Our Blog: The Podium

When It’s Time for a Change: CFO Succession

Note: This is the second in our three-part series on succession communications.

A new CEO is the highest-profile personnel announcement a Sharon Merrill Associates Investor Relationscompany can make, but a new CFO isn’t far behind. As with any executive transition, the reasons can vary widely – from termination to mutual separation to a legitimate retirement. Regardless of the rationale, however, you’ll need to negotiate a different set of questions when communicating a CFO transition.

First, let’s remember the principles I discussed in my previous post, which also can apply to a CFO announcement. But before you take a one-size-fits-all approach to succession communications, there are other details to consider when announcing a CFO departure, or new CFO and they require a nuanced approach. For instance: Did an accounting issue prompt the CFO’s departure?  Will the upcoming results be in line with expectations? Is there an issue with the company’s forecast? Will the CFO still sign off on the 10Q or 10K?

As we all know, investors do not like uncertainty. By taking the following steps, you can provide the investment community with clarity about the transition and confidence in the new CFO.

1. Consider pre-announcing your quarterly results. 

By publicly disclosing the most recent quarter’s results, preannouncements help remove doubts about the company’s performance. There is enough uncertainty with C-level changes; you don’t want investors questioning the financial results, as well. Preannouncements make the most sense when a company anticipates making the CFO announcement toward the end of the quarter, leading up to the expected earnings call date. For more information on earnings preannouncements, read our previous post.

2. Announce the transition in conjunction with the quarterly financial disclosure.

If you’re not ready to announce your results ahead of schedule but still want to avoid questions about the company’s performance, consider disclosing the CFO transition on the same day as the earnings release is issued. This tactic also provides management an opportunity to answer any questions about the transition on the earnings call and demonstrate that all parties are working together in good faith. In addition, have the CFO sign off on the 10-Q or 10-K. This additional step will demonstrate to investors that both the company and the outgoing CFO are comfortable with the validity of the results.

3. Announce the transition before it happens.

As is the case with a CEO succession, more notice is better. It calms investor uncertainty and presents the company as being in command of the finance function. If you know your CFO is leaving, give the Street as much time as you can to digest the news before he or she officially leaves. Of course, this tact is only feasible with a planned succession – if your CFO is suddenly terminated or unexpectedly resigns, providing advance notice just won’t be feasible.  

4. Include positive comments from the CEO and a polite quote from the outgoing CFO.

To the extent you can truthfully provide positive comments on the CFO’s tenure, this is the time to do it. Doing so demonstrates to investors that the finance function is in good standing and that the transition will be orderly. It also enables both parties to preserve their reputations as they move on. You can bolster this perception by announcing the transition via press release, rather than only filing the requisite Form 8-K. In order to gain additional visibility, avoid distributing the release on a Friday, which is still considered by many to be the day that companies try to bury uncomfortable news.

5. Coordinate messaging with the outgoing CFO.

A CFO won’t always leave under favorable circumstances. Still, there are good reasons to put the departure in the best light possible. Maintaining credibility with investors is one, but limiting the company’s liability from a potential lawsuit is another. By agreeing on the release language, the company can accomplish both. If you fail to agree on the message, or either side strays from the agreed upon language, you run the risk of creating doubts about the company’s credibility.

Remember, when communicating a CFO transition, you will want to present the company and the finance function from a position of strength. Give investors reasons to feel confident in the company’s financial footing and not perceive potential accounting missteps. Thinking purposefully about your messaging and your overall communications plan will demonstrate a structured, orderly transition and encourage positive relationships with the financial community.

Maureen Wolff is CEO and partner at Sharon Merrill Associates. She is a National Investor Relations Institute Fellow, Senior Roundtable Member and Honorary NIRI Boston Director. She is a trusted advisor to CEOs, CFOs and boards of directors on critical communications issues including corporate governance, shareholder activism and proxy contests, CEO succession planning and disclosure issues.

Succession Planning, Crisis Communications, CFO, Corporate Communications, Executive Transition, CFO Transition, Succession Communication, Transition Communication

Subscribe to The Podium!

Connect with your Investors

Establish a sincere connection with investors to communicate key messages during your Investor Day. Download our free e-book on effective presentation habits, and learn to deliver ideas with confidence and clarity.

Delivering Effective Presentations

When it's time for a change

Whether planned or sudden, it is crucial to communicate the succession of high-profile positions effectively. Download our three-part e-book and learn the best way to craft a plan for CEO, CFO and Board of Directors transitions.

Download Your Free eBook: Communicating Management Transitions 

Be Proactive, Not Reactive

With our new Proxy GamePlan, we create a year-round, data-driven strategic roadmap for effective shareholder engagement. Implement a best-in-class program rooted in a deep understanding of your company’s proxy practices, shareholder voting trends and peer landscape.

Learn More About Proxy GamePlan

Find Effective IR Counsel

Whether you’re seeking external IR counsel for the first time or evaluating your current provider, you need a firm that understands your strategy, adapts to your culture and tells your story. Download our free guide on how to assess the effectiveness of an investor relations firm.

How to Assess  an IR Firm

Activism Defense

No company is immune to shareholder activism. Sharon Merrill helps boards of directors and executive management teams identify the activist red flags lurking in your shareholder base, assess your governance risks and develop an action plan to prevent, detect and neutralize any threats. Download our free white paper, “Leveraging Institutional Shareholder Relationships to Reduce Activism Risk,” and learn how the best defense against activism is a strong offense.

Download Activist Defense White Paper

Captivate your Audience

Speaking persuasively is critical in today’s competitive business environment. Effective speakers use voice techniques and body language that project authority and credibility. Download our free e-book, “A Guide to Delivering Captivating Presentations,” for insight into good -and bad- presentation habits, and learn how to improve your skills.

Become a Persuasive Speaker 

Perceptions Matter

How do you ensure that investors clearly understand your strategy, growth drivers and market position? The most effective way is through a perception study. By periodically taking the investment community’s pulse you can avoid the knowledge gaps and misperceptions that hurt valuation. Download our free whitepaper, Why Perceptions Matter, to learn more.

Download your free copy of  'Why Perceptions Matter' 

Common Topics:

More topics