For CFOs Fired After Restating, Few Reprieves

When companies fudge their reporting, the employment market as well as the financial market exacts a toll on the CFO, a new academic study found.

CFOs of companies that restate results not only are more likely to be fired, they are also much less likely to find another job as a CFO within four years after termination. That's the gist of a study of 167 restating companies by professors Denton Collins of the University of Memphis, Austin Reitenga of the University of Alabama, and University of Arkansas faculty members Juan Manuel Sanchez and Adi Masli, summarized in CFO Magazine.

The Sarbanes-Oxley Act is part of the reason. Since Sarbox, just one in six CFOs (17 percent) fired by restating companies found new employment at the CFO level or higher within four years, the professors found. Before Sarbox, that figure was 37 percent. (However, the percentage of fired CFOs who found new work of any kind dipped only slightly after Sarbox, from 54 percent to 47 percent.) The odds of getting re-employed as a CFO at a public company were even lower.

The professors write:

Firms are less willing in the post-Sarbox period to hire a former CFO with a tarnished reputation. This appears to be consistent with the intent of the legislation to increase executive accountability….The reputational effects of being implicated in an accounting misstatement can be potentially devastating to the subsequent career path of the executive.

Restating: The Career Killer [CFO]