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Companies Don’t Need CFOs to Be CPAs Anymore

Interesting article in CFO.com.

http://ww2.cfo.com/training/2016/05/companies-dont-need-cfos-to-be-cpas-anymore-accounting/

The author claims "Among the last 50 CFO searches that I have completed over the past 18 months, only one client indicated that a CPA was highly desirable."

Have you seen the "move"?

Answers

Chris Shumate
Title: Accounting Manager
Company: Dominion Development Group, LLC
LinkedIn Profile
(Accounting Manager, Dominion Development Group, LLC) |

Interesting article, Wayne. I think the difference is who the clients are. The author seems to me to be a recruiter for large companies, instead of one for SMEs. I think if you were to ask a recruiter who works with smaller companies what their experience is it would reveal that CPAs are more desired than Ms. Fisher perceives.

For instance, take Robynne Sisco article, which showed up in the margin of the one you mention above (http://ww2.cfo.com/training/2016/05/accounting-will-always-matter-cfos/). Ms. Sisco makes the appeal that regardless of how much the CFO landscape has changed, it doesn't change the fact that finance is and will continue to be about numbers. What Ms. Sisco doesn't mention is whether or not CFOs need to be CPAs. Rather they still to need to have a background in accounting.

It'd be interesting to know what the demographics are in Ms. Fisher's study. Not everything in the business and finance world is New York, California, and New Jersey. Nor is the world of business and finance a Forbes 250 company (or 1000 or 500 for that matter).

Maybe a CPA isn't as necessary as it once was, but they are still, in my opinion, much more desirable than not.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

This was my reply I left on CFO.com:

"I have always been under the impression because you chose to take a test that permits you to do only one single unique process under the law, it doesn’t make you an expert in all things.

So, you passed that CPA exam and you are the only profession allowed to do public audits, what in that exam makes you a better CFO? What in your audit experiences teaches you how to actually run a company? What in your education specifically teaches you how to interpret GAAP better?

Obviously, if you do something, like Sox audits day in and day out, I would assume that you would be more conversant with the process, and possibly the laws, rules and policies surrounding the audit, but latter doesn’t need to be true. You could be mechanical in thought as opposed to analytical.

So who makes a better CFO, a CPA or a non-CPA? The answer is the better CFO (regardless of certifications or degrees), period. And the better CFO is a compilation of all life experiences that include education, work, industries, volunteerism, geography, different managerial styles worked with, business sizes, etc.

Just having passed the CPA exams is not the sole determining factor."

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Here is where I see the CFO role is going (for some, it is already there)...

STRATEGY AND RESOURCE/CAPITAL ALLOCATION FOR A SUSTAINABLE COMPANY.

Note: Some of you will know that I do NOT subscribe to the "maximization of shareholder value" as a company/Board objective. A whole different discussion on it's own.

More and more, the CFO role is mirroring the Board of Directors' primary role. As an extension (fiduciary) and the position with a dotted line to the Board, it is not surprising that the role/position will mirror that of the Board.

There is ONE underlying current in the article. The role of Investment Banking professionals. Hence....Financial Analysis and Market Analysis. Hence, the accounting background is relegated to a secondary importance. Think of it as FINANCE and Accounting. Whether a CFA background (the usual IB/Analyst background) is becoming more important still remains to be seen. As to Chris'/and the other article's point, a CFA does not to be a CPA but would also have the Balance Sheet/Income Statement know how.

Having said that, I believe that the IB background has more to do with the CURRENT general trend (and ease?) of accessing capital markets instead of debt markets which tend to favor the traditional CPA-CFO role.

Of course individual company situations/needs apply,

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

"Some of you will know that I do NOT subscribe to the "maximization of shareholder value" as a company/Board objective. A whole different discussion on it's own."

So Emerson, what objective do you subscribe to?

As a shareholder/owner I'm not sure I want you on my board. I want maximum return on my investment and efforts. ;-)

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Anon, here is a simple question.

What is/are your metric/s for the word "maximized"? What is the metric for a Board to say...."you know what? we maximized shareholder return because we hit this metric (insert whatever measure you like)...we did good...wait, no, we did great and we can't wring out anymore "return" for the shareholders!"

One man's/Board's idea of maximized return...is another man's/Board's "bleh"! A Board could return 2,000%.... and one activist investor can come in and say....you still have not "maximized" returns. (See, Valeant, ValueAct having been with Valeant and in their Board for some time....then Pershing comes in...it took two PE/HF firms with a "maximized shareholder perspective" to bring it down)

Shareholder return is JUST A RESULT of strategies and initiatives....NOT A GOAL! Strategies and initiatives CHANGE when you make it a goal. A Maximized shareholder return mindset is "fools gold"....and having it as a goal can be misconstrued and misinterpreted and can put companies in unsustainable paths. A Board's role is to ensure that the company is on a sustainable path and having "maximized returns" (whatever that means) can endanger that.

