For CFOs, the to-do list lengthens. (Cover Story).

Accounting scandals, the weak economy and integrity issues have raised the stakes as never before. That's an opportunity for top CFOs to prove themselves and their value to their organizations.

It's been about a year since the meltdown at Enron Corp. began in earnest, and what a year it has been. The drumbeat of negative headlines has been almost incessant, and the corporate miscreants and their misdeeds are so well known that few financial managers need a recap. At companies like Tyco International, WorldCom Inc., Global Crossing and Qwest Communications International, the flames may be out, but the embers are still flickering--and may be for some time.

Overlay on these scandals the sickening slide of the stock markets and an economy so weak that sonic economists still fear a "double dip" recession. Earnings at many companies are anemic, and most revisions are downward. Good news is at a premium--almost a complete turnaround from the rollicking years of the late 1990s, when earnings were soaring and confidence was almost recklessly high.

In an era of contraction, reduced expectations and higher market skepticism (if not cynicism or resignation), the demands on CFOs are unprecedented. Financial Executive spoke to a number of executive recruiters about the changing concerns of top finance officers, qualities that are especially important and time altered relationship between a CFO candidate and the hiring company.

Just do it--all of it. If anything, recruiters say, CFOs and other top finance officers are being asked to do more than ever before, even as they are wrestling with new regulatory or legal mandates like the SarbanesOxley Act, enacted this summer, that, among other things, requires CEOs and CFOs to certify the company's financial statements.

"It's a very confusing time. A lot of CFOs are being squeezed," says Allen Galorenzo, a principal in Florham Park, N.J., with recruiting firm Foster McKay Group, a 31-year-old company specializing in the finance field. "They are no longer just financial persons--companies are relying on them for a lot more, and they wear many different hats. They're very much into IT, HR. legal. There will be a lot of people who really can't perform. For the good ones, it's clearly more difficult to attract them to look at opportunities."

"You can almost say today, [companies] are looking for everything," says John T. Gardner, vice chairman of the Board Services Group at Heidrick & Struggles in New York. "I think that clients want a CFO candidate to have a full range of technical financial skills--the control, the treasury, the risk management, the investor relations--plus the strategic skills to be a full business partner with the CEO. I think, in addition, they also need to be an important thought leader and change agent as part of the entire management team.

"And," he adds, "add on that the requirements that these people be absolutely squeaky clean in every aspect."

Gardner goes on: " The breadth of the job is very demanding. They need to have all of those traditional things; yet, no one is saying that CFOs don't need to help companies deliver against firm commitment. They probably need to know the business better today then they ever have. They need to be able, along with the CEO, to ask the right questions, so they need to know the operation. And, some of these additional demands on the CFO are bound to put more pressure on the entire financial organization. So, you are going to see a need for stronger people - not just the CFO, but [in] the next layers down."

Accountability is a huge shadow hanging over many finance organizations. "Years ago, the CFO wasn't being blamed as much as he or she is now," Galorenzo says. "Finance and accounting might not have been the first--it might have been R&D or marketing. Now with all the accounting scandals we've had, it's somewhat like professional sports: If the team does poorly, the manager gets fired. CEOs are under fire, and boards are starting to blame the CFO for the economy.

One obvious result is that many more CFOs have lost their jobs--although, in many cases, it's understood that all the onus isn't on them. If you, as a CFO, were dismissed "absolutely for no fault of your own, and the ground shifted under you, and the circumstances are public knowledge, that's not a handicap," says Charles Wardell 3rd, managing director of Korn/Ferry International's Northeast practice and head of the New York Financial Services Practice. "There are many people who are very qualified, very able, whose life suddenly shifted."

"A lot of CFO opportunities today are troubled ones," says Gardner, who says his firm was recently looking for CFOs for The Warnaco Group and Sunbeam Corp.--two companies that have essentially collapsed and are attempting to emerge from bankruptcy protection. "Certainly, those folks are going to look at people who have been through tough times," he says.

Since the focus is increasingly on the messenger, communication skills have become more vital than ever. "I think there continues to be an increasing requirement for CFOs to be extremely articulate and very good communicators," Gardner maintains.

"They obviously need to be able to talk about the numbers; but they also need to be able to talk about the strategy. When you get on an investor conference call today, you hear the very good CFOs not just reporting on the numbers; but they are business people. They put it all in context."

He adds: "It seems like these CFOs are doing more road shows or external events without the CEO present then they used to. So, I see them as the primary spokesman more often. In response to that, quite a few CFOs I know have taken some professional steps to improve their ability--they've had coaching. They've had some of their long-time financial or their investor/public relations firms come in and give them training on how to be effective."

With what many call a "back-to-basics" mandate spreading across corporate America, the need for topnotch financial skills is stronger than ever. Some recruiters note that a few years ago, those weren't as vital.

