Watchdog Transparency Blog

In our Blog we take a critical look at public company disclosures and focus on issues surrounding transparency, reliability and accuracy. It you are looking for cheerleading, you have come to the wrong place. We rely on information from the best sources available to gain insight into companies and make predictions about what will happen in the future. Nothing in business is certain, so sometimes we will be wrong, but we will always be an independent voice telling you the truth as we see it. We offer Retail Investors our Research Reports for Free.

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The 5 Worst Industries for CFO Turnover

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All public company CFOs have a tough job, but keeping that job is particularly tough in these industries.

CFOs play a crucial role at every public company. They are the ones primarily responsible for ensuring that the financial reporting is accurate and complete. It is important for the CFO to be diligent, highly competent, and confident enough to fix problems when other members of management would rather have them swept under the rug.

Our research consistently identifies red-flag CFO changes as a leading indicator of securities class action suits. This would indicate that an unusual CFO departure has a ripple effect that can create short-term and long-term problems at a company.

This post is derived from our 2021: Frequency and Impact of CFO Changes report authored by Joseph Burke and Joseph Yarborough. If you would like to read the report, please email jcheffers@watchdogresearch.com.

Over the past 10 years 13.9% of companies replaced their CFO in any given year. However, some industries had significantly higher turnover rates. Here are the five industries (classified by NAICS code) that had the worst turnover rates for the CFO position.

5. Pharmaceuticals

Pharmaceuticals are well known for their volatility and are frequently named in securities class action suits. Pharmaceuticals had an annual turnover rate of 15.1%. The only surprising thing about their appearance on this list is that they aren’t higher.

4. Wholesale Trade

These are companies that sell merchandise, energy, or even food to wholesalers. Their CFOs had an annual turnover rate of 15.2%. One of the biggest companies in that industry Sysco (SYY), a food distributor, had red-flag departures for both their CEO and CFO in 2020.

3. Professional, Scientific, and Technical Services

This includes companies like Facebook, S&P Global, and Accenture. The CFOs in this industry had a turnover rate of 16.5%.

2. Entertainment, Recreation, and Other Services

This includes companies like Disney, DraftKings, and Planet Fitness. The CFOs in this industry had a turnover rate of 17.1%.

1. Retail

The worst industry for CFO turnover is retail, where the turnover rate over the last ten years has been 18.3%. Interestingly enough, companies in the retail industry also get sued in securities class action suits more often than any other industry.

Companies in the retail industry can have all sorts of difficulty accounting related challenges for the CFOs to handle. For a cautionary tale, read our post on Under Armour.

Learn how Watchdog helps D&O insurance professionals identify red-flag CFO changes and other risks by emailing jcheffers@watchdogresearch.com for a demo and pricing.

Watchdog Transparency Blog

In our Blog we take a critical look at public company disclosures and focus on issues surrounding transparency, reliability and accuracy. It you are looking for cheerleading, you have come to the wrong place. We rely on information from the best sources available to gain insight into companies and make predictions about what will happen in the future. Nothing in business is certain, so sometimes we will be wrong, but we will always be an independent voice telling you the truth as we see it. We offer Retail Investors our Research Reports for Free.

Sign up to get all of our blogs delivered directly to your inbox.

The 5 Worst Industries for CFO Turnover

by

All public company CFOs have a tough job, but keeping that job is particularly tough in these industries.

CFOs play a crucial role at every public company. They are the ones primarily responsible for ensuring that the financial reporting is accurate and complete. It is important for the CFO to be diligent, highly competent, and confident enough to fix problems when other members of management would rather have them swept under the rug.

Our research consistently identifies red-flag CFO changes as a leading indicator of securities class action suits. This would indicate that an unusual CFO departure has a ripple effect that can create short-term and long-term problems at a company.

This post is derived from our 2021: Frequency and Impact of CFO Changes report authored by Joseph Burke and Joseph Yarborough. If you would like to read the report, please email jcheffers@watchdogresearch.com.

Over the past 10 years 13.9% of companies replaced their CFO in any given year. However, some industries had significantly higher turnover rates. Here are the five industries (classified by NAICS code) that had the worst turnover rates for the CFO position.

5. Pharmaceuticals

Pharmaceuticals are well known for their volatility and are frequently named in securities class action suits. Pharmaceuticals had an annual turnover rate of 15.1%. The only surprising thing about their appearance on this list is that they aren’t higher.

4. Wholesale Trade

These are companies that sell merchandise, energy, or even food to wholesalers. Their CFOs had an annual turnover rate of 15.2%. One of the biggest companies in that industry Sysco (SYY), a food distributor, had red-flag departures for both their CEO and CFO in 2020.

3. Professional, Scientific, and Technical Services

This includes companies like Facebook, S&P Global, and Accenture. The CFOs in this industry had a turnover rate of 16.5%.

2. Entertainment, Recreation, and Other Services

This includes companies like Disney, DraftKings, and Planet Fitness. The CFOs in this industry had a turnover rate of 17.1%.

1. Retail

The worst industry for CFO turnover is retail, where the turnover rate over the last ten years has been 18.3%. Interestingly enough, companies in the retail industry also get sued in securities class action suits more often than any other industry.

Companies in the retail industry can have all sorts of difficulty accounting related challenges for the CFOs to handle. For a cautionary tale, read our post on Under Armour.

Learn how Watchdog helps D&O insurance professionals identify red-flag CFO changes and other risks by emailing jcheffers@watchdogresearch.com for a demo and pricing.

© 2020 Watchdog Research, Inc. All rights reserved.
Watchdog Transparency is a publication based on reports created by Watchdog Research, Inc.
Watchdog Research, Inc. is a financial research company providing due diligence information on public companies.

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