The recent Wells Fargo disaster reminds us that for companies, the best kind of watchdog is the internal kind. For some reason, Wells Fargo’s internal watchdog (or Chief Audit Executive) didn’t suffice in this instance, though.
Whether that means they overlooked unethical sales practices or whether their reports to management went unheard is unknown. What we do know, though, is that Wells Fargo probably wishes they had dealt with these concerns internally before it became the debacle playing out in our daily news headlines.
Chief Audit Executives play a vital role in a large corporation’s system of checks and balances. Simply put, they exist in order to operate as a fully independent audit assessor, who also often supervises other aspects of risk and compliance. These executives, who typically report to the board’s audit committee, are becoming more sought after with each passing day.
In fact, “Chief audit executives hired by large companies now command total pay packages approaching $1 million—about 30% more than a decade ago,’’ said Scott Simmons, a managing director at Crist|Kolder Associates, which recruited nearly 15 current CAEs.
The search for experienced and talented CAEs has become hyper competitive to say the least—especially when the qualifications are “superior business acumen, dynamic communication skills, unflinching integrity and ethics, breadth of experience, excellent grasp of business risks, a gift for developing talent, and unwavering courage.”
Additionally, “There is no single career path guaranteed to becoming a CAE or functioning successfully once in the position. The requirements for success vary across regions and organization types and sizes.”
Why the jump in visibility and pay? To put it simply, boards have become more worried about governance compliance, potential cyber attacks, and of course, personal liability. Not to mention, the 2002 Sarbanes-Oxley Act unleashed major corporate reform—particularly for auditing oversight.
As Terry Sheridan for AccountingWEB writes, “In addition to performing the required tasks, the CAE is expected to model desired behaviors—to project the tone at the top that shapes a value-adding culture. Internal audit’s success depends on the direction provided by its CAE and the organization’s management team. Therefore, finding a CAE with the requisite characteristics is critical for all organizations.”
In other words, the chief audit executive has an extremely vital and strategic role to carry out for corporations operating in the 21st century. Expect this position to become even more important to corporate directors in the near future. CAEs offer a crucial source of assistance for board leadership.