(FROM THE WALL STREET JOURNAL 3/31/15)
By Joann S. Lublin
Google Inc. directors launched a full-court press to poach Ruth
Porat as chief financial officer, including a multiyear pay package
valued at more than $70 million. The Internet giant said last week
that it had lured her from Morgan Stanley, two weeks after Google's
outgoing CFO announced his retirement.
Once Google's directors agreed they wanted Ms. Porat, they moved
fast because they "had a superior candidate," and "she wanted to
jump," said a person close to the company.
Corporate boards are playing an increasingly pivotal role in
choosing CFOs. Some directors had a heavy hand in recent CFO
choices at McDermott International Inc., Avon Products Inc. and
Newell Rubbermaid Inc. Boards also can help unseat underperforming
finance chiefs.
The trend took off after the Sarbanes-Oxley Act of 2002, which
required CFOs and chief executive officers to sign off on the
accuracy of their company's books. It continued apace after the
financial crisis, which proved the value of having a veteran at the
helm. Recruiters' phones started ringing again after new
regulations that spanned everything from initial public stock sales
to revenue accounting.
The volume of calls from directors to recruiters "was never that
way 10 years ago,"" said Peter Crist, chairman of the search firm
Crist/Kolder Associates. "You will see a continued trend of board
involvement in CFO selection."
Directors also are assuming a stronger role because more finance
chiefs now rise to the top job: 12 of the Fortune 50 CEOs are
former finance chiefs, up from nine in 2010, according to
recruiters Heidrick & Struggles International Inc.
"The environment has gotten more complicated. There's increasing
complexity, not just with regulation, but also with technology,"
said Merilee Raines, chairwoman of the board's audit committee at
Watts Water Technologies Inc. The maker of plumbing and
water-quality devices named Todd Trapp CFO last week. He previously
was a vice president at Honeywell International Inc.
Ms. Raines, a member of two other audit panels, added, "With the
evolution of increased compliance activity and the great recession,
it requires boards to be pretty actively involved, more
operationally than before."
Technology distributor Avnet Inc. epitomizes the power shift. In
assisting CEO Rick Hamada, outside directors William H. Schumann
III and James Lawrence focused on external contenders to replace
Avnet's long-time finance chief in late 2012.
That finance chief didn't view grooming a successor "as a
valuable part of the CFO's role,"" said Mr. Schumann, also Avnet's
chairman. "We don't want to be in that situation again.""
Messrs. Schumann and Lawrence each did hour-long phone
interviews with the two finalists. One was Kevin Moriarty, finance
chief of Honeywell's global aerospace business. "Who is going to
succeed you in your current role?" Mr. Schumann asked.
Mr. Moriarty described his efforts to develop a robust talent
pipeline, which he deemed "critical to ensuring seamless leadership
transitions as needed.""
Occasionally, boards push to replace a CFO. Several years ago,
certain directors of a heavy-industry manufacturer persuaded the
CEO that his finance chief "didn't have quite enough experience or
enough creativity," said Barbara H. Franklin, who served on that
board and has led six audit panels in the past 30 years.
The board's involvement, however, sometimes slows down the
selection process. Consider Victoria Holt, CEO of Proto Labs Inc.,
which makes custom product prototypes and parts. She hesitated to
hire her top pick for finance chief last year because independent
lead director Sven Wehrwein wanted a seasoned public-company CFO,
she says.
Mr. Wehrwein interviewed over 10 external prospects, and
recalled, "I cared deeply about the quality of the candidates."
In the end, Ms. Holt got her way and hired John Way in December.
He had been finance chief of Univita Health Inc., a privately held
company.
Avon directors played an equally broad part this winter
recruiting J. Crew Group Inc.'s James Scully as CFO.
"Jim's hiring was a result of a thorough and thoughtful process
with board participation,"" says a spokeswoman for the
beauty-products concern. During chats with Avon CEO Sheri McCoy,
three key directors outlined pluses and minuses of external
candidates they met. Mr. Scully "was Shari's selection,"" said a
person close to Avon. A board imposing a finance chief on the CEO
"is not the beginning of a beautiful relationship.""
It was a similar story at Newell Rubbermaid. John Stipancich,
general counsel and head of operations in Europe, Middle East and
Africa, was named interim CFO last year.
The audit committee's present and past chairmen, plus a finance
panel member, revamped the job description and interviewed three
finalists, says Paula S. Larson, Newell Rubbermaid's chief human
resources officer.
The directors wanted a CFO with experience in mergers and
acquisitions to match corporate strategy. Mr. Stipancich had that
in spades. He had been involved in more than 30 deals, including 15
with Newell Rubbermaid.
In February, he officially got the job.
---
Kimberly S. Johnson contributed to this article.
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