The Chief Financial Officer and the Controller

The chief financial officer (CFO)—also called the finance director in many countries—is the executive responsible for overseeing the financial operations of an organization. The responsibilities of the CFO vary among organizations, but they usually include the following areas:

• CONTROLLERSHIP—provides financial information for reports to managers and shareholders and oversees the overall operations of the accounting system.
• TAX—plans income taxes, sales taxes, and international taxes.
• TREASURY—oversees banking, short- and long-term financing, investments, and cash management.
• RISK MANAGEMENT—manages the financial risk of interest-rate and exchange-rate changes and derivatives management.
• INVESTOR RELATIONS—communicates with, responds to, and interacts with shareholders.
• STRATEGIC PLANNING—defines strategy and allocates resources to implement strategy.

An independent internal audit function reviews and analyzes financial and other records to attest to the integrity of the organization’s financial reports and adherence to its policies and procedures.

The controller (also called the chief accounting officer) is the financial executive primarily responsible for management accounting and financial accounting. This text focuses on the controller as the chief management accounting executive. Modern controllers have no line authority except over their own departments. Yet the controller exercises control over the entire organization in a special way. By reporting and interpreting relevant data, the controller influences the behavior of all employees and helps line managers make better decisions.

Exhibit 1-6 shows an organization chart of the CFO and the corporate controller at Nike, the leading footwear and sports-apparel company. The CFO is a staff manager who reports to and supports the chief executive officer (CEO). As in most organizations, the corporate controller at Nike reports to the CFO. Nike also has regional controllers who support regional managers in the major geographic regions in which the company operates, such as the United States, Asia Pacific, Latin America, and Europe. Because they support the activities of the regional manager, for example, by managing budgets and analyzing costs, regional controllers report to the regional manager rather than the corporate controller. At the same time, to align accounting policies and practices for the whole organization, regional controllers have a functional (often called a dotted-line) responsibility to the corporate controller. Individual countries sometimes have a country controller.

Organization charts such as the one in Exhibit 1-6 show formal reporting relationships. In most organizations, there also are informal relationships that must be understood when managers attempt to implement their decisions. Examples of informal relationships are friendships (both professional and personal) among managers and the preferences of top management about the managers they rely on when making decisions.

Think about what managers do to design and implement strategies and the organization structures within which they operate. Then think about the management accountants’ and controllers’ roles. It should be clear that the successful management accountant must have technical and analytical competence as well as behavioral and interpersonal skills.