Chief Financial Officers and Corporate Sustainability: A Literature Review and Research Agenda

Societal and environmental risks dominated the top 10 risks in both likelihood and impact, according to the surveys conducted by the World Economic Forum. Against this background, there have been many cases demonstrating the disastrous financial impact of organisational failure to address societal and environmental risks. As a person whose responsibility is to assess financial risks of the organisation, there is increasing expectation for the Chief Financial Officer (CFO) to lead sustainability strategy and initiatives. This research serves to review the literature which highlights the roles and characteristics of CFOs essential for corporate sustainability. Drawing upon this and related literature examining the influence of CFOs on other accounting practices, it proposes a framework illustrating the potential relationships between CFO characteristics and corporate sustainability.

CFO gender in curbing CEO dominance on overpriced acquisition premiums

PurposeThe purpose of this study is to evaluate the tempering effect of the presence of a female chief financial officer (CFO) on potentially dominant chief executive officer (CEO) behavior expressed through the overvaluing of acquisition premiums.Design/methodology/approachThis study used Securities Data Corporation (SDC) database data over an eight-year period to analyze the relationships between CEO dominance and the acquisition premiums paid in an acquisition deal. The study also analyzes the effect of CFO gender in curbing CEO dominance in the acquisition deals. The authors employ clustered standard errors ordinary least squares (OLS) regression analysis along with robustness testing, which supports the validity of our conclusions.FindingsThe authors expect and find that as CEO dominance rises, so does the acquisition premium; however, the presence of a female CFO in such situations significantly reduces the overpayment of the acquisition premium.Practical implicationsThe study findings advocate for organizational change in the form of an increased presence of female CFOs within business organizations.Originality/valueThis study contributes to the accounting literature by timely exploiting a rising trend in which female executives are expected to become more prolific. The authors’ research indicates that their entrenchment into business organizations, thereby promoting gender diversity, produces beneficial outcomes for those organizations. It also capitalizes on the specific attributes of the CEO–CFO relationship, which lends itself to particular effectiveness in the hands of female CFOs.

Case study: Central States Manufacturing, Inc

PurposeThis case study examines employee share ownership at Central States Manufacturing, where the employee stock ownership plan (ESOP) shares stunning sums of wealth with employees. Central States designs its ESOP to allow participants to access a portion of their ownership wealth while they are still employed at the company, through hardship and in-service withdrawals. This may make the “wealth benefit” of employee ownership more meaningful to lower-wage workers navigating economic challenges. The case study adds to the discussion about how employee ownership can benefit low- and moderate-wage workers and close the wealth gap.Design/methodology/approachData were collected via: (1) published accounts, (2) structured qualitative interview with the chief financial officer (CFO), (3) follow-up emails and phone communication with company contact and (4) review of plan document language.FindingsWorkers at Central States Manufacturing – including truck drivers and production workers – build large sums of wealth through the ESOP. Central States innovates in its ESOP by permitting workers to access a portion of their ownership wealth while they are still working through hardship and service withdrawals.Research limitations/implicationsThis is a mini-case study heavily reliant on the information provided by the CFO, in combination with background publications, and plan document language. It does not include employee interviews.Originality/valueThis paper lifts up an innovative company whose success and innovative ESOP plan design benefit frontline workers.

The Relationship between CFO Compensation and Corporate Sustainability: An Empirical Examination of German Listed Firms

In this paper, we analyze the relationship between Chief Financial Officer (CFO) compensation and Corporate Sustainability (CS) by relying on stakeholder-agent theory and institutional theory. Taking a closer look at the German DAX30 and MDAX firms for the business years 2014–2018 (313 firm-year observations), we perform regression and correlation analyses to determine if the different CFO compensation components are related to CS. Our analyses use the environmental, social, governance (ESG) performance as a proxy for CS, determined by the Asset Four database of Thomson Reuters and the CFO compensation data from the Beck et al. (2020) database, and reveal a positive relationship between CS and CFO compensation for pension and stock compensation. Based on our knowledge, this study is the first empirical study that takes a closer look at the relationship between the different CFO compensation components and CS for the German DAX30 and MDAX firms. This result comes with important implications concerning the design of CFO compensation and for future research.

THE EFFECT OF EXECUTIVE COMPENSATION, REPRESENTATION OF CHIEF FINANCIAL OFFICER’S WOMEN, EXECUTIVE CHARACTERISTIC ON TAX AGGRESSIVENESS

