2. 2
METHODOLOGY
A growing number of up-and-coming Chinese companies have been
seeking overseas listings in recent years. What types of skills and
experiences should a CFO bring to today’s IPO market? What should
companies do when they face a limited pool of qualified talent?
RussellReynoldsAssociatesanalysedandcomparedthebackgrounds
of CFOs at 50 Chinese companies that were recently listed on the New
YorkStockExchangeandNASDAQ.Thisreportrevealsthemaintrends
and specific insights into the experiences and skills that these CFOs
bring to their roles, and the talent implications based on these findings.
i
1 |
This analysis also includes insights provided by CFOs from both
private and public companies in China. They shared with us their views
on today’s finance talent market for Chinese companies, as well as
their perspectives on the global IPO outlook for Chinese companies.
4. 4
66%of
the companies
are in technology-
related sectors.
Many overseas
investors see huge
opportunities in
Chinese internet/
technology stocks
as the industry is
increasingly delivering
significant growth and
showing substantial
margin potential.
Traditional industries
are also facing
high-degree digital
transformation in
their businesses and
start to rely heavily
on technological
advancement and
digital strategies.
38%
16%
12%
6%
6%
4%
4%
4%
2%
2%
2%
2%
2%
INDUSTRY REPRESENTATION
INTERNET/TECHNOLOGY DOMINATION
Internet Services
E-Commerce
Computer Software/Hardware
Consumer Goods
Energy
Financial Services
Healthcare
Retail
Automotive
Education
Hospitality
Media
Steel
3 |
5. 5
KEY FINDING 1
CFO APPOINTMENTS EXPECTED TO SOAR
• According to our study, US IPO activities for Chinese companies picked up after 2009 and peaked
in 2010 - a record-breaking year for Chinese companies listing on U.S exchanges. Unsurprisingly,
there has been a noticeable increase in CFO appointments after the global financial crisis in 2008.
The hiring rate started to accelerate even more in recent years: 76% of the CFOs were appointed
since 2012; nearly half of the CFOs we studied were appointed in 2014 alone
• A 14-month moratorium on IPOs starting in late 2012 on mainland exchanges led to a backlog of
nearly 800 companies requesting to go public. Although the ban was lifted in January 2014, many
Chinese companies still want to seek overseas listings and maximize actual market visibility
• The IPO market for Chinese companies has started off flat during the first quarter of 2015,
potentially due to the slowing growth trajectory of China’s economy; however, most of the CFOs
we interviewed believed that the outlook of the IPO activities in the upcoming months would remain
bullish, as average returns of recent IPOs have appeared to be high. In addition, we are expecting
to see many Chinese emerging businesses return to the domestic capital market in the near future
due to the debut of China’s new OTCBB, as well as the revival of the main board and growth
enterprise board. Therefore, CFO appointments in both domestic and overseas market will rise.
Both IPO activities and CFO appointments have doubled in
the last consecutive years, signaling high future transaction
volume and immediate needs for high caliber IPO CFOs
IPO Per Year CFO Appointment
2008 2009 2010 2011 2012 2013 2014
0
1
21
5
8
4 4
2
6
11
12
23
1
2
4 |
6. 6
KEY FINDING 2
A NEW GENERATION OF HOME-GROWN TALENT
5 |
Most IPO CFOs are from
Greater China (Mainland,
Hong Kong, and Taiwan) – this
highlights the importance of
deep local knowledge of the
Chinese market, even though
they are listed on US stock
exchanges; moreover, coming
from the same background/
origin as the CEOs often helps
the CFOs win trust from their
top leaders.
The average age of the CFOs
from these US-listed Chinese
companies is 44. Comparing
to their peers from Fortune
100 (51) and Eurotop (52)
companies, these CFOs belong
to a much younger age group;
nevertheless, they are still more
experienced than their founder/
entrepreneur CEOs, who were
typically born in late 1970s or
1980s.
The majority of the CFOs are
men; however, more than a
quarter of this population are
women – a significantly higher
percentage than those of the
largest companies in Europe
(6%) and North America (10%).
Expats
Chinese
Nationals/Returnees
2%
98%
Female
Male
28%
72%
Average Age
44
As we mentioned earlier, close
to 70% of the companies are
in the internet/technology
sector, which is stereotypically
dominated by men.
Nevertheless, tech companies
these days have become
increasingly more aware of the
need for gender diversity and
started to add female executives
into their leadership teams.
