Chief Financial Officer (CFO) turnover is growing. For CEOs and Boards, this is a troublesome trend. Once considered just another member of the executive team, today CFOs are without a doubt some of the most valuable employees of a firm. A good CFO brings a forward-looking strategy, advanced modeling, high-level financial experience, and can also exert strong leadership skills, especially in the absence of the CEO or COO (Chief Operating Officer). 

It is unclear as to why exactly CFOs are churning through at increased rates. In 2019, 14% of CFOs turned over in S&P 500 companies. In 2020 the percentage bumped slightly to 15% and then rose again to 18% by 2021. At nearly 20%, that means one in five CEOs will see their CFO work less than five years at their place of business. Such quick turnover is pricy, especially for a position that is so integral to the firm.  

Spencer Stuart is a global recruitment agency. They’ve had some success in reducing CFO churn by encouraging companies to broaden the CFO’s responsibilities. While this might sound counter-intuitive (more work?), CFOs typically are below CEOs and COOs when it comes to the command chain. Notable firms such as AbbVie, Newell Brands, and Walker & Dunlop have gone as far as “re-titling” their CFOs as Presidents. Others have simply promoted the CFO to the COO role. Re-titling is not without its drawbacks. Spencer Stuart cautions that a move as drastic (from a vocabulary perspective) must be well-explained and well-timed by the Board. 

As of June 29th, the executive search firm Russell Reynolds reported that 6% of CFOs in S&P 500 companies had additional presidential or operational responsibilities added to their plate. Compare this with only 1.4% of CFOs with additional responsibilities in 2020 and it’s clear a shift is occurring. 

The average stay for CFOs (five years) has not changed much in recent years. What has changed is the number of CFOs exiting before the five-year mark. Added responsibilities, however, are not free. A CFO at Newell Brands, manufacturers of Elmer’s glue, Sharpie, and Rubbermaid bumped their CFO’s salary by $65,000 after accepting the additional responsibilities. At $900,000 per year, Newell has found it’s enough for him not to get poached by headhunters, the shared concern of any company. 

A potential recession will put major pressure on retaining CFOs. Only 8% of CEOs at S&P 500 and Fortune 500 companies came from the CFO seat in 2021. But that percentage is growing. A well-compensated and secure CFO is yet another hedge against departing CEOs if the person has the skills necessary to lead the firm.