If You Go Away

Do you have an exit strategy?

Everyone knows investors hate surprises. But that’s what Benetton’s investors got in November. Overshadowing the €1.8 billion fashion group’s quarterly results announcement, the company dropped not one, but two, bombshells — both CEO Silvano Cassano and CFO Pier Francesco Facchini had resigned, effective immediately. The two colleagues formerly at Fiat, who joined Benetton in 2003, didn’t even stick around for the conference call with analysts. By the end of the week, Benetton’s shares slumped nearly 9% amid plenty of speculation about the reasons for the speedy exits.

A press release said that Cassano left the top post (but would remain on the board of directors) because his turnaround programme was nearing completion. But with five months remaining on his contract, many observers assumed that the real reason must have been a rift between him and the Benetton family over the firm’s global growth strategy. As for Facchini, Mara Di Giorgio, Benetton’s director of investor relations, convinced few analysts on a conference call with the explanation that he resigned for “personal reasons” that were not linked to Cassano’ s departure.

Though the public might never know the full story behind the Benetton departures, the episode serves as a timely reminder of how closely investors monitor the conditions under which senior executives leave companies. With the average tenure of finance chiefs steadily falling, all CFOs should consider their exit strategy, one that allows them to leave their old employers on good terms while keeping options open for future job moves. As the Benetton example shows, a hasty, poorly explained departure can tarnish the reputations of both the company and the departing executive.

The Golden Rules

Ideally, a company should announce the departure of a key executive at an AGM or other regular investor meeting, with a successor already waiting in the wings. It also helps to set the departure date shortly after a results announcement so as to give the impression that the successor is beginning with a clean slate.

Thought should also go into the announcement itself. A carefully crafted statement goes a long way towards appeasing jittery investors, not to mention squelching potentially damaging rumours or speculation. Various corporate governance codes provide basic guidelines about when announcements should be made and the basic form that they should take. But companies shouldn’t be afraid of going beyond what’s required by those codes, says Jeremy Rickman, head of the European CFO practice at recruiter Russell Reynolds. A statement from the chairman or CEO, and in some cases the departing CFO, about the departure and how it will impact the company can be useful. “Otherwise, the market makes it up,” asserts Rickman.

Of the CFO departures at FTSE 100 companies last year, only one — in October by Naguib Kheraj of Barclays — is notable for its candour. After three years as the bank’s finance director, Kheraj wanted a change in direction. “I have never considered myself a lifetime finance director and I believe now is the right time to move on to the next stage of my career,” he said in a statement.


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