Financial Officer

IntroductIonThis report provides a fresh overview of Russia’s current serving genera-tion of chief financial officers. Our ongoing data analysis shows that:

» 15% of the largest Russian companies changed CFOs in 2018.

» The companies under review maintain a tradition of hiring CFOs inter-nally. That said, we observed a slight increase in external hiring in 2018, to a level last seen in 2016.

» Those having served as divisional financial directors form the largest cohort of CFOs.

» Average tenure continues to decline, to 5.4 years.

» ACCA/CFA and MBA qualifications are more evident among the CFO population.

» Women hold 20% of CFO positions among the top 100 companies, maintaining a gradual upwards trajectory in representation.

» Average total annual compensation is $1.48m.

Russia CFO Route to the Top 2019 edition

A changing role for a maturing economy

russia cfo route to the top 2019

spencer stuartpage 2

AGe The average age of CFOs remains stable at 45.3 years.

Fast-paced consumer, TMT and financial services sectors tend to hire younger CFOs, closer in age to executives who occupy product and technol-ogy roles in these companies. However, the majority of Russian listed companies operate in the industrial sector, where the average age of CFOs is 46.5, a reflection of a maturing CFO function.

The average age of CFOs at FTSE 100 companies is 52. Fortune 500 CFOs average 49.3 years (up from 44 years in 2005).

Two CFOs at Russian companies were hired into the role at the age of 26. The youngest CFO among Fortune 500 companies was hired when he was 29 years old. Four CFOs among FTSE 100 companies were 32 when appointed.

CON

40.5 42 43.3

FS

41.4 42.944.5

IND

43.6 45 45.9

LS

4143.5

45.5

TMT

40.4 4144.8

42.5 43.146.3 46.5

43.9

0

10

20

30

40

50

0

10

20

30

40

50

2015

42.7 44.2

2016

45.3

2018

45.3

2017

Average age of CFOs

Three-year analysis

Average age of CFOs by industry sector

▪ 2015 ▪ 2016 ▪ 2017 ▪ 2018

russia cfo route to the top 2019

page 3

inteRnAL VS eXteRnAL HiRinGWhen Russian companies appoint a new CFO they tend to draw from internal talent pool (59% in 2018) rather than hiring an external candidate (41%).

However, the decrease in internal promotions in 2018 could indicate talent shortages inside some Russian companies, possibly as a result of low renewal rates among senior management tiers in the biggest companies.

At the moment, most companies have a good choice of senior professionals for the CFO role — either experienced external candidates or internal candi-date with the potential to become a fully pledged CFO. While companies may be saving costs with an internal promotion, they usually have to increase the compensation for a CFO after the first year in the role.

65% of FTSE 100 CFOs are internal promotions, while Fortune 500 compa-nies have 67% of internally promoted CFOs. The proportion of internal hires at Fortune 500 companies has been gradually growing for the last 11 years, from 61% in 2007 to a peak of 69% in 2016.

CON FS IND LS TMT

67%63%

67%62%

69%64%

57%59%

67%

25%

33%33% 33%

50%

57%55% 53%

61%

33%

55%

0

10%

20%

30%

60%

50%

40%

70%

55% 59% 65%

45% 41% 35%

2015 2016

59%

41%

20182017

Internal vs. External CFO appointments

▪ Internal ▪ External

Internal CFO appointments by industry sector

▪ 2015 ▪ 2016 ▪ 2017 ▪ 2018

russia cfo route to the top 2019

spencer stuartpage 4

PReVioUS eXPeRienCe Expectations of a CFO’s previous experience are changing Our review showed no dramatic shift in where demand is directed, although we do note a rise in interest from selection committees in FP&A professionals. That aside, divisional financial directors and former CFOs continue make up the primary talent pool for future CFO roles.

The number of experienced CFOs has grown slightly in 2018, but the trend for newly promoted CFOs is clear. Among FTSE 100 companies 44% of CFOs have previous CFO experience. It is interesting to observe the oppo-site dynamics in Fortune 500 companies — only 31% of F500 CFOs have previous CFO experience, compared with 24% in 2006.

