Not every company favors the finance executive for CEO, however. Technology companies often have a decided prejudice against putting them in operational roles, says Crist. Similarly, consumer-products companies like Kraft Foods and Procter & Gamble rarely promote executives who didn’t come up through product management and brand marketing. “If you go to P&G and you aren’t a product manager, you just aren’t going to rise to the top,” says Crist.
Do former CFOs make better CEOs? In some cases the answer may be no. An overly financial view of the organization might lead to a bias for acquisition rather than organic growth, for instance. “Whatever advantages one function brings [to the CEO's job], there are also blind spots to watch out for,” says Sonnenfeld. “For a financially oriented person, that might be whether they truly understand how a decision will cascade down to interpretation and final execution in the organization.”
There is no evidence that companies with finance executives in charge are any better at avoiding financial scandal; Entergy Corp., which was investigated in 2003 for illegal “round trip” trades, and Harley-Davidson Inc., which is currently being examined for alleged channel stuffing, are two that have run into trouble despite being headed by onetime CFOs.
In several other ways, though, the CFO background is an asset.
Focus on shareholder value. “Your background shapes your biases when it comes to a value-creation strategy,” says Eric Olsen, a senior vice president of The Boston Consulting Group (BCG). “Sometimes a former marketing guy will think that growth is the answer, or an operations guy will see cost as the answer. But often a former CFO will look at all the levers.”
The numbers seem to bear this out. Data provided by Capital IQ, a unit of Standard & Poor’s, shows that over the past three years, large companies run continuously by ex-CFOs have outperformed the S&P 500, returning 41 percent compared with 29 percent for the market index. (These stocks are also more volatile — they have done worse when the market has fallen and better when it has risen, as it has over the past year.)
“When you are a CFO, you come to see that this is all about shareholder value, even at a private company,” says Bowman of MLB Advanced Media. “And operationally, you understand the things that drive value. For example, it’s second nature for me to know that an online cash flow will be worth more to the public than an offline cash flow [because an online income source is presumed to be able to grow faster than one offline].” As a result, Bowman focuses on the parts of the business that are valued more highly — subscriptions to the Website’s videos of baseball games, for instance, rather than merchandise. “It’s part of your DNA, for better or worse. Of course, it does mean that you aren’t the first person people want to invite to a dinner party.”