Long-term recruiting trends show top accounting and consulting firms are slipping as a dominant contributor to the talent pipeline for chief financial officers at big publicly traded companies, though they remain a common launching point.
About one-quarter of CFOs at large US-listed companies in the S&P 500 index bring past work experience at
The remaining two-thirds of CFOs at S&P 500 companies, however, have taken a different path. Many have come from finance-focused jobs in investment banking, private equity, or venture capital. Corporate finance chiefs such as John Lawler at
That mix reflects how the C-suite position has evolved beyond traditional duties of financial reporting and compliance to a more recent emphasis on business strategy and operations, recruiters say. CFOs are responsible for cash flow management and risk mitigation, as well as communications with analysts and investors.
As a result of the role’s shift, fewer CFOs are coming from the Big Four’s “feeder function” or other accounting training grounds of the past, said Jim Lawson, who co-leads the global financial officers practice at leadership advisory firm Russell Reynolds Associates.
“Investment bankers are filling a lot of that gap,” along with internal promotions to CFO, said Lawson, a former PwC manager and a Certified Public Accountant (CPA).
Client Experience
At companies in the S&P 2000 index, 43% of CFOs held a CPA credential in 2022, down from 55% in 2012, according to a Russell Reynolds analysis published last year.
The analysis also looked at the top 25 businesses feeding the talent pipeline for S&P 2000 CFOs. Over the same time period, it found a 17 percentage point increase in financial services backgrounds from firms such as
A generational divide also may be at play. More Baby Boomer CFOs hold CPAs than Generation X and Millennial CFOs, the Russell Reynolds analysis showed. Meanwhile, more GenX and Millennial CFOs bring investment banking experience than Baby Boomer CFOs.
Accounting, consulting, and investment banking are all “really worthwhile” foundations for corporate finance chiefs, said Jeff Constable, who leads management consulting firm Korn Ferry’s financial officers practice in North America and co-leads it globally.
“Those experiences give you exposure to a lot of different clients,” Constable said. Client-centric training can help CFOs build relationships with their chief executive officer, business unit leaders, and other stakeholders, he added.
Big Four Background
Many of the S&P 500 CFOs with accounting and consulting backgrounds held early-career jobs at PwC, EY, Deloitte, and KPMG, as well as past firms that became part of these Big Four brands.
PwC leads top accounting and consulting firms in spinning out future CFOs at companies such as the
Lauren Sandor, PwC’s deputy people leader, says the firm’s employees are prepared for positions like the corporate CFO job thanks to a wide range of professional experiences working with clients across industries. The firm is readying its workers for emerging technology trends by investing $1 billion in developing artificial intelligence capabilities. PwC also supports its alumni’s careers through networking opportunities, Sandor said.
“We like to say, ‘once a PwCer, always a PwCer,’” she said in a statement.
About 20 of the S&P 500’s corporate finance chiefs previously worked at Arthur Andersen, an accounting firm that collapsed in the early 2000s following scrutiny of its work vetting financial statements for the now-defunct companies Enron and WorldCom.
A ramp-up in corporate financial reporting rules in the aftermath of those scandals drove an emphasis on compliance and a demand for accountants as CFOs, said David Arnold, founder and president of Arnold Partners, which recruits CFOs for tech companies. Arnold said he’s seen more interest in wider skillsets lately due to evolving demands of the finance chief’s job.
“The role of the CFO has become much broader than it used to be,” he said.
A few executives, like
Educational Profiles
Experience at accounting and consulting firms can be a helpful background for future CFOs because it exposes workers to financial reporting, tax transactions, and treasury functions at different companies, said Lillian Mills, dean of The University of Texas at Austin’s McCombs School of Business.
“You’ll have seen good systems and bad systems, best practices and weaknesses,” Mills said. “So if 20 to 30 years later you’re a CFO, you have a breadth of experience that helps you evaluate decisions.”
Educational profiles still show sitting CFOs overwhelmingly majored in accounting instead of finance or other subject areas, according to an analysis by executive search firm Crist Kolder Associates that looked at companies from the Fortune 500 and S&P 500. About half of the CFOs examined hold a Master of Business Administration, or MBA, Crist Kolder found.
The McCombs business school brings CFOs and CEOs to campus to talk about career paths, Mills said. Aspiring CFOs should seek out opportunities to develop skills in financial forecasting, team leadership, and other areas that hiring managers value, according to a survey led by the Massachusetts Society of CPAs.
Talent Squeeze
Attention on CFOs’ past experience comes against the backdrop of a shrinking pipeline for accounting professionals, with fewer workers and a decline in graduates in recent years. Some companies have cited insufficient staff in accounting and other departments as a reason for potential earnings statement errors.
With CFOs in high demand, “there is a growing shortage of qualified candidates,” said Michael LaPorte, partner at Ormsby Park, an executive search firm that specializes in recruiting for roles like the CFO.
“As traditional talent pools for CFOs shrink,” companies are often turning to “step-up candidates,” such as chief accounting officers, that rank just below finance chiefs, LaPorte said. “This trend further depletes the pool of CAOs, intensifying the shortage of qualified leaders in both roles,” he said.
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