Capital Markets

25 Years of Finance

On our silver anniversary, a look at the past, present, and future of the CFO.
Scott LeibsFebruary 1, 2010

An unprecedented banking crisis that would require billions of dollars in taxpayer bailouts; a President frustrated by House Republicans who defy his top domestic-policy initiative; endlessly replayed TV footage of U.S. airline passengers imperiled by a terrorist threat.

Welcome to 1985, the year in which CFO was launched. Amid the unfolding S&L scandal, Ronald Reagan’s struggle to enact tax reform, and the 17-day drama surrounding the hijacking of TWA Flight 847, a new monthly business magazine was created with the express purpose of highlighting the strategic importance of corporate finance.

Our inaugural issue quoted a turnaround expert who had helped hundreds of companies survive troubled times. Asked what his experience had taught him about the value of CFOs, he said: “The role and definition of the CFO has to be broadened and changed. I can think of numerous cases in which the CFO has told the company what steps it needed to take but nobody listened. And unfortunately, justified or not, often it’s the CFO who takes the blame. That has to change, too.”

In the ensuing 25 years, his first recommendation has certainly come to pass; the CFO role has broadened dramatically, in many companies expanding to that of a de facto chief operating officer. As the role has expanded, so too has the CFO’s sphere of influence. As for the concern that finance chiefs too often play the fall guy…well, some changes take longer than others.

The CFO position, in fact, entails even more risk today, thanks to the Sarbanes-Oxley Act. Complying with that sweeping regulatory change represents just one of many seismic shifts that CFOs have had to adjust to over the past quarter century. A CFO who had a Rip Van Winkle moment in 1985 and fell asleep for 25 years would awaken today to a vastly different world, both within his own department and throughout the entire realm of business.

What changes might prove the most mind-boggling? As we reviewed developments that have made the largest impact on corporate finance, three stood out:


“Twenty-five years ago, the CFO was essentially the chief accounting officer,” says John Graham, finance professor at Duke University’s Fuqua School of Business, which, in partnership with CFO magazine, has surveyed finance chiefs every quarter for the last 14 of those years. “It was a challenging role, but it was focused. Now the CFO deals with M&A, strategy, capital investments, and many other duties. CFOs track more things, and each of those things has become more complex.”

Even if a CFO managed to stay focused on accounting, he would nonetheless confront profound changes. As James Flaws, the CFO of Corning Inc., points out, “By 1985, the Financial Accounting Standards Board had issued 83 standards. Since then, the number has doubled, and many of those new standards are very technical.”

One result, he says, is that CFOs now confront “tension between their role as strategic adviser and their need to oversee much more sophisticated levels of financial requirements.” Or, put another way, “You can’t screw up the accounting issues even though the CEO wants more help in running the business.”

Graham points to the way in which CFOs assess capital-spending decisions as another example of increased complexity. “In the ’80s,” he says, “companies based capex decisions on simple rules, such as whether they expected a payback in two years. Now you have net present value, discounted cash flows, the impact of the options markets, and various efforts to calculate other, more-nuanced benefits.”

Other CFOs point to the credit markets as an area that has changed markedly since the mid-1980s. Instead of a warm, fuzzy relationship with a local banker, finance chiefs at companies of all sizes now routinely negotiate with global banking giants, and must navigate all the requirements that such a relationship implies.

Which brings us to another dominant theme…


For all but the largest companies, “global business” used to mean “exporting to Europe.” Today, companies of all sizes have supply chains that span multiple continents, growth plans that seek to exploit China’s burgeoning economy, offshoring relationships that blur the distinction between internal and external workforces, and a host of complex tax and foreign-currency calculations that often spell the difference between black and red ink.

As the company’s name implies, “We went global well before 1985,” says Jeffrey Burchill, CFO at commercial-property insurer FM Global. “Initially we did it to keep pace with select clients as they expanded into Europe. Today all our clients are global, and we have become truly global ourselves.”

A CFO awakening from that aforementioned Rip Van Winkle moment would, in fact, “probably find the global aspect of business the most daunting,” Duke’s Graham suggests. “The outsourcing and global supply-chain responsibilities alone would represent a huge change” to that CFO’s conception of the business world.

Our second issue featured a cover story on “Innocents (and Dollars) Abroad.” The focus then was on cash management, specifically currency conversion and rebilling. These days it wouldn’t be unusual for us to address offshoring, international financial reporting standards, the Foreign Corrupt Practices Act, the impact of a strong euro, the fate of the Asian supply base, and the risks posed by Somali pirates — all in a single issue.

“In December, an earthquake hit Taiwan,” says Corning’s Flaws, “and we had to rush out a press release letting investors know that our manufacturing partners weren’t affected.” That experience speaks not only to the impact that globalization has had on business but also to the astounding rise in the importance of…


Corning’s rush to issue a statement regarding the soundness of its Taiwanese supply base doesn’t merely reflect increased globalization, Flaws continues, but also “the speed at which information flows. The Internet didn’t exist 25 years ago. Today it’s ubiquitous.”

