Financial services firm Prudential Financial and tax preparation giant H&R Block are among the latest companies to deliver the one-two news punch of earnings and finance leadership shuffles this week, a move that is sometimes viewed as a “best practice” messaging strategy aiming at telegraphing an orderly succession, executive search experts say.
Newark, New Jersey-based Prudential on Tuesday announced Yanela Frias, 51, — currently president of Group Insurance and a nearly three decade veteran of the financial services firm — would become the company’s new CFO, effective March 15. She will replace Kenneth Tanji, who took the CFO seat in December of 2018 and will remain with the company until Sept. 30 to help with the transition.
Also on Tuesday, tax preparation giant H&R Block announced CFO Tony Bowen, 48, plans to retire, with the news coming the same day the company reported its fiscal second quarter results. Bowen held the position since April of 2016, according to his LinkedIn profile.
On Feb. 1 Bowen notified the company he planned to retire from his CFO position after the company’s fiscal 2024 “to spend more time with his family and focus on personal interest,” according to a Securities and Exchange Commission filing. The company said it has “initiated a process to identify a successor.”
Varying from the others’ timing script was retailer Costco. The Issaquah, Washington-based company announced yesterday outside of an earnings report period that its long-time CFO Richard Galanti would step down from the role next month, to be replaced by Gary Millerchip, the former finance chief at grocer Kroger’s. The company is scheduled to report its fiscal second quarter earnings on March 7.
In an emailed response to questions from CFO Dive on the thinking behind the timing of the leadership change announcements, an H&R spokesperson said “it takes a few days to develop the communications that go out to associates and the media. The leadership thought the earnings call would also be a good opportunity to inform the many investors that Tony has worked with for the past eight years as CFO.”
A Prudential spokesperson declined to comment beyond the release. A Costco spokesperson told CFO Dive the company had needed to be “sensitive” to the interrelated nature of the news with that of Kroger’s when making its CFO announcement.
While many factors related to a company’s strategy can affect how and when companies report material executive changes, in many situations it is often seen as a “best practice” strategy to package leadership changes and earnings together.
Josh Crist, co-managing director of executive search firm Crist Kolder Associates in Downers Grove, Illinois, said his firm maintains that even if a change in the CFO seat is being made midstream, keeping that person around through earnings season allows for continuity through the earnings release process, shows “solidarity” with the numbers and paves the way for a smooth and timely executive transition.
“We have always felt that a CFO exit notice at earnings season, given the obvious overlap, is best practice,” Crist said, adding that it’s thought to help maintain investor confidence. “A random 8-K regarding an exec transition, specifically outside of traditional public company reporting cadence, is usually seen as something that may spook the Street.”
Of course there are other strategies for announcing executive moves. Shawn Cole, president at the executive search firm Cowen Partners, said executive announcements like the “well-received” news at Costco this week can “stand alone” if they are viewed as positive. Costco shares were up 8% in the $720 area in late afternoon trading Wednesday, one day after the CFO announcement.
While Cole agreed that there are many positives to packaging positive earnings and an executive change together, Cole noted there can be downsides to the practice. For example, it can prompt suspicion if it is viewed as a “tactic of crisis control PR — packaging information in an attempt to not draw too much negative attention to a company,” Cole said.