Move Over, CEO: The Time Is Right for the Chief Financial Officer to Be a Co-Leader

Thank you Tracy Houston of Board Resource Services www.linkedin.com/in/tracyehouston for sharing this with me this morning. I see more dynamic equilibrium these days with the CEO and the CFO. When I perform in the part time CFO role, my customers expect me to help them move towards the unity in duality described below.

By PHILIP TULIMIERI And MOSHE BANAI

The chief executive as visionary leader is a thing of the past. It’s time to make room at the top for co-equals: leadership by the CEO and the chief financial officer—with equal authority and accountability.

CFOs have long labored in the shadows of their bosses, responsible mainly for such duties as overseeing the corporate treasury and attempting to rein in the excesses of their chief executives in the pursuit of growth. But distinctions between the two positions are blurring. We see changes afoot in corporate structures and society at large that already are driving a kind of merger of the two jobs.

At the start of this decade, billions of dollars were lost in a series of corporate scandals marked by fiscal mismanagement, fraud and outright greed on the parts of CEOs, CFOs and other senior executives. The public and legal backlash gave rise to new thinking about the ways companies should be organized, managed and governed, placing greater emphasis on accountability, regulation and transparency. New regulations were passed, including the Sarbanes-Oxley Act, which thrust the CFO into the forefront of the boardroom and helped create a new balance of power between CEO and CFO.

Optimist and Realist

As a result, the two positions, while maintaining distinct duties, have come to be seen as necessary counterforces in a company’s power structure: one, the eternal optimist pushing ahead at full speed; the other, the realist, urging caution and remaining wary of risk. The two must function as a team, addressing needs for both growth and responsibility.

Other forces elevating the importance of CFOs include globalization and offshoring, which have created a complex, and sometimes ill-defined, web of responsibilities atop corporations. There is also the decline in the role of chief operating officers, a trend that started when computers arrived and businesses began to apply IT to manufacturing, back office and logistics.

From the outside, meanwhile, pressure from governments, media and a globally connected community of consumers, shareholders and activists, are all pushing corporate leadership to operate with greater transparency, adherence to moral and ethical principles and accountability to stakeholders.

The top job has simply become too large, too complex and too demanding for one person. Thus, businesses are encouraging more of a consensus model of management in general. Younger employees are quite comfortable sharing roles, working in teams and nonhierarchical environments. They understand the concepts of teamwork and consensus management.

Critics may argue that two strong-willed people won’t be able to share such power, and that inevitable differences on strategy, growth and other issues will make timely decision-making impossible. But this argument fails to acknowledge the fundamental changes taking place in corporate management, or the principles of mutual respect and corporate pluralism on which young managers are being raised. A CEO-CFO partnership will provide the engine for this new-millennium corporation, and serve as a starting point for the new corporate model of ethical behavior, sustainability and true stakeholder value.

Continuous Communication

Equal sharing of responsibility for strategy and growth will require continuous communication between the two executives. Decisions made in partnership gain from additional perspective and expertise. Joint leadership can also draw on more energy to see a plan to its successful conclusion.

There is always the possibility of irreconcilable disagreements. But at many organizations with co-chairs or “co-leaders,” appeals are made to a higher or independent authority who can break a deadlock. In a public company, a dispute can be put to a vote by the board or a subcommittee, which also can act as an arbitrator.

The concept of the “buck stops here,” that one person shoulders the responsibility, and reaps most of the rewards, is fast becoming an anachronism.

–Dr. Tulimieri is a professor of management at the Zicklin School of Business, Baruch College, City University of New York, and a principal at the Capital Group, Pompton Plains, N.J. Dr. Banai is a professor of management at Baruch’s Zicklin School of Business. They can reached at reports@wsj.com.