Previous functional experience, by role

2015 2016 2017 2018

CFO 29% 26% 21% 23%

DFD 22% 26% 31% 30%

Controlling 11% 11% 12% 11%

Corporate Finance / M&A 10% 9% 7% 7%

GM 8% 9% 4% 1%

Reporting 7% 4% 10% 9%

FP&A 3% 3% 7% 8%

IR 3% 3% 2% 3%

Treasury 3% 3% 2% 2%

Risk 2% 2% 2% 2%

Non-finance 2% 2% 1% 2%

russia cfo route to the top 2019

page 5

tenURe Average CFO tenure has fallen slightly, to 5.4 years. We note that many companies with a ‘short CFO cycle’ changed their CFO again in 2018, so the shorter average tenure we are seeing does not indicate a specific trend on the Russian market.

The average CFO tenure at Fortune 500 companies has been stable, remain-ing within 5–6 years since 2006 (it was 5.6 years in 2018). The tenure of FTSE 100 CFOs in 2018 was 5.3 years.

15% of companies appointed a new CFO, slightly fewer than in 2017. Annual CFO turnover among Fortune 500 companies averages 14%. Among FTSE 100 companies, 17% had new CFO in 2018.

0

10%

20%

2015

13%

16%

2016 2018

15%

2017

18%

0

3

6

2015

5

5.7

2016 2018

5.4

2017

5.7

CON FS IND LS TMT

5.7 5.45.8

4.85.2

5.6 5.46.1 5.8

5.05.7

6.7

3.23.9 4.1

5.7

4.2

5.9

7.7

3.3

0

6

4

2

8

New CFOs among top 100 companies

Percentage of companies with CFO hired in the past year

Average tenure of CFOs

Years in current role

Average tenure of CFOs by sector

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top 2019

spencer stuartpage 6

edUCAtion Levels of education and professional qualifications among Russian CFOs continue to strengthen: we see more qualified accountants and PhDs in 2018.

A competitive talent market tends to push up education expectations and to increase professionalisation in the function. To drive a CFO agenda, solid financial acumen is essential.

From our experience, the decision to select a candidate for a CFO role is driven by more than education. But we note a correlation between a strong professional education and career progress in blue-chip companies.

Our survey shows, that only 6% of international CFOs hold a PhD compared with 15% of Russian CFOs. 13% of UK CFOs have an MBA compared with 24% in Russia. In the US, 48% of Fortune 500 CFOs have an MBA degree and 36% have CPA.

MBA ACCA Ph.D. CFA

21%

25%23%

6%

11% 11% 11%13%14%

2% 2% 1%

24%

14% 15%

2%

0

20%

10%

30%

CFO education

▪ 2015 ▪ 2016 ▪ 2017

russia cfo route to the top 2019

page 7

diVeRSitYGender diversity among the Russian CFO pool continues to grow, despite no official target existing.

One in five CFOs among the country’s top 100 companies is a woman. The population of women at the less senior tiers of financial departments is wider still, so we expect to see more women represented at CFO level in the future.

Just 14% of FTSE 100 CFOs are women and 13% of F500 CFOs (compared with 7% in 2006) — both less than the 20% recorded in Russia.

ComPenSAtionWide variations in levels of CFO compensation are present among the companies in our sample.

Although average figures can illuminate general compensation practices, they cannot be used for detailed analysis. Some CFOs at the largest compa-nies receive substantial long-term incentive payments, and as a result their total compensation greatly exceeds the average.

We have noted some indicative figures that can help to gauge the current CFO market, however. The average base salary is ₽27.7 million, the average annual bonus is ₽29.9 million, and the average annualized LTI is ₽34.9 million. Total average compensation for a CFO is ₽92.5 million, or $1.48 million.

85%

15%

201585%

15%

201682%

18%

2017 201880%

20% CFO Diversity

▪ Male ▪ Female

russia cfo route to the top

spencer stuartpage 8

A modern CFO for a modern board

The role of the CFO continues to grow swiftly in complexity and scope, making the CFO one of the most important — and most scrutinised — execu-tive appointments the board will make.

Effective nomination committees expect an incoming CFO to step beyond the role’s already demanding fiscal responsibilities. He or she must demonstrate that they are comfortable helping to shape strategy or operational matters, or advising the board on risk and compliance decisions. This demanding slate of skills is enhanced by the kind of rapport and communication capabilities on which trusted relationships are built.

