Financial, Insurance Sector CEO Departures Keep Climbing

Unsurprisingly, the number of departures of CEOs at finance and insurance companies rose sharply during the last two years, at the highest rate for any industry, according to Audit Analytics.

However, departures were still the lowest of any industry as a percentage of the total population, Audit Analytics said in a new CEO and CFO Departures Briefing.

The number of financial industry CEO departures increased from 197 in 2005 to 332 in 2007, over 68 %, while CFO departures increased over 50% between years 2005 and 2007, from 192 in 2005 to 292 in 2007.

The Finance and Insurance industry, which had an executive turnover rate of about 9% in years 2005 and 2006, experienced a significant increase in departures rate in 2007 – to 12.64% for CEOs and to 11.12% for CFOs. The Retail and Wholesale industry had the highest turnover of CEOs and CFOs in years 2005 to 2007. In 2007, the CEO turnover rate was 16.62% (compared to an average in the general population of 13.36%), while the CFO turnover rate stood at 18.77%.

Other findings of the report:

• During calendar year 2007, there was a significant increase in C-level executive departures from public companies. The number of CEO departures increased 17.97% in comparison to 2006, while the number of CFO departures increased 17.18%.
• The number of voluntary resignations in 2007 increased for both CEO and CFO positions, while the number of dismissals decreased from the 2006 level. The number of CEO dismissals in 2007 was 33 compared to 53 in 2006, while number of CFO dismissals decreased to 34 in 2007 from 45 in 2006.
• In 2007, CEOs departed most frequently due to a merger or acquisition or a change of position within the company (e.g switch from executive to board positions). By contrast, the most common reason given for a CFO resignation was either that employment had been obtained elsewhere or the CFO was pursuing other interests.
• Companies that filed financial restatements during the years 2005 to 2007 were significantly more likely to be associated with C-level executive changes.
• Restatements that imply possible management involvement or override of controls(e.g, stock options or revenue recognition restatements) appear to have a stronger correlation with both CEO and CFO resignations.

For example, in the years 2005 to 2007 the turnover rate associated with companies that filed revenue recognition restatements was at least twice of that of the general population.