Recent economic and geopolitical events have everyone concerned about job security, including controllers and chief financial officers (CFOs). While recent reports suggest that the U.S. economy is in a cyclical slowdown that is helping to mitigate the risks of a full-fledged recession, many organizations are still scrambling to find ways to boost revenue during these uncertain times.
Unfortunately, it is those CFOs and controllers that are often held responsible for their organization’s economic challenges, even if its financial underperformance is caused by unprecedented events, such as the global pandemic or the ongoing Russia-Ukraine conflict.
Whether you currently hold the role of CFO/controller or are an aspiring financial executive, it is important that you familiarize yourself with the job security outlook for this challenging but rewarding profession.
Below, in an analysis of a 2023 study conducted by Datarails, we will provide insights about the state of CFO job security. Unless otherwise noted, all data points and statistics were obtained from the Datarails report.
The Study
Datarails conducted a comprehensive analysis of C-suite job security and pay. In the study, “CFOs and the C-Suite? Staying Power, Pay, and Pain Points,” researchers analyzed 2,056 SEC filings of the biggest U.S. listed companies, all of which were submitted between 2016 and 2021.
The researchers found that CFOs have the lowest job security of any C-suite executive and that 2021 was the worst year for CFO attrition during the time span analyzed by the study. With that being said, researchers estimate that 2022 was even harder on CFOs and controllers, though relevant data was not available at the time of the study’s publishing.
Average Tenure, Pay, and Other Findings
On average, CFOs lasted just 3.5 years in their jobs, lower than any other C-suite role. CEOs were a close second, lasting only 3.9 years on average. Chief marketing officers and chief technology officers fared much better, however, with both groups averaging nearly five years on the job from 2016-2021.
Of the more than 2,000 companies included in the Datarails study, 16% experienced CFO turnover more than once, and over half of the companies experienced at least one CFO change. A total of 53 have had four different CFOs within that five-year span, another 269 have had three different CFOs in that time, and three companies — Harte Hank, Sally Beauty Holdings, and Superior Industries International — went through a CFO per year on average. Only 44% of participants did not have a CFO change during the five-year study.
Nevertheless, despite these abysmal attrition rates, CFOS also received some huge pay increases within the five-year span. Researchers report that their average pay, which consists of a salary, stock options, and bonuses, increased from $2.4 million in 2016 to approximately $3.5 million in 2021. Most of these increases came in the form of stock awards, which accounted for 63% of CFO compensation in 2021.
CFOs in the education sector received the lowest average pay, coming in at $1.1 million annually, while cable and satellite industry CFOs had the highest average compensation, totaling more than $8 million each year.
CFO Tenure by Sector
Aside from the handful of companies that averaged a CFO every 1-1.25 years, most CFO turnover trends can be traced to specific sectors. Researchers found that the railroad and advertising sectors experienced the most CFO turnover, with them only lasting 2.5 years on the job.
Surprisingly, travel industry CFOs enjoyed some of the longest tenures, with most exceeding the five-year threshold. They also enjoyed the second-highest compensation on average, falling just behind satellite and cable industry CFOs.
Why CFOs Leave Their Roles
Datarails researchers also examined why CFOs vacate their positions. Approximately 70% of CFOs were fired and subsequently replaced due to a variety of factors, such as underperformance. Another 22% of outbound CFOs left via retirement at an average age of 60 years old, and the final 8% were promoted to CEO positions.
CFOs are certainly at a high risk of being fired within a few years of taking their new roles, but from a strictly financial perspective, becoming a CFO is becoming an increasingly lucrative option.
Looking Ahead
Maximizing profits will always be at the top of an organization’s priority list, especially if they are publicly listed and beholden to shareholders. As such, CFOs will continue to face intense pressure to perform. Those that do will be rewarded with stock options, great salaries, and the potential opportunity for promotion.
As a financial professional, you can use the insights provided by the Datarails study to maximize your own earning potential, determine which industries are the best fit for your unique skill set, and navigate the ongoing turnover challenges that have impacted the CFO profession for years.
