Financial Officer Practice

IntroductIonThe modern chief financial officer is a leader. The role is evolving fast in terms of complexity and scope, so the remit of the modern CFO extends far beyond traditional financial responsibilities such as account-ing, controlling, treasury and tax. A successful CFO also shapes strategy, advising CEO and board on strategic, operational, risk and compliance issues as well as working closely with major investors and financial institutions.

The Russian CFO market is progressing rapidly and follows key UK and US trends, so we have carried out extensive research in order to provide international benchmarks. These benchmarks highlight some gaps in experience and in career planning. Attention should be paid to closing these gaps in order to establish a vigorous talent pipeline.

In many Russian companies, the CFO is the key decision-maker after the CEO. There are several reasons why this is so. First, a series of financial crises from 2008 demanded an intense focus on operational finance; second, the M&A scene in Russia is especially dynamic, and third, the need for CFOs to collaborate closely with major shareholders on special projects. 

We hope that this report will be a useful tool to encourage closer under-standing of the role of the CFO in Russia, and the part that succession planning and talent development must increasingly play in its evolution:

» Career development for current and future CFOs. Which areas of experience must be developed in those for whom a CFO role is three to seven years away?

» Defining a CFO profile. How can market information help create a smooth CFO succession plan?

» International trends. What can mature markets tell us?

Russia CFO Route to the Top

russia cfo route to the top

SPENCER STUARTpage 2

MethodologyThe research uses data drawn from public sources and Spencer Stuart research that analyses the professional background and career paths of CFOs of the 100 largest Russian public companies by market capitalisation (using the 2016 ratings prepared by RIA Rating). Ratings are based on data from the Moscow Exchange, RIA Rating estimates of foreign exchange floors and issuers’ data, and Bank of Russia data. Capitalisation is estimated as of December 30, 2015.

We have compared Russian market data with Spencer Stuart CFO benchmarks from the UK (FTSE 100) and the US (Fortune 500) markets.

Industry acronymsCON – Consumer goods and servicesFS – Financial servicesIND – IndustrialLS – Life sciencesTMT – Technology, media and telecommunications

Function acronymsDFD – Divisional financial director FP&A – Financial planning and analysisGM – General managementCD/M&A – Corporate development/Mergers and acquisitionsControl – Financial controllerIR – Investor relationsONF – Other non-financeOGF – Other group financePS – Professional services

Key findings » 15 of the CFOs at the 100 largest Russian companies are women, compared with 11 in

the UK and 13 in the US.

» The average age of the Russian CFO is 43, compared with 52 in both the UK and US.

» The average CFO tenure in Russia is five years, compared with 4.5 in the UK and close to 5.5 in the US.

» 55% of CFO appointments are internal hirings, compared with 48% in UK and 61% in US.

» Russian CFOs promoted internally come predominantly from finance controller or divisional finance director roles.

» Annual CFO turnover among the 100 largest Russian companies is 13%, the same as in the UK and US.

» 24% of Russian CFOs sit on their board.

RUSSIA CFO ROUTE TO THE TOP

page 3

Companies ListAcron

Aeroflot

Alrosa

AvtoVAZ

Bank of Moscow (VTB)

Bashneft

Chelpipe

Chelyabinsk Zinc Plant

Cherkizovo

CTC Media

Dixy Group

Dorogobuzh

E.On

Enel

ETC

EVRAZ

FSK UES

Gazprom

Gazpromneft

Global Ports

Globaltrans Investment

Hals Development

Inter RAO

Irkutskenergo

KAMAZ

Kazanorgsintez

Krasnoyarskaya HES

Kubanenergo

Kuybishevazot

Lenta

LSR Group

Lukoil

M.Video

Magnit

Mail.ru

Mat’ I Ditya

Mechel

Megafon

MGTS

MMK

MOESK

Moscow Credit Bank

Moscow Exchange

Mosenergo

Mosoblbank

Mostotrest

MTS

NGP (Novorossiysk Grain Plant)

