A chartered accountant qualification can take you anywhere - and increasingly, it seems, straight from the position of CFO to chairman without stopping at the traditional CEO base. There are a number of reasons for this, according to Mark Freebairn, partner and head of the CFO practice at Odgers Berndtson. One, the typical finance director plays a far broader commercial, operational and leadership role in business than they used to. Two, FDs are becoming audit committee chairmen at a younger age, which can give them valuable experience and exposure on a number of different boards. And three, their personality is an ideal complement to that of the CEO.
Freebairn explains: “The CEO is an alpha personality who has to win every battle. The CFO, like the chairman, also has to be an alpha personality in order to avoid being eaten up by the CEO and to be able to play the part of supportive and critical friend. But the key difference with the CFO and chairman is that you know which battles you can afford to lose and feel comfortable being ‘the power behind the throne’.”
If you own a business and want a chairman, in eight out of 10 cases the background, set of skills and personality you would describe would be those of a CFO, reckons Freebairn.
We tested out his hypothesis on three chartered accountant chairmen, asking how they did it and adapted from an executive to a non-executive role.
Name: Irena Georgiadou
Chairwoman, Hellenic Bank, Cyprus
Background: Economics and politics graduate, University of Bristol. Chartered accountant (qualified 2001); six years at PwC
2004: CFO and corporate finance manager, Cybarco
2008: CFO, Megabet
2011: Manager, House of Representatives of the Republic of Cyprus
2013: Adviser to the Minister of Finance
March 2014: Commissioner for the reform of the civil service
May 2014: Director, Hellenic Bank. Also chairs the nominations, internal governance and remuneration committees
“The government jobs were key to my transition from CFO to chairwoman. They were critical positions at a challenging time in Cyprus: I was at the heart of decisionmaking when the banking system collapsed in March 2013. I witnessed at first hand and dealt with very difficult situations, and with officials at senior level in Brussels, Washington, Frankfurt and elsewhere. It was a period of very intensive learning.
I was interested in politics from an early age and although I never thought I would become involved full time, I seized the opportunity when I had it. As director of the Ministry of Finance office for a year I was heavily involved in helping to turn the economy around: rebuilding the banking sector, getting public finances back in shape and introducing structural reforms.
I resisted the idea of business as usual, and was willing to challenge everything – qualities that Hellenic Bank needed. Business as usual has failed in Cyprus: the banking system collapsed and everything had to change. The bank’s new shareholders wanted a new approach and a new young board of directors who were uncontaminated by the practices that had contributed to the crisis.
As a 37-year-old woman coming in as chair I was something of a culture shock. These sorts of roles have traditionally been held by grey-haired men. But my appointment was a tangible signal of the change we wanted to make and it helped to effect that change. People saw this young, well-dressed, modern woman going around the building talking to people. I’m not a banker, but the bank of the future will be very different from the bank of the past and it is important to look forward and outside the industry to identify new trends, sources of competition and so on.
My chartered accountancy training has proved a strong base for everything I’ve done. I understand the numbers and their implications, and quickly tie everything together and see the complete picture. But I’ve deliberately taken opportunities to use the qualification and training to build my experience, open doors and stand out from the crowd.
I became chairwoman of this company knowing that it was a very important and challenging role. The bank is one of 159 in Europe that are directly regulated by the European Central Bank in Frankfurt, and operating in such a highly-regulated environment means that you have to keep abreast of trends. But shaping and managing a board of 15 people, all with different skill sets, backgrounds and personalities, is a challenge too. Having the right team around you is critical to aligning shareholders, other stakeholders and the CEO behind the strategy, and the more successfully you can do that as chairman, the easier your life is.
A chairman shouldn’t tell people what to do: in the bank my role, along with the rest of the board, is to set the strategy and priorities and the risk appetite and risk framework limits, and ensure that the executives operate between the two. But you also set the tone, the culture, the ethics, and you role-model integrity: corporate governance starts from the top and people look to you for direction. On top of that you provide oversight, challenge, focus, guidance and mentoring to the executives, and particularly the chief executive. Having been so recently on ‘the other side of the river’ I feel I know all the right questions to ask.
