Corporate Finance Chiefs Face New Pressures
Turnover of CFOs at Major Companies Rises Sharply and Outpaces CEO Departures, Amid Credit Crisis and Slowing Economy
By Cari Tuna
The Wall Street Journal
Monday, December 1, 2008

The credit crisis and slowing economy are creating new pressures for chief financial officers, spurring turnover and increasing demand for experienced finance professionals.

CFO turnover hit a 13-year high in 2007, and accelerated earlier this year.  Executive-search firm Crist|Kolder Associates says 19.5% of finance chiefs at Fortune 500 and S&P 500 companies left their posts last year, up from 14.1% a year earlier.  By comparison, 13.2% of those companies changed chief executive officers last year.

In the first seven months of 2008, 70 CFOs departed these 659 companies, compared with 49 over the same period last year.  The average CFO's tenure is 4.8 years, down from 5.5 years a year ago.  The average CEO stays in office for 6.2 years.

Chief financial officer is "the least secure job in corporate America," says Gordon Grand, head of CFO recruiting at search firm Russell Reynolds Associates.

Alcatel-Lucent SA last week said Hubert de Pesquidoux will leave the telecommunications-equipment maker after 13 months as CFO.  In October, Ford Motor Co. finance chief Don Leclair announced plans to retire.  Procter & Gamble Co. will replace longtime CFO Clayton Daley on Jan. 1, and by year's end Sears Holdings Corp. will bid farewell to its third CFO since March 2005.

Other blue-chip companies that changed their CFOs in 2008 include Oracle Corp., Google Inc., Walgreen Co., UAL Corp. and Allstate Corp.  CFOs at some financial-services firms left or were ousted amid meltdowns, bailouts and takeovers.

Recruiters and finance chiefs say CFOs are quitting or being ousted because the demands of the job are growing. CFOs were handed new responsibilities in 2002 by the Sarbanes-Oxley corporate-reform law. This year, many had to scramble to keep their companies afloat when credit markets dried up.

CFOs also handle outreach to investors and serve as strategic advisers to CEOs, but close ties to a CEO can make finance chiefs vulnerable when the top job changes hands. Some companies are eliminating the role of chief operating officer and giving CFOs more operational responsibilities.

The CFO "gets asked all of the hard questions," Mr. Grand says. "When the numbers don't work, the accountability is enormous."

The surge in CFO turnover puts a premium on finance veterans. Dessa Bokides says she received about a call a week from recruiters since stepping down as CFO of Denver real-estate-investment trust ProLogis last year. She worked as chief operating officer for an educational start-up and recently was named global treasurer of GMAC Financial Services.

"For a long time, there was a real accounting emphasis on CFOs," she says. "But CEOs have realized that they need a business partner who is forward-looking [and] who knows how to talk to the markets and set the financial strategy."

As demand for CFOs rises, so does pay. The median compensation for finance chiefs in the S&P 500 rose 5.2% to $2.9 million last year, including salary, bonuses, the value of equity grants and other compensation. The increase was bigger than the 1.3% jump in CEO compensation, according to data tracker Equilar Inc., of Redwood Shores, Calif.

Joseph Zubretsky joined Aetna Inc. last year as CFO at a salary of $700,000, 23% more than predecessor Alan Bennett was paid in 2006. Mr. Zubretsky also is eligible for a larger bonus than Mr. Bennett was, and received a $6.5 million equity grant as compensation for equity he left behind at his former employer, Unum Group. In a Securities and Exchange Commission filing, Aetna said it believed the package "was necessary to induce Mr. Zubretsky to leave" Unum and join Aetna.

Some companies, including eBay Inc. and Rohm & Haas Co., this year granted their CFOs special bonuses or equity awards valued at $1 million or more. "This is actually the biggest and best sign that CFOs are increasingly important and that companies are making an extra effort to retain top finance officers," says Equilar research manager Alexander Cwirko-Godycki.

CEO turnover contributes to CFO churn, particularly as finance chiefs increasingly act as partners and advisers. Over the past five years, one-third of companies with a new CEO changed CFOs within 12 months, Crist|Kolder says.

Andrew Bonfield resigned as CFO of Bristol-Myers Squibb Co. this year, shortly after James Cornelius was named permanent CEO. Mr. Bonfield had served as Bristol's CFO for more than five years and says it was "time to do something different." Mr. Cornelius "needed somebody who was going to be committed to working with him for the long term," he says.

Mr. Bonfield says recruiters have approached him with more than 50 job opportunities since he announced plans to leave in February. "There is plenty of opportunity out there," he says. "It's finding the right one that suits you as an individual."

Some experts expect the high turnover to continue amid the slowing economy and depressed stock market. CFOs "will absolutely bear the brunt and, in some cases, take the fall," says George Herrmann of Right Management, a unit of Manpower Inc. "All of that stuff has really made the job, in a nutshell, less fun than it used to be."

Write to Cari Tuna at cari.tuna@wsj.com

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