Through its work with Russian and international boards in the country, Spencer Stuart has identi-fied patterns often present in CFO selection and decision-making processes. Some of our insight in particular emerges from our work with audit committee members, who deal with CFOs more closely than chairs or members of nomination committees.

The following are the qualities and skills that boards most frequently seek in a CFO:

» Boards want CFOs who can engage in a con-structive fashion, rather than either agreeing or arguing with everything. Soft challenges to others’ opinions are often encouraged within boards; hostile or critical attacks are not. A successful CFO uses open questions rather than open criticism.

» Experience that speaks to honesty and integrity has a high value. The interests of stakeholders — including customers and investors — take precedence; personal agendas — promotion, bonus, ego — come last.

» Boards need to know that a CFO will admit to mistakes (the loss of market positions due to poor planning/analysis, for example). The real threats these days come from those who believe they do not make mistakes.

» Strong collaborating capabilities. Results are driven by the team, not by an individual.

» Evidence of deep strategic awareness, of what is going on in the sector and other industries, of partnerships that could benefit the organisation.

» Good communication skills — an effective CFO must explain to the board and investors the workings of product lines and business divisions alike.

» Experience of different cultures, which adds a global sensibility.

russia cfo route to the top 2019

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metHodoLoGYThe research uses data drawn from public sources and Spencer Stuart research that analyses the professional background and career paths of CFOs of the largest Russian public companies by market capitalisation. 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 30 December 2018.

We have compared Russian market data with Spencer Stuart CFO bench-marks from the UK (FTSE 100) and the US (Fortune 500) markets in 2018.

The majority of companies under review are industrial (63 companies out of 99), followed by financial services (15), consumer (nine), technology, media and telecommunications (nine), and life sciences (three). A full list of companies can be found on the following page.

Industry acronymsCON Consumer goods and

services

FS Financial services

IND Industrial

LS Life sciences

TMT Technology, media and telecommunications

Function acronymsDFD Divisional financial director

FP&A Financial planning and analysis

GM General management

CD/M&A

Corporate development/ Mergers and acquisitions

Control Financial controller

IR Investor relations

ONF Other non-finance

OGF Other group finance

PS Professional services

russia cfo route to the top 2019

spencer stuartpage 10

Companies ListAcron

Aeroflot

Alrosa

AvtoVAZ

Bashneft

Chelpipe

Chelyabinsk Zinc Plant

Cherkizovo

Detskiy Mir

Dixy Group

Dorogobuzh

Enel

EVRAZ

Evroplan

FG “Future”

FSK UES

Gazprom

Gazpromneft

Global Ports

Globaltrans Investment

Inter RAO

Irkutskenergo

KAMAZ

Kazanorgsintez

Kubanenergo

Kuybishevazot

Lenta

LSR Group

Lukoil

Luxoft

M.Video

Magnit

Mail.ru

Mat’ I Ditya

Mechel

Megafon

MGTS

MMK

MOESK

Moscow Credit Bank

Moscow Exchange

Mosenergo

Mosoblbank

Mostotrest

MRSK Centr

MTS

Nizhnekamskneftekhim

Russneft

NLMK

NMTP

Norilsk Nickel

Novatek

OGK-2

O’Key Group

OTC Pharm

Otkritie

Phosagro

PIK

Polymetal International

Polyus Zoloto

Promsvyazbank

Protek

QIWI

Raspadskaya

Rosbank

Rosgosstrakh

Rosneft

Rosseti

Rostelecom

Rusagro

Rusal

Rushydro

Saint Petersburg Bank

Sberbank

Severstal

Sistema

Slavneft-Megionneftegaz

Sollers

Southern Kuzbass

Surgutneftegaz

Synergy (Beluga Group)

Tatneft

TGK-1

Tinkoff Credit Systems

TMK

TNS Energo

TransKonteyner

Unipro (ex-E.On)

United Aircraft Corporation

United Wagon Company

Uralkali

Uralsib

Utair

Vimpelcom

Vozrozhdenie Bank

VSMPO AVISMA

VTB Bank

X5 Retail Group

Yandex

russia cfo route to the top 2019

page 11

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

Oslo

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 © 2019 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 Gennady Vanin

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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