Nizhnekamskneftekhim

NLMK

NMTP

Norilsk Nickel

Novatek

OGK-2

O’Key Group

OTC Pharm

Otkritie

Pharmstandard

Phosagro

PIK

Polymetal International

Polyus Zoloto

Promsvyazbank

Protek

QIWI

RAO ES Vostoka

Raspadskaya

Rosbank

Rosgosstrakh

Rosneft

Rosseti

Rostelecom

Rusagro

Rusal

Rushydro

Saint Petersburg Bank

Sberbank

Severstal

Sistema

Slavneft - Megionneftegaz

Slavneft Yaroslavnefteorgsintez

Sollers

Southern Kuzbass

Surgutneftegaz

T Plus

Tatneft

TGK-1

Tinkoff Credit Systems

TMK

TransKonteyner

United Aircraft Corporation

United Wagon Company

Uralkali

Uralsib

Vimpelcom

Vozrozhdenie Bank

VSMPO AVISMA

VTB Bank

X5 Retail Group

Yandex

russia cfo route to the top

SPENCER STUARTpage 4

CoMpany breaKdown by industry

positions analysed

diversity

0

30

60

90

120

150

180

210

IND

66

37

186

FS

1424

79

TMT

9 10

70

CON

7

25

118

LS

4 4

44

Russia 100 FTSE 100 Fortune 500

15% 11% 13%

85% 89% 84%

Russia FTSE 100 Fortune 500

Female Male

100

97ACTIVE CFOs

VACANT POSITIONS

3

RUSSIA CFO ROUTE TO THE TOP

page 5

Russia has more female CFOs than both the UK and the US. In the early years of the Russian corporate environment (1991-2000) the role of financial director was looked upon as “women’s work”. Previously the Soviet management paradigm meant that few men worked in accounting and financial planning departments, so such work was associated predominantly with women. The gender balance started to shift in the late 1990s and early 2000s, when international consumer companies started to introduce management trainee programmes in the local market. Men began to be appointed to many of the junior roles in financial planning and analysis, accounting and reporting. At the same time, men began to outnumber their female colleagues in small and medium business financial roles from the 1990s, gradually moving up to middle-level management positions in large companies.

age

In any economy, the presence of a relatively young senior management tier indicates a rapidly developing market. In the industries we reviewed, Russian CFOs are on average nine years younger than their UK and US peers. In 2007, the average age of a CFO in Russia was 40, according to “The portrait of the modern financial director”, research conducted jointly by Financial Management magazine and Moscow International Higher Business School (MIRBIS).

Several factors have combined to account for the relative youth of many financial executives in Russia. This cohort had an advantage over older managers who grew up in the Soviet economy, without any international experience or management schooling. Nowadays young executives compete with older colleagues who have been educated and trained in international companies in 1990-2010, have gone through crises and corporate restruc-turing and experienced a competitive market environment. These factors lead to the increase of average CFO age.

0

10

20

30

40

50

60

IND

45

51 52

FS

42

50 51

TMT

41

52 53

CON

42

51 53

LS

42

53 52

Russia 100 FTSE 100 Fortune 500

russia cfo route to the top

SPENCER STUARTpage 6

eduCation and qualifiCations

MBAs and especially ACCA and CFA professional qualifications are not currently perceived as essential at the top 100 Russian companies. However, these qualifications are significant in appointments that entail a leadership role in Russian branches of international companies, or at smaller Russian companies.

Cfo turnover 2015

On average, turnover of CFOs at the largest Russian companies is about the same level as that in the UK and US. In 2015 one in seven of Russia’s top 100 companies appointed a new CFO.

0

5

10

15

20

25

MBA

21%

6%

ACCA

Russia

2%CFA

0

5

10

15

Russia 100

13%14%

FTSE 500

Percentage of new CFOs

Fortune 500

15%

RUSSIA CFO ROUTE TO THE TOP

page 7

internal or external hiring

In slightly more than half of cases a CFO was appointed from internal candi-dates. There is an even split between internal and external appointments. The largest Russian companies are more likely than the largest British companies to promote internally to CFO roles, but less likely than In the US, where 61% of CFOs are drawn from internal candidates.

Citizenship

In 2015, only six CFOs of the 100 largest Russian companies were foreign citizens. Russian nationals are replacing expatriates in top management, a trend that has been apparent over the past three years. According to research by RANEPA, the volume of work permits issued in 2015 for highly qualified managers dropped by 57% overall, compared with 2013. The number of permits in the same period issued to UK citizens fell by 68%, to Germans by 58% and to US citizens by 50%.

55%48%

61%

45%52%

39%

Russia FTSE 100 Fortune 500

External Internal

6%23%

94%77%

Russia FTSE 100

RussianNon-Russian

BritishNon-British

Russia Top 100 FTSE 100

russia cfo route to the top

SPENCER STUARTpage 8

possible Cfo Career traCK

The illustrated career paradigm does not reflect any actual hierarchy in any individual company, but it is a useful starting point for companies aiming to review development areas in order ultimately to enrich their talent pipeline.

In general, reporting, accounting, audit and treasury roles represent starting positions within the financial function. External relations roles necessarily are taken by experienced professionals, able to protect the company’s finan-cial position by deploying complex finance and investment management skills. Operational finance management fosters the ability to forge strong partnerships to drive cross-functional projects. M&A assignments and busi-ness development initiatives develop an understanding of, and contribute to, the long-term strategy of an organisation at a senior level. This accrued blend of experience and skills provide a CFO with a clear path to a board-level appointment.

