Corporate Finance: Facts and Trends

 

The job outlook in corporate finance is bright.

A recent surveys by Robert Half found a very strong occupational outlook in this field. Shortages in a variety of job categories are taking place. Hot job categories include international and operationally-oriented positions. Hot industries include manufacturing, high-technology, environmental management services and distribution.

Strategic and Global Thinkers Wanted

"Asked to name the qualities that finance executives should have, CEOs top their list with strategic thinking, fresh perspective, and candor. The demand for finance executives who can formulate strategies and foment change on a global scale will only increase in a world where trade barriers are crumbling." CFO Magazine.

Team Players Thrive

It is crucial that a financial officer be a team player, whether at the bottom or the top of a company. At the top, relationships are especially important. For a CEO, the chief financial officer is financial whiz, strategist and partner. The relationship needs to be tight. Consider the role played by Marcus Bennett at Lockheed Martin, the largest defense firm in the United States: "As a key member of [CEO] Augustine's inner circle, [Bennett] is intimately involved in hashing out the company's strategic plans. And when the group decides on a major acquisition or merger, such as the recent linkup with Lockheed, Bennett serves as the primary negotiator. Once a deal is done, he oversees the melding of the balance sheets of the two companies, the combining of employee benefits programs, the squeezing out of cost savings and the overall financial operation of the five current major operating units -- aeronautics, electronics, energy and environment, and space and strategic missiles." ("Stealth CFO", Institutional Investor)

Make a Difference

A good financial officer can create enormous value. For example, when Jerome York switched from being the CFO of IBM to being the CFO of Chrysler, Chrysler's stock gained $1.3 billion the next day, while IBM's stock fell sharply.

Door Wide Open to Women

While still largely a male world, women are making rapid inroads in corporate finance positions around the United States. According to the Detroit News: "Finance has become the first field of opportunity for women because promotions are based on merit - not the old-boy network. Experts say accounting and its natural offspring - finance, treasury, budgeting - are less obstructed by the macho cultures more prevalent in manufacturing and engineering, other traditional paths to the corporate pinnacle." There a wide variety of examples of women who have succeeded in corporate finance. For example, Heidi Kunz engineered General Motor's turnaround plan in 1992 and jumped to become CFO of a new ITT spinoff in 1995. And Judy Lewent is widely credited with creating large amounts of value at Merck as a thinking CFO and strong leader. Mina Brown, CFO at Aviall notes that it is very important for women who want to rise far to get management positions in line divisions.

Value-Based Management is a Huge Trend

Corporate finance professionals are increasingly getting involved in value based management--the practice of figuring out if shareholder value is being created in each of a company's activities. Look for this practice to get hotter and hotter over time. Some of the most innovative companies in the world are now using value management.

Integrated Risk Management Growing in Importance

There is growing interest in integrated methods of risk and liability management. Many companies have decentralized risk management activities where each division or plant can hedge away price and interest rate risk. Companies are increasingly permitting this, but aggregating positions into a book at the corporate level and adding controls.

Quantitative Skills Trade at a Premium

Many corporations are looking for quantitative analysts in their finance group. Merck now employs dozens of rigorous finance professionals who use techniques like Monte Carlo simulation to assess new R&D projects. There will be more and more firms who quantitatively make financial and operating choice. For example, choosing a capital structure by balancing off the expected costs and benefits of debt.

Pay is Rising

Pay throughout corporate finance areas is up. In particular, Chief Financial Officer (CFO) pay is rising. Average annual pay of CFOs in Fortune 100 companies exceeds $1 million. The compensation includes salary, bonus, 'other' income, stock options exercised, and restricted stock. Superstar CFO's can make more than $5 million per annum.

Carry the Torch for Shareholder Value

A company's finance group is the bridge between the investment community and the shop floor. In a day and age, when institutional investors are increasingly active, it's crucial that managers get the message that their job is to create shareholder value. The job of the finance group is to make sure that happens.

A Benefits Focus Can Help

Twenty to forty percent of employee costs now come in the form of benefits. Managing benefits cost-effectively has now become a major challenge for financial officers.

Be Sure to Develop Negotiation Skills

A key skill for financial professionals is negotiating ability. Persons who can put the other side at ease at the negotiating table, while still getting a good price are invaluable. Many firms are actively engaged in acquisitions strategies and require employees who can evaluate possible partners and then negotiate transactions.

Get Ready for Challenge

Being a financial officer can sometimes be more challenging than usual. For example, Barry Weintrob, CFO of the Port Authority of New York and New Jersey had to deal with the aftermath of the World Trade Center bombing on February 26, 1993. From a World Trade Center command center Weintrob and others put together an immediate cost estimate for rebuilding, made sure insurance carriers were notified and kept on paying all bills despite a massive disruption.

Leadership Skills are Highly Valued

Company's want more and more leadership ability in their financial officers. The financial leader of the future will have more and more experience with the dynamics of the financial markets and be innovators in that market as well. She must be a strategic planner, a problem solver and an innovative leader.

Some Companies are Centralizing Corporate Finance Function

Leading-edge companies such as General Eletric are centralizing their finance functions under a system known as shared services. Instead of each business unit having its own CFO and accounting operations, the businesses become customers of a centralized finance function.

Corporate Finance isn't Bean Counting

The oftentimes derogatory view of finance professionals as "bean counters" is changing fast. Technology means the computers count the beans. This frees up time of executives to interpret the results of bean counting. In the words of Roberto Goizueta, the late CEO of Coca-Cola: "The secret isn't counting the beans. It's growing more beans." Ultimately, this means that the demand for smart, communicative and thoughtful people in finance positions will increase even more in the future.

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