Business, Legal & Accounting Glossary
A Chief Financial Officer aka CFO is a corporate officer, often of a public company, whose primary responsibility is the management of financial risks for said company.
CFOs occupy an increasingly important and visible role in corporations. Besides managing the finances and risk of a company, their roles have typically expanded to communicating the financial performance of the company to shareholders. The role has gained some notoriety in recent years due to accounting scandals at Enron and WorldCom and the roles their respective CFOs (Andrew Fastow] and Scott Sullivan) played in those scandals.
The typical CFO reports only to the CEO and often has a seat on the board of directors. It is not a requirement for a CFO to have an MBA or have a CPA, and there are many who do not possess one or both degrees. The frequency of that occurrence however may change due to laws put in place by the Sarbanes-Oxley Act (passed in 2002) which requires a least one member of a company’s audit committee to have a U.S. accountancy qualification.
Potential investors should check SEC filings and company documents/proxy statements to find out how much the CFO is paid and whether that pay is tied to performance. Executives with compensation that rises with good performance have more incentive to make the company succeed. Are the executives’ interests aligned with shareholders’? Compensation can include salary, benefits, bonuses, and stock options. Look to see how your CFO’s compensation compares to others in the same industry.
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This glossary post was last updated: 4th August, 2021 | 0 Views.