FTSE 100 CFO turnover reaches post-financial crisis peak

FINANCE bosses at the UK’s largest companies are changing jobs more frequently than at any stage since the beginning of the financial crisis, raising questions about the meaningfulness of long term pay deals, accountants KPMG have said.

According to analysis by the Big Four firm, churn (the percentage replaced in a year) among FTSE 100 chief financial officers was 24% in 2013/14, up from 13% the preceding year.

The research, which forms part of the firm’s annual guide to directors’ remuneration, also found that churn among FTSE 100 CEOs was 23% over the same period, while over half of the board rooms in index experienced at least one change of executive director, the highest proportion in the last five years.

According to David Ellis, head of reward services at KPMG in the UK, these high levels of churn beg the question of whether long term pay remains meaningful.

“Does it really make sense for companies to put pay structures in place that run for, say, five years, if churn is running at over 20%? If this level of turbulence applies consistently across the FTSE100, no chief exec would be still in post after five years. Of course the reality is that there is some variance across the sample but even so, these high churn rates do beg the question of what is the most appropriate time horizon over which to structure a meaningful incentive package,” Ellis said.

“Companies have rightly been focussing on linking pay to long term corporate success. It is not that we think this focus is misplaced – but perhaps that the current rate of CEO churn creates a different problem for remuneration committees to grapple with.