And that, he adds, has profound implications for CFOs, because while the Internet provides a technological infrastructure of astounding power, flexibility, and reach, its very nature means that executives have “less time to think and reflect, and less ability to control” responses to events. The Internet has ushered in a new set of rules that CFOs have no choice but to follow.

“In 1985, I actually took typing classes as a way to get comfortable with computer keyboards,” Burchill recalls. “Lotus 1-2-3 was a revolutionary development and I couldn’t afford to miss it.”

While perhaps no technology has touched the inner finance soul in quite the same way as the spreadsheet (even today, articles about Excel regularly rank among the “most read” on, technology has dramatically reshaped the CFO role. Not only have CFOs had to acquire personal proficiency (in part to work effectively with a younger generation of finance staffers who have been immersed in technology since childhood), they also have had to gauge the strategic impact of technology.

Indeed, the turn of this century marked a wave of corporate reengineering driven by ERP systems — a movement that united technology with an increasingly finance-based view of the organization. Today, CFOs find themselves either overseeing IT directly or playing a critical role as adviser and approver, often to vastly expensive technology initiatives that continually defy a satisfactory ROI analysis.

What Lies Ahead?

Asked what things haven’t changed since 1985, CFOs are quick to point to three things: economic uncertainty and its attendant impact on forecasting and risk management, the (mostly negative) impact of regulation, and the continued primacy of cost-cutting and process efficiency.

Those challenges, Graham suggests, constitute much of the “art” of the CFO job, and for that reason he says that the hypothetically long-slumbering finance chief who awakened in 2010 would be able to cope with the essence of the job “even if the technical changes would be very challenging.”

Flaws agrees in principal, but notes that while regulations have always posed a challenge, the task is now much more difficult. “Many of the changes have been stunning,” he says. “Now with Sarbox the CFO has personal liability for the accuracy of the financial statements. You have to disclose far more about compensation practices. You have Reg FD limiting what you can say when, and to whom. In 1985, we had far more freedom. Maybe not all of it was appropriate, but it was a far less restrictive climate in which to operate.”

25th Anniversary Logo for Use within Story

Nonetheless, he says, the best CFOs have the skills needed to adapt to any business climate. And he credits the previous generation with having one skill that many current finance chiefs lack (until last year, that is). “In 1985, we began a prolonged period of strong growth with only mild recessions,” he says. “Many of today’s CFOs have enjoyed a long period of prosperity, and I think in many respects a pre-1985 CFO might have handled this current recession better.” (Flaws knows whereof he speaks: he became a CFO in 1997, but has seen Corning last out six recessions since he joined the company in 1973.)

Yet CFOs who did not have “navigating an extreme recession” as a résumé bullet point have since received so much intense on-the-job training that Burchill cautions that some may find it hard to change gears and help lead their companies’ growth strategies.

As for how precisely these finance executives will lead, Duke’s Graham suggests that while any lingering doubts about the strategic nature of the CFO’s role have been put to rest, the position will continue to evolve. “Global competition and complexity,” he predicts, “will drive more specialization, at least at larger companies. I think we’ll see more C-level posts created, such as chief risk officer and chief accounting officer, with the CFO being more of an overseer and less of a doer.”

Will that prediction come to pass? Will there be a FAS (or IAS) 1,000? Will our 50th anniversary issue be delivered as a hologram? We very much look forward to answering all of those questions, and many more. Thanks for reading.

Scott Leibs is editor-in-chief of CFO.

Never a Dull Moment

If complexity, globalization, and technological innovation represent three profound forces that have reshaped corporate finance over the past 25 years, three other close cousins also merit mention: volatility, risk, and the ever-quickening pace of change. Consider the Dow’s astounding rise and fall from 1999 to 2001, the deregulation and reregulation of the banking/financial-services sector, and the scandals of 2001–2002 that gave rise to the Sarbanes-Oxley Act and CFOs’ personal liability for the accuracy of financial statements. Even when an impending change posed far less risk than first perceived (think Y2K), the boom in ERP implementations that it fueled accelerated the digitalization of the corporation (and the finance department in particular) and further propelled changes ranging from e-business and data-driven decision-making to offshoring and telecommuting.

Finance, Well-Covered
The good, the bad, and the regulatory, as chronicled in a dozen cover stories

As we mark our 25th anniversary, a trip through our archives reveals much about what has — and hasn’t — changed in the world of corporate finance during the past quarter century. Over the course of 300 issues, we have produced roughly 5,000 articles spanning 25,000 pages, totaling somewhere in the neighborhood of 6 million words. That’s the equivalent of writing Moby-Dick every year for 25 years, plus an additional half-million words for good measure. Add to that the thousands of original articles we’ve produced for our Website,, over the past decade, and it’s clear that we’ve covered the world of finance from “accounting” to “z-scores.” A look back at some notable cover stories offers a quick and occasionally quirky take on the recent history of finance:

1985 Cover

Our first issue, in February 1985, offered a cover story that we could almost run again: an inside look at turnaround experts, and the empathy they have for beleaguered CFOs. This inaugural issue was notable in other ways: we wrote enthusiastically about a range of new Dictaphone products (less than $5,000 for the reel-to-reel version!) and, in a curious sign of the times, we ran a full-page photograph of an executive replete with cigarette in his hand and an ashtray at his side (to be fair, he was under a lot of pressure).





