Introduction
The CFOs have a lot to deal with as their strategic responsibility in business continues to grow and become more complex. Owing to their extensive duties, the cash compensation of the financial officers continues to increase with each passing year so much that the officials are starting to bridge the gap between CEOs and them. The financial market appears to be more inclined towards a skill-driven workforce as compared to the traditional approach of leadership provided by the CEOs. This essay attempts to develop an understanding concerning the issue of the rising salary of CFOs by using three primary aspects to evaluate the topic critically. The three elements that will be utilized include corporate integrity, conscientious leadership, and personal integrity.
Body
Everyone is born with the ability to comprehend and materialize moral judgment and power. Personal integrity allows individuals to execute their ethical authority through self-discipline and self-awareness. In a fast-changing corporate environment, new ethical difficulties continue to emerge. Hence, leaders should be adaptive and develop moral trust using conscientious management. There is also an increased awareness regarding public trust that requires businesses to consider the perceptions of stakeholders and shareholders. The enhanced public trust falls under the term corporate integrity (Kahneman, 2003).
The growing power provided to the CFOs questions the aspect of personal integrity. The authority is too much for one person to handle, and the financial officers may be inclined to change the outcomes to work in their favor. The example of Enron can portray the extent that the CFOs overwhelming power can result in fraudulent attempts to conceal the true financial state of a firm to show investors that the company is doing fine (Bazerman and Tenbrusel, 2012). The CFOs primary directive is to ensure that the company functions at minimal costs. They thus focus on profit-maximization which can sometimes interfere with corporate integrity and conscientious leadership when the firm’s goals override those of the stakeholders. The CFOs are provided with complex objectives, standards, and rules that they can use to their advantage (Schumpeter, 2016).
The Schumpeter (2016) describes the role of the CFOs as imperial meaning that the officials have developed a somewhat empire. No one can challenge the rules of the King unless he wants to lose his head. The description goes to show the immense power that the CFOs wield in the business surrounding. The CFOs authority is more exuberant compared to the old-fashioned mechanisms of the CEOs. The officials monitor every element in an organization and pilot the primary initiatives of the firm. The growing roles have thus resulted in the rising salaries of the CFOs.
Recent statistics depict that in the big firms such as Twitter and Google; the CFOs are the heart of the companies and walk away with lump sum six-figure compensations. The bonuses are harmless as long as they do not interfere with the interests of shareholders and stakeholders by maintaining conscientious leadership and corporate integrity. Also, owing to the fact that the CFOs perform various functions in the firm, they do deserve extensive rewards and payments. The problem thus arises when the individuals utilize their power to ensure that they materialize their objectives and that of the corporation (Kahneman, 2003).
An example of a corporate failure that interfered with the elements of conscientious leadership and corporate integrity is the BP oil spill. The response to the disaster indicated that people react to hazardous situations differently. Instead of tackling the issue head on to assist the community affected by the oil spill, BP attempted to separate itself from the disaster. The response shows the lack of conscientious leadership while at the same time it portrays poor corporate integrity because BP did not consider the interests of the public. The crisis ruined the reputation of the firm and made the executives look weak and indecisive (Corkindale, 2010).
Following the collapse of the Enron enterprise, many policies and efforts have been directed towards overseeing the duties of the CEOs. For instance, the Sarbanes-Oxley Act ensures that professionalism is maintained within the business especially in financial matters. The CFOs thus work as overseers of the company’s operations. They are allowed to access all the data in the organization to develop an image of the current state of the corporation. The responsibility has won them favor in the eyes of the shareholders who continue to promote the CFOs and extend their roles (Schumpeter, 2016).
The underlying principle that may pose a risk to the organization is the increased emphasis on pay to performance that governs the activities of the executives in a firm. The officials are compensated based on the outcomes directed towards obtaining the goals of the enterprise. The principle affects the CFOs more than any other executive in the corporation (Schumpeter, 2016). Hence, it can pressure the individuals to go out of their way to prove themselves to the stakeholders and shareholders. For example, the CFOs initially worked as auditors or experts who were only interested in increasing and calculating the returns of the company. However, their growing responsibilities introduce corporate strategies and integrity that requires them to consider the interests of the public. Corporate social responsibility has the ability to interfere with the wealth-maximization goals. The CFOs roles thus begin to create a conflict of interest between corporate integrity and revenue maximization. There is also the issue of personal integrity when the officials are pressurized to exceed the expectations of shareholders; hence, they indulge in fraudulent actions to conceal the true economic well-being of the enterprise (NPR, 2012).
Conclusion
The rising salaries of CFOs are well-founded due to the increased responsibilities they have to handle. However, they create enormous pressure to satisfy and exceed the expectations of different parties in the firm. The pressure can result in misplaced or misguided decisions that will result in corporate failure. The CFOs should observe the three essential aspects of business management: corporate integrity, conscientious leadership, and personal integrity. As the new face of corporate leadership, the CFOs are expected to create shared values and be self-aware, self-disciplined, adaptive, transparent, and socially responsible to remain relevant in today’s dynamic business surrounding (Ciulla, 2009). Also, firms should not provide excessive authority to the CFOs. When a person is provided with a lot of power, they are bound to be challenges ethically. Hence, the duties should be delegated to different people to allow democratic views, activities, and ideas.
References
Bazerman M. and Tenbrusel A. (2012). Blind Spots: Why We Fail to Do What's Right and What to Do about It. Princeton University Press.
Ciulla (2009). ”Leadership and Ethics of Care,” Journal of Business Ethics.
Corkindale G. (2010). Five Leadership Lessons from the BP Oil Spill. Crisis Management. Harvard Business Review.
Kahneman (2003). “Maps of Bounded Rationality: Psychology for Behavioral Economic.” The American Economic Review.
NPR (2012). “The Psychology of Fraud: Why Good People Do Bad Things,” Retrieved June 30, 2016 from
http://www.npr.org/2012/05/01/151764534/psychology-of-fraud-why-good-people-do- bad-things
Schumpeter (2016). The imperial CFO. Retrieved June 30, 2016 from http://www.economist.com.proxy1.library.jhu.edu/news/business/21700633-chief- finance-officers-are-amassing-worrying-amount-power-imperial-cfo.
