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CFO Resignations Soared in 2004

Pressured by earnings and compliance demands, finance chiefs at the Fortune 500 quit their companies at a rate 21 percent higher than the previous ...
Lisa YoonApril 5, 2005

How many times have we heard this: the CFO is no longer just a bean counter. The CFO is a business partner and strategist.

Yet just when the job was getting fun, many finance chiefs seem to feel the party’s already over and it’s time to call it a day, thanks to ever-increasing earnings pressure and—you guessed it—the demands of the Sarbanes-Oxley Act.

So suggests a new survey by search firm Russell Reynolds. Indeed, CFO resignations at Fortune 500 companies increased by 21 percent last year in comparison with the rate recorded in 2003, moving up from 18.2 percent to 22.2 percent of companies that changed finance chiefs, according to the study.

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Overall, the CFO turnover rate increased by 23 percent. Specifically, 81 of the responding 491 companies changed CFOs in 2004, while 66 of the 497 companies that responded in 2003 shifted finance chiefs.

Further, controller turnover rose by 25 percent. To be sure, 29 percent of that turnover stemmed from promotions. Still, controllers resigned at a whopping rate of 400 percent more in 2004 than in 2003: 6.8 percent in 2004 compared with 1.7 percent in 2003. (That’s based on the 61.6 percent of companies that explained their controller changes in 2004 and 45 percent of companies that explained controller turnover in 2003.)

Recruiters at Russell Reynolds attribute the higher turnover and resignation rates to increasing pressure to beat quarterly expectations and the drive to comply with Sarbanes-Oxley. “Many CFOs and controllers rise to the occasion; but some decide to opt out of public-company top roles, too,” said Lorraine Hack, a member of the firm’s financial officers practice, in the study’s release.

That’s good news for those in the job market. “Being a financial officer of a publicly-traded company has become more challenging and less attractive [because of] compliance demands, so companies must keep scouting new talent,” said Hack.

Partner Eric Rehmann added in the release that “particularly for controllers, this is their moment to shine. The best and the brightest of this group are in such high demand they’re like top athletes that teams really want to sign.”

Treasurers for their part, stayed put, however. The turnover rate in 2004 was exactly the same—12 percent—as in 2003. Moreover, treasurer resignations were actually down in 2004 by 42 percent. Treasurers might feel less compelled to leave their jobs because they “don’t have direct responsibility for Sarbanes-Oxley compliance or for posting quarterly numbers,” Steve Scroggins, another member of the finance executive practice, told CFO.com.