The profession has changed beyond all recognition – even at the point when I started studying for the qualification nearly 20 years ago I realised it was about far more than debit and credit. A chartered accountant qualification is a very solid base on which to build a career, but it is up to you how you use it.”
Name: Keith Hamill
Chairman, Horsforth Holdings Group, chairman Bagir Group Ltd, non-executive director, easyJet, non-executive director, Samsonite
Background: Politics graduate, University of Nottingham. Chartered accountant (qualified 1978); 13 years at PwC
1988-1993: Director of financial control, Guinness, and CFO, United Distillers
1993-1996: Group finance director, Forte
1996-2000: Group finance director, WHSmith, chairman WH Smith USA
2000-2014: Chairman or deputy chairman of 12 other companies, including Tullett Prebon, Travelodge, Moss Bros, and a non-executive director of five more
“I stopped being a CFO at the age of 47. I was about to do another one and got quite a long way down the route and decided I didn’t want to do it. It was announced that I was leaving WHSmith and my neighbour, who is a stockbroker, came round to see me and said he was floating a small tech company called Alterian, and needed a chairman. So the art of becoming a chairman is to live next door to the right person.
But then things happened very quickly: I got six chairmanships and two non-executive directorships within 12 months. I think the reason was that I was fairly financially oriented and well known, not least for the role I played in defending Forte against takeover by Granada [the bid ultimately succeeded, but at a price 25% higher than the original offer].
Corporate governance is as important as ever because business is more challenging, particularly since the crisis of 2007/08
There are circumstances where it is best if someone who is not necessarily one of the ‘great and the good’ but who is technically strong and knows their own mind, and is known to investors, is made chairman.
I have never chaired a FTSE-100 company, because I think they are more likely to look for CEO experience on the grounds that it is difficult to understand what it is like being a FTSE 100 CEO unless you’ve been one yourself.
A CFO brings a facility with numbers and extensive board experience to the chairman’s role, but a chairman needs a range of skills, not least a reasonable capacity to get on well with people and the ability to figure out what’s important and what is not. By the time I took on my first chairman role I knew that I was becoming relatively good at understanding what was important. I had accumulated lots of experience quickly and had managed through lots of turbulence – when I was at PwC I handled the firm’s work on the ‘Guinness affair’, then I went to Guinness to sort it out, then I got involved in the Forte/Granada takeover, and then came the turnaround at WHSmith.
But making the relationship with the CEO work is core to being an effective chairman, and you don’t need to be the life and soul of the party to be able to do that. A CFO will have spent much of their career working in close co-operation with the CEO as part of a team and be very used to the division of work, which helps to reduce the sense of ‘threat’ to the CEO when they become chairman. And the nature of the CFO role is to be supportive to the CEO – so that helps in the chairman role too.
But being a CFO or chairman is not about playing second fiddle. The CFO needs a high degree of self-confidence to push themselves forward and cope with situations that can be bruising. As a chairman you don’t need that in the same way, because you aren’t confronted by daily problems that you need to fix and are accountable for, so it is less intense. But while, as chairman, you are part-time, and providing leadership rather than exercising management control, you do have the ‘nuclear weapon’ in some circumstances – and your and the CEO’s knowledge of that is something you need to manage with great subtlety and sensitivity.
Corporate governance is as important as ever because business is more challenging, particularly since the crisis of 2007/08. Progressive corporate governance codes are requiring everyone, including the chairman, to work harder at getting corporate governance right and working out where responsibility lies.
However, I believe that Rona Fairhead [head of the BBC Trust and a long-standing non-executive director of HSBC] was unfairly criticised by the Public Accounts Committee [for her apparent lack of knowledge about the alleged tax avoidance scandal at the bank]. You can’t possibly know everything as a chairman or non-executive: you rely on process and on your assessment of people. You can’t check everything all the time.
