At some companies, the CFO position is becoming a temp job. In recent years, while struggling to turn around their businesses, Delta Air Lines and advertising giant Interpublic Group have each churned through multiple finance chiefs. In July, Interpublic hired Frank Mergenthaler, its fourth CFO in three years. His predecessor, Robert Thompson, left after only a year. At Delta, Michael Palumbo split “to pursue other opportunities” after just 14 months.
Short tenure in the finance department is common at troubled companies, with HealthSouth’s five CFOs in six years serving as perhaps the most notorious example. Ford Motor Co. cycled through four finance chiefs from 2000 to 2003, and American Airlines employed three different CFOs during the same period. But are these companies hurting their chances for success by rearranging the executive suite so often?
Although constant turnover seems like a recipe for failure, Scott Simmons, vice president of Crist Associates, a Chicago-based executive recruiting firm, says it can be necessary. “When a company figures out that a particular CFO isn’t the best person for the job, often the right decision is to make a change,” says Simmons.
“Six months is an awfully short period of time to do justice to the role,” says Crist president Tom Kolder. “But what can happen in that time is you can have a very definitive reaction to the chemistry among the senior leadership team.” CFOs may also head for the exit if they uncover any nasty surprises, he says, and such difficult turnarounds can be thankless jobs that drive CFOs out the door.
But whether voluntary or forced, sudden moves are usually unwelcome on Wall Street. In an April research note, Prudential Equity Group analyst Steven Barlow called for calm at Interpublic. “Despite the commendable efforts to build a new management team, we believe the notion of management stability must be restored in investors’ minds,” he wrote. Then, upon the latest CFO’s exit in June, he added, “Mr. Thompson’s seemingly hasty departure does not bolster our confidence.” — Kate O’Sullivan
It’s About Time
Accounting has been a struggle at the Department of Homeland Security (DHS) since its inception in 2003. It has yet to produce audited financial statements, and its mismanagement of large contracts at the Transportation Security Administration has been well documented. Budgetary problems at the Bureau of Immigration and Customs Enforcement were so bad that, according to a statement from former DHS inspector general Clark Kent Ervin, agents didn’t have enough money to fill their cars with gas or use their cell phones.
In July, Rep. Todd Platts (R-Pa.), chairman of the Subcommittee on Government Management, Finance, and Accountability, called DHS Secretary Michael Chertoff and CFO Andrew Maner, among others, to testify before Congress on the continuing problems. “I am especially aware of the importance of sound financial management, and I am responsible for improving financial management by taking effective action to address our shortcomings,” the CFO stated.
Now, Maner will be even more responsible. After Platts noted that the CFO Act requires the finance chief to report directly to the secretary, Maner was promoted to report to Chertoff. He had previously reported to the undersecretary for management. — Joseph McCafferty