You will NOT find "maximized" anything on Board Governance Guideline/Policy Documents on ANY (i might have missed one or a few) of the top US public companies....and I have not seen any on the few private ones I have served. Try FB, Exxon, Apple, Amazon....you wont find it.

If you say that "maximize shareholder return" is the primary goal, you would think that that is the number 1 objective/role of the board that they will write down in their governance documents yes?

Second point is....what is "shareholder return"? Is it dividends? Is it share price? Both? Amazon has reinvested everything and has not declared profits nor dividends in a looooooong time....as a result, they are now touted to be the biggest company in a few years with more revenue streams than if they did NOT reinvest. And even using Amazon as an example, NO one can claim or measure that Amazon has "maximized" shareholder value.

Third point is....what is your time horizon? 1 yr? 5 yrs? 10 yrs? 20 yrs? Again using Amazon as an example, it IPO'd in 1997 and they are just now seeing the results of their reinvestments.

One more thing.....I do NOT subscribe to the concept of Shareholder primacy. Not all decisions should redound to the benefit of 1 STAKEholder.

If you want a healthy and SUSTAINABLE company....you WILL want me on your Board! And this is done by assuring that there are VALUE CREATION strategies and initiatives.

Again, shareholder returns are just a result and not a goal.

If you still don't believe me.....a lot of business titans and academes have already come out against the mindset. Jack Welch as called it "a dumb idea", Vinci Group Chairman and CEO Xavier Huillard has called it “totally idiotic.” Alibaba CEO Jack Ma has said that “customers are number one; employees are number two and shareholders are number three.” Paul Polman, CEO of Unilever [UN], has denounced “the cult of shareholder value.”
John Mackey at Whole Foods [WFM] has condemned businesses that “view their purpose as profit maximization and treat all participants in the system as means to that end.” Marc Benioff, Chairman and CEO of Salesforce said..."It is the world's dumbest idea" Tim Cook of Apple or Mark Zuckerberg has other priorities/goals and not shareholder value/returns.

----end of rant----

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Emerson -

As a great man once said... "Have a snickers..."

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Wayne.... touche!

If I may add, if one can't define a goal, then one fails every single time. And even if one does define it, another one can come in and have a different definition. The "maximized shareholder return" is TOO SUBJECTIVE AND ARBITRARY to be a goal.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

So Anonymous User (CFO at Local Government Agency), now you know SOME of the reasons and justifications why I don't subscribe to the maximization of shareholder value goal.

I still have not touched on diversity of investor's goals. I still have not touched on diversity of investor "values". What makes an investor's (your?) $1 more valuable than another's.

I still have not touched on the overall effect of this mindset (short-termism) on the overall market. Or the overall ethical pressure finance professionals get from this mindset.

Hopefully I could at least have made you reevaluate or rethink (not necessarily change your views) the mindset.

Anonymous
(Independent Consultant) |

I think there are many aspects to passing the CPA exam that make one a better CFO. Having both an MBA and a CPA, I can tell you that I learned just as much in terms of running a business from studying for and passing my CPA exams, as I did during my MBA work. I think among those who are not licensed (either CMA, CPA, CFA, etc), there is a huge misperception of what is actually on these exams. People who try to put me in a box because they see my license and think I only have certain skill sets are just as wrong as those who look at someone without a license and make similar conclusions. My experience is that having a CPA does not guarantee anything one way or another - just as not having one isn't a panacea either. I just wish we could treat everyone with respect as until you talk to them and know there background, you really shouldn't judge. It seems like on this forum there is a definite anti-CPA bias. I wish we could change that.

Anonymous
(CFO) |

I don't think it (the forum) has an anti-CPA bias but more of an anti-IammorequalifiedthanyoubecauseIhavethe3letters bias.

Anonymous User
Title: CFO
Company: Local Government Agency
(CFO, Local Government Agency) |

" I learned just as much in terms of running a business from studying for and passing my CPA exams, as I did during my MBA work."

We should return to this discussion after you get some experience under your belt. There's an awful lot they don't teach you in b-school. Even less in audit work or studying for the CPA exam.

David Franceus
Title: Sr. Manager, Accounting & Finance
Company: mid size co
(Sr. Manager, Accounting & Finance, mid size co) |

Agreed, that those who don't have CPA are quick to set out to disprove its importance. Usually, its the same people who couldn't pass it or never devoted the time to pass it. It is a choice and it requires sacrifice and discipline.

Anonymous
(Independent Consultant) |

For what it's worth: I consult now after working for many extremely successful tech companies in Silicon Valley over the last 28 years, so I'm happy to have a conversation on what I learned in MBA school, passing my CPA exams, and my career during the last 3 decades. In fairness, I never said that an MBA and/or CPA teaches everyone everything they need to know, I merely said that I learned as much in my CPA prep as I did in b-school (I didn't even mention my career, you brought that up assuming I hadn't had one to this point). Arguably, I've learned the most in my career, but the foundation for that learning is based on my education (including formal university training, and prepping for certifications).

