The CEO-CFO Relationship: Are New Regs Strengthening or Straining the Ties?

CFOs' responsibilities and key relationships are being recast as Sarbanes-Oxley takes hold. A new Business Finance survey paints a disturbing portrait of the ethical challenges many finance executives face. Breaking the silence about pressure from CEOs may be the best chance for self-preservation.

Last fall, former HealthSouth Corp. CEO Richard Scrushy snared a prime-time television slot to proclaim his innocence of SEC and U.S. Justice Department allegations. He blamed five former HealthSouth finance managers for falsely inflating the company's profits by almost $3 billion.

The accused did not publicly respond. One, an assistant controller, was sentenced to five months in federal prison in December. Four other members of Scrushy's finance team have received four-year probation terms. All five are cooperating with an ongoing criminal investigation into HealthSouth's accounting practices.

Finance executives struggling to adapt to today's regulatory environment uniformly dismiss the usefulness of HealthSouth's downfall as a cautionary tale. Rather, they say, the scandal was a matter of a crooked chief executive pressuring senior finance managers, who deserve to be punished for failing to walk away at the first sign of fraud. HealthSouth's accounting troubles are an aberration, practitioners say; the overwhelming majority of U.S. companies will never find themselves in similar straits. Yet Scrushy's public finger-pointing should sound an alarm within many finance departments, according to the findings of an anonymous Business Finance reader survey.

The survey results raise troubling questions about the extent of ethical pressure on finance executives, the Sarbanes-Oxley Act's effect on corporate attitudes toward risk-taking, the CEO-CFO relationship, and -- ultimately -- the changing nature of the finance executive's job. The vast majority of survey respondents said they experience pressure to commit unethical actions, although they remain tight-lipped about their experiences.

Publicly, CFOs report positively on their bond with their CEO and their company's post-Sarbanes-Oxley appetite for risk. But off the record, they say there is a sense that the CFO has gotten the CEO into a regulatory mess and the CEO-CFO relationship has become more adversarial. In addition, the vast majority of survey respondents claimed their organization has become less likely to invest in opportunities outside of its strict core competency and much less likely to approach acquisition targets.

Former finance executives who speak candidly about the challenges they once faced indicate that the most effective way to navigate ethical pressure and challenging CEO relationships is to break the silence. That's a daunting prospect for current CFOs, whose career depends on a track record unblemished by any association with ethical dilemmas. Whether finance executives can maintain their balance while walking the new regulatory tightrope will determine how their role and key relationships are recast as Sarbanes-Oxley takes hold.