By Nina Trentmann
Tackling operational issues such as procurement and corporate
strategy likely helped Merck & Co. Chief Financial Officer
Robert Davis acquire the skills needed for his promotion to the top
spot.
The pharmaceuticals company Thursday named Mr. Davis, who has
served as its CFO since 2014, as chief executive, effective July 1.
Merck's current CEO, Kenneth Frazier, plans to retire after about
10 years in the role.
Mr. Davis, 54 years old, joins a relatively small group of CFOs
who have ascended to the top spot. In 2020, about 6.6% of sitting
CEOs at companies in the S&P 500 and Fortune 500 came from the
finance chief position, in line with previous years, according to
the Crist|Kolder Volatility Report that tracks executive moves.
Finance chiefs with ambitions for the CEO role need to
demonstrate their experience managing issues beyond their company's
balance sheet, said Peter Crist, chairman of Crist|Kolder
Associates. "When you are expanding the remit of the CFO, you can
see how the person performs with additional tasks," Mr. Crist
said.
Mr. Davis, who has a law degree and a master's degree in
business administration, finance and marketing, rose through the
finance ranks at Eli Lilly & Co. and Baxter International Inc.,
where he became CFO in 2006. In 2010, Mr. Davis was hired as
president of Baxter's medical products business, enabling him to
pick up more management experience outside of finance.
He joined Merck as CFO in 2014, and in 2016 took on the task of
managing the company's global support functions. Those include
corporate business development and strategy, investor relations,
information technology, procurement and real-estate operations,
Merck said.
"Business development and strategy are the pieces that are
really important to develop a forward-looking view," said Dale
Rose, president at 3D Group, a consulting firm.
Responsibility for corporate strategy often also includes
mergers and acquisitions, which will be crucial for Merck in the
coming years, analysts said. Patent protection for cancer
immunotherapy drug Keytruda, one of its main revenue drivers, will
expire at the end of 2028, which could force the company to do some
large-scale M&A, said Damien Conover, an analyst at Morningstar
Research Services LLC.
"In an acquisitive company, a CFO who has been promoted to CEO
can drive the M&A process with inside knowledge of the
organization," said Hugh Shields, co-founder and principal at
Shields Meneley Partners, a consulting firm.
Other companies in recent years also have handed their CFOs more
tasks before elevating them to the top. Howard Hughes Corp., a
Woodlands, Texas-based real-estate development company, gave
then-CFO David O'Reilly the additional position of president in
June. He became interim CEO in September and was named permanent
CEO in December.
JPMorgan & Chase Co. in 2019 drafted then-CFO Marianne Lake
to lead the bank's consumer lending business. Ms. Lake, one of
several executives viewed as potential successors to CEO James
Dimon, needed experience running a business line to be a contender
for the top office, analysts said at the time.
Working closely with Merck's Mr. Frazier during his time as CFO
likely provided Mr. Davis with insight on his attitude on
leadership and his strategy. "The CFO often has unparalleled access
to the CEO's thinking, and the two spend a great deal of time
discussing options for the business," said Keith Goudy, a managing
partner at Vantage Leadership Consulting. "This can give the CFO a
leg up."
CFOs who become CEOs often have to adapt quickly and add certain
skills to their toolbox -- for example, relationship building.
"CEOs are responsible for identifying the relationships that they
and the business need to be successful, yet this is often not an
explicit part of the development of the CFO," Mr. Goudy said.
CFOs who are being promoted to the top role can face a number of
other challenges and pitfalls, advisers and recruiters said.
Intel Corp. CEO Bob Swan, formerly the company's finance chief,
was ousted last month after about two years in the role after the
company in 2020 ceded the title as the U.S.'s most valuable
semiconductor company to rival Nvidia Corp. and came under pressure
from an activist investor.
"You are promoting someone who has never done this job before,"
said Mr. Rose. "It is a high risk, high stakes move."
Kristin Broughton contributed to this article.
Write to Nina Trentmann at Nina.Trentmann@wsj.com
(END) Dow Jones Newswires
February 05, 2021 05:44 ET (10:44 GMT)
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