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Under Armour announced on Tuesday that it was bringing on a new CEO and it’s no surprise that the sportswear maker didn’t pick a finance chief. The percentage of CFOs tapped to fill the top spot at the country’s largest companies has barely budged since 2012, according to a study by executive talent firm Crist|Kolder.
CFO promotions have remained nearly static, according to the annual report, even as the CFO role has grown in importance, involving more strategic and technological duties, in the wake of the Great Recession and the digitization of the workplace.
According to the survey of 675 companies among the Fortune 500 and S&P 500, only 6.9% of sitting CEOs were drawn from the CFO ranks in 2018, a small uptick from the 5.6% in 2012.
“There are some biases against financial people,” says Jack McCullough, president of the CFO Leadership Council, a professional organization for finance chiefs. “People still have visions of CFOs as only accountants.”
The Baltimore-based Under Armour announced that when CEO and founder Kevin Plank steps down, at the end of the year, Chief Operating Officer Patrik Frisk will take over as chief. Plank, who has served as chairman and CEO since launching the company in 1996, will remain as executive chairman and brand chief. “Patrik is the right person to serve as Under Armour’s next CEO,” Plank says in a statement. “As my partner during the most transformative chapter in our history, he has been exceptional in his ability to translate our brand’s vision into world-class execution.” An Under Armour spokeswoman declined further comment on the succession plan. Shares of the company rose 6.11% to $19.28 in late afternoon trading Tuesday.
According to Crist|Kolder data, nearly 50% of CEOs come from either the COO role – like Under Armour’s Frisk – or a divisional presidency. CFOs certainly possess the skills to assume the top spot, said David Garfield, head of the North America business unit and consumer products practice at consulting firm AlixPartners. But “a lot of businesses place a premium on line-operating experience,” he said. “I personally don’t think that makes one executive better than another.
Notable appointments of CFOs to serve as CEOs include Sarah Friar, the former long-time finance chief of San Francisco-based payments processor Square, who last year became CEO of social media platform Nextdoor. There should be more such appointments, says McCullough. Beside the perceived lack of operational experience, CFOs can also be seen as missing customer-facing skills, he said. “Thirty years ago if a CFO became a CEO that was a bad sign. It meant that the company’s finances were in distress,” he said. “There has been an evolution, and CFOs now blend financial expertise and strategic thinking.”
Still, perceptions of CFOs may need to change further before many get to lead companies. “There’s certainly no reason more CFOs shouldn’t be picked to be CEOs,” McCullough says. “They have the skills.”