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Cover Story CFO to CEO 5,254 words 1 April 2005 Corporate Finance English © 2005 Euromoney Institutional Investor PLC

News stories about CFOs are rarely positive. One only has to look at the departures of Alison Reed at Marks & Spencer, Howard Dobbs at Boots and Christopher Rogers at Woolworth's in March to grasp the type of articles that journalists like to write about finance executives. But March also brought a number of 'good news' stories about CFOs – where they stepped up to the top job. Although these pieces might have generated smaller headlines, they tell us more about the role and skills of contemporary CFOs than any 'City pushes out...' article does.

In the past month, James Bell, CFO of Boeing, was appointed as interim CEO after the departure of Harry Stonecipher, Jose Luis Duran was promoted from CFO to CEO of French retail giant Carrefour, Bertrand de La Noue became CEO of Total Holdings (see box), James Ziener stepped up as CEO of Harley Davidson, Harry You took over as CEO of consulting and integrations firm BearingPoint (leaving the CFO role at Oracle) and Trevor O'Hoy became CEO of Foster's.

Although recruitment consultants say it is too early to call it a trend, over the past 18 months an increasing number of company boards have decided that in order to best serve shareholders it is prudent to promote the CFO to CEO. CFOs themselves remain reticent about any personal ambitions beyond the CFO role – at least in public. But given this recent string of high profile promotions there is an increasing recognition that they have what it takes to take over the CEO role. How and why has the CFO become a contender for the top job?

Dynamic bean counting

To understand why CFOs are more frequently getting the top job it is important to know what the contemporary holder of the post does with his time. "The Monty Python image of an accountant sitting in a corner counting beans has disappeared," says Ian Graves, district director of continental Europe, at recruitment agency Robert Half International. Bluntly put, CFOs are now a much more exciting breed.

In the 1990s, the CFO role became more dynamic and strategic, moving from being merely a functional head to also being a corporate leader. "The best CFOs acted like mini-CEOs," explains Neal Kissel, partner at management consultants Marakon Associates.

Nowadays when someone reaches the position of CFO he has two qualities: first is a comprehensive knowledge of finance and internal controls; second an understanding of the operational and commercial aspects of business. Both are attributes demanded of CEOs.

Concerning the first quality, Nick McCall, chair of the London chapter of The Financial Executives Networking Group (Feng) explains that: "Business is becoming increasingly complex – and deal making highly technical – [so] CEOs need to have a sound financial background."

More recently, the CFO has had to pick up responsibility for responding to regulatory changes. And with regulation, compliance and corporate risk at the forefront of everyone's minds, the CFO makes the perfect choice for CEO says Deborah Thomas, head of treasury at recruitment consultancy Michael Page International. "We are becoming more control oriented. There is such an emphasis on it that you can see why a finance background would fit well with the role of CEO."

But Kissel believes the situation is more complex than simply assuming that an understanding of corporate governance and Sarbanes-Oxley (SOx) will land a CFO the top job. "The jury is still out as to whether the emphasis on SOx, corporate governance and compliance is working in the CFO's favour," he says.

"It must be asked," he adds, "how much time is left for the CFO to do other things? The CFO must work hard to continue to wear two hats. He must make sure that the increased focus on SOx doesn't stand in the way of developing the other skills a CFO must have in order to make the transition to CEO."

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