operating elements of a company, when boards consider [the next] CEO, the CFO is included in the pool of candidates."
More generally, CFOs continue to have an advantage over almost all other candidates for the top job – access to both people and knowledge. Not only do they have insight into the drivers of company value, they also have privileged access to the CEO and the CEO's agenda. "The CFO's role is continuing to become more closely aligned to the CEO role," says Rickman of Russell Reynolds. "The CFO must know the answer to a question before the CEO is even aware of the question so [he] is naturally seen as someone who is capable of stepping in to the CEO's shoes."
Grooming the CFO for CEO the EMI Way:
According to a 2004 study by Crist Associates, CEOs are – marginally – more likely than not to be recruited internally. In a survey of Fortune 500 and S&P 500 companies over the past nine years, the study showed that in those companies which had changed CEO two or more times, 51% came from internal promotion: and of this 51%, 52% came directly from the COO chair. The figures demonstrate the importance of succession strategies – especially as the length of CEO tenures continues to fall and an amazing 71% of US CEOs now leave their posts involuntarily.
And there is no better example of a succession strategy than the one EMI Group has put in place at EMI Music Publishing. By promoting Roger Faxon from CFO of EMI Group to COO of EMI Music Publishing, the group has secured itself not only a future CEO but a future chairman as well (see box opposite). Faxon became COO in January 2005. In April 2006, he will become joint CEO of EMI Music Publishing, in April 2007 sole CEO and in March 2008, chairman. EMI Group chairman Eric Nicoli explains.
"I was looking at the long-term strategy for EMI Group. I always start with management on the basis that if you don't get that right no amount of financial resource or clever strategy will make a difference.
"In the EMI Music Publishing group, I didn't have an urgent problem at all. If you look at its track record in terms of revenues and their profits, it is impossible to tell that the recorded music market – from which it derives about 50 % of its revenue – has had any kind of problem at all, even though over the past five years it has declined by 25%.
"If you have the luxury to put succession in place when you are winning it is much better than waiting until you have a problem. Most companies will change senior management when they have a problem. I take the opposite view. Address it when you are winning and have a smooth and relatively long succession plan.
"Roger [Faxon] came in a little over three years ago to be my group CFO. He had been the CFO of Music Publishing and prior to that he had been head of strategy for the group. He was ideally equipped to be my CFO at a time when I was turning the recorded music division upside down. His grasp of financial and strategic principles was really important as a senior partner for me in the corporate management team and he did a brilliant job.
"When Roger took on the Group CFO role just over three years ago, I had in mind that he would return to his native New York at some point and probably play a leading role in EMI Music Publishing. So, from a position of strength we were able to bring in Martin Stewart from BSkyB to succeed Roger and move him back to New York.
"Marty [Bandier, CEO of EMI Music] has huge respect for Roger's skillset and his strategic inclination is and will be important for music publishing as the world of music changes out of recognition. The fact that our shareholders know Roger well and rate him and trust him was also very important as they see the Music Publishing group as a resilient and dependable part of our business."
Roger Faxon, COO EMI Music Publishing In January 2005 Roger Faxon was appointed COO of US-based EMI Music Publishing. Previously CFO of London-based EMI Group, this is the first of three succession steps that will see him progress from COO to CEO to chairman.
With a lifetime spent in the entertainment business in a variety of guises – he joined EMI in 1994 but has held positions at Lucasfilm, Columbia Pictures and been a founding partner in motion picture and TV company Mount Company – he isn't, he says, your traditional CFO. Is this why he was approached to become part of EMI Music Publishing's ambitious succession strategy?
"When I came out of college I was more interested in public affairs and I spent 10 years doing that. It was serendipitous that I got in to the entertainment industry and I got in at the top. I was working in government as chief of the staff of a subcommittee in the US House of Representatives when a friend asked me during a break in the legislative session to help her out on a project she was doing for George Lucas. It was a pretty exciting time at Lucasfilm. George was generating new film ideas, gathering around him the most talented special effects technicians, researching the possibilities of digital effects and digital sound and building a creative centre for film makers. The creative energy was astounding. What it missed was the business discipline necessary to effectively harness that energy. I was lucky enough to be in the right place when George asked the question about who could help him instil a little of that discipline into his business.
"I have an affinity for the creative industry and a real appreciation of the people who make their living from providing