The High Turnover of CFOs in FTSE 100 Companies: What’s Going On?
The recent departure of a quarter of FTSE 100 Chief Financial Officers has raised questions about the reasons behind such a high level of abandonment. According to data compiled by savings platform AJ Bell, this figure is well above the long-term average. Both Unilever and Prudential are among the companies announcing the departure of their CFOs. While companies have given a variety of reasons for the departure of executives, there are some broader trends to contend with.
CEO Prefer Their Own Lieutenants
The close relationship between CFOs and CEOs is one of the reasons behind the high turnover of CFOs. Often, the CEO prefers to bring in their own lieutenant rather than inherit an existing one. This is particularly evident in the current situation, whereby nine companies that are changing their CFOs have new CEOs.
Clean Sweep
Another reason for the high level of abandonment is the clean sweep phenomenon. A bunch of CFOs walked out in the middle of a new clean sweep. Among the companies that could be included in this project are Unilever, Prudential, BAT, and InterContinental Hotels.
Regime Change
Regime change is a happy event for CFOs when they get the best job themselves. When companies are doing well, investors are usually happy about the CFO’s promotion, too. However, the CFO carousel spins faster than the CEO carousel. The average term for lieutenants is just over four years, compared to five years plus for captains.
Bumpy Economy
One plausible theory is that the bumpy economy has made the job of CFOs more difficult. The role was already getting longer, as CFOs are expected to dive into strategy, mergers and acquisitions, and investor relations from their traditional stronghold of planning and controlling. Meanwhile, reporting obligations have multiplied. Slowing revenue growth and cost inflation mean the finance department is poised to deliver complex and unpopular cost-cutting programs. Nervous capital markets make raising debt costly and hair-raising.
Engaging Piece
The role of CFO has become increasingly challenging over the years, requiring finance professionals to possess both technical expertise and business acumen. CFOs are no longer simply responsible for managing a company’s financial affairs; they are expected to be strategic partners to CEOs, playing a key role in driving growth, managing risk, and creating value. This shift in responsibility has created new challenges for CFOs, particularly in the current economic environment, where uncertainty and volatility are the norm.
One of the biggest challenges facing CFOs today is managing risk. With the global economy facing unprecedented challenges, such as the COVID-19 pandemic, climate change, and geopolitical tensions, CFOs must be able to anticipate and mitigate a wide range of risks. This requires a deep understanding of the business, as well as a keen awareness of the external environment.
Another key challenge facing CFOs is managing costs. In today’s economy, cost control is critical, as companies face pressure to deliver improved financial performance while minimizing expenses. CFOs must be able to identify opportunities to streamline operations, reduce waste, and improve efficiency, while maintaining the highest standards of quality and service.
Finally, CFOs must be able to communicate effectively with stakeholders, including investors, analysts, and regulators. This requires strong communication skills, as well as the ability to present financial information in a clear and compelling way. CFOs must be able to explain complex financial data in terms that are understandable to non-financial stakeholders, while also providing insights into the business’s performance, prospects, and risks.
In conclusion, the high turnover of CFOs in FTSE 100 companies is a reflection of the changing nature of the CFO role. As the role becomes more strategic and complex, CFOs face new challenges and requirements. Those who are able to adapt to these changes and excel in their roles will be well positioned to succeed in the years ahead.
Summary:
– A quarter of FTSE 100 Chief Financial Officers have departed their roles within a few months, raising questions about the reasons behind such a high level of abandonment.
– The close relationship between CFOs and CEOs, as well as the clean sweep phenomenon, is one of the reasons behind the high turnover of CFOs.
– Another reason for the high level of abandonment is the bumpy economy, which has made CFOs’ jobs more difficult.
– The key challenges facing CFOs today are managing risk, managing costs, and communicating effectively with stakeholders.
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The loss of a CFO is an isolated misfortune. But when a quarter of FTSE 100 Chief Financial Officers box up the contents of their desk within a few months, it’s clear that something isn’t adding up.
The level of abandonment is remarkable. Both Unilever and Prudential has announced its departure of their CFOs this week. That brings the tally to 25, according to data compiled by savings platform AJ Bell, two-thirds above the long-term average.
Companies have given a variety of reasons for the departure of executives. Yet there are some broader trends to contend with.
The first is the close relationship between CFOs and CEOs. The latter often prefer to bring their own lieutenant rather than inherit one. Nine of the companies that are changing their chief financial officers also have new chief executive officers.
A bunch of CFOs walked out in the middle of a new clean sweep. Unilever, Prudential, BAT and InterContinental Hotels could be included in this project.
Regime change is a happy event for CFOs when they get the best job themselves. When companies are doing well, investors are usually happy with the promotion as well. In addition to underperforming Vodafone, the elevation of Margherita Della Valle has raised doubts.
However, the CFO carousel spins faster than the CEO carousel. The average term for lieutenants is just over four years, compared to five years plus for captains.
One plausible theory is that the bumpy economy has made the job of CFOs more difficult. The role was already getting longer. These days CFOs are expected to dive into strategy, M&A, and investor relations from their traditional stronghold of planning and controlling.
Meanwhile, reporting obligations have multiplied. Slowing revenue growth and cost inflation mean the finance department is poised to deliver complex and unpopular cost-cutting programs. Nervous capital markets make raising debt costly and hair-raising.
It’s no wonder, then, that CFOs can more easily fall foul of their organizations or decide that now is a good time to count themselves.
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https://www.ft.com/content/267c541b-4e5a-41a0-9bea-304de4f23c24
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