As a result of increasing investor scrutiny and a renewed commitment to corporate governance, there are an increasing number of these latest C-suite executives in corporate America. Ernst & Young asserts that this development is especially prominent in companies that actively engage in transactions such as mergers and acquisitions, SmartPros news service is reporting.
“There is a shift in how companies are approaching corporate development, and the emergence of the CDO role is at the center of that change,” said Kerrie MacPherson, Americas Markets Leader, Transaction Advisory Services, according to SmartPros. “They are gaining significant executive visibility, accountability and responsibility throughout the execution, implementation and integration of a transaction. Companies are creating and elevating this position to increase the likelihood of their transactions adding value.”
MacPherson attributes this rise in CDOs as a result of an increasingly loud call for focused financial reporting and regulatory compliance.
The CDO is increasingly becoming more and more like its C-suite contemporaries. Thirty-seven percent of CDOs report directly to the CEO or corporate board. Eighty-six percent of CDOs were a primary source of transaction opportunities, according to the study, whereas only 74% of investment bankers were. Also, CDOs were most often named as the internal executive leading M&A and monetization transactions such as sales of subsidiaries, carve-outs and spin-offs.
Ernst & Young expects this trend to continue. Corporate transactions are expected to increase, with 96% of respondents expecting to undertake a merger or acquisition in the next two years. Seventy-nine percent expect to launch an alliance, 63% expect to achieve monetization through the sale of a subsidiary.
The study also warns that CDOs will have to take on further responsibilities such as risk processing in response to increased calls for proper governance.
In the study, entitled “Striving for Excellence: The Emerging Role of the Corporate Development Officer,” over 175 interviews were conducted with executives bearing the responsibility for corporate development. Eighty-nine of the companies were in the Fortune 1,000. Twenty-six were in the Fortune 100.