7. 7
Overseas
Education
Overseas Work
Experience
Accounting or
Finance Qualification MBA
Nearly half of the CFOs
have obtained accounting
or finance qualifications.
This shows that strong
technical knowledge remains
an important prerequisite
for US-listed Chinese
companies.
Over one-third of the CFOs
have an MBA. This suggests
the rising importance for
finance leaders to have
systematic training, potential
strategic vision, and broad
business sense.
70% 40% 48% 36%
6 |
A meaningful percentage of the CFOs have studied
and/or worked overseas, indicating a growing
demand among US-listed Chinese companies for
talent with international exposure and a global mind-
set
Big 4
Training
Investment
Banking
Experience
Management
Consulting
General
Management
Experience
Previous
Start-up
Experience
Companies hire finance leaders with a Big 4 backgrounds for their strong
technical skills and barrier-free communication with external auditors; many of
them have previously done pre-IPO audit or consulting work.
Companies seek talents with investment banking background for their
knowledge of the IPO process and ability to contribute significantly to
roadshows, pricing, and building connections in the capital markets.
However, CFOs who were ex bankers are likely to leave shortly after receiving
their post-IPO financial reward.
Ex-management consultant CFOs are highly strategic and natural business
partners with a great sense of, and extensive access to market insights.
They are also able to build and maintain trusted, long-term partnerships with
independent professional services firms.
More and more companies are looking for finance talent who can demonstrate
strong leadership skills and gravitas, and make excellent business partners to
the CEOs.
CFOs who have previously been with a start-up have strong financial
knowledge of supporting a company’s early growth stages in a timely, cost-
efficient fashion who is comfortable in a fast paced environment.
14%
32%
8%
32%
40%
KEY FINDING 3
INTERNATIONAL, STRATEGIC FINANCE TALENT PREFERRED
KEY FINDING 4
A DIVERSE MIXTURE OF PREVIOUS BACKGROUNDS
8. 8
The average current tenure of IPO CFOs at US-listed Chinese companies is
much shorter than the that of the CFOs from the largest listed companies
around the world, which averages around 5 years.
This is because:
• CFOs – often those that came from investment banks - are hired to
specifically to facilitate the IPO process instead of being incentivized to serve
as a long-term financial chief
• Once CFOs go through an IPO, they soon become in high demand in the
market and may leave for more attractive outside opportunities or new
challenges
• As pointed out by many CFOs RRA has interviewed, while companies
continue to go through various growth stages before and after an IPO, the
opinions of the CEO and the CFO may start to diverge, which can cause the
CFO’s departure
KEY FINDING 5
IPO CFOs HAVE MUCH SHORTER TENURES
7 |
2.3
years
We learned from the CFOs we surveyed that managing relationships with and
gaining trust from founder CEOs were among some of the biggest challenges
since they began their tenures. As they alluded, these “big bosses” sometimes
do not give enough importance to grooming a well-functioning finance
organization within the modern business structure for the long run. In order to
become true business partners to the top seats and elevate their engagement
and commitment in the finance function, the CFOs need to always maintain
straightforward and transparent communication with the CEOs, and be willing to
speak their language and understand where their interests stand.
In addition, today’s multicultural capital market needs finance talents that are
strong communicators, negotiators, and masters of resolving conflicts both
internally and externally.
Average years between CFO appointments and public listings
1 year 2.8 years
Pre-IPO CFOs Post-IPO CFOs
IPO
9. 98 |
KEY FINDING 6
HIGH VOLUME OF EXTERNAL, CROSS-SECTOR HIRING
Companies demand different skill sets from
their CFOs during different growth stages.
Nearly 70% were external hires as, more often
than not, internal candidates’ qualifications
are unable to meet the defined mandates
throughout a company’s development:
1. Early stage: a finance leader with excellent
accounting and financial control skills to
support the company’s basic daily financial
needs
2. High-growth stage: a finance leader
who has strong knowledge in FP&A, tax,
treasury, as well as ERP systems, to drive
fast, direct financial impact to the company
3. Pre-IPO stage (12-18 months prior to
IPO): a CFO with extensive capital market
experience, investor relations skills and
GAAP knowledge to effectively prepare a
public listing
Companies usually prefer to hire CFOs with
relevant industry experience in order to
reduce the learning curve.
