. These challenges require companies tofocus on cost, risk and cash- ow management three areasthat fall squarely within the CFOs skill-set. Translated to theboard-room, this means that non-executive directors with aCFO background are uniquely placed to navigate the complexeconomics and steer companies toward the right strategicdecisions.

The competitive advantage for many rms is no longer your

products, your services and your quality on the technical side.Its cost discipline and minimizing risks into the future, saysAndrew Kakabadse, Professor of International ManagementDevelopment at the Cran eld University School of Management.Its understandable that shareholders want a safe pair of handsand sound nancial knowledge on their boards, given thecurrent circumstances. Finance skills alone do not necessarilymake someone a good board director, but nancial expertise isdesperately needed. That places the CFO in a very favorableposition to be recruited for non-executive roles.

3. The increasing breadth of the CFO role has made

them more valuable to boards

Perhaps most importantly, the evolution of the CFO role overthe past decade has signi cantly broadened the contributionthat nance leaders are able to make to these board positions.As we explored in The DNA of the CFO series, the modernnance leader has a broad and complex role, encompassingstrategic contribution, business partnering, internal andexternal stakeholder management, as well as operationalresponsibilities far beyond the core technical and nancialcapabilities that once characterized the role. 5

5 Our three The DNA of the CFO reports look at what makes a modern CFO aroundthe world. The DNA of the CFO: a study of what makes a chief nancial of cer ,Ernst & Young, 2010, focused on EMEIA. Views. Vision. Insights: The evolvingrole of todays CFO , Ernst & Young, 2012, focused on the Americas. The DNAof the CFO. Shifting up a gear: From corporate nance to corporate strategy ,Ernst & Young, 2012, looked at CFOs in the Asia-Paci c region.

1. Changing regulatory requirements

2. Challenging macroeconomic environment

3. Expanding breadth of the CFO role

Three factors are driving the CFOsincreasing appeal

Finance skills alone do not necessarily make someonea good board director, but nancial expertise isdesperately needed.Andrew Kakabadse, Professor of International Management Development, Craneld University School of Management



Unprecedented demand for CFO experience on corporate boards

Boards no longer recruit CFOs because they are reportingexperts, says Mr. Johnson. They want someone who canbring a strategic perspective to nance, whether that isrelated to capital, M&A or an investment analyst view of theworld. If there was a CFO who became a nance leader just

because they had the best knowledge of accountingstandards, then that would not be the person that people arelooking for to go on a board.

Demand is outstripping supply

Indeed, such has been the explosion of demand for thebroader CFO skills on boards, that demand for current orformer CFOs with the right mix of skills far outstrips thesupply of good candidates. There is massive demand forpeople with CFO-type experience versus very little supply,says Keith Pogson, Managing Partner for Financial Services,Asia-Paci c at Ernst & Young. There are only so manyworld-class CFOs and disproportionately large numbers ofspaces on boards to ll.

In some respects, CFOs may be better placed than CEOs toful ll non-executive roles, because they are more accustomedto taking an analytical, challenging approach to decision-making. If youre a deal junkie or someone who wants tomake every decision going, then youll probably nd a

non-executive role very frustrating and your board colleagueswill be driven mad by you, says Mr. Grigson. Youre notactually there to make decisions. Youre there to challenge,offer support and provide oversight so that management aregoing about their role in the right way.

The CFO skill-set is relevant to a wide rangeof non-executive positions

The vast majority of our survey respondents believe thatCFOs are well-suited to every key board position, includingmembership of audit, nomination and risk committees, as wellas the chairmanship of the overall board (Chart 2).

Chart 2. How suited do you think CFOs are to take on the following non-executive roles at organizations other than theone they work for? (percentage)

Source: survey of 800 CFOs

56

66

72

77

81

12

9

8

6

6

Member of nomination

committee

Non-executive c hairman

Member of remunerationcommittee

Member of risk committee

Member of audit committee

Not suited Suited


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The audit committee role is the most obvious tfor the CFO

Unsurprisingly, CFOs think that they are most suited to the

role of audit committee member: 81% of our respondents saythat nance leaders are a good choice for this particular job.Regulatory requirements will often demand that at least onemember of the audit committee is a nancial expert, but thereare a variety of other reasons why boards and nominationcommittees are turning to current and former CFOs to ful llthese roles. Accounting standards are moving at an incrediblyrapid rate, investor activism is on the rise and companies facean extremely complex risk and regulatory environment. All ofthese trends increase pressure on audit committee membersand make it more dif cult for those with a non- nancebackground to perform the role.

If you have an audit committee chair who does not have theright knowledge and background, then there is a danger thatthey will not do enough to provide the right checks andbalances, and a risk that the CFO will simply run rings aroundthem, says Steve Hare, Head of the Portfolio Support Groupat Apax Partners. On the other hand, if you have an auditcommittee chair with current knowledge, then they clearlyhave insights into where the key judgments are likely to bemade and where adjustments are required. A good auditcommittee chair is someone who the CFO can consult andseek advice on complex issues.

The audit committee role can also be considered a steppingstone to a bigger board position. As an audit committee

member, your experience and independence is highly valued,says Kees Storm, Chairman of the Supervisory Board of KLMand Anheuser-Busch InBev, Vice-Chairman of Unilever, and amember of the Supervisory Board of AEGON. Once you have

ful lled that role, you may well nd that you are asked to takeon a bigger role on the board, such as the senior independentdirector or chairman.

but to pigeonhole them is to miss out on their fullrange of skills

Despite their suitability for audit committees, some CFOsexpress concerns about being pigeonholed. Some CFOs ndit frustrating that they are automatically seen as candidatesfor chair of the audit committee when they have so muchmore that they can offer to the board, says Gerard Dalbosco,

Managing Partner Markets Asia-Paci c, Ernst & Young.Many CFOs run business development, fundraising and haveexperience of large transactions, while the narrowerresponsibilities of the audit committee may have consumedonly about 10% of their role as CFO. So I think some of themcan be a little insulted that the breadth of their experience asCFO is not necessarily recognized.

Mr. Grigson agrees. I would be wary of taking a board positionpurely because somebody was thinking, Ive got a vacancy onmy audit committee, I need a nance director. Basically,theyre saying that theyre going to undervalue my broader

contribution and if thats the case then its probably not aboard I want to be on.

There is massive demand for people with CFO-typeexperience versus very little supply.Keith Pogson, Managing Partner for Financial Services, Asia-Paci c, Ernst & Young


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67%of CFOs have taken on,or would be willing totake on, a voluntary ornon-executive role.



