CFO Turnover Dips, Reversing Three-Year Trend

Improved corporate performance and evolving compensation trends may be contributing to the about-face.
David McCannAugust 27, 2014
CFO Turnover Dips, Reversing Three-Year Trend

The twice-yearly “volatility report” from executive recruiting firm Crist | Kolder Associates is a highlight for observers of CFO meanderings, and the newest edition once again fails to disappoint.

14Aug_CFOsMoveThe biggest news, if you will, is that CFO turnover at large companies has bent downward this year through July, after three straight years of increasingly frenetic musical chairs (see chart). The data, as presented, includes projections for the rest of the year based on historical and current trends. Still, Tom Kolder, president of the recruiter, says he wouldn’t be surprised if there were a solid or even “dramatic” uptick in CFO turnover over the next few months.

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The research, which also covers the movement of chief executive officers and chief operating officers, included the 669 companies presently residing in either the Fortune 500 or the S&P 500. (Five of the companies don’t currently have a CFO.)

CEO turnover has also dropped sharply this year. If the trend is not merely a brief aberration but, rather, actually reflects today’s market for executive jobs, the relatively stable recent performance by a majority of U.S. companies may offer a partial explanation, Kolder suggests. “Companies are growing and performing, and the stock market is going up, so fewer people are getting tossed out on their ear,” he says. Historically, however, there has tended to be an inverse relationship between executive turnover and corporate performance.

An evolution in the way top executives get paid may also account for some of the slowed turnover. “With the advent of restricted shares as a predominant currency for long-term incentive compensation, CEOs and CFOs are sitting on significant dollars they’re not willing to walk away from and companies aren’t willing to buy out,” Kolder says.

Here are some other nuggets from the Crist | Kolder Volatility Report 2014:

Bank on it: For the first time since Crist | Kolder began tracking executive data in 1995, more than 10% of CFOs (69 out of 664) have investment banking backgrounds. “It shows how acquisitive corporations are these days,” notes Kolder. “Deal-making skills are really being put at the top of the priority list in virtually all CFO searches we’re doing.”

Where art thou, bean counters? Only 30% of sitting finance chiefs have public accounting backgrounds. “It is extremely rare for us to have a client that demands a CFO have a CPA, let alone experience at one of the Big Four,” Kolder says.

Inside job: There’s been a sharp falloff this year in the percentage of CFOs recruited from outside the company, to 31.8%, compared with 42.7% last year.

This is the operator, may I help you? The industrial sector leads in the proportion of existing CEOs with CFO experience, at 24.4%. In that sector, there is a heavy orientation toward having operating experience in the CFO role. “With that comes a much broader mindset and orientation, and an ability to transition to the CEO chair,” says Kolder. Next is services (17.1%) and financial (14.6%). The sectors least likely to have such a chief executive are health care (4.9%) and consumer goods (7.3%).

Spreading the wealth: The number of women CFOs in the Fortune 500 and S&P 500 has reached 76, five more than last year and more than double the 2004 count of 37. The total number of Asian/Indian, African-American and Hispanic/Latino CFOs in the group is now 31, compared with just 19 ten years ago.

Breeding grounds: Concerning where finance chiefs received undergraduate degrees, the most-represented school is the University of Illinois, Champaign-Urbana, with 19 graduates who are now heading finance at a Fortune 500 or S&P 500 company. Next are the University of Indiana (13), University of Notre Dame (12), Pennsylvania University (11) and Stanford University (10).

Among major collegiate football conferences, the Big 10 schools have contributed 74 CFOs to the large companies, dwarfing the runner-up Atlantic Coast Conference (46). Forty-four of them received their undergraduate degrees outside the United States. And among the 341 CFOs who’ve earned MBA degrees, 34 of them did so at the University of Chicago and 28 at Harvard University.

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