With the labor market continuing to limp its way into the new year, economic issues are exacerbating a bigger issue in the C-suite. Adding inflation, pandemic recovery, and supply chain issues to the equation, turnover in the CFO space is at a new high.
Recent findings by Datarails highlight that nearly a quarter of CFOs (21%) left their jobs in 2021. With some projections saying a third of all employees plan to leave their jobs in 2023, CFOs aren’t leading the way in departures for all roles, but may be leading the way in turnover when it comes to the executive board.
“The overall labor market is a symptom of the economic malaise,” Jonathan Marciano, director of communications for Datarails and spokesperson for the survey, told CFO. “The feet of CFOs are increasingly being held to the fire, particularly if guidance is missed.”
CFO Job Security at its Lowest
Among their executive colleagues, CFOs are sticking around for significantly less time, Datarails found. According to the survey, the average tenure for a CFO was just over three and a half years (3.51), a rate significantly lower than other executives. While chief technology officers and chief marketing officers had average tenures of well over four and a half years, it was only the CEO whose average tenure came close to the CFO, at 3.89 years.
According to Marciano, there is an extensive list of factors. While he named needed skill sets in operations, leadership presence, powerful understanding of data, long-term vision, global outlook, and investor relations, Marciano made it clear that the role of the CFO is broad and exponentially changing, which limits the labor pool of potential candidates.
“With such an all-encompassing list — particularly in an economic downturn when challenges are greater, the pool of CFOs seems smaller and smaller," he said. In addition, "many CEOs and boards are increasingly interested in hiring seasoned CFOs which makes the pool of CFOs even smaller still."
The tenure problem is just not just limited to companies who need a good CFO to get them off the ground. Datarails found that 52 U.S.-based companies have had up to four CFOs since 2017 — including big name consumer based-groups like Papa John's, Starbucks, Tesla, Under Armour, Shack Shack, United Airlines, and Procter & Gamble. Ford Motor and Phillip Morris were just some of the large-scale companies that have seen a revolving door of CFOs for the past several years.
Tenure and Compensation by Industry
Despite the trendiness of departure being non-industry focused, the amount of CFO salary and compensation was strongly dependent on the respective industry. Leading the way in both compensation and tenure was the cable and television industry. CFO tenure, according to findings, is around an average of three and a half years at an average salary of $8.3 million.
In what the survey calls a “plum job,” CFOs in the cable and television industry work in a legacy marketplace with not very much competition. In compensation packages that saw wages make up only 12% of their earnings, CFO equity pay in this space is significant. According to Datarails, in 2021 Comcast's CFO Michael J. Cavanagh earned $18.7 million, Michael J. Grau of cable provider Altice USA earned $10.3 million, and Christopher Winfrey (now COO) of cable operator Charter Communications earned $8.8 million.
“The average CFO's pay, involving salary, bonuses, stock awards, and options rose from $2.4 million in 2016 to $3.5 million in 2021 — a 40% increase over the five-year period,” Marciano said when asked about how CFOs should assess their compensation. According to him, it’s important for CFOs to know the compensation of their fellow financial officers, as total compensation is less about the dollars and more about the equity.
“CFO stock awards jumped to 63% of overall compensation in 2021, [and] overall pay continues to shift towards stock awards and away from salary, bonuses, and stock options,” said Marciano. “The percentage of total pay that came from stock awards in 2021 jumped to 63%, up 10% from the 2016 value of 53%.”
The lowest areas in both tenures were railroads and advertising, holding the bottom spot with an average of just two and half years in position for their financial executives for each industry. In compensation, financial executives in education saw the lowest average salary, with CFOs in that space earning an average of $1.1 million in 2021.
Preparing for the Future
For CFOs who may be beyond the average tenure or below the average salary, all hope is not lost, according to Marciano. The long-term projection for CFOs is fairly positive, as the emergence of new skill sets, technology, and industries has begun to make a major impact on how finance operates within organizations of all sizes and industries.
According to the Datarails' communication director, the long-term future of the CFO is related to how successfully they outline their long-term vision for their company.
“We hear from CFOs that there is a need to win the hearts and minds of others, both internally and externally more than ever before,” he said. “They must be able to articulate their vision whether by communicating change internally or on conference calls, and display passion about where the company is going.”