But business has also become more strategic and chairmen have to be more strategic too. The kind of chairman who just chairs a meeting or forms a view doesn’t work these days. The chairman and chief executive must work in tandem on strategic matters and they need to sort out any issues between them in advance of the board meeting because in front of their board colleagues they need to be more or less aligned. In the board meeting the chairman must let the CEO take the lead, but act as sounding board and support, be open and contribute, and then support the conclusions of the board. So the chairman needs to handle their strategy role very carefully, but if they have nothing to say on strategy, it is a waste of a position.
In private companies, where boards tend to be smaller and the chairman plays less of a shareholder protection role, they have more freedom, and can be more influential, committed and creative, and their business experience in that context can be more useful.
It’s significant that, internationally, the separation of the chairman from the CEO has started to happen too, in line with UK practice. Other countries’ views of the contribution accountants can make is also changing, which means there are more opportunities these days for CFOs to get involved in international business.
I’m winding up now. I still sit on the boards of easyJet and Samsonite, but I only chair two small companies. After PwC, CFO and chairman, I’m moving into my fourth career – looking after my grandchildren. I’ve gathered a wealth of experience to help me there, not least an ability to be more laid back because I only focus on the important things.”
Name: Jeremy Newman
Chairman, Single Source Regulations Office, and Arkarius
Background: Chartered accountant; joined BDO in 1978, partner in 1986
2001-2008: Managing partner, BDO UK
2008-2011: CEO, BDO International
2012-March 2015: Chairman, Audit Commission
“I spend most of my time as a chairman mentoring the CEO and acting as a sounding board on strategy. To do that you need credibility, and having been a CEO gives you that. Would the CEO have sufficient respect for you to take your advice if you’d spent most of your career in a functional role? If you’d been CFO in a much bigger business I can see that would work, or if you have particular experience in an area the company wants to move into. But otherwise there is the danger that they won’t take direction from someone who has been ‘subordinate’ to them.
“A chartered accountancy qualification is always an advantage, because there will never be a board meeting where the numbers aren’t discussed”
A chartered accountancy qualification is an advantage for a chairman, because there will never be a board meeting where the numbers aren’t discussed. If you’ve worked in practice you will have gained a wealth of experience and understanding by being out and about among a variety of businesses. You’re also used to dealing with a portfolio: people who have worked in a single environment might find it more difficult to adapt quickly between different companies.
After leaving BDO I went trekking in Peru: I knew that if I didn’t as soon as I moved into a chairman’s role I would risk trying to ‘out-CEO the CEO’. I turned down the chairmanship of various professional services firms because I knew there would be a greater temptation there to try to run things. But yes, there have been moments when I’ve had to bite my tongue.
Each chairmanship I take on involves a different challenge, but I’m careful to manage the stretch. My first role was at the Audit Commission. Ironically, I was the first chairman who was an auditor by training. I had decided I wanted a public sector role, and as that was going to be the ‘stretch’ it made sense to stay in an area that was familiar to me, and where I had strong credentials. There are limits to the amount of transition you can handle at once.
Now I’ve taken on the chairmanship of SSRO too, which is in defence. I knew nothing about defence, but I had the credibility of having been chairman of a public body so I minimised the challenges of the transition. I am also chairman of a private-equity-backed business, Arkarius, that provides accountancy services to contractors and SMEs. So I have knowledge of the sector, but private equity is a different environment.
Leadership ability is paramount but it’s a much more collaborative style than the one you need as CEO. Running a partnership, where you’re trying to align different stakeholders, has helped me. If you’ve always been a CFO do you have the skill set to talk to someone about sales, marketing, HR and so on and are you comfortable engaging with all those people and sufficiently knowledgeable to be able to challenge and/or support them?
Personal ethics should matter across the board, but maybe the chairman’s skill is to see where others draw the ethical line and, where necessary, to help them redraw it.
The main downside of the chairman’s role is that you have less sense of engagement with people in the business. And, as the role of CEO grows increasingly onerous, the demands on the chairman grow too: the lines between executive and non-executive responsibility are blurring, which exposes the chairman to more risk. As chairman you have absolutely no grounds for saying you don’t know what’s going on.”