The rate of CFO turnover at large companies continued at a brisk pace in the third quarter, with 37 new openings in the Fortune 1000, according to a Heidrick & Struggles update.
That was a noticeable slowdown from the first half of the year, when 106 positions became available, but the job market for finance chiefs is typically less volatile in the third quarter, with many books being closed in July and vacations taken in August. The recruiting firm observed a similar result in last year.
In fact, 2008 is looking a lot like 2007, with 143 CFO slots having opened through the first nine months of this year, compared to 148 last year. Overall, since the beginning of 2007, 323 Fortune 1000 companies have named a new CFO — almost one-third.
Michele Heid, co-managing partner of the finance practice at Heidrick & Struggles, said she has been surprised that the turnover rate hasn’t moderated this year. “There were a lot of logical explanations for the churn being so robust in 2007, with all the activity in private equity, so many restatements, the stock-option backdating scandals,” she said.
Further, she said, in an overall economic downturn such as in progress this year, companies tend to be in cutback mode and usually are less likely to bring in new people from outside the company. That, apparently, has not been the case in 2008. Through the first three quarters, 63 people were promoted internally to CFO, a negligible change from 60 last year.
Heid said it will be interesting to see the fourth-quarter statistics, with several factors in play that could slow down the turnover mill.
For one, while year-end is when retirements usually take effect, she expects some CFOs to defer retirement because of recent heavy losses in the value of their stock holdings and options. Also, she said, with the extreme economic squeeze seen in the past couple of weeks, some companies are adopting a wait-and-see attitude before moving on new hires. And with the housing market so depressed, many executives are not interested in relocating.
“You wouldn’t see an impact from the market [meltdown] in the third quarter,” Heid said. “If there is one, we’ll see it in the fourth quarter.”
Some companies may be looking for specific qualities in new finance chiefs, she suggested. Those skilled in restructurings, turnarounds, and cost-cutting likely will be in high demand. Such needs also might indicate a forthcoming upswing in the average tenure of CFOs. “You don’t turn a company around overnight,” Heid said. “My guess is that companies will put incentives in place to get people to complete the task.”