Our analysis shows that the majority of the
CFOs who came externally did not have
previous industry/product knowledge.
This underlines the high transferability of
top CFOs – such as technical knowledge,
leadership skills, and learning agility – across
industries.
68%32%
Majority of the CFOs came externally
65%35%
Majority of the CFOs did not come
from the same industry
Came from
Industry
OutsiderExternalInternal
10. 10
KEY FINDING 7
PRE-IPO CFOs VS. POST-IPO CFOs
Taking a company through an IPO and being a scalable public company finance leader requires more than just a
regular background. Our analysis shows that CFOs appointed pre-IPO appear to have a more competitive profile
than those appointed after IPO.
9 |
• The long listing process requires pre-IPO CFOs with broad experience and capabilities, as well as
extraordinary resilience to handle the exhausting procedure of execution and being the face of their
firms – they must be outward looking, and act as the CEO’s go-to person in communication with
the Street and the Board.
• In addition, to comply with overseas stock market requirements, pre-IPO CFOs need to bring
governance, processes and controls, rigorous accounting and reporting skills, as well as the ability
to deliver reliable numbers on a timely basis.
• In contrast to pre-IPO CFOs, post-IPO CFOs are usually recruited as proven “routine” listed finance
leaders with strong finance and control background to preside over the financial function and
maintain the integrity of the financials.
Previous Portfolio
Experience as a
CFO
IPO Experience
Group CFO
Experience
Previous CFO at another
US-listed Chinese
Company
55% 25% 41% 18%
59% 39% 45% 18%
Pre-IPO CFO Post-IPO CFO
11. 11
As more and more ambitious, high-growth Chinese companies
start to set their foot in the global capital markets, there
will be an increasing demand for CFOs who have overseas
experience and a strategic mind-set, and are able to enforce the
standardization of financial systems and manage the growing
investment and financing requirements.
Companies look for different types of finance leaders to meet
their unique operational needs during different growth stages.
Therefore, finding talent with the right skills/experience at the
right time is more than critical. In addition, when a pre-IPO
company chooses a CFO, not only does it seek a finance
leader with a proven track record of finance leadership, it also
pays great attention to his/her personality, management style,
influencing skills, and ability to win trust from the CEO, Board,
and other key stakeholders.
Today’s IPO market needs finance talent with extensive
knowledge of the capital market and the ability to be a great
business partner. Whilst CFOs at multinational corporations in
Greater China usually excel at business partnering, they may
lack direct exposure to the capital market. Developing such
experience is critical for this type of CFOs if they plan on moving
to the IPO CFO career track.
As Chinese companies accelerate their pace into the global
capital market game, the pool of qualified IPO CFOs with diverse
mix of experience will remain limited. While internal referrals and
PE/VC recommendations continue to provide valuable resources
when searching for the next finance leader, top executive search
partners can systematically identify, select, and assess the best
pre- and post-IPO talent who can defend stakeholders’ interests
and help companies succeed.
SUMMARY
10 |
12. 1211 |
Jeffrey Cheng, FCCA
Based in Shanghai, Jeffrey is a key consultant of Russell
Reynolds Associate’s Corporate Officers Practice. He
has served more than 100 multinational organizations,
Chinese SOEs and POEs across different industries. He
has substantial experience providing advice and talent
solutions for Chinese and multinational companies at
different growth stages.
Rachel Ouyang
Based in Hong Kong, Rachel is a key member of the
Knowledge function for Russell Reynolds Associates.
She leads Corporate Officers Practice’s talent market
analysis and other knowledge management projects
for both Chinese and Multinational Corporations in Asia
Pacific.
GREATER CHINA CONTACTS
SHANGHAI
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88 Century Avenue
Shanghai 200121
China
Tel: +86-21-6163-0888
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18 Chater Road Central
Hong Kong
China
Tel: +852-2523-9123
BEIJING
Unit 3422 China World Tower 1
No. 1 Jian Guo Men Wai Avenue
Beijing 100004
China
Tel: +86-10-6535-1188
AUTHORS
13. 1312 |
ABOUT RUSSELL REYNOLDS ASSOCIATES
Russell Reynolds Associates is a global leader in assessment, recruitment and succession planning for chief executive
officers, boards of directors and key roles within the C-suite. With 350 consultants in 45 offices worldwide, we work closely
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teams that can meet the challenges and opportunities presented in the changing global business environment.
www.russellreynolds.com
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