"The non-traditional CFO that was popping up in dot-coin boom didn't have the historic accounting background," says Jim DiPietropolo, a director with Foster McKay. "They were relying more on the auditors. And a lot of the people who started dot-coin firms wanted CFOs who wouldn't rock the boat. Those [CFOs] are having a tough time now. A lot of companies have said they will now require a CPA and public accounting experience.

One area that may be getting less emphasis in this high-stress time is CFOs serving on boards, especially for another company. While some organizations have actively reached out for CFOs to head their audit committees, there appears to be pushback from employers of those they are trying to bring in, says Gardner. "With all the new requirements and pressures on the CFO, their own companies in some cases are saying, 'Gee, is this really a good time for you to be spending your time outside? Yes, you are going to learn a lot -- and we support it -- but right now isn't the right time."

Of course, one of the great unknowns these days is what impact the Sarbanes-Oxley Act of 2002 and other legislative and regulatory initiatives will have on corporate reporting and the concomitant pressures on CEOs. Many clearly fear there has already been an overreaction to what they feel were isolated cases of fraud and chicanery that tarred too many with the same brush.

A common reaction is anger and frustration. "Ninety-nine percent of the honest, hard-working CEOs out there are outraged that these [accounting scandals] happened," says Korn/Ferry's Wardell.

Senior finance executives "are outraged that events have led to Washington interference, and they're not sure that Washington legislation won't, in the end, cause more harm that good," says a high-level recruiter who asked not to be named. "Governance broke down at the board level. There's a general feeling that a very few people were running criminal enterprises 'and should put spend time in jail for it, but that this has created a whole new era of oversight."

While it's often said that tough times produce great leaders, an unending battlefield slog may not be for everyone. "I think one of the things that you have to ask yourself is: are you up to the challenge?," says Gardner. "The CEO job is not going to get any easier -- it is going to get harder. It's going to be more demanding from every single aspect. It's going to be more demanding intellectually. It's going to be more demanding just in terms of the physical attributes of the job.

"I think that it's important that the CEO asks himself [or herself]: Is this really what I want to do? Because they have to have a 1,000 percent commitment. They have to have huge passion and tremendous energy to do the CFO job. The CFO also has to ask himself/herself: Do I have all the skills it takes to do today's job?"

The answers need to be "yes": it's not a time for doubters.

RELATED ARTICLE: Essential Tasks for Today's CFOs.

William Reeves 

Hundreds of articles have been written since August, pondering the "new reality" for CEOs and CFOs who must personally vouch for the veracity of their company's financial reports. Most business writers have called for a cleansing of corporate America, declaring that corporate ethics are back in vogue.

Interestingly enough, ethical behavior, integrity and honesty are not new requirements for the CFO position. What is new is the level of scrutiny under which that office will operate in the coming years, and for good reason: Two of 2002's most high-profile incidents of corporate impropriety came at the hands of powerful CFOs at WorldCom Inc. and Enron Corp.

With the unraveling of these two corporate giants, the days of swashbuckling finances and whiz kids doing deals to influence the stock market have come to an end--thankfully. In the years ahead, expect a renewed interest in basics and solid accounting principles from the CFO's office, but also expect something else: The elimination of CFOs who aren't strong or resilient enough to undergo the increased scrutiny mandated by Congress.

Taking their place will be more powerful and influential executives, and the CFO's role as a strategist, capital manager and ambassador to the investor community will become essential to corporate health and stability. CFOs will be hired for their talents to think strategically, innovate, manage risks and build teams. Moreover, CFOs will be expected to touch every aspect of the corporate enterprise: treasury and risk management; pensions and benefits; investor and public relations; information technology; operations; and human resources.

With these new responsibilities in mind, every CFO in America should complete three essential tasks to build the corporate foundation for the coming year. Those include:

* Update your company's risk management policy. Create a memo that outlines the program's key elements; a good one will be your first line of defense for financial risk management. List which assets must be protected, including technology, your corporate brand, your corporate property, as well as the common financial risks associated to assets: accident or theft, embezzlement or mismanagement of funds. Revise and strengthen your internal control policies and financial procedures, ensuring they are well understood throughout the company.

* Review all aspects of your company's regulatory compliance status, including state, federal and SEC regulations. The associated risks can include everything from benefits plans to taxes to accounting practices. Expect to see an increased demand for corporate compliance officers; in fact, you might consider adding one to your staff.

* Review your associations. Tending to your corporate brand and reputation is an increasingly important strategic initiative, and a thorough internal audit should evaluate your comfort level with current clients, accountants, board members and other external consultants.