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Should serving CFOs takeon non-executive positions?

You go on boardsfor three reasons.The intellectual

capital, which iswhat you learn;the social capital,which is who youmeet; and thecreative capital,which consistsof the ideas andconcepts thatyou can nd outabout and bringback to your owncompany.Susan Stautberg , President ofPartnerCom Corporation

3

The pressures of a CFOs day job make itextremely challenging to t external roles into theschedule. Yet, despite the obvious constraints,part-time positions can bring powerfulprofessional and personal bene ts for those whocan nd a way to juggle their responsibilities. Forthis multitasking to work, CFOs need to chooseadditional roles carefully, and ensure that anyextra responsibilities are relevant either to theircore CFO position or their long-term careerdevelopment.


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Should serving CFOs take on non-executive positions?

In general, CFOs surveyed for this report have a strongappetite for supplementary jobs. Just over one-quarter ofrespondents have already taken on one or more part-time,voluntary or non-executive positions in addition to their CFOposition, while a further 40% say that they would be interested

in doing so (Chart 3). Unsurprisingly, more senior CFOs aremore likely to have a supplementary position: almost one-thirdof group CFOs have already taken on part-time roles,compared with 24% of regional and divisional nance leaders.

Our research into 347 of some of the worlds largest companyCFOs shows that, between 2002 and 2012, the likelihood of aserving CFO holding a non-executive role alongside their coreposition has increased signi cantly: in 2002, 36% of servingCFOs held a non-executive position; by 2012, this proportionhas increased to 46%. And, although the audit committee hasremained the most likely destination for large-company CFOs,the number of CFOs taking on a broader range of roles including sitting on the remuneration committee or servingas non-executive chairman has also grown (Figure 1).

Figure 1. Proportion of serving CFOs at the largest companies with non-executive roles in 2002 and 2012

* Breakdown includes the top four most popular types of non-executive director roles. Others include risk committee and policy committee


Class of 2002

8% non-executivechairman

30% audit committee

10% remunerationcommittee

11% nominationcommittee

Class of 2012

17% non-executivechairman

36% audit committee

17% remunerationcommittee

11% nominationcommittee

36% heldnon-executive directorpositions in 2002

46% holdnon-executive directorpositions in 2012

Breakdown * Breakdown *

Chart 3. Have you taken on, or would you be willing totake on, one or more part-time, voluntary or non-executiveroles, as an addition to your current CFO position?(percentage)


27

33

40

I have taken on such a role

I have not and haveno intention to do so

in the future

I havent yet, but would beinterested in doing so


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A CFO who is established in the role can derive real bene tfrom lifting their head out of their organization and thinkinghard about the issues that face another company.David Grigson, Chairman of Trinity Mirror and former CFO of Reuters and Emap

Chart 4 shows some interesting regional variations. In everycountry or region, except Scandinavia, CFOs from the class of2012 are more likely to hold a non-executive directorshipcompared with the class of 2002.

Chart 4. Serving CFOs with non-executive directorships in 2002 and 2012 (percentage)


10 33

China

46 49

UK

32 43

Italy and Spain

3017

63 71

Germany

36 39

US

17 60

Australia

45 60

Class of 2002 Class of 2012

Scandinavia

France


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CFOs are securing non-executive director roles ata younger age

Furthermore, CFOs are taking on board positions at a youngerage. The increase in the proportion of CFOs to hold these

positions is most marked among the younger generation those aged between 4049 years old (Figure 2).

CFOs are split on whether they should take onpart-time roles while serving as CFO

There is division among nance leaders over whether or notit is appropriate for them to take on supplementary roles,

as shown in Chart 5. The challenge, it seems, is that while mostCFOs recognize that these roles bring a variety of bene ts,there are also barriers that make it extremely dif cult for themto accommodate these additional roles. Figure 2. Break down of non-executive director positions

held by serving CFOs in 2002 and 2012

Age groupClass of2002

Class of2012

40-49years

% non-executive director 29% 42%

% audit committee 25% 40%

% remuneration committee 5% 18%

% nomination committee 5% 16%

% nonexecutive chairman 7% 12%

Average number of nonexecutivedirector positions

2 2.1

50-59years

% nonexecutive director 48% 54%

% audit committee 32% 34%

% remuneration committee 9% 18%

% nomination committee 15% 11%

% nonexecutive chairman 5% 20%

Average number of nonexecutivedirector positions

2.3 3.4


Chart 5. Do you agree that CFOs should not take onpart-time responsibilities outside of their main role?


Disagree40%

Agree42%

Neutral18%


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... if you dont have deep sector expertise, then that givesyou permission to ask the more fundamental questionsbecause youre not embarrassed if you dontunderstand something.Steve Hare, Head of the Portfolio Support Group, Apax Partners

The bene ts of a non-executiveposition

There is no question that part-time and extracurricularroles can, if chosen wisely, bring a range of personal andprofessional bene ts to the CFO. These include a betterunderstanding of boardroom dynamics, the cross-pollinationof ideas and best practice, and exposure to a differentcorporate culture.

Understanding board dynamics from the other side isthe principal bene t

According to survey respondents, the most important bene tto becoming a non-executive director is the opportunity

to gain general management and board-level experience(Chart 6). Most CFOs spend a lot of time engaging with theirown board members, but, often, it is only by sitting on theother side of the table that they understand fully thechallenges and dynamics of the boardroom.

Professor Kakabadse agrees with these ndings and considersit a good idea for any top-serving executive to have onenon-executive board position in addition to their full-time job.It exposes them to boards and provides experience of howgovernance requirements need to be handled, he says.

That will help them enormously in their current role,as well as bringing their knowledge and experience intothe non-executive board context.

Faisal Al-Hajri, CFO of the Qatar Foundation, also agreesand points to the wide range of new knowledge that nanceleaders can collect in part-time roles as a key bene t.You get to look beyond the purely nancial and think morestrategically about a different organization, he explains.You can also use these roles to play a broader role in societyor the community.

For divisional CFOs, who may be one step removed from grouplevel decisions, experience on a board can provide extremelyvaluable insight that they may be unable to secure in theirday-to-day operational role. As a divisional CFO in a large

company, you may not have to deal with the issues that takeplace at head of ce, such as funding, no matter whether debt orequity, because that is the responsibility of the group CFO, saysMichael Sen, CFO for the Healthcare Sector at Siemens.By taking on a board directorship at a smaller company orsitting on the audit committee, you gain exposure to thosedecisions and that can be useful experience for a future rolein a group CFO position.

