High CEO Turnover = Opportunities for CFOs

Doreen E. Lilienfeld headshot
Courtesy of Shearman & Sterling
CFOs are more qualified than ever to take over as CEO, says Doreen Lilienfeld of A&O Shearman.

In this challenging economy, more than a few C-Suiters—including finance leaders—are heading for the nearest exit. Global CFO turnover spiked in the first quarter of 2024, according to Russell Reynolds Associates, with 82 new CFOs appointed at publicly held companies.

The chief executive’s office churned nearly as much. The Rusell Reynolds CEO Turnover Index found 68 CEOs were appointed in the first quarter and 52 CEOs left the role, the highest Q1 totals since 2018 and 2020, respectively. More concerning is that “failed CEO appointments” (a term Russell Reynolds uses for those of less than two years) accounted for 15% of the outgoing CEOs.

Volatility in the CEO’s office can jolt an organization and its people, but it creates room for finance chiefs with the ambition and the right skills to reach the summit of the org chart.  

To get some perspective on the causes of the high turnover rates and whether CFOs are really well-positioned to move beyond finance if they so desire, Katie-Kuehner Hebert interviewed Doreen Lilienfeld, co-managing partner of the U.S. at A&O Shearman. Lilienfeld helps senior executives negotiate their employment, severance and compensation agreements. 

Executive turnover seems to be at all-time highs this year. Why do you think that is? 

Market dynamics have changed, and the economic environment is significantly altered from several years ago. We are in a period of high interest rates, and we face other headwinds that some executives do not have experience handling. 

High interest rates have also made it challenging for companies eager to grow through acquisitions. Complicating matters, many companies have made acquisitions in the recent past, and they are still digesting those businesses in this more demanding environment.  

Uncertainty about the global macro economy has further heightened management’s challenges. These factors combined put C-Suite executives under enormous pressure, and often pressure sparks turnover.  

You say you have assisted with more CFO transitions than CEO transitions this year. Why do you think that is? 

Traditionally, the CFO was more frequently seen as an accounting expert, someone who was great at keeping the books and deftly handling audits and compliance. That profile has dramatically changed in the last two decades. The most sought-after CFOs can do so much more. 

Companies and boards are always mindful of CEO succession, and unlike in years past, they’re looking at their CFO as a possible and perhaps even likely successor to the CEO. Companies are eager to find CFOs with varied skill sets. Those who can do the top job in the short or long term and who are agile are in high demand. They’re frequently being tapped for internal or external promotion.  

How has the role of CFO evolved over the past decade? 

We’re nearing the end of a decade-long evolution that only recently became fully apparent. Today’s CFO needs to have many more skills—comfortable with board interactions, deeply knowledgeable about company operations and able to serve as a resource for gauging market conditions. They still must understand compliance, auditing and internal controls. 

CFOs used to be in the role of CFO forever—they dealt with audits, financing, forecasting, and managing the balance sheet. Now, the most effective CFOs perform strategic, market-facing functions with broad remits covering investor relations and sometimes even human resources. 

Is more experienced talent needed for balance sheet management in an environment of relatively tight monetary policy? What other skills are at a premium? 

Yes, more experienced CFOs are likely to better adapt to the tightened money supply and market volatility. Regarding critical skills, CFOs need a great understanding of and ability to deal with many stakeholders: lenders, investors, internal teams and others. In addition, more companies have been in distress lately. Those who have avoided further problems are engaged in creative financing solutions, which require a finance team with an expansive skill set. Finance teams with deep experience have an even greater and more critical role to play in today’s market. 

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