Do you think finance departments are the best place to train future CEOs? Provide two actual examples of CFOs of publicly-traded companies who became CEOs of publicly-traded companies within the past 5 years. Do these individuals have the CPA and/or CFA designations?
How a CFO can graduate to CEO Brewis, Janine. Corporate Finance 175 (Jun 1999): 13. Turn on hit highlighting for speaking browsers by selecting the Enter button Hide highlighting Abstract (summary) Translate [unavailable for this document] Positions of power within corporates are highly sought after, and today's chief financial officers and finance directors are increasingly becoming aware that they now have a realistic opportunity of becoming CEO. Part of the reason for the trend towards recruiting CFOs who can behave as strategic partners is that the investor community looks much more critically at the business performance and management strengths and weaknesses of corporates. This strategic positioning gives them an opportunity to buff up their image, and make themselves seen as a more credible candidate to take over the CEO role. Full Text Translate [unavailable for this document] There will always be leadership battles in corporates, either bubbling under the surface away from the watchful eye of the public, or high-profile feuds that make the headlines. Positions of power within corporates are highly sought after, and today's chief financial officers and finance directors are increasingly becoming aware that they now have a realistic opportunity of becoming chief executive officer. The role of the CFO is evolving and there are more opportunities for the right kind of candidates to achieve CEO status, although not all CFOs have the potential. Such career issues came into focus last month when Phil Yea, group finance director at UK food and drink group Diageo, announced that he would leave the company after six years' service with the group and with Guinness before it merged with Grand Metropolitan in 1997 to create Diageo (see plO). Yea refuted speculation that he had based his decision on the knowledge that he would not get the CEO position in the company that will become vacant when chief executive John McGrath retires at the end of the year. Chairman Tony Greener also retires this year. CFOs are now expected to interact with their management boards, and in particular with the CEO, and contribute to strategic planning. Says Rucker McCarty, partner-in-charge at the chief financial officer practice of US executive search firm Heidrick & Struggles: "In the past the CFO was looked at more as a storekeeper. Today many companies see CFOs as strategic partners, helping to build shareholder value. It really is a different role, and it is evolving. That is why we are seeing more CFOs having the opportunity to become CEO." Part of the reason for the trend towards recruiting CFOs who can behave as strategic partners is that the investor community looks much more critically at the business performance and management strengths and weaknesses of corporates. Says Ian Butcher, finance director at UK recruitment firm Whitehead Mann Group: "The two most visible people in the company to the investor community are the chief executive and the finance director. "The finance director is an even more important ambassador in the investment community than he or she might have been a few years ago," he adds. "It does give them an opportunity to buff up their image, and make themselves seen as a more credible candidate to take over the CEO role." There are many reasons why some competent CFOs fail to move into the CEO role. Those who come from a purely accounting background are not generally expected to make such a speedy rise up the corporate ladder, but much has to do with the character of the individual and the mentoring system that the corporates provide. Individuals who are able to gain a breadth of experience across several functions may stand a better chance of rising to CEO, and will be more indispensable to the kind of CEO who seeks advice from his or her staff. Most boards do not focus on one effective individual but are more concerned about teams working together. A CFO who can think outside the pure finance function is useful to the organization, whether he or she remains CFO for life or moves on, because the function areas within corporates are becoming more integrated. Says Janina Harper, senior manager at UK recruitment firm KPMG Search & Selection: "If you go back to the basics of accountancy training, it is changing quite a lot in terms of trying to be broader early in peoples' careers. And maybe that will lay the seeds in the future that people will start to think more about the chief executive role." Sometimes CFOs or finance directors switch into the CEO role unexpectedly. Last month Jamie Dundas moved from being finance director to CEO of UK property group MEPC, ending speculation over what former CEO James Tuckey was going to do with the business, following a couple of years of refocusing the company and fighting off a hostile takeover bid (see opposite). Others that have succeeded in moving from CFO to CEO include Doug Ivester, who was controller, then CFO, then chief operating officer and then CEO at US beverages group CocaCola. And Jerome York left IBM in 1996, where he was CFO, to become chief executive at entertainment group Tracinda. Last year Richard Nanula, who at 31 became the youngest CFO ever of a Fortune 500 company in 1991 at Disney, quit to become CEO at US group Starwood Hotels & Resorts Worldwide (see Corporate Finance, May 1998). Although the relationship between Nanula and Starwood chief Barry Sternlicht has since soured, the achievement was a great one for Nanula. When recruiting a CFO a company should be clear about what kind of candidate it wants. The criteria that recruitment firms are having to meet are shifting. There is a greater expectation that their staff should know everyone in the market and have an intimate knowledge of clients' business strategies. Many large recruitment firms conduct searches for a wide range of executive functions, but the emphasis has changed. In the old days of executive recruitment, recalls McCarty at Heidrick & Struggles, the recruitment executives were generalists. "They would get a call, the client might say: `Have you ever done an assignment for a controller?' And even if a person had not done it, they would say: `Oh sure, I can do that."' JB Do CFOs Really Make Good CEOs Picker, Ida Institutional Investor; Aug 1989; 23, 9; ProQuest Central pg. 47 Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission. Reproduced with permission of the copyright owner. Further reproduction prohibited without permission