53

Opportunity to demonstrate suitability for leadershiproles beyond nance

58

A means to stretch or diversify a business career without thepressure of executive responsibilities

51

Opportunity to gain exposure to another companyor industry

65

Opportunity to gain general managementor board level experience

75

62Opportunity to get a different perspective on runningan organization

Opportunity to leverage the non-executive director

experience to benet my main CFO role

Chart 6. What are the bene ts for a serving CFO in becoming a non-executive director? (percentage)



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Cross-sector or cross-company learning is anotherkey motivator

A second key bene t is the opportunity to gain exposure toanother company or industry. As well as offering a different

perspective, spending time at another company enables CFOsto learn lessons that have valuable applications in their corerole. We all have a tendency to work hard and take our jobsvery seriously, but there is a danger that we can becomemyopic and not do enough to broaden our experience, says Mr.Grigson. A CFO who is established in the role can derive realbene t from lifting their head out of their organization andthinking hard about the issues that face another company.

CFOs often gain greater knowledge by joining the board ofa company in an unfamiliar sector. A diversity of experiencealso brings bene t to boards, encouraging broad, innovativethinking. As Mr. Hare suggests, Theres a lot of value for bothsides to bringing a fresh pair of eyes to a board. The problemwith staying in your sector is that its very easy for everyoneto keep thinking the same way. And if you dont have deepsector expertise, then that gives you permission to ask themore fundamental questions because youre not embarrassedif you dont understand something. Asking these more basicquestions can help to spark discussion and challenge long-held assumptions that may not actually be right.

Rather than seeking deep sector expertise from a CFO,external boards are often looking to make use of their broaderbusiness knowledge. A CFO who has been involved in multipleM&A transactions, the implementation of shared services,or a corporate restructuring can often apply those skills inalmost any sector.

Equally, CFOs can use the opportunity to sit on a board asa way of learning about broader business themselves. Forexample, it would be hugely bene cial for a company thinkingabout investing in a new market if its CFO had the opportunityto sit on a board that had already gone through that process.You go on boards for three reasons, says Susan Stautberg,President of PartnerCom Corporation. The intellectualcapital, which is what you learn; the social capital, which is

who you meet; and the creative capital, which consists of theideas and concepts that you can nd out about and bring backto your own company.

Beyond cross-pollination of ideas and concepts, exposure tonew corporate cultures can also be useful. Dealing with adifferent set of management or board dynamics helps CFOs todevelop soft skills critical to success. If you talk to boarddirectors about the style of boards and the way they work,

youll nd that no two are exactly the same, says Mr. Pogson.Understanding how those cultures differ, and why, can bevery valuable, because you start to appreciate how problemsand challenges can be solved in different ways.

There is a tendency to gravitate toward the sectoryou know

Serving CFOs often nd it more challenging to justify takingon a non-executive role in another sector. The constraints ofthe CFOs job mean that there is a tendency to be attracted bya position that has more obvious relevance to their core role.Furthermore, moving from one sector to another mayincrease the time commitment required, simply because theenvironment is less familiar and it takes longer to becomefamiliar with sector-speci c issues.

These are certainly real challenges but, as Mr. Grigsonexplains, a focus that is too narrow can ultimately be a missedopportunity. A lot of CFOs do think that this is company timethey are using and, therefore, try to nd a role that is directlylinked to their main job. That is a mistake, because this shouldbe all about diversity. Taking on a non-executive role helps toexpand your knowledge and understanding that thefundamentals of business are the same wherever youexperience them.

The disadvantages of anon-executive position

Time constraints and con ict of interest are thebiggest barriers

Despite the obvious bene ts, there are also potential costs totaking on supplementary roles. Perhaps the most intractable

of all is the demanding nature of being a CFO. Our surveyrevealed that being overstretched is perceived as the biggestchallenge a serving CFO faces when taking on a non-executivedirectorship. Con ict of interest whether around issues ofcompetition or simply schedule clash was also aconsideration for a signi cant proportion (Chart 7).


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Until they have been through a crisis as a non-executivedirector, many people dont appreciate just how muchadditional time may be required, particularly during acrisis situation.Chris Pierce, CEO, Global Governance Services

Increasingly demanding non-executive roles requirecareful choices

The risk of being overstretched is only likely to rise in line withthe increasing demands of the non-executive role. In somecountries, there are corporate governance guidelines thatstipulate how much time non-executives should spend on theirrole. In the UK, for example, the nal Walker Report in 2009,which focused on the banking sector but has also beenin uential elsewhere, recommends that several non-executivedirectors on each board should spend between 30 and 36

days on their duties over the course of a year. Committeechairs are expected to spend even more time ontheir responsibilities.

What Walker identi ed was that many individuals were notspending suf cient time on their duties, and there was amisalignment between what we should expect in terms of levelof professionalism and the reality, says Chris Pierce, CEO atGlobal Governance Services. If boards make thoseexpectations clear, then existing CFOs should be very waryabout taking on non-executive positions because theypotentially dont have the ability to manage that

workload appropriately.

Certainly, there is a mismatch between the expectations ofWalker and the amount of time that CFOs say they couldallocate to a part-time position: more than half of ourrespondents estimate that they could only spare ve hours orless per week (Chart 8), and yet the Walker recommendationscorrespond to at least that.

Chart 7. What would you say are the biggest challenges a serving CFO faces in taking on non-executive director positionsas a part-time responsibility? (percentage)


Doesn't have the right skills to take on role successfully 18

Lack of condence to take on the role 27

CFOs lack strong networks needed to b e considered for non-executive director roles38

Risk of over-stretch by taking on non-executive director roles 60

37

Tendency to overstep their non-executive director responsibilitiesas an independent advisor and sounding board

48Risk of conicts of interest between CFO and n on-executive director role

Chart 8. How many hours a week do you think is themaximum that a CFO can afford to spend on a part-timerole, in addition to their main responsibilities?


Between 510

38%

None

2%

None

2% Less than 15%Less than 15%

Between 10204%

More than 20

1%

Between 25

50%


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Other executives may be wary of the impact of yourexternal role on your day job

Concerns about time commitment mean that some companiesare reluctant to let their nance leaders take on external

positions. Some rms even request that any fees earned bythe non-executive should be paid to the company, to ensurethat external positions have direct business relevance.

But our research mostly suggests there is general support forthe idea that CFOs should consider external roles. Sixtypercent of respondents agree that other C-level executives intheir organization are very supportive of leadership teammembers taking on part-time roles, while only 11% disagree(Chart 9). It is also notable that those who have alreadytaken on a part-time role are much more likely than those whohave not to say that their C-level peers are supportive oftheir decision.

