The past 18 months has shown to be the most active period for the CFO market in Australia since the pandemic. Senior finance executives are increasingly open to exploring opportunities outside their current organisations. Whilst this isn’t exclusively linked to the challenging environment with heightened anxiety posed by rising interest rates, inflation and a weaker Australian dollar, these factors certainly haven’t helped inspire confidence to stay.
Blenheim Partners have been actively tracking the CFO market for ASX-listed companies throughout the years. Based on our research and discussions with a variety of finance executives across different sectors, we present some key themes and trends in this domain.
In the 2022 calendar year, there were 155 CFO appointments across ASX-listed organisations. So far in the 2023 calendar year, there have been 118 CFO appointments. There are a variety of factors driving this change. In some part, it is due to the fallout of the pandemic where we saw an enormous amount of movement in boards and executive leadership. These changes may also be the result of a shift in strategy in the business and a subsequent need for a different capability. For others, it was ‘time for change’, whether that was driven by a long tenure in the organisation, having successfully helped the company navigate the pandemic, a change in leadership or a desire for greater work-life balance and flexibility.
Of these appointments, there has been a greater weighting on external placements as opposed to internal with around 70% being external which is relatively consistent with the previous year. There has been a slight increase in the number of females being appointed to CFO roles with 27% being female in comparison to 22% in the prior year. A strong preference for CFOs with direct industry experience still remains a common theme with 80% of these placements having prior experience in the same industry. We are also observing slightly fewer appointments from adjacent industries.
Figure 1: CFO Appointments, 2022 vs 2023 (January to September)
For CFOs with aspirations to become CEOs, we are seeing encouraging signs from recent CEO appointments in ASX-listed companies. In ASX top 100 companies, 24 CEOs were previously CFOs. Of the 20 CEOs that commenced from 1 July 2022, eight were previously CFOs of their respective companies. Comparing this to five years ago, only 14 CEOs in ASX top 100 companies were previously CFOs.
The significant shift in the prevalence of CEOs with CFO backgrounds can be attributed to a number of factors, including a renewed focus on costs, the rising trend of internal appointments, and long-term succession plans coming to fruition. With approximately half of ASX 300 CEOs having been in their roles for over five years, the aptly quoted “average CEO tenure in Australia,” we anticipate a further increase in the percentage of incoming CEOs who were previously CFOs.
Figure 2: Recent CFO to CEO appointments for ASX top 100 companies
On recent assignments, we have seen an uplift in the appetite for commercially-focused senior finance executives. While this may be an obvious point to some, it has been voiced by numerous CFOs that there is a lack of “true commercial expertise” in their teams. Points raised included having the ability to look beyond an individual’s remit and the finance function and adopt a big picture view to be able to identify how different actions could impact the business and its bottom line. As part of this, we have seen greater demand for senior finance executives with broader experience outside of traditional finance such as strategy, operations and risk to allow them to support the CFO in a more meaningful way and enhance their value to the business.
In addition to the current state of the market, we highlight some themes gleaned from discussions with senior finance executives across industries since the beginning of 2023. From a macroeconomic point of view, concerns surrounding rising interest rates and inflation were top of mind for CFOs at the start of the year. It seems that not a lot has changed. Adding the weak Australian dollar into the mix, an air of caution pervades the market with a sense of stability expected to come in some time next year.
With enormous turnover in the past 18 months, we expect much of the same as the lag in executive movement since the start of the pandemic continues to play catch up, with change trickling down the ranks.
Mel Huang and Paulo Jose
Financial Officer Practice