The pattern has become all too familiar. A company issues a statement, announcing it is a) restating earnings, b) laying off a whole lot of workers, or c) fighting a shareholder lawsuit. In a few days, another release comes out — this one noting that the company CFO is departing. Usually, the company’s management asserts that the finance chief is leaving “to pursue other interests.”
Coincidence? Maybe. The fact is, finance chiefs do leave jobs to do other things. In the past year alone, a number of CFOs have resigned good positions to spend more time with their families, go back to school, or switch sectors. Long-time energy industry finance executive Edward Moneypenny, for instance, quit his job at Covanta Energy because an opportunity arose in a different sector (at retailer 7-Eleven).
But when the departure of a finance chief comes directly on the heels of bad company news, “pursuing other interests” often means “looking for work.” And a whole lot of CFOs seem to be looking for work these days. Although numbers are hard to come by, it appears that finance chiefs are resigning — or being dumped — at a brisk clip.
Admittedly, blame for the recent batch of accounting scandals has been widely spread among senior management types — not to mention outside auditors. And in a number of these cases, CFOs ought to shoulder a great deal of the responsibility. In the Enron fiasco, for example, CFO Andrew Fastow managed the off-balance-sheet investment vehicles that ultimately brought the company down.
But the recent rash of CFO exits has some observers wondering if there’s a larger trend here. The question some privately ask: are finance chiefs the scapegoats of a busted economy? Notes Stephen Wasko, CFO of Perceptual Robotics in Evanston, Illinois, reporters like “to put a face on some aspect of a story.” These days, the face most often put on the story of corporate ineptitude — or worse, malfeasance — appears to be that of the CFO.
Decoder Ring Needed
Spotting this trend is easy. Getting corporate executives to talk about it is not. The reality is, few management teams are willing to flat-out state that there’s a link between poor corporate performance and the departure of a CFO.
Take the case of pharmaceuticals giant Bristol-Myers Squibb. The company suffered a disastrous first quarter, with earnings plummeting 56 percent from what they’d been a year earlier. In the wake of the Q1 results, CEO Peter Dolan announced in April that CFO Frederick Schiff was leaving the company. In explaining the move, Dolan stated that he had previously “begun working on CFO succession” as part of the company’s plan to improve its performance.
That’s about as close as you’ll get to a company pillorying a finance chief for bad numbers. And even here, Dolan never specifically fingered Schiff for the company’s troubles. In fact, in the very next sentence in the press statement, Dolan noted that Schiff was leaving Bristol-Myers Squibb to — surprise — pursue other interests. (CFO.com tried to contact Bristol-Myers Squibb about this story, but did not get a response.)