Personal and professional risk can deter would-beboard members

Concerns about personal and professional risk can also bea deterrent to taking on non-executive roles. Althoughcorporate governance practices differ between countries,board directors are very often personally liable if it can be

demonstrated that they have neglected their duciary duties.Directors and of cers insurance coverage can offer someprotection, but many CFOs will decide that the risk to theirown personal reputation is simply too great to consider an

external role. This is particularly true when taking on a role asaudit committee chair any subsequent nancial dif cultiesor accounting irregularities could damage the CFOsreputation and career prospects.

Finding the right positionMake sure its right for you and your company

Any serving CFO who has the opportunity to take on a non-executive directorship must weigh up the circumstances of thecompany where they hold their full-time position and the natureof the role that they are being asked to ful ll. If either companyis under any form of stress, for example, or is planning majorstrategic initiatives, it will be dif cult for the CFO to take onanother job and a decision to do so may be looked on lessfavorably by the shareholders and management team.

Tenure is an important consideration in determiningsuitability

Length of time served and experience should also in uenceCFOs in deciding whether they are suitable for external rolesor have the ability to handle multiple positions simultaneously.Although there are no hard and fast rules about when to seekout a non-executive position, Richard Emerton, ManagingPartner, Board and CEO Services, EMEA, for Korn/Ferry, theworlds largest executive search and talent managementcompany, says that a rule of thumb should be to start looking18 months after rst taking on the CFO role: It could takeyou up to a year before you nd the role that is right, so thatstwo-and-a-half years into your tenure, by which time youshould be up and running. Given that the average tenure ofthe CFO is around four-and-a-half years, it probably makeslittle sense to leave it any longer, otherwise you will be startingto think about the next executive role.

Evaluate the board thoroughly before committingto a role

When considering an external directorship, prospective

candidates need to conduct thorough due diligence tounderstand not only the nancial position and reputation ofthe company, but also its strategic goals, culture and boardand management dynamics. They also need to ask searching

Chart 9. Other C-level executives in my organisation arevery supportive of members of the leadership team takingon part-time roles


Neutral29%

Agree60%

Disagree11 %


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questions about the expectations of the role, to ensure that itis appropriate both for them and their career. The rstpriority is to do your homework on the board you are thinkingof taking a position on, because you dont want to learn once

you are there, says Mr. Berquist, Executive Vice-Presidentand CFO of Marriott International. You need a good feel forwho the other board members are and must be honest withyourself about whether you could t in.

The type of role that the CFO is being asked to ful ll will alsomake a difference. A role as an audit committee member maybe suitable, but a position as chair of the audit committee willbe more challenging, because of both the time pressures andprofessional risks associated with the role. As Mr. Pogsonexplains, I am not sure youd want to be the chairman of theaudit committee if youre a serving CFO, because your

credibility will be connected to the performance of anotherorganization which is probably a step too far.

Prepare to manage the impact on your core role

CFOs who take on a board role may decide to delegate some oftheir CFO responsibilities to their team, to maximize thebene ts of the board role to them and their organization. Thisis particularly true for CFOs who have been asked to take onhigh-prole board positions, which can not only add value totheir own personal reputation but also bestow a halo effecton the company where they serve as nance leader. If a CFO is

asked to take over a non-executive role in a large globalcompany with a strong global reputation, its very hard to turnthat down, even if it means hiring one or two more people to dosome of the work they no longer have time to do, saysChristian Orth, Head of Corporate Governance Services forGermany, Switzerland and Austria at Ernst & Young. Itstrengthens their personal reputation, but also bene ts thecompany where they serve as CFO because they are consideredeffective enough to serve on such a prestigious board.

In preparation, Mr. Pierce advises that, You need to try tobuild in some organizational slack because you have to take

into consideration the peaks and troughs of both roles. Untilthey have been through a crisis as a non-executive director,many people dont appreciate just how much additional timemay be required, particularly during a crisis situation.

Most serving CFOs may only have time to take on onenon-executive position, and indeed, most corporate

governance experts suggest that, as a general rule, thisshould be the limit. Our survey respondents, however, thinkthat it is possible to do more, with one-third claiming thatserving CFOs could take on three or more non-executive

roles (Chart 10).

Mr. Pierce argues, however, that it makes little sense to thinkin terms of number of board positions or for regulators toapply a cap because the demands of each role vary sowidely. Applying a cap is a very crude approach, because theworkload requirements for sitting on an NGO board, forexample, are going to be completely different from a listed

companys board, he says. It is now regarded as goodpractice for the chairman to make the expectations very clearin a letter of appointment, so that directors have a clearunderstanding of what time commitment will be expected ofthem. Serving CFOs can then make the right decision abouthow many positions to hold, based on what is required.

If you can bring value to a board, you will takevalue too

Ultimately, the decision over whether to take on an externalrole depends on two key questions: whether the position will

add value to the CFOs career, personal development and core job; and whether they can make a valuable contribution to thatpart-time position. If the answer to either question is yes, theCFO owes it to themselves and their company to at leastconsider the appointment. It will not always be appropriate fora CFO to hold an external position, but those who do will veryoften nd that the experience is a highly rewarding one.

Chart 10. What is the maximum number of non-executiveroles that you think a serving CFO should take on?


3 or more32%

None4%None4%

121%

243%

The rst priority is to do your homework on the board...You need a good feel for who the other board membersare and must be honest with yourself about whether youcould t in.Carl Berquist, Executive Vice-President and CFO, Marriott International


26/6824 CFO and beyond The possibilities and pathways outside fnanceCFO and beyond The possibilities and pathways outside fnance24

Our survey of 800 CFOs nds a strong appetite for givingattention and expertise to community, social or charitableroles. Board member or trustee of a charity or culturalinstitution emerged as the most attractive part-time role forour respondents (Chart 11). And, making a contribution tosociety is seen as the second most important motivation fortaking on external responsibilities after gaining broaderbusiness knowledge and experience (Chart 12).

CFOs can make a valuable contribution to charitable roles,because they can apply the discipline and analytical skills thatthey bring to their core role to create better nancialoutcomes for the charity. Ritchy Drost, CFO for EuropeanBroadband Operations at Liberty Global, says that this hasbeen an important bene t to his role as a Member of the

Supervisory Board of the Alzheimer Foundation. You canhelp the organization balance the short-term goals it has witha more long-term perspective, he says. With your training asa CFO, you have a good sense of how to translate the ideasand actions that a charity has into a monetary impact.

