By Nina Trentmann

Eaton Corp. PLC's finance chief Richard Fearon has managed 71 acquisitions and 50 sales since he began his tenure in April 2002, reshaping the portfolio of a business that was once known for making vehicle parts. Eaton, which operates out of Beachwood, Ohio, has expanded to become a power-management company that also manufactures products such as industrial clutches, motors and fuel pumps for a range of industries.

Mr. Fearon, who will retire in March, talks to CFO Journal about the changing role of the chief financial officer, the pandemic and why cash remains king. Edited excerpts follow.

CFO Journal: Eaton earlier this month announced you will be leaving. Why now?

Mr. Fearon: Maybe it's antiquated. But our policy for over 50 years has been that our senior officers have to retire the month they turn 65. I am turning 65, March 13, and so I retire March 31. I have known this, and the date, for a long time -- a decade at least -- and so you plan around it.

CFO Journal: When you retire, you will be 15 days shy of 19 years as Eaton's CFO.

Mr. Fearon: I think many people wouldn't want to do a job like [this] for 19 years, but I've enjoyed it. The company has changed dramatically. When I joined, it had a [market capitalization] of around $5 billion, and today, our market cap is around $46 billion. It's been like working for many companies, given how we've changed the company over the last 19 years.

CFO Journal: How did you change the company?

Mr. Fearon: I came into this job with a deep understanding of corporate strategy and corporate change. Eaton was largely a vehicle-component manufacturer, mainly North America-focused. It became clear to me and our chairman at the time that wasn't going to generate the kinds of returns to our shareholders. And so we set about [it] in a very systematic way. You've got to be disciplined and thoughtful about doing acquisitions, and we needed to do a lot of [them] to change.

CFO Journal: How did you approach these acquisitions?

Mr. Fearon: For every acquisition that you complete, you probably start on four or five. And so we've really worked on 250 to 300 acquisitions over this time period and completed 71. At the same time, we've sold 50 businesses. It's not something that you do by sitting on your hands. You really got to be out in the marketplace talking with competitors. A lot of things can go wrong.

CFO Journal: And striking a deal is only half the battle.

Mr. Fearon: Whenever you buy a company, you've got to integrate it thoroughly. Our philosophy has been [to] have a monthly meeting, myself and the chairman, and [get] updated on what remains to be done. It's a game of details, in addition to a game of strategy, understanding what to buy. You've got to keep your discipline up, month after month after month, for a period of years.

CFO Journal: Many companies these days agree to transactions remotely. What are your experiences with this?

Mr. Fearon: We have found the process pretty effective. [But] you can't be 100% remote. On some of these acquisitions, we are having selective in-person meetings. For some of the integrations [it's the] same thing, but for the most part, you can do 90% to 95% remotely. What you can't do quite as well in this environment is what I would call blockbuster deals because they require an awful lot of human connection and trust.

CFO Journal: You said knowing your retirement date would help with planning. What are the things you need to finish before you leave?

Mr. Fearon: For the last 11 months, what I've been focused on are five things, and I think those areas of focus will continue through March 31, when I depart the scene. One is making sure that we manage the pandemic as effectively as possible. Topic two is making sure you generate a lot of cash. I always say the number one job of a CFO is to make sure you have enough cash to run your business. If you don't have enough cash, you failed in your job as a CFO.

Third is making sure that for the declines in revenue in a downturn, you reduce the loss in profits as much as possible. Fourth has been to make sure that we've got a successor for me [Eaton hired Thomas Okray, currently the CFO of W.W. Grainger Inc., an industrial supplier.] The fifth thing is [tee up] a bunch of acquisitions. Our pipeline is as full as it's been in quite some time.

CFO Journal: Do you think you will strike another deal before you leave?

Mr. Fearon: As a betting man, having done this my whole life, I think we'll get some of these done. I don't know the exact timing. That's the one thing you never know.

CFO Journal: What has changed during your tenure, in terms of the role of the CFO? An accounting degree, for instance, is no longer a requirement.

Mr. Fearon: An effective CFO needs to have a strategic mindset to help drive the business. In a lot of companies, CFOs are effectively a combination of a CFO and a CEO. They straddle those two responsibilities. I don't see many companies that are comfortable with a CFO that's more of an auditor or an accountant.

CFO Journal: Do you think the job of CFO got harder during the pandemic?

Mr. Fearon: There are issues every week that I have to deal with, operating issues, not so much finance issues. I think that is the job of a CFO now. That's why the job has become hard. You end up working pretty long hours, and there's a fair amount of stress to them. And then you add the Zoom environment, which is just less satisfying. I wouldn't call it this, but some might think it's become a bit of a grind. And so I think that's why you're seeing many CFOs step out.

Write to Nina Trentmann at Nina.Trentmann@wsj.com

(END) Dow Jones Newswires

12-18-20 0544ET