The Effect of Executive Compensation, Representation of Chief Financial Officer’s Women, Executive Characteristic on Tax Aggressiveness. The purpose of this study was to determine the effect of executive compensation, female CFO representation, executive characteristics on tax aggressiveness in companies listed on the Indonesia Stock Exchange for the period 2013-2017. The population in this study were manufacturing companies on the Indonesia Stock Exchange for the period 2013-2017. The number of manufacturing companies sampled in this study were 12 companies with 5 years of observation. Based on the purposive sampling method, the total sample is 60 financial report data. This study uses multiple linear regression analysis techniques, t test with the application of the SPSS 24 program. The results of this research showed that the variables of executive compensation have a positive and significant impact on aggressiveness tax, Representation of Chief Financial Officer (CFO) Women has no significant on aggressiveness tax, and the variable executive characteristic has a negative and significant impact on aggressiveness tax. Simultaneously, executive compensation, Representation of Chief Financial Officer (CFO) Women and executive characteristics have an impact on tax aggressiveness.Keywords: Executive Compensation, Representation of Chief Financial Officer (CFO) Women, Executive Characteristics, Tax Aggressiveness Abstrak: Pengaruh Kompensasi Eksekutif, Keterwakilan CFO Wanita, Karakteristik Eksekutif terhadap Agresivitas Pajak. Tujuan dari penelitian ini adalah untuk mengetahui pengaruh kompensasi eksekutif, keterwakilan CFO wanita, karakteristik eksekutif terhadap agresivitas pajak pada perusahaan yang terdaftar di Bursa Efek Indonesia periode 2013-2017. Populasi dalam penelitian ini adalah perusahaan manufaktur di Bursa Efek Indonesia periode 2013-2017. Jumlah perusahaan manufaktur yang dijadikan sampel dalam penelitian ini adalah 12 perusahaan dengan pengamatan selama 5 tahun. Berdasarkan metode purposive sampling, total sampel adalah 60 data laporan keuangan. Penelitian ini menggunakan tehnik analisis regresi linier berganda, uji t dengan aplikasi program SPSS 24. Hasil penelitian ini menunjukkan bahwa secara parsial variabel kompensasi eksekutif berpengaruh positif dan signifikan terhadap agresivitas pajak, keterwakilan CFO wanita tidak berpengaruh signifikan terhadap agresivitas pajak, dan karakteristik eksekutif memiliki pengaruh negatif dan signifikan terhadap pajak agresivitas.Kata kunci: Kompensasi Eksekutif, Keterwakilan CFO Wanita, Karakteristik Eksekutif, Agresivitas Pajak

CFO attributes and accounting conservatism: evidence from Malaysia

Purpose This paper aims to examine whether conditional conservatism is affected by chief financial officer (CFO) attributes as this issue is understudied in Malaysia. Given that CFOs have a direct responsibility for financial reporting, therefore, their individual attributes are important in influencing conservatism in financial reporting. Design/methodology/approach This study uses non-financial listed firms in the Main Market of Bursa Malaysia from the years 2016 until 2019. Findings The results show that CFOs’ attributes, namely, gender, age, education level and ethnicity, affect earnings conservatism. To test for robustness, the authors use difference-in-difference, propensity score-matching and unconditional conservatism, namely, market-to-book ratio and the authors find the results hold with an exception for age and education level. Further, the effect of these attributes is more profound in non-Big4 audited firms, suggesting that CFO attributes act as a substitute mechanism for lower audit quality. Originality/value This study complements existing studies by documenting the first evidence on the significant effects of CFOs’ attributes in influencing accounting conservatism in an emerging country, namely, Malaysia. This is the first paper, to the humble knowledge, that examines CFOs’ attributes on accounting conservatism in Malaysia.

Relative exploration orientation and real options reasoning: survey evidence from Denmark

Purpose This paper aims to extend the understanding of how real options reasoning (ROR) is associated with downside risk and how a firm’s portfolio (explore and exploit) of investment activities affects managers’ ability to effectively apply ROR in relation to downside risk. Design/methodology/approach The survey method is used. It is applied to a population of Danish firms, which in 2018 had more than 100 employees. The chief financial officer was the target respondent. Findings This study finds that a higher level of ROR is associated with lower levels of downside risk. ROR’s association with lower levels of the downside risk is also moderated by the level of relative exploration orientation in a negative direction. Originality/value The field of ROR research on downside risk and portfolio subadditivity has been dominated by research focused on multinationality. This paper extends extant literature on ROR by studying ROR as a multidimensional construct of firm action, which is associated with lower levels of downside risk, also when studied outside of a multinationality setting. This is the case when ROR is implemented as a complete system. This paper also applies a framework of exploitation and exploration to show that findings on subadditivity in options portfolios caused by asset correlations extend outside the scope of multinationality and into one of product/service innovation.

Mulheres CEO (Chief Executive Officer) e CFO (Chief Financial Officer): influência da presença feminina na qualidade dos accruals

A presença feminina em cargos de diretoria executiva, gerência de alto escalão e nos conselhos tem apontado influência significativa na diminuição dos accruals discricionários das companhias. O estudo parte dos pressupostos evidenciados nas hipóteses H1a e H1b de que empresas com CEO e/ou CFO do gênero feminino possuem menos accruals discricionários e, assim, uma maior qualidade dos lucros. O modelo empírico foi aplicado numa amostra de 170 empresas não financeiras listadas na B3 S/A – Brasil, Bolsa, Balcão de 2013 a 2018. Os resultados rejeitam a H1a. Já os achados não rejeitam H1b, ou seja, foi encontrada influência significativa do CFO do gênero feminino com a diminuição da discricionariedade dos accruals que resulta em uma melhor qualidade dos lucros. A pesquisa ainda observou o total de mulheres como CEOs e CFOs, sendo 25 (2,68%) e 72 (7,73%), respectivamente, totalizando 97 mulheres em ambos os cargos.