Bruce Shaw and Ariel Babcock are Managing Directors, Research and Victoria Tellez is a Research Associate at FCLTGlobal. This post is based on their FCLTGlobal memorandum. Related research from the Program on Corporate Governance includes The Myth that Insulating Boards Serves Long-Term Value by Lucian Bebchuk (discussed on the Forum here).
Executive Summary
Operating at the nexus of short-term performance pressures and the behaviors that promote long-term value creation within the firm, the chief financial officer (CFO) has a unique ability to drive long-term value creation for the organization. Among their growing set of responsibilities, CFOs and their teams report company financial results, communicate with and field questions from investors, secure financing to fund corporate strategies, and act as a strategic resource for the chief executive officer (CEO) and board of directors.
CFOs need to manage legitimate short-term performance pressures and, at the same time, advocate for capital allocation decisions with long-term benefits, even if potential contributions to corporate earnings are years in the future. CFOs are essential to driving long-term behaviors and are in a unique position to make a meaningful difference. According to one leading academic, “There’s a huge opportunity for CFOs to focus firms on what truly matters.”