Asia’s existing shortage of chief financial officers for portfolio companies has become more acute over the past 18 months due to accounting scandals in China and pressure from LPs to tighten corporate governance, according to industry sources who help fill CFO roles.
Scandals such as Caterpillar’s $580 million write-down of the value of a Chinese acquisition due to financial irregularities and continuing reports from research firm Muddy Waters highlighting claims of financial wrongdoing at US-listed Chinese companies are driving the need for CFOs with deep and broad experience.
“Those factors have absolutely made an existing shortage more severe,” said Gene Shen, head of China practice for Options Group, an executive search firm with private equity clients. “The CFO with extensive experience is one of the most difficult professionals to find in Asia.”
LP pressure for higher corporate governance standards impacts on the CFO role because transparency requirements have become more rigorous, sources said. “The CFO has a lot of fiscal responsibility in a China-based company because he or she writes the checks, as it were,” Shen said.
It’s management skills that are lacking, not accounting skills. Leading a team to a goal requires more than just finance experience
Olivier Hubert, partner, AlterCFO
The shortage is most acute in China and in Indochina — Cambodia, Laos and Vietnam.
“In Indochina, due to the culture and history, it’s not possible to find a [local] professional who is both a CFO and a businessman,” said Olivier Hubert, partner at AlterCFO, a firm that takes interim CFO assignments in Asia.
Filling a full-time CFO role in Indochina could take a company up to 15 months in certain cases, he said.
Asia has many financial professionals, but it is the increasing requirements for the role, which are also driven by maturing economies, that make the scarcity worse.
“It’s management skills that are lacking, not accounting skills. Leading a team to a goal requires more than just finance experience,” Hubert said.
Other factors are also involved. More adoption of business management software such as ERP platforms in emerging markets requires a CFO to have some technical knowhow. Hubert said his firm fulfilled one such assignment at a manufacturing operation in Cambodia.
The search for an experienced finance executive may be further complicated if language skills or specific sector expertise are needed. “Private equity tends to seek candidates with excellent command of the local language who can be operational quickly,” Hubert said.
Shen, form Options Group, added that the shortage is somewhat offset by the trend of expatriate talent willing to move back to Asia, particularly China. “Getting professionals to move back to China is less of a challenge than in the past.”