The 3-year itch – Are CFOs on borrowed time?

The tenure of CFOs in major US-listed companies has hit a new low, averaging just 3.1 years, according to an analysis of SEC filings by financial planning platform Datarails. This marks a continued decline from 3.5 years two years ago, leaving CFOs with the shortest tenure in the C-Suite.

By comparison, CTOs enjoy the longest average tenure at 4.3 years, followed by General Counsel (4.2 years), Chief Marketing Officers (4 years) and Chief Executive Officers (3.9 years).

The findings reflect a growing paradox for CFOs: rising compensation coupled with plummeting job security. While their time in the finance hot seat may be brief, the rewards are significant for those who succeed.

The Revolving Doors

The report reveals significant CFO churn across America’s largest companies. Nearly half (48%) of the 1,657 companies analysed experienced at least one CFO turnover between 2018 and 2023.

For some organisations, however, turnover has been particularly acute. A select group of 22 companies cycled through an eye-watering four CFOs in five years. The ‘Revolving CFO Club’ includes notable names like Apogee Enterprises, Cardinal Health, and Papa John’s International.

Apogee Enterprises offers a good example. After the retirement of its long-serving CFO James Porter in 2020, the company appointed Nisheet Gupta. Gupta resigned just two years later, replaced by interim CFO Mark Augdahl. By 2023, Augdahl was also out, and Matthew James Osberg became the company’s latest finance chief.

The frequency of CFO turnover highlights the pressures associated with the role. CFOs often serve as key drivers of organisational strategy, cost control, and value creation, but these responsibilities come with immense performance expectations. Boards and shareholders appear increasingly willing to make leadership changes if targets are missed or financial turbulence arises.

Meanwhile, 152 companies went through three CFOs during the same period, including familiar brands like eBay, Guess, and Expedia. For these firms, CFO turnover has become almost routine.

Where CFOs Last (and Don’t)

Not all industries face the same volatility. CFOs in the hotel, resort, and cruise line sectors, along with satellite companies, reported the longest average tenure at 4 years. At the other end of the spectrum, the utilities sector had the shortest CFO tenure, averaging just 2.65 years.

This disparity may reflect sector-specific pressures. Industries with heavy capital investment and regulatory scrutiny, like utilities, often demand financial leadership capable of managing complex challenges. CFOs in these sectors may be under constant pressure to balance regulatory compliance, infrastructure investments, and cost management, all while delivering financial results in an environment with limited flexibility.

Conversely, the relative longevity of CFOs in hospitality and satellite sectors suggests greater operational stability. With fewer regulatory hurdles and more predictable market dynamics, CFOs in these industries may have the opportunity to focus on long-term growth strategies, allowing them to remain in their roles for longer periods.

Short Stays, Big Paydays

While CFOs may not hold on to their jobs for long, they are increasingly well-compensated. The report highlights a 9% year-on-year rise in average CFO pay, which reached $3.8 million in 2023. This figure includes salaries, bonuses, stock awards, and options.

For a few standout CFOs, the rewards were even greater. Outliers included:

• Joe Berchtold (LiveNation Entertainment): $52 million in total annual compensation
• Michael J. Cavanagh (Comcast): $40.5 million
• John David Rainey (Walmart): $40 million

These figures underscore the immense value boards place on the CFO role, particularly during times of economic uncertainty. CFOs are increasingly expected to serve as strategic partners to CEOs, driving profitability and efficiency while addressing challenges such as rising interest rates, supply chain disruptions, and inflation.

However, the high compensation comes with equally high expectations. Boards appear willing to pay a premium for top-tier financial leadership but remain quick to make changes when performance falters. This dynamic contributes to the revolving door seen in many companies, as organisations strive to find CFOs capable of delivering consistent results in volatile conditions.

A Stepping Stone to the Top

Despite the turbulence, the CFO role remains a critical path to the CEO position. In 2023, 15 CFOs across the sample companies made the leap to CEO, a notable silver lining in the otherwise short-lived tenure of finance chiefs.

This progression often reflects the strategic importance of the CFO role. Boards increasingly view CFOs as operational leaders who can drive growth and profitability in challenging conditions. For example, Jonathan Carpenter’s promotion to CEO at Comscore was attributed to his “strategic acumen” and “experience driving both growth and profitability”. Similarly, Andy Power’s elevation at Digital Realty was linked to his “clear vision for the company’s future” and strong execution record.

The skills required of CFOs today align closely with those demanded of CEOs: an ability to communicate with stakeholders, implement strategic initiatives, and oversee complex operations. However, the study also revealed a stark lack of gender diversity: all 15 CFOs promoted to CEO in 2023 were male.

This lack of diversity reflects broader challenges within corporate leadership pipelines. While CFOs play a pivotal role in shaping company strategy and success, opportunities for women to ascend to the CEO role remain limited.

The Modern CFO Walking a High-Wire Act

The findings paint a picture of the modern CFO role as one defined by extremes. As Didi Gurfinkel, CEO of Datarails, puts it:

“The modern CFO role has become corporate America’s ultimate high-wire act — shorter tenures but bigger paydays. The CFO seat is increasingly becoming less of a destination and more of a crucible… where CFOs who can produce value-creation in an atmosphere of volatility are seeing long-term rewards and opportunities.”

In short, the CFO role may no longer be the endgame it once was, but for those who can weather its demands, it remains a launchpad to greater opportunities. Whether this trend signals a fundamental shift in leadership dynamics or a temporary period of instability remains to be seen.

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