Example of a career path in finance:

1. Auditor in Big Four firm

2. Analyst, senior analyst in financial planning and analysis

3. Financial manager, supply chain (business partner for supply chain function)

4. Treasury director

5. Corporate finance director

6. Finance director, international assets

7. CFO

Board/Management Committee

Strategy & Business DevelopmentMergers & Acquisition, Corporate &

Business Development, Strategic Planning and Analysis

OperationalFinancial Planning and Analysis, IT, Real Estate,

Administration, Human Resources

External RelationsInvestor Relations, Rating Agencies, Banking Relationships

Treasury & TaxCapital Markets, Corporate Finance, Cash Management, Foreign Exchange,

Structured Finance, Tax Planning and Optimization

Accounting FundamentalsAccounting, Controls, Financial and Regulatory Reporting, Audit and Sarbanes-Oxley

Strategic» Strategic thought partner» Executive Committee responsibility» Board-level exposure

Analytical» Complex thinker with actionable insights» Broader enterprise exposure » Emerging managerial responsibilities

Executional» Tactical decision-maker» Solid technical skills » Functional competency

RUSSIA CFO ROUTE TO THE TOP

page 9

prior position of Cfos

29% of CFOs in Russia and the UK has had previous experience in the role. First-time CFOs have often previously worked as finance director of a divi-sion or subsidiary of their company. The next largest pool from which CFOs in Russia are drawn is that of financial controller or director of controlling. Contrary to popular belief only 7% of CFOs have previously worked as chief accountant or head of reporting. In the UK and US even fewer CFOs are promoted from reporting roles.

CFO

DFD

GM

IR

ONF

Risk

PS

Control

Reporting

Corporate Finance

FP&A

Treasury

CD/M&A

18%36%

15% 21%

11% 15% 16%

8% 10% 14%

7% 5% 6%

5% 2% 2%

2%

4%

5%

4%

3%

9%

12%

3%

22%

29%

1%

3%

5%2%

2%

Russia 100 FTSE 100 Fortune 500

russia cfo route to the top

SPENCER STUARTpage 10

internal and external hiring, by industry

Compared with UK companies, Russian telecom and pharmaceutical companies more often seek CFO candidates from external sources. Companies in Russia’s consumer and financial services sectors prefer to promote from within. In industrial companies, UK CEOs and board members prefer to draw on external experience, while in Russia internal candidates were appointed to 56% of CFO positions. Fast-moving consumer goods (FMCG) companies facing tough competition frequently leverage internal development and training by hiring from within.

External Internal

CON FS LSIND

Russia 100

66.7%

33.3%

61.5%

38.5%25.0%

75.0%

56.9%

43.1%33.3%

66.7%

TMT

Fortune 50064.4%

35.6%

65.8%

34.2%

59.1%

40.9%

73.9%

26.1%

58.6%

41.4%

60.9%

39.1% 41.7%

58.3%50.0%50.0%

41.7%

58.3% 60.0%

40.0%FTSE 100

RUSSIA CFO ROUTE TO THE TOP

page 11

tenure

Despite the seeming instability of Russian management teams, the average tenure of a Russian CFO is longer than that of UK peers across all industries, except for TMT. The relatively shorter tenure of British CFOs may indicate that they are being promoted to other operational roles within a company.

finanCe baCKground, all Cfos

When examining the career profile of CFOs we have checked all positions served, therefore totals exceed the number of CFOs in each market. Both internal and external promotions are counted.

CON

FS

LS

IND

TMT

5.4

5.0

3.2

4.8

5.7

Russia 100

5.6

7.9

3.7

4.0

1.9

FTSE 100

6.0

5.9

5.5

5.0

5.2

Fortune 100

DFD

Controlling

PS

Audit

Treasury

FP&A

OGF

Tax

IR

Reporting

ONF

Corporate Finance

Other Finance

CD/M&A

MD/GM

25

23

21

18

17

16

11

44

53

11

10

9

7

9

2

Russia 100

66

29

37

64

43

36

7

7

6

44

20

19

FTSE 100

100

106

40

42

20

33

53

63

29

Fortune 500

russia cfo route to the top

SPENCER STUARTpage 12

In Russia, as in the UK, many CFOs are promoted from finance director roles at a company division, business unit or subsidiary. The career ladder of CFOs in UK companies is structured in a way that allows professionals to move every two or three years from one financial area to another. In Russia, such a transition usually happens only when an individual changes his or her employer, whereas their counterparts working for international companies expect planned transitions as a part of their professional devel-opment programme.

More than 64% of British CFOs have worked in consulting companies, while in Russia only 23% have accrued similar experience. In Russia only 21% of CFOs have other functional experience such as risk, compliance or project management, compared with 43% in UK.