Although it can be dif cult to nd the time to allocate tocharitable roles, Mr. Drost and others argue that these roles

also have a real bene t to their core position as CFO, as well asbeing potentially less time-consuming than a directorship at alisted company. By spending time on the board of a verydifferent institution, you gain a much better understandingof how groups work and how decisions get made, saysMr. Drost. This has real practical bene t because you learnmore about leadership, communication, group dynamics and allthe other softer skills that are so critical to the CFO role today.

Robert Blain, CFO of Cirque du Soleil, says that he has derivedsimilar bene ts from becoming involved with One Drop, anNGO focused on developing clean water and sanitationprojects. You need to have a vision when you join such anorganization, and it is not all about nance, he says. Youretrying to create a ripple effect through strategic planning, and

you also develop a network because you are meeting people ina different environment.

By demonstrating a willingness to spend time volunteering forcharitable work, CFOs and other leaders set a strong examplefor the entire workforce. The toy company Mattel, for example,distributes 2% of its pre-tax pro ts toward social impactefforts through its Foundation, donations and toy donations.

Giving back through charitable roles

Chart 11. Which of the following part-time, voluntary or non-executive roles, would you be most interested in takingon as an addition to your current CFO position? (percentage)


15 26Mentoring role

11 18Leadership role in industry

or trade body

11 27Part-time professor or lecturer

7 25Policy advisor to government

or regulators

17 35Trustee or board member

of a charity or cultural institution

5 20Chairman of another company

10 26Chairman of current company

11 32Non-executive director in other

companies in another sector

19 24Non-executive director in other

companies in the same sector

I would be interested in taking onI have taken on


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For Kevin Farr, CFO of Mattel and Chairman of Mattel ChildrensFoundation, this is a valuable way to position the company as aresponsible corporate citizen. Its important for the company

to be recognized for the fact that we give back to thecommunities in which we work and live. This has a positivesocial impact and is also good for the personal ful llment ofthose involved with this work.

Spending time on the board of a charitable body can alsoprovide younger CFOs, in particular, with valuable boardroomexperience and the opportunity to network with other

business leaders. You get good experience of how boardsinteract and experience of how the board role differs from theexecutive one, says Mr. Berquist. That can be usefulknowledge that may well help you secure a non-executiveposition on a corporate board in the future.

Chart 12. What has motivated you, or would motivate you, to take on a part-time, voluntary or non-executive rolealongside your current CFO positions? (percentage)


Other

Gaining broader knowledge andexperience of business

Broadening knowledge or experienceof nancial issues and subjects relevant

to the CFOs role

Utilizing my skills and expertisetowards making a contribution to society

in a part-time or voluntary capacity

Improving knowledge of the industry, marketconditions and regulatory environment

Improving soft skills,e.g., communication and inter-personal skills

Utilizing my skills and experience to benetyounger management talent and give

back to the business communityPersonal fulllment/satisfaction

and to broaden networks

Gaining better understanding of whatdrives different stakeholders

Gaining better awareness of career options

As an avenue to boost earnings

63

58

58

52

51

49

48

47

39

23

1

By spending time on the board of a very different institution,you gain a much better understanding of how groups workand how decisions get made.Ritchy Drost, CFO for European Broadband Operations at Liberty Global



82%of CFOs would consideranother role either part-or full- time after ful llingtheir goals as CFO.

CFO and beyond The possibilities and pathways outside fnance26


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Possibilities post-CFO

Finance professionals who reach the CFO positionhave achieved extraordinary success and, formost, this is the pinnacle of their executive career.But once they have met their CFO ambitions,many are open to answering the demand for their

skills and experience in a new sphere, either in anexecutive or non-executive capacity. For thisconsiderable proportion of CFOs, there is noshortage of options.

The CFOs roleinvolvescoordinating

the seniormanagem en tteam andencompassesgroup skills ratherthan leadershipfor the sake ofleadership. Thoseskills are also veryimportant for thechairman.Chris Pierce , CEO, Global GovernanceServices

4


30/68CFO and beyond The possibilities and pathways outside fnanceCFO and beyond The possibilities and pathways outside fnance


28

A substantial 82% of survey respondents said that they wouldconsider another role after ful lling their CFO goals. Whenasked why, the majority cited the opportunity to broaden theirskills and experience, and to apply the knowledge they havegained as CFO in other roles (Chart 13).

Chart 13. What would motivate you to take on a part- or full- time role after serving as a CFO? (percentage)


37

37

39

40

46

45

53

60

61

Using skills and experience to gain personal equity in a private company

Working in an environment which allows greater autonomy and theopportunity to be entrepreneurial and develop own venture

Improving earnings

Improving work life balance by taking on a less demanding role

Contributing more to public service or socially useful work

Doing something more in line with personal interests,e.g., a hobby or a pursuit unrelated to the corporate world

Leading an organization in another role such as CEO or chairman

Using skills and experience gained as CFO in other roles

Broadening range of skills and experience


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Sixty-two percent of the 347 large-company group CFOs inrole in 2002 are either still CFOs today or the job was theirlast executive post.

CFO to CEOOur The DNA of the CFO series found that the vast majorityof nance leaders in EMEIA and Asia-Paci c see CFO as a

destination in its own right; only 10% and 13% of respondentsrespectively harbored the ambition to become CEOs.Interestingly, this contrasted with the ndings from theAmericas study, where those CFOs interviewed were morelikely to express a desire to move to the CEO role.

This desire to be a CFO rst and foremost is further supportedby the leading CFOs we researched for this study. Sixty-twopercent of the 347 large-company group CFOs in role in 2002are either still CFOs today or the job was their last executivepost. Of the remainder, only 15% have become either CEO orCEO and chairman, 4% chairman and 3% COO. A further 16%

had moved on to a variety of other executive roles, includingdeputy CEO, regional managing director and CIO (Figure 3).

1. Becoming a CEO

2. Leaving the public sphere to become CFOof a private equity (PE) portfolio company

3. Taking on one or more non-executivedirectorships

In this chapter, we explore three paths

Figure 3. Last executive role for the CFO class of 2002


2002

347 CFOs

16% Other (includingregional/divisional MD,CIO, Deputy CEO etc.)

3% COO

3% Chairman and CEO

12% CEO

62% CFO

4% Chairman




30

While CFO to CEO is still a transition for the minority, as withnon-executive roles, there are signs that nancial expertise isbecoming more valued as an attribute in CEOs. Research fromrecruitment rm Crist Kolder, shows that between 1999 and2011 the proportion of CEOs who have nancial DNA

which refers to experience in any nance capacity inFortune 500 and Standard & Poors 500 companies, has risenfrom 22% to 33% (Chart 14).

