CFO turnover rises, driven by robust IPO market

Dive Brief:

Turnover this year among CFOs at Standard & Poor’s 500 companies has exceeded the rates for 2019 and 2020 as a robust IPO market opens up opportunities at new public companies and high equity prices increase the feasibility of retirement for many top executives, according to Russell Reynolds Associates.
During the first 10 months of 2021, S&P 500 companies reported 78 CFO transitions for a 16% turnover rate, Russell Reynolds Associates said, adding that the rate will probably increase by the end of 2021. Many CFOs are moving into operational roles at their companies, opening up their position to others.
“Companies will need to be more intentional than ever about understanding their CFO’s career aspirations and investing in internal succession planning to get ahead in a competitive talent market,” Russell Reynolds said.

Dive Insight:

The rising turnover rate among S&P 500 company CFOs indicates that, like lower-level employees across the U.S. economy, top financial executives are more actively seeking new opportunities than last year.

The quits rate, or the number of workers who left their jobs as a percent of total employment, increased to 3% in September, the highest rate in data going back to 2000, the Labor Department said last month. There were 1.4 job openings for every unemployed worker.

CFO turnover is especially high this year among consumer retail and industrial companies, Russell Reynolds said. Companies in these sectors “have had to pivot dramatically due to COVID-19-induced issues such as supply chain disruption and local regulations imposing new operational restrictions.”

An increasing proportion of companies are filling the CFO spot by promoting from within, Russell Reynolds said, adding that “for companies that had succession plans in place, the benefits have started to become clear.”

CFOs promoted internally this year have an average tenure within their companies of 13 years, Russell Reynolds said.

Competition is intense for external hires to the CFO slot, “driven by high levels of activity in private equity, in addition to SPACs [special purpose acquisition companies].” CFO experience is prized, with 84% of externally appointed finance chiefs having served as a CFO compared with 75% last year.

Gender diversity has increased among CFOs in 2021, with women taking 33% of the new openings so far this year compared with 17% in all of 2020, Russell Reynolds said.

The rise of women “points to the benefit of succession planning,” Russell Reynolds said. “More than 80% of newly-minted women CFOs were internal appointments, as many companies have turned inwards to develop and promote women in finance.”