New Datarails Survey: When CFO’s Go, Company Share Prices Go Lower

CFO departures are deemed as “bad news” by investors.

Chief financial officers may have more impact on a company’s bottom line than even C-suite officers may think, especially when it comes to a company’s share price.

That’s the takeaway from a new Datarails report, “CFOs and the C-Suite 2023.

In it, Datarails notes CEOs earn 2.8 times more than CFOs, with an average compensation of $9.74 million compared to $3.48 million for CFOs in the past year.

That gap is closing, however, as chief financial officers saw a 1% gain in salary packages as opposed to a 6% salary slide for CFOs over the same period. Even so, CFOs face shorter timespans on the job than chief executive officers, only remaining in the role for 3.15 years between 2016 and 2021, the most recent years covered for which official data exists.

Here’s how the CFO suite compares to other senior executive roles in terms of tenure and salary, according to the Datarails report.

Role, Average Tenure Over Five Years, and Salary (2021 Figures)

Chief Technology Officer: 4.64 years on the job at a $3.8 million annual salary.

Chief Marketing Officer: 4.63 years at a $2.5 million salary.

General Counsel: 4.5 years at a $2.5 million salary.

Chief Executive Officer: 3.89 years at a $10.4 million salary.

Chief Financial Officer: 3.51 years at a $3.5 million annual salary.

Share Price Arrows Point Down After a CFO Leaves

The Datarails’ study also points out the negative impact of a CFO’s departure on company performance.

According to the data, a company’s share price falls 1% the day following a CFO’s departure from the firm. That’s just for starters, as that descent continues for 30 days after a CFO leaves, with the company’s share price falling an additional 2%, on average.

Once a new CFO is brought on board, it takes 180 days for the same company’s share price to stabilize, the study notes.

The takeaway?

There’s so much on a chief financial officer’s plate rolling into 2024, with the complete corporate finance realm along with company compliance, cybersecurity issues, and artificial intelligence rollouts throughout the company, it’s encouraging to see CFO pay narrowing with CEO salaries.

It’s just as encouraging to validate the critical impact a good CFO has on company stock prices, which should spur companies to open up the pocketbook, keep CFOs on board longer, and adjust their pay accordingly – on the upward side.

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