THE NUMBER of audit committee chairs who have previously held CFO roles has more than doubled in the last decade, according to a new survey.
The survey of 800 CFOs found that 71% of audit committee chairs in the UK have held the top finance job at a company, up from 35% ten years ago, as a result of the demands of a far more complex risk and regulatory environment.
CFOs also viewed the position as the most realistic non-executive destination, followed by the risk committee, remuneration committee and finally membership of the nomination committee.
Hywel Ball, Ernst & Young UK&I assurance managing partner, said: "Accounting standards are moving at an incredibly rapid rate, investor activism is on the rise, and companies face an extremely complex risk and regulatory environment. All of these trends increase pressure on audit committee members and make it more difficult for those with a non-finance background to perform the role."
However, the report found that many CFOs believe the risk to their own personal reputation is too great to take an external role, particularly as an audit committee chair – with subsequent financial difficulties or accounting irregularities potentially damaging the CFO's reputation and career prospects.
David Grigson, chairman of Trinity Mirror, and former CFO of Reuters and Emap, said: "I would be wary of taking a board position purely because somebody was thinking, ‘I've got a vacancy on my audit committee, I need a finance director.' Basically, they're saying that they're going to undervalue my broader contribution and if that's the case, then it's probably not a board I want to be on."
Frankly I am more surprised that 29% of audit chairs are not ex FD's. good finance directors have often had diverse careers, working in different industries or cultures. They are used to challenging and have learned to do this in a variety of ways. They are likely to be independent in mind as well as financially. And to suggest they might only make or be expected to make an input on financial matters I find quite insulting. I believe ex FD's will often make very good board members and also their chairman potential is enhanced by experience chairing an audit committee.
Posted by: Robert Beveridge, 11 Dec 2012 | 06:49
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