- As both pressures on financial leaders rise and the need for top-tier financial leadership increases, CFOs are staying on with their companies for the shortest amount of time compared to their fellow C-suite members, a recent study by FP&A software provider DataRails found.
- CFOs at the largest U.S. listed companies logged an average term of 3.51 years in the five-year period between 2016 and 2021, according to the study, which examined the complete filings of 2,056 companies during that period.
- While they are logging the shortest tenures, CFOs’ overall compensation increased during that same period, the study found — CFOs’ overall compensation for 2021 averaged $3.5 million, a 40% bump in compensation from 2016, when their compensation averaged $2.6 million, according to the study.
Turnover within the CFO position also increased between 2016 and 2021 — 56% of companies surveyed reported experiencing at least one CFO turnover during the five-year period between 2016 and 2021, while 16% experienced more than one CFO turnover.
The study also pointed to several examples of companies — such as retailer Sally Beauty — which had five CFOs take on their financial duties between 2016 and 2021. This in particular showed “the difficulty of a CFO’s role, and getting them on board and the amount of energy it takes to constantly hire and reappoint new CFOs,” Jonathan Marciano, director of communications for Datarails said in an interview.
CEOs remained in their roles an average of 3.89 years during the same five-year period, while general counsel served an average tenure of 4.5 years. Chief technology and chief marketing officers settled into their roles for the longest amount of time, serving 4.64 years and 4.63 years on average, respectively.
CFOs may be logging shorter tenures than their C-suite colleagues for a variety of reasons, Marciano said. Financial leaders, many of which faced consistent economic pressures during the pandemic, are continuing to face market headwinds, which creates more pressure on financial executives while also revealing that their skills are at a premium — especially concerning skills in keeping costs down.
“We see that specifically the skills of cost cutting are in demand,” Marciano said, in reference to a smaller sample of 87 CFO departures in 2022, taken from market announcements.
CFOs’ average compensation has steadily ticked upwards: In 2021, CFO’s overall average compensation reached $3.5 million, making them the third-highest paid executive in the C-suite behind CTOs — who averaged $3.8 million in overall compensation for the year — and CEOs, whose overall compensation hit a median of $10.4 million.
Turnover for financial leadership also reached a high point in 2021 and although there is not a full-year picture for 2022 available yet, a smaller sample based on public statements found 87 of the 2,056 companies surveyed experienced high-profile CFO swaps or departures for the year, according to the study.
October research by executive search firm Russell Reynolds predicted an uptick in CFO turnover during the year’s final quarter despite slower turnover during the first three quarters of 2022, in part due to continued market volatility as well as better succession planning on the part of businesses.
Several CFO departures and swaps have already occured during the final months of 2022. Companies including American Airlines, doughnut brand Krispy Kreme and retailers such as Newell Brands, Goodyear tires, as well as healthcare distributor Cardinal Health, have all announced changes to their financial leadership in December, bolstering predictions that CFO turnover is likely to pick up.