Three years ago, Morningstar founder, chairman, and CEO Joe Mansueto and human-resources head Martha Dustin Boudos spent five long months interviewing external candidates to fill the CFO slot at the Chicago-based investment research products firm. Replete with accounting expertise, each was technically qualified for the job. But Mansueto found them a bit too narrowly focused for his taste. In fact, he would often joke to Boudos that she would be better at the job, even though she’d never worked a day in finance.
As the interviews plodded along, Mansueto began to seriously consider giving the former product manager and director of marketing the job. “When the idea first occurred to me, it seemed wild, because she didn’t have the traditional background,” he says. “But she knew the company and its people so well, she was clearly at an advantage in my mind.”
Boudos was skeptical. “I wanted to be sure it was the best thing for the company,” she says. “It’s such a beyond-reproach decision to [promote] someone who’s been a treasurer or controller; to take someone from a less-conventional background could be a risk.”
That sort of risk has become all the more pronounced thanks to the intense accounting scrutiny that new regulations have put on public companies and on private ones, like Morningstar, that hope to go public. And while in the past decade large companies like Alcoa, DuPont, and Northwest Airlines have successfully installed CFOs with no previous finance-department experience, some experts wonder whether “nontraditional” candidates will get future consideration. “Everyone wants a CFO who can positively impact their business, but I think people are more concerned these days about finding someone who’s not going to get caught by [the] Sarbanes-Oxley [Act of 2002],” says White Plains, New York-based executive recruiter Rich Dowd.
Mansueto convinced Boudos (and the board) that her familiarity with the company would be a greater asset than accounting expertise, and she took the position in December 2001. “We’ve been thrilled with her performance,” he says. Even so, the board initially continued to discuss possible risks associated with Boudos’s background in conjunction with the potential for an initial public offering, concerned that external investors might not take such a holistic approach.
In reality, though, experts are hard-pressed to name CFOs who have stumbled simply because they didn’t have technical expertise. “It’s not clear to me you have to be a CPA to be a CFO,” says Robert E. Mittelstaedt, director of executive education at The Wharton School of the University of Pennsylvania and a director for three public-company boards. “A good CFO is someone who knows when to bring in technical help, but not necessarily someone who possesses all of it.”
Alcoa Inc. CFO and executive vice president Richard Kelson, an attorney who was previously the company’s general counsel, would agree. “You’re trading deeper knowledge in accounting and other areas for leadership and judgment, with the idea that accounting can be taught, or purchased from technical experts,” he says. He has relied on various controllers and the 25-person controllership group since taking over as CFO (his first finance job) in 1997, and hasn’t found it necessary to otherwise deepen his understanding of accounting as a result of Sarbanes-Oxley. Accounting “has more time on my agenda,” says Kelson, but only because more constituencies are asking more about it.