The idea that a CFO could be a good chief executive isn’t new. As far back as 1990, CFO wrote about finance executives taking on the top job at such companies as PepsiCo, American Airlines, and Gillette. Many of these executives rose on the flood of takeovers during the 1980s: boards believed that someone with balance-sheet discipline and Wall Street experience could guide a company through its own takeovers and deal with the aftermath.
Other trends have also contributed to the increase in CEOs with a past in finance.
Increased emphasis on finance. In the 1990s, the financial CEO fell out of fashion in favor of executives with engineering, marketing, and sales in their backgrounds. Things are different today. Recession, the dot-com and telecom meltdowns, and a rash of corporate scandals have led board members to view a strong finance background as essential to the CEO. “You see an ebb and flow over the years as different functions step into the limelight,” says Jeffrey Sonnenfeld, senior associate dean at the Yale School of Management and a director of Gevity Inc. and TheStreet.com Inc. “Today, boards want CEOs who can help them understand the puffed-up proposals coming in from the company’s bankers, consultants, and attorneys.”
Shifting senior management. But this is only part of the story. More important is the evolution of senior management roles. First, finance has become a bigger part of the CEO’s job as companies have grown more global and thus trickier to manage.
The CFO’s role has changed, too. As finance executives find themselves more involved in strategy and operations, they are gaining at least some of the experience a CEO needs. Take, for example, David Hoover, CEO of $5.4 billion Ball Corp., based in Broomfield, Colorado. Hoover, who became CEO in 2001, joined the company’s treasury operation in 1970. Over three decades he moved through a variety of financial positions, including jobs with Ball’s agricultural-irrigation division (which sent him to the Middle East and Venezuela) and its aerospace business. He became senior vice president and CFO in 1992, and eventually took on responsibility for the aerospace unit as well. “I was fortunate to get outside the finance area,” says Hoover. “If I’d stayed in the accounting department, that’s probably where I’d be today.”
Operational experience not only teaches finance executives to think broadly about business, it also puts them in front of those who will choose the next CEO. “People don’t often notice this,” says Crist, “but CFOs at big companies are now present at every significant strategic discussion the board has. And when you are in the room, you are being observed.” That is how Bob Bowman, the president and CEO of Major League Baseball’s online unit, MLB Advanced Media, got his first operational job as president and chief operating officer of ITT Corp. He had worked closely with chairman and CEO Rand V. Araskog on a variety of projects, including the three-way split of the company in 1995. “Rand and I had a good working relationship,” says Bowman. “We worked closely in the gnarliest of circumstances, and that was valuable to both him and the board.”