Also vying for the CFOs time are new investor classes — such as hedge funds — as well as bond analysts and other stakeholders with long-term interests in a company. In the wake of a record number of credit rating downgrades and bond defaults over the last few years, bond analysts are especially interested in hearing directly from the CFO about a company’s financial fundamentals and attendant health.
“The CFO is more active than he or she was five years ago,” asserts Langhoff, and to handle the heavier workload, he says CFOs have been relying on “super controllers.” These caped accountants, sometimes called the chief accounting officer, oversee the corporate accounting and financial reporting functions, so that a CFO can focus on more strategic or operational duties, such as mergers and acquisitions, capital raising and deployment, treasury management, and sometimes information technology, human resources, and supply chain issues.
Increasingly, CFOs bring their controllers with them when they change jobs, says Langhoff. If not, they are actively searching for an executive to step into the super controller role to help share the CFO burden. Indeed, hiring a super controller may be one way to retain a current CFO, or attract a new one.
Even though the CFO position remains a coveted post, retention may be a bigger issue that expected going forward. Indeed, turnover at the CFO spot is up, says another Russell Reynolds survey released last year. According to the findings, 4.7 percent of the CFOs at Fortune 500 companies left their jobs in 2004, compared with only 3.5 percent in 2003. “If I were a younger financial director coming up through the ranks,” posited one UK executive, “the thought of managing a business’s finance in the current governance environment would not be appealing.”
In fact, some CFOs from the joint study worry that the pipeline for young finance chiefs is drying up because candidates are deterred by the professional and personal demands of the job. “Young guns used to say ‘I want your job,’” comments another CFO. But now all he hears is that the CFO job has “Too much stress,” and “Life is too short.”
CFO burnout is not the only reason executives leave their post, however. Some CFOs are kicked upstairs. Another survey released by Russell Reynolds last year showed that one-third of theFortune 500 CFOs that left their positions in 2004 did so because they were promoted to CEO, chairman or became a CFO of a larger company.
In addition, the second study found that having a financial background seemed increasingly useful in landing a CEO position, especially in the United States. For example, 14 percent of the Fortune 100 CEOs were former CFOs. In the UK, a similar trend prevailed, however most of those CFOs were named chairman.
There’s one other silver lining — albeit this one has been widely reported. CFO pay is rising as fast as the workload is ballooning. The average overall compensation package for CFOs — including salary, bonus, and stock and option grants — was $2.2 million in 2004, according to the Mercer 350 salary survey, which bases its calculations on data collected from companies with over $1 billion in revenues. Since 1997, when the average compensation package was $1.34 million, CFO compensation has been growing at a 7.4 percent compound annual rate.
During that period, base salaries only increased at a 3.8 percent rate, and currently hover around $500,000 annually. As expected, stock and option grants accounted for most of the compensation, and compensation growth, averaging about $1 million in 2004, and growing at an 8.8 percent.
So, while the demands of a CFOs have increased, so has the rewards. And that, as James Brown might say, “feels good.”