Net Net: Promoting innovation and managing change
Net Net: Promoting innovation and managing change

The CEO and CFO of Pepsi open up about when and how they fight

Indra Nooyi
David A. Grogan | CNBC

Running a multinational corporation with annual revenues north of $63 billion and a market cap of more than $153 billion is not easy. Every day presents new choices on which the future of the company could depend.

As a result, the CEO and CFO of Pepsico get into arguments on a pretty regular basis, say Indra Nooyi, the CEO and chairman of Pepsico, and Hugh Johnston, CFO and vice chairman of Pepsico. The pair appeared earlier this week at the Net/Net event at the New York Stock Exchange.

"We argue and fight about lots of issues," says Nooyi. "We shut the door and we debate."

Nooyi was elevated to the CEO role in 2006 after serving as the company's CFO for five years.

She took note of Johnston early in his career and challenged him to see how he would respond. "I saw something in him and I thought, I need to pick up this guy and nurture him because I felt he was going to go places, so I took him out of his comfort zone in field finance and brought him up to corporate, to corporate strategy," says Nooyi.

Johnston always rose to the challenge. "That was what was amazing about Hugh," Nooyi says. "He never shirked from big assignments, always rose to the big assignments."

Hugh and I can finish each other's statements. That is why we are able to have the constructive fights and the constructive dialogues leading to a better outcome.
Indra Nooyi
Pepsico CEO

While Nooyi and her CFO do butt heads, the working relationship is successful because there's a method to the "fighting," one that preserves civility.

"When we come out to the executive committee, we have to show a level of unity. The reason being that it can't be that the CFOs disagreeing with the CEO, then the question is who's running the company. You can't have that kind of confusion," says Nooyi. "It's very important that the CEO and CFO see eye to eye – and we discuss things ahead of time."

While the CEO and CFO may argue about how risky a decision is or how well suited the organization is to make a change, they are always heading in the same direction, says Johnston.

Pepsi's Nooyi: Cannot grow without healthy products

"Part of the reason that good healthy debate works, though, is that we have complete agreement on the strategy of the company," says Johnston. "It is very much about driving performance, but doing that in a sustainable way. And we see that with 100 percent clarity."

Also, at the end of the day, Johnston understands that Nooyi is his boss. "It is very clear. The CEO is the decision maker at the end of that. I make a case. Sometimes you agree, sometimes you don't, but at the end of the day, the organizational structure is very clear and I think that is why it works."

The long-term working partnership and open communication has resulted in a highly functional compatibility.

"Hugh and I can finish each other's statements," says Nooyi. "That is why we are able to have the constructive fights and the constructive dialogues leading to a better outcome."