Important Relationship Between Head of Tax And CFO
During our interviews with hundreds of corporate tax executives on compensation, we identified business trends we believe are important for corporate management teams to learn. As we asked many questions of tax executives, we recognized the importance of the relationship between the CFO and the Head of Tax. Unless you work in the trenches with lead tax executives to learn this information, a company management team may not know how important the CFO relationship is with their Head of Tax. According to the hundreds of tax executives we interviewed during the last year, the most important relationship for the Head of Tax is a close working relationship with their CFO. The reason for this is the tax executive wants to be brought into the business transactions upfront to structure transactions from a tax advantage standpoint.
Without having the Head of Tax working closely with the CFO in analyzing how the business transaction should be structured, numerous mistakes can occur which will be very costly to the company. CFOs who work on developing a business strategy with the Head of Tax at the very front end of the deal create outstanding value-added opportunities to save the company millions annually in what would be corporate income lost to tax revenue authorities in multiple international, federal, state and local tax jurisdictions. When the Head of Tax is not included in the CFO discussions on business transactions early in the development, problems can and do occur. There are unnecessary problems that arise in business transactions that could have been easily avoided if the CFO and Head of Tax had been working together from the start of the deal being structured. The most successful companies we encounter have the CFO and Head of Tax working together as good business partners at the beginning of all business transactions.
There are CFOs who view their in-house corporate tax organization as a profit center; while other CFOs admit they do not understand tax and see the tax department as a cost center. CFOs who maintain a close working relationship with their Head of Tax are bearing the fruit of millions in tax savings annually that positively impact the corporate bottom line.
What many companies may not realize is tax executives frequently turn down tax opportunities to work for a company if the Head of Tax role does not report directly to the CFO. The CFO and Head of Tax business relationship is a moneymaker that should never be underestimated. When the Head of Tax and the CFO are in sync, you have great dealmakers working together within the multinational organization, creating greater value for the investors. When you separate the Head of Tax from reporting to the CFO, and you have organized the Head of Tax to report to someone else like a Controller or Treasurer or Accounting Officer, you create the potential for the loss of tax savings opportunities and possibly the loss of a tax executive who preferred to be included to avoid problems on corporate business transactions.
Whenever an offer is extended for a Head of Tax role, and it is turned down by the tax executive candidate, the likely culprit is the Head of Tax reporting relationship is to someone other than the CFO. Companies are often bewildered by what happens when they spend so much time interviewing a Head of Tax candidate only to have the candidate turn down an offer after weeks of interviewing with multiple people in the organization. The company management team is bewildered by the process and wondering why they lost a strong tax executive candidate during the interview process. There are many reasons tax professionals turn down offers with a company who extends an offer to them but the one reason that is often overlooked is how management has set up the organizational reporting relationship of a Head of Tax to someone other than a CFO. In fact, the number one reason tax executives turn down an offer with a company is the reporting relationship is not to the CFO of the organization. This is a killer of many deals. A company will likely see maybe 25% of potential candidates in the talent pool when the organizational chart has the Head of Tax reporting to someone other than the CFO.
Another issue we encounter about the importance of the CFO and the Head of Tax relationship is when a new CFO is hired by a company. The incumbent Head of Tax and the previous CFO were in sync, working together on a business transaction. The Head of Tax had the support of the previous CFO who just left for another company. However, the new CFO is here with the goal of cost cutting including the tax department’s annual budget. All the tax planning strategies are now thrown into the wind and out the door with no further support to complete them. This is an unfortunate occurrence for any Head of Tax whose has spent weeks/months/years developing a tax strategy and then realizes the rules have changed and the Head of Tax has no support to implement their tax savings strategies.
Whenever a company’s organizational structure changes from Head of Tax reporting to the CFO, to Head of Tax reporting to the Controller or Accounting Officer, it is a problem since the Head of Tax is often removed from the upper management action. The Head of Tax does not want to have to go to the Controller to have them go to the CFO for what they need. We highly recommend companies avoid this type of reporting structure in their organization because this change removes the Head of Tax one step away from the CFO involved in corporate business transactions. A company doing this will experience higher turnover at the Head of Tax level when the Head of Tax is not reporting to the CFO. Plus… you have the added issue of tax being compensated at a lower pay grade level.
Gain A Competitive Advantage Compensating Your Head of Tax
The purpose of the 2024 Corporate Head of Tax Compensation Report is to provide corporate management teams with a valuable, additional pay data resources to hire and retain, for a longer period, a lead tax executive in their organization. Companies relying solely on A.I. data for compensation pay information will find themselves struggling to retain their Head of Tax in a highly competitive business environment for sophisticated tax expertise.
Our goal is to educate companies by helping them maintain a competitive advantage to attract, retain and hire qualified tax executive talent for their multinational organizations.
State pay transparency laws are negatively affecting a multinationals’ access to a greater pool of highly sophisticated tax executive talent which has gone underground… for the most part. This report provides access to valuable information you need to make more informed pay decisions for a lead tax executive. Advertising lower than expected pay transparency information online is affecting multinationals’ ability to attract and retain lead tax executive talent.
State pay transparency laws coupled with A.I. data pulled from online job boards is not only confusing to many tax executives and corporate management teams who compensate them; it is also costing major corporations access to the best possible pool of highly sophisticated, tax executive talent. As thirty year veterans in retained tax executive search for many of the worlds leading multinational organizations, we frequently observe the pay reported for a lead tax job online as incompatible with the actual salaries corporate tax executives are receiving in these multinational tax organizations. During our private discussions, we spoke with numerous corporate tax executives who were puzzled by lower-than-expected pay ranges advertised to comply with state pay transparency laws.
Behind the scenes, corporate tax executives are taking notice of compensation discrepancies. The questions are: “Are corporate human resource compensation executives paying attention to stated tax executive pay trends?”; “Is the pay data companies are posting on a lead tax executive role accurate and up to date?” We do not believe human resource professionals pay data information is up-to-date on tax executive pay. For this reason, we conducted a survey on corporate tax executive compensation to ask what they are really making as head of a corporate tax function.
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Want To Receive A Copy Of The Lead Tax Executive Compensation Report?
The January 2025 Lead Tax Executive Compensation Report is now available to you for $500 to help us cover the costs of our three month study. Contact Ki***@******ch.com to request a copy of the Tax Executive Compensation Report for software company tax executives and we will request payment via zelle or Apple pay and we will deliver this valuable report the day we are paid. Send email to ki***@******ch.com making the request along with your phone number.
Read Part 1 In Blog Series On Lead Tax Executive Compensation
Read Part 2 In Blog Series On Lead Tax Executive Compensation