The fact that so many finance professionals in Russia have to change employers in order to progress in their careers reiterates how important it is to devise structured professional development and succession programmes.

saMe seCtor previous experienCe

NO DATA on Fortune 500

No CFO in Russia’s financial services industry comes from any other sector. In contrast, our study found that not one Russian CFO working in FMCG had any experience of the consumer sector prior to their appointment – all were hired from other sectors. 83% of CFOs in the TMT sector came from other industries, compared with their counterparts in the UK, where only 25% of CFOs do not have relevant sector experience.

Yes No

CON FS LSIND

Russia 100

100% 100%33%

67%77%

23% 17%

83%

TMT

22%

78%

21%

79%

50%50%

33%

67%

25%

75%

FTSE 100

RUSSIA CFO ROUTE TO THE TOP

page 13

routes to the top: internal vs external hiring

We have checked all previous positions served by CFOs therefore totals exceed 100%.

In Russia it is essential for both internal and external CFO appointments to have experience as financial director or finance controller of a division or business unit. Only 25% of current CFOs have worked in reporting-related positions. This indicator is slightly higher among UK companies.

External Internal

DFD

Controlling

Reporting

MD/GM

Audit

Treasury

OGF

FP&A

Tax

IR

CFO

PS

CD/M&A

Other Finance

ONF

Corporate Finance

60%48%

43%48%

42%45%

25%27%

21%27%

13%23%

11%23%

23%20%

6%18%

25%11%

11%11%

13%7%

11%7%

13%5%

9%5%

4%0%

Russia

45%70%

47%34%

26%70%

43%28%

55%76%

15%24%

40%54%

26%38%

17%6%

23%16%

47%34%

11%2%

11%4%

FTSE 100

21%14%

21%3%

2%

18%53%

6%7%

14%14%

5%4%

2%12%

1%

1%2%

Fortune 500

russia cfo route to the top

SPENCER STUARTpage 14

UK companies especially value consulting experience, and external CFO candidates are often expected to have had a previous CFO role. That said, the career paths of UK CFOs quite often encompass functions unrelated to finance, such as project management, risk and compliance.

route by seCtor

Again, we checked all positions served by CFOs therefore the total exceeds 100%. As there are only four pharmaceutical and nine TMT businesses in the largest 100 Russian companies by capitalisation, we have not included their data in this chart.

While it is obvious that treasury experience is vital for banking, in manufac-turing and FMCG it is more technical, so in those sectors treasury directors rarely move into CFO roles. FS companies tend not to appoint CFOs from reporting or internal audit directors. An individual with consulting experi-ence will have a better chance of becoming a CFO in an FMCG or a FS company than in industry, whereas a financial controller has a better chance of being promoted to a CFO position in an industrial company.

DFD

CFO

GRP Control

Treasury

PS

MD/GM

ONF

Reporting

43%56%

57%41%

29%

50%5%

5%

0%

29%48%

29%

29%18%

43%

7%

7%

7%

24%

43%

36%17%

29%

21%23%

29%

Audit

CD/M&A

Other Finance

IR

Tax

FP&A

OGF

Corporate Finance

21%12%

14%

14%

14%

14%

14%

14%8%

0%15%

57% 29%

0%9%

9%

29%

0%

11%

0%

0%2%

Russia 100

CON FS IND

RUSSIA CFO ROUTE TO THE TOP

page 15

Amsterdam

Atlanta

Bangalore

Barcelona

Beijing

Bogota

Boston

Brussels

Buenos Aires

Calgary

Chicago

Copenhagen

Dallas

Dubai

Frankfurt

Geneva

Hong Kong

Houston

Istanbul

Johannesburg

Lima

London

Los Angeles

Madrid

Melbourne

Mexico City

Miami

Milan

Minneapolis/St. Paul

Montreal

Moscow

Mumbai

Munich

New Delhi

New York

Orange County

Paris

Philadelphia

Prague

Rome

San Francisco

Santiago

Sao Paulo

Seattle

Shanghai

Silicon Valley

Singapore

Stamford

Stockholm

Sydney

Tokyo

Toronto

Vienna

Warsaw

Washington, D.C.

Zurich © 2016 Spencer Stuart. All rights reserved. For information about copying, distributing and displaying this work, contact: permissions@spencerstuart.com.

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@Spencer Stuart

authorsAnton Storozhenko, Moscow office Gennady Vanin, Moscow office Viktoria Kim, Moscow office

about spenCer stuartAt Spencer Stuart, we know how much leadership matters. We are trusted by organizations around the world to help them make the senior-level leadership decisions that have a lasting impact on their enterprises. Through our executive search, board and leadership advisory services, we help build and enhance high-performing teams for select clients ranging from major multinationals to emerging companies to nonprofit institutions.

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For more information on Spencer Stuart, please visit www.spencerstuart.com.

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