CFO Turnover: Frequency and Explanations

The frequency with which Chief financial officers (CFOs) leave their jobs has puzzled observers and analysts. In 2021, about 21% of the CFOs left their jobs. Word on the street is that CEOs favor CFOs with whom they have personal attraction but show less tolerance for those with whom they have no personal attraction, regardless of the latter’s job performance. To remain in the job, CFOs must therefore gain and sustain the CEO’s personal attraction. The immediate corollary is that the nature of CEO-CFO relations rather than job performance explain CFOs’ turnover. This study explores such a view and finds that CEO-CFO relations largely explain the hazard of early CFO exit, whereas job performance has little effect. Furthermore, powerful CEOs lower the hazard of early CFO exit but have no discernible effects on the impact of job performance or CEO-CFO relation on the hazard of early CFO exit. The findings highlight the implications of CEO-CFO social dynamics for CFOs’ longevity in organizations.