In every job description for the role of CFO I have ever written, there is a bullet point about the character of CFO as a person of “uncompromising ethics.” People may consider this a given – or just another generic job spec, but it is a core quality for a CFO. Below, I will dive into what this means. But first, let’s take a real-life example when this characteristic is put to the test. Particularly when it is challenged by the CEO!

Recently, a CFO shared with me a story about his CEO. They were in a Board meeting and the CEO was being challenged on why the revenue had been “soft” in the last quarter. This company has a high concentration of revenue from a small clutch of customers. The CEO attributed the lack of sales to a lag in product development that was slowing their ability to deliver and implement their software. Sounds feasible. But in truth, one of their largest customers was actually very unhappy with the product and had not renewed their license. The CEO was working very hard to woo the customer back, but at the time of this Board meeting that effort had not shown results. The CEO may have believed that the customer was not happy because they did not deliver the product on time, so perhaps he even felt he was telling “the Truth.” What is the CFO’s obligation at this moment? The fact at this moment is that the customer did not renew. It was a hope that the CEO could return them to the fold.

The CFO could have taken one of two approaches if the CEO was in fact aware of the real reason the client did not renew. At a break in the meeting, he could have taken the CEO aside and suggested that he take a more aligned approach of communication with the Board to set the record straight. This would not have kept the CEO from being on the spot in real time in front of the Board, but it would have given the CEO a chance to reconsider his explanation of why the revenue was soft in the quarter. This is a very tough spot to be in for everyone, CEO, CFO, Board. Another approach would seem more harsh, but equally respectable. The CFO could have said directly: “You know why that key customer did not renew. If you are not going to come clean, we can talk about my resignation after the Board meeting.”

It’s About Ethics, All the Time

Uncompromising ethics means doing the right thing when no one is looking. It also equally means doing the right thing when everyone is looking. For a CFO, this means keeping the entire enterprise on the up and up. The CFO must be the one person who keeps the mundane issues of accounting on the level. She must keep the enterprise aware of and safe from undue risk. The CFO is the one who must keep the company’s management team focused on its long-term strategy and not let a multitude of shiny objects distract from what is really important. The CFO must be the keeper of the truth.

Another CFO told me a story of how his CEO went around him on an important contract negotiation and talked with the Controller about how to book the deal. This booking would have been outside GAAP. This was a private company in the most stringent of definitions. The company had no outside investors and a Board of the CEO’s picking, but none the less it was a sizable company with ambitions to be a public company one day. The CFO actually called me about what to do. Flattered to be of council, but also uncompromising, I told him that if the CEO were to complete a transaction that was neither GAAP acceptable nor ethically palatable, the only thing to do was to resign. For me, the market would find out about this eventually; perhaps a year down the line when the S-1 was being drafted or even sooner when the company’s annual audit was conducted. What outcome would that have for the CFO? Clearly the CFO would be thrown under the bus for accepting a deal that was not above board. Going along with a wrong is a wrong in itself, particularly for the Keeper of the Truth.

Shades of Gray

Hey, there are hundreds of gray areas in business. I am not naive. But when it comes to doing the right thing, the CFO needs to be the person in the room above all who stands up for what is right. Right? I’d love to hear from CFOs who have been faced with these sorts of dilemmas and learn how you handled them. Perhaps my suggestions are too draconian. My sense is we are headed to a tougher financing environment and an economic slowdown (my next blog!), which will only put more pressure on CFOs to bend the truth. Let’s team up to make sure that does not happen. Shoot me an email at and we will get the conversation going, or leave a comment here on LinkedIn or both.

Dave Arnold
President, Arnold Partners, LLC
Strategic CFO and Board Recruitment