THE BOTTOM LINE
Richemont: Why does this man not report to his boss?
Chief financial officer bypasses CEO and answers directly to the board. This is odd, but there are reasons
It is odd when a chief financial officer does not report directly to a CEO, but this is exactly what luxury brands group Richemont has put in place. CFO Burkhart Grund does not report to newly appointed CEO Jérôme Lambert. Instead, like Lambert, Grund reports directly to the Johann Rupert-chaired board.
Besides Grund not reporting to the CEO, the CEOs of two of its most notable subsidiaries, Cartier and Van Cleef & Arpels, also report directly to the board.
On a recent conference call, Grund defended these moves. He said the management of Cartier and Van Cleef & Arpels could give the board considerable insights as they were “ahead of the curve” when it came to figuring out what the market wanted.
As for why the CFO should report to the board, rather than the CEO, Grund said it was to provide “checks and balances”.
This move by Richemont ties into an ongoing debate about governance and reporting structures about who should report to whom. Some argue that having a CFO report directly to the board would allow it greater oversight. This means that information would not just be channelled through one person, the CEO, to the board.
The counter-argument is that it creates two centres of power in the business. If a CEO for instance, tells the CFO to “fund this”, will this instruction be followed or will they have to arm wrestle over it at a board meeting?
Only time will tell if Richemont made the right move.