If you are in the professional services industry, are you working with any bad apples? If so, are you protected from any related image or reputation issues? Your company's name is an important yet hard-to-quantify-asset; if protected and preserved, it can outlast even the most valued hard assets. At the board level, check to ensure that you don't have a member that might be an embarrassment down the line.

Finally, remember that the role of the CFO has grown in visibility and in importance since the corporate scandals of 2002. In many cases, a strong CEO could have made a difference for many of the year's troubled companies.

William B. Reeves is a member of Spencer Stuart's Worldwide Board of Directors, a senior member of the Global Financial Services Practice and a core member of the Financial Officer Practice.

What It Takes to Succeed

Below is a checklist that an executive leadership team conducting a CFO search may want to keep in mind. Look for signs that a candidate can:

* Accept the role as the one ultimately charged with accountability for all aspects of the organization.

* Embrace new ideas and is eager to examine new trends.

* Act as a critical driver behind enterprise-wide change.

* Act comfortably within a culture of change.

* Play the role of the Great Communicator both within and organization and with external stakeholders--such as shareholders, analysts and Wall Street.

* Take an aggressive role in selling corporate equity (i.e., the company's strategy, product and future) to the investor community.

* Bring added value to support the CEO in the role of strategic business counselor.

* Ensure that all employees, regardless of position, know and understand the company's financial targets.

* Engage in enterprise-risk management and measure the cumulative effect of risk on all important corporate decisions.

* Bring a wide breadth of functional experience that can be applied to the job.

* Make risk management a team endeavor--while retaining ultimate responsibility for its successful execution.

* Show the self-confidence and flexibility to admit error and change direction.

RECRUITMENT: Advice from the Pros

Needless to say, it's not exactly a seller's market for would-be CFOs.

At least for now, the notion of zigzagging upward in a series of jobs at different companies is unlikely. "There's usually some thing of a domino effect, where a CFO will leave and open up a slot, for someone else," says Allen Galorenzo, a principal with the Foster McKay Group. "Generally, though, the economy now is such' that most people are staying, where they are."

One word that crops up in any conversation with recruiters is "scrutiny." "Candidates are getting scrutinized, but even more than ever, candidates are scrutinizing the companies," says Charles Wardell 3rd of Korn/Ferry International. "If I'm being asked to come in as a CFO, I'm going to have a hard look and vet the company. I want to know the background. People are more reluctant to move; they've survived hard times. They don't want to be the new guy in a firm with surprises and end up as Exhibit One down at the courthouse."

On the other hand, the impetus for caution from companies eyeing a high-ranking finance officer is obvious, and recruiters say the process is more complicated now. "It's more of a layered approach," says Jim DiPietropolo, a director at Foster McKay. "Where there might have been two to three layers of interviews, now they are bringing in people for tests and adding a lot more people to the schedule."

Directors, too, are often a vital part of the process. "When we do a top CFO search today, 9 times out of 10, the board [of directors]" is heavily involved, along with the CEO," says John T. Gardner, vice chairman of the Board Services Group at Heidrick & Struggles. "I can't remember doing a large-company CFO search where the head. of the audit committee and the other members of the board were not right smack in the. middle of that search. And that was not the case five years ago."

"Many more of our clients are using third-party companies that specialize in behavioral evaluations, or using corporate psychologists," says Galorenzo. Adds Robert Rice, a consultant with Christenson Hutchison McDowell, LLC, a small search firm in Barnegat, N.J.: "In general, psychological testing is more prevalent, and that has actually knocked out a number of our candidates."

References are another area drawing increased-attention. "We need to do a lot more reference checking -- some organizations even do a credit check on a candidate," Rice says. Where companies had once asked for four or five references, they are checking them more thoroughly and often asking for one or two more references.

Rice believes that "promotability" is a key concept for hiring companies, especially at: levels below the CFO. "I sense that companies are eager to bring someone in who they think can ascend to the CFO role. They want someone who can fit culturally, and then take the next step," he says. While some smaller companies are attracted by candidates with big-company experience, they may wonder if whether they can fit culturally.

More women are in the mix of candidates these days, Rice adds -- but so are other minority groups, since companies will ask to consider a diversified slate. But, he adds, "Diversity candidates know they are in demand, especially women who have made a name for themselves in their organizations. They have a reluctance to jump."

And what about relocation: Will companies pay for it any more? "The major Fortune players are still willing to pay the freight, but a struggling company might not," says John Cohn, another principal at Foster McKay. His colleague, Galorenzo, adds: "At the CFO level, larger companies are willing to spend whatever it takes to get the right person. At lower levels in the organization, there might be some reluctance."

To Wardell, personnel choices like the CFO have become more critical than ever -- and that has been good for search firms "The need for good people continues to increase. That's made our business a great deal more serious and more important -- we're much more involved in the business proposition than in the past. When they need somebody, they really need somebody who can do what they say they can do, and help them manage the business."