The rate of CFO turnover continued to be brisk in the first half of 2008, when the chairs became vacant at 106 Fortune 1000 companies, according to new data from recruiting firm Heidrick & Struggles.
Add in the 52 positions that were unfilled as the year commenced, and almost one in six of the largest U.S. companies had finance-chief positions open at some point between January 1 and June 30. New CFOs were named at 116 of the companies, meaning 42 posts remained empty as of June 30. At the current pace there would be more than a 21 percent flip in these jobs by year-end.
The numbers show a slight increase in CFO churn over 2007, when 46 positions were open at the beginning of the year and 104 more became available during the first half. That surprised Michele Heid, co-managing partner of the finance practice at Heidrick & Struggles. “I thought it would slow down, but it hasn’t,” Heid told CFO.com. Altogether last year 188 Fortune 1000 CFO postions opened up.
For this year, Heid said, logic might have dictated that the struggling economy would motivate CFOs to delay retirement. “Your stock is probably at a low point, and your options in many cases are under water,” she observed. “So you wouldn’t think this is the ideal time to retire.”
Yet among the finance heads who departed this year, 30 percent retired, according to Heidrick’s data. And at least half got out of finance, including the 20 percent who moved to other positions at their existing companies. All in all, a significant number of CFOs felt they had something better to do.
Some of them, though, are likely to be missing from the profession only temporarily. Quite a few people “retire” then show up later as the CFO somewhere else, Heid noted. Additionally, while most companies looking to fill their top finance job put a premium on landing a sitting CFO from another company, at the moment, with the high turnover rate, the demand for them substantially exceeds the supply. That means management executives with previous CFO experience fill some of the open positions.
Among the 50 percent of CFOs who exited their companies to “pursue other opportunities,” Heid could not, of course, say with any precision how many were forced out and how many left voluntarily. But clearly poor earnings results have pushed some of them out the door. “Companies that are performing don’t change their CFOs,” Heid said.
Other key factors contributing to the high turnover rate include a greater workload and increased legal liability, both thanks in large part to heightened government regulation over the past few years.