CEO, CFO Make Clean Break of It – In Public

A shuffle of finance chiefs at Reckitt Benckiser shows the importance of chemistry.
Andrew SawersSeptember 25, 2012

Usually when a chief executive officer decides to part company with his CFO, the public pronouncements are couched in the sort of diplomatic language that makes the two parties look like founding members of a mutual admiration society. And usually, few are convinced by the press releases that talk of “leaving to pursue other interests.”

In the case of Reckitt Benckiser (RB), a U.K.-based multinational focused on health, home, and personal-care products, not only is the language a little more interesting than the normal blandishments, the announcement of the departure of CFO Liz Doherty comes  less than two years after she joined the company. More tellingly, though, it’s just twelve months since the ascension of the CEO, Rakesh Kapoor.

After the CEO’s polite thanks for the “excellent support” from Doherty who is “stepping down,”  Kapoor said in the press release: “However, Liz and I have agreed that RB’s and her way of working are not as well matched as either of us would like, and now is the right time for her to move to a new opportunity.” At the same time, Kapoor announced that she is to be replaced by Adrian Hennah, the finance chief at Smith & Nephew, a smaller rival firm.

How Startup CFO Grew Food Company 50% YoY

How Startup CFO Grew Food Company 50% YoY

This case study of JonnyPops’ success highlights the unusual financial and operational strategies that enabled rapid expansion into a crowded and highly competitive frozen treat market. 

Indeed, the pressure for quick results can push a new CEO to get rid of an incumbent finance. But while the bluntness of the language employed may be somewhat wince-inducing, the alternative view is that this is just an honest, straight-forward explanation that clears the air and doesn’t allow for ill-informed gossip to take root. Quite simply, Doherty and Kapoor don’t appear to have been as “well matched” as either might have hoped for.

A person familiar with the situation (who spoke on condition of anonymity) said of the forthright language used in the press statement: “This could well be the right way to deal with it. If you can both be clear about [the reasons for leaving] it stops rumors and speculation. The statement shouldn’t be seen as a negative one about her abilities as a CFO – it says more about the fact that personal relationships do matter.”

This person explains that, while some press commentary hinted that Doherty wasn’t winning over the investor community, “I think the analysts picked up on the lack of chemistry between the CEO and CFO. If you’re a co-pilot, if you’re a business partner, then it’s got to work. You’ve got to be able to shoot the breeze with your CEO because you spend a lot of time on the road together. If you’re presenting on road shows, that chemistry has to be right. The alchemy that’s produced has got to be productive.”

Doherty joined Reckitt Benckiser in January 2011, formally taking up the reins as CFO a month later. Her pay last year (over 11 months) included £375,000 ($607,000) in salary plus an additional £377,000 ($610,000) in bonuses and £109,000 ($176,000) in other benefits.

Her finance career includes 22 years with Unilever, seven years as group international finance director at Tesco, then two years as CFO at Brambles in Australia. At Reckitts, she succeeded Colin Day who, with then-CEO Bart Becht, had formed an impressive double-act for about ten years. But while her style is said to be quite different from that of Day’s much more hands-on approach, that may well have suited Becht. It appears to have worked less well with Becht’s own successor, Kapoor, who rose through the ranks in a 25-year career at RB.

Kapoor’s new recruit, Hennah, has been CFO at Smith & Nephew for six years, giving him global experience in the healthcare industry that, RB says, will be particularly valuable as the company looks to expand in emerging markets. Hennah also spent some 18 years with GlaxoSmithKline. As some outsiders note, however, just as important is the fact that he appears to be a good cultural fit for his new employer. Last year Smith & Nephew paid Hennah £568,000 ($919,000) in salary, a bonus of £549,000 ($889,000) and £191,000 ($309,000) in pension-related and other benefits.

“You have to assume that your performance is always under scrutiny and that boards should always have a succession a plan,” says the person familiar with the situation at RB. “Then if they can opportunistically hire someone who they think is going to deliver better value or fit better, of course they’re going to put them in.”

As if to prove that this isn’t an acrimonious split, Reckitt’s statement says that Hennah will join the company at the end of December this year, and that Doherty will remain until March 2013 so as to ensure that the year-end period runs smoothly. During that period of overlap, however, CEO Kapoor seems much more likely to go knocking on the door of his expensive new recruit.

Andrew Sawers is editor of CFO European Briefing, a CFO online publication.