The reasons CFOs are being increasingly valued in the CEOposition are not dissimilar to the reasons they are beingsought for non-executive director roles. First, manycompanies now face more signi cant regulatory challengesthan at any time in living memory, and shareholders want

con dence that the management team understands theimplications of these pressures. In general, more heavilyregulated sectors are more likely to have CEOs with CFOexperience: energy and nancial services companies are mostlikely to have former nance leaders in the CEO position,according to Crist Kolder (Chart 15).

Chart 14. Financial experience of newly named CEOsbetween 1999 and 2011

Source: Crist Kolder

0

5

10

15

20

25

30

35

40

45%

1999 2001 2003 2005 2007 2009 2011

Immediate role CFO Any CFO experience Financial DNA

2011 Fortune 500 and S&P 500 companies

Chart 15. Percentage of CEOs with CFO experience byindustry between 1999 and 2011

Source: Crist Kolder

0

5

10

15

20

25

30

Technology6.3

Retail10.8

Consumer13.9

Healthcare17

Services19.8

Industrial21.4

Financial22.6

Energy25.2

%

2011 Fortune 500 and S&P 500 companies


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While CFO to CEO is still a transition for the minority,as with non-executive roles, there are signs that nancialexpertise is becoming more valued as an attribute in CEOs.

A corollary of this is that, in general, it is less common forCFOs to make the transition to CEO in industries that are verydependent on marketing or have a large public pro le. Forinstance, in sectors such as consumer goods and retail, CEOs

tend to come from a customer-facing background, perhapshaving served as a chief marketing of cer.

Second, the external environment has forced many companiesto spend the past few years focusing on cost management,ef ciency and managing risk all core CFO activities. In theabsence of growth opportunities in many developed economies,these bottom-line improvements have become a key source of

value, leading a growing number of companies to lean towardappointing a former CFO to the top position.

Third, the CFOs evolving role makes them more capable

of making the transition to CEO. Taking on strategicresponsibilities, building broader commercial experience andworking on their leadership abilities, means CFOs are muchstronger candidates for the job. Our survey respondents citedthe need to gain experience in developing business strategyand leading operations as the top priority if considering CEOas the next stage in their career (Chart 16).

Chart 16. If you were to consider a CEO role for the next stage of your career, which of the following skillsand experience would you most like to develop further in your current role as CFO? (percentage)


14

24

24

27

31

38

40

61

Launching a new product or service orlaunching operations in new market

Deep industry or sectoral expertise

International experience

Risk management or crisis management skills

Experience in a non-executive role

Senior level experience in leadingM&A transactions

Communicating and inuencing a widerange of internal and external stakeholders

Senior level experience in developingbusiness strategy or leading operations




32

The qualities of business partnership make for agood CEO candidate

The CFO who makes a good CEO candidate will already beheavily involved in commercial and strategic decisions, serve

as a strong partner to the business and have a clear vision ofthe companys long-term strategy. A cross-over CFO is onewho is thinking about how to build the future of the business,is focused on leadership and considering how they canimprove the customer experience, says Philip McHugh,CFO of Barclaycard.

Christophe de Margerie, CEO of Total, is a prominent exampleof a former nance professional who has made the transition.He sees developing strong operational experience and buildingclose relationships with internal and external clients as keys tosuccess. You need to be able to help your clients to achievetheir targets in the best way, he says. A good CFO is notthere to say no, but to evaluate risks, assess their impact onthe company and enable the business to achieve its goals.

Barriers to a transition to CEO remain

Even though the CFO to CEO transition is becoming morecommon, there remain barriers to success. One is thatnomination committees and recruitment rms may retainoutmoded perceptions of nance as a narrower role. Thereis often a perception that nance people are mainly concernedwith blocking or making things dif cult for those in thebusiness, says Mr. de Margerie. This is unfair, but the realityis that CFOs who aspire to the CEO position need to challengethat perception.

Changing this perception requires CFOs to demonstrate thatthey are willing to take risks. As Dominique Thormann, GroupCFO of Renault and CEO of Renaults captive sales nanceunit, RCI Banque, explains, There is a danger that formerCFOs in an executive position can be too unwilling to takerisks, simply because that is the way they have been trained.But if nance leaders cant shake off this trait, they are lesslikely to succeed. Thorman continues, The business of theCFO is mitigating or eliminating risk, but if you dont take risks

with your products, technologies or investments then youarent going to produce a return.

A second danger is that, having become CEO, a formernance leader is unwilling to let go of their previous nancialresponsibilities. This not only undermines the new CFO, butcan also have broader implications. If you have a CEO whotalks like a CFO, then the whole organization and the markets

can lose con dence in the company, says Bhavesh Shah,Vice-President, Asia-Paci c at Johnson & Johnson. Whenyou move out of the nance function, you need to be verycareful not to step on the new CFOs toes, because that willundermine not only his role but also the value that you bringto the company.

From listed to private equityFor a certain type of CFO, the transition from public listedcompany to PE can be very attractive. There are two mainoptions: one is to become the CFO of a private equity portfoliocompany; the other is to work as an advisor or in anoperational role within a PE rm itself. The former is morelikely, because there are more of these roles available. Both ofthe PE executives we have interviewed for this report,however, have taken on roles in the latter category. Thesemanagement roles will suit CFOs with a strong operational andM&A background, who are able quickly to get to grips with awide range of different businesses across the portfolio.

The CFO of a PE portfolio company has the opportunity forsigni cant nancial rewards and can take a hands-on role intransforming a company. The deal teams at a private equityhouse have a tremendous ability to analyze what needs to bedone strategically, as well as a crystal-clear understanding ofwhat is value creating and what is not, says Robbie Barr, COOat Terra Firma. But implementing that in a commercialframework requires people who have the operationalexperience to execute and select the right management teams.That is a huge part of the skill-set that you pick up as CFO.

In addition, the entire process happens away from the glare ofthe public markets, and without the need for regular reportingrequirements, such as the annual report or quarterlyearnings. But, as Mr. Barr explains, this is only swapping one

form of scrutiny for another. By going into a portfolio


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If you have a CEO who talks like a CFO, then the wholeorganization and the markets can lose con dence inthe company.Bhavesh Shah, Vice-President, Asia-Paci c at Johnson & Johnson

company you get to avoid the public scrutiny, and that meansthat you are able to build a business for the longer termwithout people worrying about quarterly reporting, heexplains. But you replace that with a lot of pressure from the

PE house to justify operational decisions, for example therequirement to produce detailed analysis before you are ableto deploy capital expenditure. And some people nd thatscrutiny very intrusive.