1986 Cover

A year later, we described “The New Ruling Class,” an emerging contingent of CFOs-turned-CEOs. That career path has been a topic we’ve revisited many times over the years, most recently in November 2009, when we looked at the stock performance of companies whose CEO had worked as a CFO at some point in his or her career, versus those whose hadn’t. Results suggested an edge for companies helmed by former CFOs.




1987 Cover

In 1987, we offered what would become the first of several cover stories devoted to the rise of China specifically or Asia more generally. The need for CFOs to adopt a global perspective was a constant refrain among those we interviewed for this 25th anniversary story, and with good reason: between 1985 and 2009, trade with China increased almost 40-fold.





1991 Cover

Then again, sometimes we got it wrong. In 1991 we devoted a cover story to IT giant Unisys, which was floundering at the time, as ailing hardware giants Sperry and Burroughs tried to figure out how to make their merger work. As it turns out, they did make it work, despite our suggestion that the company’s future was not bright. Today Unisys, focused on IT services rather than gear, ranks 456 on the Fortune 500.





1994 Cover

We were a good deal more prescient about the need to take a hard look at derivatives, or, as we called them in 1994, Derivatives! This cover story noted that “derivatives are tools for managing risk. That means, of course, that they are tools for taking risk, which is appropriate when done consciously and carefully.” Today, the matter of what constitutes a careful and conscientious approach remains very much up for debate — in Congress, among other places.




1996 Cover

Long before Y2K hysteria created a booming market for ERP systems, we chronicled the complexities and frustrations associated with SAP’s then-new R3 system. The company hit a home run when it offered clients a chance to run a powerful ERP system on machines other than mainframe computers, but there were plenty of devils lurking in the details. The problem was compounded by a rare phenomena: a dearth of consultants.




1999 Cover

Technology trends have had a profound influence on Corporate America, of course — sometimes for the good. In June of 1999, as the dot-com bubble inflated, we examined the “New Attitude” of the CFOs at Amazon, eBay, Yahoo, and other dot-com giants in the making. What characterized that new attitude? “If we don’t have to invest in inventory or receivables,” said one CFO, “we really don’t care if we sell $100 and make $10 on it or sell $200 and make $10 on it.” Another company profiled in that article had a market cap of $500 million, with revenue of $5.5 million and a recent annual net loss of $14.7 million. Ah, the good ol’ days.

2000 Cover

But the ominous inflation of the dot-com bubble wasn’t the only major issue we were tracking as a new century dawned. For all of the recent twists and turns in the GAAP vs. IFRS debate, it’s interesting to note that a decade ago we devoted a cover story to the promises and pitfalls of accounting-standards convergence. Former Federal Reserve chairman Paul Volcker had just been charged with restructuring the board that set international accounting rules, a move intended to align them more closely with GAAP and level the playing field between the two standards. Ten years on, much has transpired and many issues have been resolved, yet this topic will almost certainly land on our cover again.


2003 Cover

Indeed, IASB alum and newly minted FASB chairman Robert Herz graced our cover three years later, as we parsed the many complexities of fair-value accounting. “I think it’s hard to argue with the conceptual merits of fair value as the most relevant measurement attribute,” Herz said at the time. But others worried that “income numbers can…become so volatile as to be meaningless.” The financial crisis that hit five years later would provide a test case, the impact of which is still hotly debated.




2006 Cover

Freud famously asked, “What do women want?” In 2006 we sought the answer — in terms of finance careers, anyway. Since 1995, we’ve examined the progress that women have made in advancing to the CFO position, and 11 years into that effort we noted that while the number of female CFOs in the Fortune 500 had more than tripled between 1995 and 2006 (to 35), that number seemed to pale in comparison to the high percentage of women who entered the finance pipeline at entry-level positions.



2008 Cover

As part of our multistory look at the unfolding financial crisis, in March 2008 we described a bankruptcy hearing in which lawyers asked creditors for an additional 15 minutes to review a just-hatched debtor-in-possession financing agreement, and were turned down. Talk about a rough-and-tumble credit market — was it really just a year before that we ran an article describing easy credit conditions and the warm, fuzzy feelings that CFOs had for their bankers?




2009 Cover

Finally, last year we decided that amid the doom and gloom there must be something good to say, so part of our look at “The Year Ahead” included a list of economic bright spots. Among them: the finance-talent crunch was easing, as were energy prices, while the stock of the CFO was rising. But we weren’t overly optimistic: this issue also included the worst confidence scores in the 12-year history of the Duke University/CFO Business Outlook Survey. We must have gotten the mix right, because this issue won Folio magazine’s Gold “Eddie” Award for the Best Business/Finance/Banking coverage among business-to-business publications. — S.L.