Volatility increased in the C-Suite as management turnover was way up in 2006....rising 68% to 28,058 changes from corporate directors to vice presidents. CEOs came and went at a 30% higher rate and CFO churn rose 23%.
Companies with a market cap of at least $1 billion changed CFOs three times more often in 2005 than in 2002, according to 10-K Wizard. And while the rate of exits slowed a bit at big companies last year, Richard Jacovitz of Liberum Research found that among public companies of all sizes, CFO exits increased from 1,867 in 2005 to 2,302 in 2006.
Why is there Skyrocketing Turnover in CFOs?
At least 12 FORTUNE 50 CFOs left their posts in 2006. Combine the workload necessary to comply with the Sarbanes-Oxley legislation and the knowledge that you're almost certainly the sacrificial lamb if the SEC comes calling, and you have the answer. Another reason there's greater volatility at the CFO level is because there's more room to grow as a CFO, like moving into a CEO position.
CFOs are leaving public companies for private equity firms where there are significant opportunities and fewer restraints and headaches. Sarbanes-Oxley, passed in 2002, has forced CFOs to spend nearly a third of their time on IT systems, paperwork and tedious board inquiries rather than on the big picture. That's in addition to typical responsibilities like communicating with Wall Street and dealing with creditors. Some companies are trying to reinvigorate the CFO job by creating a new position: the chief accounting officer, equipped to handle the technical aspects of finance.
The number of chief operating officers (COO) at the nation's largest companies continued to drop from 219 in 2005 to 213 in 2006, according to a recent study by Crist Associates, a Chicago-based executive search firm. There are 17 percent fewer COOs today than in 1999.
There is potential danger ahead when a C-level executive moves to a new leadership position. The brutal reality is that executives have less time than ever to prove their worth. 40% to 60% of high-level corporate executives brought in from outside a company will fail within two years.
Sources: FORTUNE, February 5, 2007 and Human Resource Executive, February 2007