SEC wants bigger role for CFOs
MANILA, Philippines - The Securities and Exchange Commission (SEC) is looking at standardizing and even expanding the role of chief finance officers (CFOs) of publicly listed corporations as part of broader efforts to promote good corporate governance.
SEC chairman Teresita Herbosa said the review—which is being pursued in partnership with Financial Executives of the Philippines—moves in step with other SEC-backed studies to bolster transparency such as more detailed disclosures on executive pay and bonuses.
Herbosa said the purpose of this study is meant to establish a more uniform definition of the CFO’s role as businesses today face environments that grow more complex with unseen risks.
The CFO post, once limited to handling a company’s financial health, has been increasing in importance and is now viewed as a partner to the chief executive with areas of responsibility now encompassing a company’s strategic direction and growth.
“Each company has its own definition for the CFO, its own function. But it should be more or less uniform to what responsibilities should be and the scope of functions. This is so the CFO has an eye on all operations of the company,” Herbosa told the BusinessMirror in a recent interview.
“There are more specializations today. There are certain things that go to the internal auditor. There are aspects that go to the audit committee. So should a chief financial officer also be a member of this or that committee?,” Herbosa said.
Herbosa noted that the review remains in the preliminary stage. Other studies, like the one that could result in the “itemized breakdown” of salaries and bonuses for top officers and directors of public companies, could be more contentious and will likely meet resistance, she noted.
But this would shed some light on the often opaque standards of reporting executive pay and should ultimately serve in bolstering minority rights, Herbosa said.
The current rules allow companies to report aggregate compensation figures for officials and directors but Herbosa said transparency standards need to be raised.
A survey of listed companies showed that some corporations try harder than others to be more transparent.
A top family-owned conglomerate, for instance, goes as far as naming who its top executives are, actual combined compensation for the last two years and projected earnings for the coming year. Other firms simply include everyone under “directors and executives.”
The plan comes alongside other potentially contentious moves by the SEC, including a current study involving the close scrutiny of third-party audit firms and their relationship with publicly listed clients.
Early this year, the SEC succeeded in placing curbs on independent directors taking on too many commitments.