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UK corporate money men are on the move. Barely a week into the new year, a dozen CFOs of listed UK companies have announced plans to quit or physically done so. The average tenure for a FTSE 100 chief financial officer is down nearly a fifth since 2020 to four years, calculates AJ Bell.
True, that is quite the innings compared with some of their public sector peers — like the four men who sat as chancellors of the exchequer in 2022. Less favourable are private sector comparisons. UK FTSE 100 chief executives have an average shelf life of 5.6 years; globally, according to headhunters Russell Reynolds, that stretches to just over eight years.
Increased churn is at least partially a reflection of more volatile times. The bust-boom-bust cycle unspooled by the pandemic, escalating geopolitical tensions and skittish sentiment all make this a tough gig.
Delivering on numbers is bad enough. But the current crop of CFOs are increasingly CEOs in waiting, or at any rate deputy CEOs. A decade ago, a finance director was just that. Now, like the big boss, they are steward to the board and business leader too — someone with operational chops and thoughts on strategies for growth, sales, workforce; the whole caboodle.
They must also contend with a growing chorus of critics, activists pushing for change and the tyranny of quarterly reporting. The leeching of the UK stock market into private hands is another negative. No wonder some, like Auction Technology Group’s departed CFO Tom Hargreaves, are themselves susceptible to the siren call of private equity.
Should investors care? It is tempting to fret — a CFO after all is probably the first to spot things going awry — but these exits are generally for more quotidian reasons, like retirement or seeking new pastures. Some walk after taking umbrage at missing out on the top job; others take their hard-earned experience to a clutch of non-executive roles and the golf course.
Shorter executive tenures can give rise to the so-called agency problem, putting the interests of C-suite executives in conflict with those of their shareholders. An unscrupulous executive, plotting a brief stint, is incentivised to pursue strategies that pump up the share price in the short term. But performance benchmarks to be met before payouts are awarded help address this conflict.
Departing CFOs, in short, are less red flag than part of the corporate rough and tumble — and very good news for the headhunters that win mandates to replace them.
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