When recruiting a CFO to a portfolio company, PE houses aretypically looking for a very speci c combination of skills andcapabilities. Candidates need deep technical nancialknowledge because, when stepping into the role, they arelikely to acquire complex nancing and lending arrangements.At the same time, a good PE CFO also needs to have broaderstrategic vision, and the ability to handle large M&A

transactions and lead integration efforts.

Candidates who combine both of these capabilities are rare.CFOs from smaller companies may be closer to the numbersbecause the nance function is smaller and less specialized,but they are less likely to have experienced large-scale M&Aand integration. Equally, listed-company CFOs may have thebig-picture strategic vision, but most will have long sincestepped back from the more technical aspects of the role.People from a PLC background are used to having a team ofpeople who do the numbers, says Caroline Ross, Director ofErnst & Youngs Private Equity Key Executive Program, which

connects candidates with those looking to ll executive rolesin the PE sector. Youre not necessarily going to have that ina private equity-backed business.

The nature of the asset will determine the right CFOfor the job

In addition, a PE house will be seeking speci c experience ina portfolio CFO that will depend on the nature of the asset.Often, the company will be in a turnaround situation, so thenew CFO will be required to make quick decisions and turn aloss into a pro t. CFOs at a turnaround company need to be

robust, quick and able to make dif cult decisions, says AshleyWhipman, a Director of Robert Half Management Resources.

That takes a certain type of CFO who is comfortablewith stress, who can identify where problems are and thenx them.

In other cases, the asset may be in better shape but the PEhouse will have a speci c improvement goal in mind, such asinvesting internationally or creating new routes to market. Inthose situations, a business partnering CFO who can help toeffect that change will be in demand.

When a PE company acquires a business, it will often replacethe incumbent CFO with someone who has PE experience.This begs the question of how CFOs from listed companiesgain the initial experience necessary to position themselvesfor these roles. It can be dif cult to get into the club in therst place, but, once you are in, you do nd that people move

between jobs and across different sectors, says Ms. Ross,who suggests that interim roles in PE can be one way to gainthe necessary experience. Sector experience can be lessimportant than knowing how to operate in a highly leveragedprivate equity environment.

PE culture can take some adjusting

CFOs who do succeed in making the transition are likely to ndfew similarities between the PE environment and that of apublic company. Part of this is driven by the goals of the dealsthemselves. Rather than building value over the long term, and

reporting to external shareholders, the priorities are typicallyto make an exit and meet challenging internal targets.

The culture is also one where data and analysis are core toany decision. This suits certain types of CFOs, but those whoare accustomed to pushing through decisions and areuncomfortable with dissent may nd the environmentfrustrating. The way things are discussed in a PEenvironment is very, very data driven, says Mr. Hare.Nobody makes a decision until theyve explored all theoptions, and the answer is always something that is derivedfrom that analysis. Its not about trying to pitch your point of

view and win people over. In fact, there is a deep suspicion ofpeople who reach a conclusion too quickly.




34

With the days of large leveraged deals now in the past, andthe returns from PE less certain, CFOs also need to considercarefully the risks of making the jump. The success of a PEdeal now depends less on nancial leverage and much moreon operational improvements, but these can be dif cult to

achieve. You can end up in something that goes nowhere,with the added problem that you have your name associatedwith that, says Ms. Ross. Its an exciting environment and, ifit goes well, you will do very well nancially, but you have gotto have that tolerance of risk.

Non-executive directorshipspost-CFO

CFOs training and background make them ideally suited totake on one or more non-executive directorships once theyhave achieved their ambitions in their executive role. Over thepast decade, there has been a substantial increase in thepercentage of board directors who are former nance leaders.Today, 12% of board directors at the 347 companies studiedfor this report are former CFOs, compared with 7% in 2002.Chairman and audit committee chair emerge as particularlypopular destinations (Chart 17).

Chart 17. Percentage of former CFOs in non-executive director positions, 2002 and 2012


2002 2012

9

19

6

7

35

13

Former CFO nomination committee chairman

13

7 12

Former CFO audit committee chairman

18

Former CFO remuneration committee chairman

Former CFO non-executive director

Former CFO chairman


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CFOs at a turnaround company need to be robust, quickand able to make dif cult decisions. That takes a certaintype of CFO who is comfortable with stress, who canidentify where problems are and then x them.Ashley Whipman, Director of Robert Half Management Resources

At a country level, the changes are even more striking. In theUK, the proportion of audit committee chairmen who areformer CFOs has doubled from 35% to 71%, while the UShas gone from 13% to 35% (Chart 18).

Chart 18. Proportion of audit committee chairs at 347 of the worlds largest companies who are former CFOsin 2002 and 2012


11

24

43

71

35

6

13

26

35

13

19 35

Global

US

2927

France

Germany

Scandinavia

Italy and Spain

2811

Australia

UK

2002 2012




36

CFO to non-executive chairman

Although it is still relatively unusual for a chairman to be aformer CFO of the same company, Mr. Pierce argues thatindividuals with a nance background are increasingly being

seen as strong candidates for the leader of other companyboards. Part of the attraction of CFOs is that they are typicallyrecognized for having strong values, ethics and integrity.Communication is also a core part of their role, although onethat CFOs have identi ed in our previous studies as the areawhere they most need to improve their skills. The CFOs roleinvolves coordinating the senior management team andencompasses group skills rather than leadership for the sakeof leadership, says Mr. Pierce. Those skills are also veryimportant for the chairman, who needs to be a team player, tohave empathy with individuals and only act when they ndevidence based on questioning.

The portfolio route

Although personal preferences vary, a typical approach for aformer CFO seeking a portfolio director career is to seek outa range of positions. Once they go plural, we tend to see that

those non-executives who were formerly CFOs will look for acollection of roles that include one FTSE 100, one FTSE 250,one smaller business, and something in the charitable orpublic sector, says Mr. Emerton. This gives them range andbreadth and helps to keep the roles interesting.

CFOs hoping to build a portfolio of board directorships shouldplan for this transition as early as possible. Taking on anon-executive role while still serving as an executive enablesyou to see the bigger picture and provides a valuable lesson inhow boards work, Mr. Grigson says. When it comes to makingthe decision about moving into a portfolio of roles, you have gota reference point that you can use to make the right choices.


