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Assignment Questions

CFO to CEO

From CFO to CEO

Due to the increasingly complex nature of corporate finance, more and more corporations are tapping their chief financial officer to become their chief executive officer. The CFO brings substantial financial expertise to the position of CEO. However, there may be other reasons why the CFO is not necessarily the best person to become the CEO.

Read the two articles below, and then write a four-page paper answering the following question:

Do you think finance departments are the best place to train future CEOs?

Include a discussion of both the pros and cons of hiring a CFO to be CEO. Try to cite at least three articles in your paper in support of your arguments in favor of and against hiring a CFO to be a CEO
Please read the articles below:

How a CFO can graduate to CEO
Corporate Finance; London; Jun 1999; Janine Brewis;

Abstract:
Positions of power within corporates are highly sought after, and today’s chief financial officers and finance directors are increasingly becoming aware that they now have a realistic opportunity of becoming CEO. Part of the reason for the trend towards recruiting CFOs who can behave as strategic partners is that the investor community looks much more critically at the business performance and management strengths and weaknesses of corporates. This strategic positioning gives them an opportunity to buff up their image, and make themselves seen as a more credible candidate to take over the CEO role.

Do CFOs Really Make Good CEOs
Institutional Investor; New York; Aug 1989; Picker, Ida;

Abstract:
With the proliferation of corporate takeovers, leveraged buyouts, and restructuring in the US, it would seem that chief financial officers (CFO) hold the keys to executive wisdom. Recruiters report a growing trend of grooming CFOs for chief executive officer (CEO) positions, with some estimating that nearly 25% of top corporate leaders are former CFOs. Analysts, academics, and headhunters agree that the ideal CEO communicates well, is adept at managing managers, understands the company’s product and operations, and provides a consistent vision. A recent survey by Management Practices Quarterly reveals that, of 83 new CEOs appointed in 1988, more than 18% came from operations-production backgrounds, some 23% had technical training, while only 14.4% had a financial background. D. Wayne Calloway, who became CEO of PepsiCo in May 1986, was formerly the company’s CFO and is probably the best example of the valuable experience CFOs can bring to the CEO position.

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