For those looking for a new CFO gig, there’s bad news and there’s good news.
On the bad-news front, CFO turnover, as measured by the pace of hires, is set to hit its lowest level since 1995, according to a new report by executive-search firm Crist Kolder Associates. Just over 12% of the 668 large companies the study tracks are likely to make a new hire by the end of the year, compared with 14.5% in 2009 and nearly 20% in each of the two years before that.
The good news? The CFO market may finally be picking up. “This summer has been busier than any I’ve seen in my years in the business,” says Tom Kolder, president of Crist Kolder. Both executives and companies are realizing “they can’t wait forever to make a change,” he says, and an uptick in M&A and private-equity activity is also contributing to CFO churn.
Of course, there’s something to be said for stability, and some finance chiefs have been safer in their position because of the concurrent slowdown in CEO turnover. Crist Kolder data shows that about half of new, externally hired CEOs replace their CFO within three years of joining a company, most within the first year.
Finance chiefs may have good reason to hope for more CEO turnover, however, as they become more viable CEO candidates. While few go straight from the CFO role into the top spot, the Crist Kolder report finds that the percentage of new CEOs who have prior experience as a corporate CFO has been rising in the past four years, to about 25% this year. “It’s not often, if ever, that we get a client saying, ‘We’ve got to have a CEO who has been a CFO,’” says Kolder. “It’s more the reality that CFOs are better prepared than ever for taking the role [of CEO].”
CFOs are better prepared in part because they are taking on responsibilities that used to belong to the chief operating officer, a job that many companies are phasing out. At this point, in fact, the COO role is more commonly seen “as a succession tool” or a bridge to the CEO spot rather than as a permanent part of a company’s corporate structure, notes Kolder.
The average large-company CFO these days is 50 years old (versus 55 for CEOs) and male, according to the report. Overall, about 8% of large-company CFOs are female, similar to what CFO’s most recent tally found, but there are much greater concentrations of female CFOs in two industries: financial services and industrial companies.
While female CFOs still make less than male CFOs at companies of every size, the pay gap is closing at smaller companies (under $5 billion in revenue) and larger companies (over $20 billion in revenue), Crist Kolder found. For finance chiefs at companies in the middle ($10 billion to $20 billion in revenue), however, the gender difference remains significant: women make an average of $481,441 versus $607,938 for men.
One surprising finding: of the 19% of large-company CFOs who sit on an outside public board, only 69% also serve on the audit committee. “It speaks to the complexity of the CFO job these days, that some may be unwilling to take on that additional responsibility and liability,” comments Kolder.