The Top Spot

Why more companies are tapping their finance chiefs for CEO.

Darbee decided that the issue might be natural-gas supplies: demand for clean-burning natural gas is expected to rise in coming years as new plants come online. If supplies prove inadequate, the price could jump. (The spike in natural-gas prices following Hurricane Katrina shows that this isn’t far-fetched.) This realization led Darbee to contact the chairmen of the state’s other main utilities, Edison and Sempra, as well as California’s energy regulators. “We are working as a group to come up with a common view on natural-gas supplies,” says Darbee. “If we decide they are inadequate, we’ll work to address the problem.”

Are You Ready?

More CFOs may be taking charge, but no one claims that finance executives are a shoo-in for chief executive. Peter Crist contends that only 10 percent are qualified. “It’s a pretty rarefied atmosphere,” he says. “Was there a potential CEO among the last 10 CFOs I met with? There was one.”

To run a major company, an executive needs several traits in addition to financial acumen, according to Crist. These include international experience, strong leadership and communication skills, and strategic sense. “Lots of CFOs are very reactive people,” he says. “But the really good ones are forward-looking and able to create energy around a strategy.”

In any case, demand for financially experienced CEOs at public companies will only rise. The reason: according to most experts, stocks are entering a period of slow growth — between 5 and 8 percent annually, rather than 16 percent. That has already made investors pushier about value creation, says Olsen. “There will be a lot of emphasis on the guy at the top knowing how to pull all the financial-, investor-, and business-strategy levers,” he contends. “Companies will need a strong CFO. And chances are, a strong CFO is going to be a competitor for the top job.”

Don Durfee is research editor at CFO.

Experience Required

What is the best background for a CFO angling to become CEO? Historically, the finance executives most likely to get tapped for the CEO position haven’t come up through the controller’s organization. Instead, they have tended to come up through treasury or — more likely — to be ex-bankers. This is true for the three CEOs discussed in this story: David Hoover started in the treasury function of Ball Corp.; Peter Darbee got his start at Citibank; and Bob Bowman began his career at Goldman Sachs before becoming treasurer for the state of Michigan.

The reason: companies sometimes recruit banker-CFOs to oversee their mergers and acquisitions, and that kind of work is a good training ground for future CEOs. “M&A really stretches a CFO to be more than an accountant,” says Eric Olsen, a senior vice president at The Boston Consulting Group. “You have to negotiate deals, interact with people, face off with investors, and argue the rationale for why the deal makes sense.”

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