Anonymous
(Financial Reporting Manager) |

I have to weigh in on the ...."Some of you will know that I do NOT subscribe to the "maximization of shareholder value" as a company/Board objective. A whole different discussion on it's own."
Who truly benefits from this " maximization of shareholder value arrangement? The Board?

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Observation:

It is sometimes more fascinating to watch the morphing of the original question into multiple disparate lines of discussion than the actual answers.

Anonymous
(Sr. Manager, Accounting & Finance) |

Wayne,

Have you ever taken and/or passed any parts of the CPA exam? You don't accidentally pass that exam. As a CPA myself, I think it shows the minimum requirement of discipline in the financial accounting profession. If someone can't pass a "silly" exam that is highly revered in the financial world, why should some company entrust that person with the financial assets of the company.

The CPA is not the end-all, but it is a place to start weeding. If you have a strong controller (as almost all public companies do), a company may see slightly less need for a CPA CFO.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Anonymous,

I think it's great that you put the time and effort into getting your CPA. I truly do, but and this is a major but, it proves that you successfully achieve a score that gave you a passing grade on a test.

Granted, it was a series of truly grueling tests. These difficult test took you a fair amount of time to study for and ate up a fair amount of your life. It provided enormous amounts of angst and when you did pass, whether on the first try or nth try, brought joy and accomplishment. Congratulations (without rancor or sarcasm).

That being said I feel you are justifying the time you spent to pass the test. Non-CPA's, who felt that managerial accounting was the road they wanted to travel had no need to take those tests.

This does not mean they are better or worse, more or less educated (since they probably have the same degree that you have; unless we play my college was better than your college; which is infantile). They took the other path.

The end game in public accounting is to Partner. In managerial is to CFO slot, or treasurer, for some controller, others Comptroller.

Somehow, some people think that the CPA is more qualified. Not exactly true. In some cases, yes; in other cases no.

Case in point. You only need to take 1, singular, 3 or 4 credit course in taxation to sit for the CPA exam. The course is only about Federal taxes, and let's be truthful, how much can you cover of 87,000 pages of tax code in a 16 week, of either two 45 min or 1hr 45 min classes? Does this make you an expert?

Of course not. And if you aren't in the tax department of the public firm you belong to, you will never become the tax expert. You may be very well versed, but there is a difference.

On the other hand, the accountant that goes to private industry and moves around in their career from accounting to operations to whatever other department has more experience (maybe not more education or maybe they do, and certainly not that CPA test) than someone who spent their career in public.

But, that same CPA can go into private, obtain the same private experience. Does it necessarily make the CPA automatically better? NO, why, it is the quality of the experiences, the diversity of the experiences, the tasks assigned, completed, the difficulty of the assignments and I can go on.

So I repeat what I said earlier on in this thread:

"So who makes a better CFO, a CPA or a non-CPA? The answer is the better CFO (regardless of certifications or degrees), period. And the better CFO is a compilation of all life experiences that include education, work, industries, volunteerism, geography, different managerial styles worked with, business sizes, etc.

Just having passed the CPA exams is not the sole determining factor.""

It is not a weeding out factor. It is one of a zillion factors that make you, them, I the persons we are.

Do I know every ASC, FASB or IRS tax regulation. Hell no. Can I find the answer, yes. Can I read the regulation or pronouncement, sure. Will my personal experiences be enough to fully and "properly" interpret said rule, I don't know. But I am smart enough to know when I need to ask the right person, that subject matter expert the question. So whether I'm a CPA or not, if I realize I am not the SME, and don't have a handle on the subject matter, and go out and find the "right" answers or opinion, mull over the available information and make a decision, then I have done the best job possible.

Case in point. I work(ed) in an industry where I am considered by some to be an "expert". I went into a new company who had a very experience and seasoned lawyer. For four months (the length of my contract) I educated that same lawyer on the law, as it pertained to that industry (which was unique). Each time citing the particular law and how it applied to the industry and the circumstance.

Each time he looked up both the cite and applicable case law and responded by tipping his proverbial cap. Was I better than he, no, I just had expertise in an industry he didn't.

Could aCPA do better in this example? who knows, but just because they have that post-nominal doesn't make them better or worse.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

A lot of "B" school terms are overly broad allowing the definition de joúr to rule. The problem is, you may not be on the inside track of today's interpretation.

Erik Blumenau
Title: Principal
Company: Batten Advisory Group
(Principal, Batten Advisory Group) |

Wayne,

This topic continually comes up, although sometimes asked in different ways. I think there are two ways to look at this:

1) Being a CPA, does not make you a better CFO.
2) Being a CPA, makes your chances of becoming a CFO better. It definitely opens the door for you. (Same for an MBA)

For me personally and the career path I was on, I did not want to fight opening the door without my CPA although I felt confident that once I had the door open, my skills would carry me. That was a personal choice.

I will say that going to grad school and studying for the CPA gave me knowledge that I would not otherwise have. One of my professors a long time ago said it best. He said earning your CPA is like giving you a map. You can't possibly remember everything on the map, but you will at least remember there was a road and what direction to start traveling.

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