Surviving CFO Scrutiny: How to Handle Boardroom Power Struggles

Today CFOs are involved in almost all aspects of a business – financial, strategy, risk management, governance – which often places them at the centre of a conflict within the company and the boardroom.

Years ago, I was on a board when the Chair – without informing the rest of the board – issued an announcement confirming profit guidance. However, the CFO had not given this assurance and privately expressed doubts about whether the guidance could be met.

So, how should a CFO manage such a situation? If good people resign every time things go wrong, who is left running the company?

A great CFO is a strategic leader, influencing corporate direction, managing investor expectations, and often acting as a counterbalance to the CEO. And a good CEO will allow this counterbalance. After all, a strong CEO-CFO partnership can be one of the most powerful forces in any company.

So how does one manage this conflict?

Managing Conflicts with Boards, Activist Investors, and Executives

In any company, there are always competing priorities.

• Boards and investors push for growth, profitability, and shareholder returns.

• CFOs, on the other hand, are expected to deliver financial discipline and strategic foresight.

A disconnect between the CFO’s recommendations and the board’s expectations can lead to friction—especially when directors prioritise short-term profits over long-term financial health or, even worse, are oblivious to what it takes to create lasting shareholder value.

Tensions with the CEO and Executive Team

Consider a scenario where free cash flow targets are linked to executive incentives. A CFO can artificially create the appearance of strong free cash flow using various accounting manoeuvres.

Take Chemours, a $2 billion global chemical company. Its CFO, Jonathan Lock, resigned in February 2024, less than a year into the role, after an internal investigation found that he had engaged in unethical financial practices, including delaying vendor payments to artificially meet free cash flow targets tied to executive bonuses. The CEO and an accounting officer were also implicated.

A CFO who compromises ethical standards for bonuses, or to please management or the board risks damaging not only their own reputation but the company’s future.

Dealing with Activist Investors

Activist investors add an additional layer of complexity. They may push for aggressive cost-cutting measures, asset sales, or leadership changes to maximise their short-term financial objectives.

CFOs need to engage in good faith, with an open mind and give their direct views. They are entitled to push back if the demands are unrealistic but there has to be a clear narrative as to why these demands are unrealistic or what other measures are in place to achieve the value creation the shareholders are looking for.

Enron

The most famous case of a CFO who may have believed he was acting in the corporation’s best interest was Andrew Fastow of Enron. Fastow orchestrated complex off-balance-sheet entities to hide the company’s financial losses, leading to one of the most infamous corporate scandals in history. His actions ultimately contributed to Enron’s bankruptcy in 2001, resulting in significant financial losses for investors and employees – But was he truly trying to save the company or was he merely kicking the can down the road delaying the inevitable collapse.

Star Entertainment

Star Entertainment highlights a classic CFO dilemma: the need to drive business growth and profitability while ensuring compliance with strict regulatory requirements.

In this case, Star Entertainment’s CFO faced regulatory action for failing to prevent the company from submitting misleading information to the bank regarding the use of China UnionPay (CUP) cards for gambling—a transaction type explicitly prohibited for such activities. As a result, Star faced significant financial penalties for compliance failures.

This scandal serves as a stark warning to financial leaders: even if a CFO is not directly involved in wrongdoing, they can still face personal liability if they fail to uphold compliance and regulatory standards.

When to Stand Your Ground and When to Compromise

The best CFOs know when to push back and when to negotiate.

As Kenny Rogers famously said:

“You got to know when to hold ’em, know when to fold ’em.

Not every battle is worth fighting. Knowing when to hold firm and when to negotiate is crucial.

A useful tip for a CFO is to engage with the Audit Committee early and often. A good Chair of Audit may help navigate this issue and its certainly worth getting their support.

When to Stand Your Ground

• If the Risk exposure is unacceptable

The risks may not be understood by the management team or the board, but a good CFO will clearly enunciate the risks with detailed scenarios.

• Ethical boundaries including regulatory risks

I’ve seen this firsthand in industries like childcare, where violating strict regulations doesn’t just lead to fines—it jeopardizes the company’s entire existence.

• Financial well being
• Paying excessive dividends despite uncertain future cash flows.
• Awarding executive bonuses from company losses.
• Funding risky expansions with excessive leverage.

When to Compromise

• Is there an alternative?

Instead of outright rejecting a proposal, offer a more viable solution.

• Is there a middle ground?

If the board insists on dividends, is there an option for a smaller payout or alternative capital management measures?

Pick your battles wisely.

Some fights aren’t worth the damage they cause. Save your credibility for critical decisions.

Resilience, and diplomacy coupled with good communication can win most situations. Great CFOs instinctively know how to do this. They instinctively know when to say no, when to negotiate and when to walk away.

About the Author: Jon Brett

Jon Brett is a Non-Executive Director of Corporate Travel (CTM) and Chair of the Audit and Risk Committee. He also serves as a Non-Executive Director of Raiz Invest (RZI).

Jon is also the author of the very successful podcast series The Taking of Vocus, chronicling the extraordinary rise of Vocus, what went wrong with the M2 merger, and the eventual privatization of Vocus. The podcast is accessible via his LinkedIn profile Jon’s book The Taking of Vocus, is available on Kindle.

Connect with Jon on LinkedIn – LinkedIn Profile