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Once they goplural, we tendto see that those

non-executiveswho wereformerly CFOswill look for acollection of rolesthat include oneFTSE 100, oneFTSE 250, onesmaller business,and somethingin the charitableor public sector.Richard Emerton, Managing Partner,Board and CEO Services, EMEA,

Korn/Ferry



55%of CFOs with a long-termcareer p lan have takenon a p ar t-time role.

CFO and beyond The possibilities and pathways outside fnance38


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How to maximize your chances of securing a place on the board

CFO and beyond The possibilities and pathways outside fnanceCFO and beyond The possibilities and pathways outside fnance40

Part-time board positions are a necessary part ofcareer planning

Supplementary roles, such as non-executive directorships, canplay a valuable role in helping CFOs prepare for an onward

step while they are still in the nance function. Almosttwo-thirds of respondents agree that, if CFOs want to movebeyond a pure nance role, they need to broaden theirbusiness experience with part-time responsibilities (Chart 19).

Our research also suggests that CFOs who plan for the futureare more likely to be securing supplementary positions. Morethan half of long-term career planners have taken on part-timeroles, compared with just 29% of those with a short-term planand 16% of those who have no plan at all (Chart 20). Theseplanners are also much more likely to take a broader view of thetype of positions they might take on, with a clear correlationbetween their tendency to plan and the likelihood they hold a non-executive director role in a different sector, a role as acharity trustee, a policy advisor or a leadership role in industry.

You need to have a destination in mind and be practicalabout what is required to develop the skills and experienceyou need to get there, says Lawrie Tremaine, CFO ofWoodside, Australias largest independent dedicated oil andgas company. That means taking a proactive approach to

guring out what is lacking on your CV and then going out toget it. It never ceases to amaze me just how many people donot have that plan in place and abdicate responsibility for theirown career development.

The 61% of CFOs with only a short-term plan or no plan at allsuggests that many nance leaders are opportunistic in theircareer approach (Chart 20). However, its likely to be thelong-term planners who are appointed to boards, havingacquired depth and diversity in the skills and experiencethey can offer.

Chart 19. Do you agree with the following statements? (percentage)


53

64

79

24

16

4

If CFOs want to move to another CFO role in a different sector,they need to rst broaden their experience

with a part-time or voluntary role in that sector

If CFOs want to move beyond pure nance roles in the nextstage of their careers they need to rst broaden their business

experience with part-time, voluntary or non- nance responsibilities

Should a CFO choose to take a next step in their career,networking skills will be crucial in helping broaden

the range of available career options

AgreeDisagree

Chart 20. Correlation between the tendency to career plan and part-time roles


I have a very clear, long-term plan of howI would like my career to proceed

I have a clear plan, but only over arelatively short-term period

I do not have a clear plan of howI would like my career to proceed 16 20 24

29

20

41 46 45

5539 34 31

I have takenon such a role

I haven't yet, but would beinterested in doing so

I have not and have no intentionto do so in the future

In general, how would youdescribe your approach toplanning your career?(percentage)

Have you taken on, or would you be willing totake on, one or more par t time, voluntary ornon-executive roles, as an addition to yourcurrent CFO position? (percentage)


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Any search rm is going to Google you, and will want tosee that you are out and about and well-known.Susan Stautberg, President, PartnerCom Corporation

Eight steps to preparing fora place on the board

The precise experience and skills that a nance leader needsfor an additional role will obviously depend on the position inwhich they are interested. However, in general, our researchsuggests that there are eight key ways for CFOs and futurenance leaders to make better career decisions andmaximize their attractiveness for executive andnon-executive positions:

1. Develop a coherent CV

Boards and nomination committees are increasingly adopting

a more strategic approach to hiring to achieve the right mix ofexperience on both the management team and board to ful llthe companys long-term goals. This means that recruiters arenow often looking for particular experience, such as M&A,capital markets or rapid-growth markets.

When planning your career, it often makes sense to keep to abroad theme on your CV, where the roles that you take on andyour key areas of focus have some similarities between them,says Ms. Ross. If you have deep experience of a particulardomain, such as M&A, then this will give you a good chance ofbeing matched up with certain positions on certain boards.

2. Take on roles outside nance and even business

Board roles on charitable trusts, government taskforces orcultural institutions can help CFOs to develop important skillsto take them toward their next career goal, as well as providingrich and ful lling experiences in their own right. These rolesprovide valuable exposure to another sector, access to newnetworks and experience of group dynamics. A move outsidethe comfort zone into a non- nance role, whether in businessor not, also demonstrates a willingness to gain a broaderperspective. Spending time on the board of a charitable

organization gives you a good experience of how boardsinteract, and teaches you how to keep your knowledge about anorganization current when you are only meeting several times ayear, says Mr. Berquist. It also gives you experience ofstepping back and the shift in mindset that is required for boardpositions rather than trying to run everything.

3. Build networks

In recent years, boards have taken a more transparentand independent approach to recruiting directors. But

nevertheless, to be considered for directorship roles, it stillhelps to have the right contacts among senior businessleaders. CFOs should nurture these networks through tradeassociations, conferences, industry meetings and part-timeroles. Word of mouth is still a signi cant factor that willdetermine whether or not you are on a list for a boardappointment, says Mr. Johnson.

4. Develop a personal pro le

In the past, CFOs have been accused of not doing enough tobuild relationships with the outside world. This is changing,

but a CFO seeking a directorship or onward executive stepshould still work on building a public pro le for themselvesthat extends beyond their core role. Any search rm is goingto Google you, and will want to see that you are out and aboutand well-known, says Ms. Stautberg. You need todemonstrate not only that you are a leader in your eld, butalso someone who can think broadly beyond the CFO role.

5. Gain international experience

Companies increasingly expect board directors and seniorexecutives to have spent time in different countries, as Mr.

Pierce explains. Group CFOs increasingly need to be peoplewho have traveled and been exposed to multiple ways oflooking at similar problems. There is a lot of training takingplace in cross-cultural awareness and empathy, so CFOs whohave those skills already will be at an advantage. Experienceof rapid-growth markets is particularly desirable.

6. Build relationships across the business

CFOs who enjoy a wider range of potential career opportunitiesand are most in demand for executive positions are thosewho can demonstrate breadth, by having moved beyond the

traditional nance role to assume wider business andcommercial responsibilities. Every time I saw an opportunityfor me to get involved with the business I would take theinitiative, rather than just sit on the periphery and look at itonly from a limited nancial perspective, says N.

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