In the last few months, some of the country’s biggest companies have lost their finance chiefs. Studies show that Fall is a period of high CFO turnover. Take a look at a recent Wall Street Journal article to learn about finance chiefs switching jobs as companies face uncertainties.
As reported by Wall Street Journal on October 23rd, 2022 by Jennifer Williams-Alvarez
Finance Chiefs Switch Jobs, Retire as Companies Face Uncertainties
A number of finance chiefs at some of the country’s biggest companies have left their jobs in recent weeks, an exodus that comes amid the pressures that high inflation and the Covid-19 pandemic have had on corporate balance sheets and the economic outlook.
Fall is often a period of heightened CFO turnover, because this is when companies tend to launch searches to bring in new finance executives for the early part of the next year, recruiters said. This time around, however, recruiters are seeing more churn than usual among finance executives, which they expect to continue throughout the end of the year.
September, for instance, saw the highest number of monthly departures at companies in the S&P 500 since the beginning of the year, accounting for roughly 20% of the 71 CFO exits through the third quarter, according to Russell Reynolds Associates, an executive search firm. This compares with 8% in September 2021 and 11% in the same month in 2020, Russell Reynolds said.
As the third-quarter earnings season ramps up, economists and executives are seeing a high probability of recession in the coming months. That is pushing some executives to make a move now before the labor market changes, recruiters said. It is also leading some companies to prepare for a potential downturn by looking for CFOs with experience in cutting costs or restructuring operations, they added.
Joel von Ranson, who leads the global functional practices at recruitment firm Spencer Stuart, which includes the financial officers group, said companies are increasingly searching for CFOs with experience in cost management and balance-sheet refinancing as they struggle for visibility on the direction of the economy. He expects these skills, which took on greater importance in the third quarter, to remain top priorities for businesses as they hire new finance leaders.
Retailer Nordstrom Inc., oil-field-services company Baker Hughes Co. and digital financial-services company Ally Financial Inc. were among the companies that in the span of a week recently said their CFOs would depart.
Detroit-based Ally Financial last Tuesday said CFO Jennifer LaClair was leaving immediately, just a day before it posted its third straight quarter of declining profits with results that missed analysts’ estimates for adjusted earnings per share and revenue.
Ms. LaClair and the company agreed to terminate her employment after nearly five years in the role, according to a filing with regulators. Terminating an executive allows companies to pay the person a severance package, unlike when an executive resigns or is fired for cause, said Steve Flores, a partner at law firm Winston & Strawn LLP.
Ms. LaClair will remain as a senior operating adviser with the company until early March and continue to receive her $750,000 base salary until then. She remains eligible for her 2022 discretionary cash and equity-based incentive-compensation awards. Chief Executive Jeffrey Brown said on a recent call with analysts that Ms. LaClair was looking forward to pursuing her next chapter.
Ally Financial declined to comment on what her plans are. Ms. LaClair didn’t immediately respond to a request for comment.
“We’ve seen where there’s been pressure to perform,” said Alyse Bodine, a partner at recruiting firm Heidrick & Struggles International Inc. “And if the right leadership team is not in place to guide the company, then certainly we’re seeing a turnover in key leadership roles and new leadership coming in to guide the company.”
Nordstrom, meanwhile, last Monday said finance chief Anne Bramman will leave in December after more than five years in the role. The Seattle-based retailer in recent quarters has been battling pressures such as weakening consumer spending among shoppers at its Nordstrom Rack discount chain and high inventory levels. In August, Nordstrom lowered its annual outlook, saying it expected adjusted earnings per share of between $2.30 to $2.60 for the year, down from a range of $3.20 to $3.50.
Ms. Bramman decided to leave to pursue the next phase of her career, Nordstrom said. The company, which hasn’t reported third-quarter results yet, reaffirmed its financial outlook with the CFO change announcement. Ms. Bramman declined to comment.
Last Wednesday, Baker Hughes announced that CFO Brian Worrell is set to step down as the Houston-based company looks to cut $150 million in costs and raise profits through a reorganization announced last month. Mr. Worrell will move into a strategic advisory role on Nov. 2 and leave Baker Hughes in the second quarter of next year. Nancy Buese, the CFO of gold producer Newmont Corp., is set to succeed him next month.
The transition wasn’t a reflection of the company’s finances or earnings performance, a company spokesman said, it was instead driven by the CFO succession process and the need for the right finance leader for the company’s transformation. Mr. Worrell didn’t immediately respond to a request for comment.
Overall, CFO turnover in the first three quarters of the year stands at 14%, compared with 16% during the same period in 2021 and 12% in 2020, according to Russell Reynolds. The slight downturn comes after a recruitment boom last year that followed the early days of the pandemic during which companies asked their CFOs to stay on and help manage the impact of the health crisis, recruiters said.
Meanwhile, CFOs in the early part of the year were more cautious about change because of the uncertainties, said Spencer Stuart’s Mr. von Ranson. “That created some pent-up demand for change that we’re seeing flow through,” he said.
Aside from departing for another role, CFOs are increasingly retiring. This year through the third quarter, retirements—meaning executives either leaving the workforce altogether or moving exclusively to board roles—accounted for 52% of CFO departures at companies in the S&P 500, according to Russell Reynolds. This compares with 45% during the same period last year and 47% in 2020 and is the highest retirement rate during the same three-quarter period in the previous three years, the executive search firm said.
Some CFOs came out of the pandemic looking for their next act, whether that is to join a board, become a chief executive officer, work as a private-equity operating partner or become an angel investor, said Jenna Fisher, co-head of Russell Reynolds’ global financial officers practice. That trend is continuing, with the slowing economy forcing finance chiefs into thinking about their next steps, she said.
“Once CFOs had gotten through the first significant tranche of the pandemic, there were a lot of people who just said, ‘You know what, I’ve hit my number, this job isn’t fun anymore,’” Ms. Fisher said. “And that has continued.”
Companies are not just facing uncertainty for quarter 4 and the start of the new year, they are also losing top executives during these hard times.
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