To make more progress diversifying C-suites, companies must promote from within, especially as the recent jump in demand for CFO candidates of color is straining ranks of experienced candidates, Shawn Cole, president of the boutique executive search firm Cowen Partners, said in an interview.  

“We can’t just assume that some other company is going to invest in minority hiring and we’re going to poach their candidate…companies need to look within and they need to create a bench,”  Cole said. 

CFOs are under increasing pressure from the Securities and Exchange Commission, shareholders, lawmakers and investors to adopt environmental, social and governance (ESG) disclosure standards and diversity, equity and inclusion (DEI) programs that bring more people of color and women into the workforce. 

Since the murder of George Floyd in 2020 intensified demands for racial equity in the workplace, companies have been increasing their efforts to recruit more CFOs of color, Cole said. Currently over 50% of the executive searches that Cowen is working on are mandated diversity hires, he said. 

Executives of color are “are in very high demand and it’s an extremely competitive market,” Cowen said. “If you talk to a person of color in any industry they will tell you they get hit up with job offers nonstop.” 

Yet material progress toward a more diverse demographic makeup of CFOs across most industries has come slowly. The percentage of Fortune 500 and S&P 500 companies with CFOs of racially or ethnically diverse backgrounds ticked up to 10.8% last year, from 9.8% the year earlier, well above 2.9% in 2004 but still relatively low, according to a study from executive search firm Crist|Kolder Associates. Likewise, that study found the percentage of female CFOs hit an all-time high in 2021 albeit the 15.1% level was still a fraction of all CFOs, the study found. 

The numbers of CFOs from diverse backgrounds is continuing to grow, but new data from Cowen’s CFO Movement Study 2022, shows white executives still dominated the ranks of the CFOs hired through the first half of this year at large companies. 

Trove of internal talent 

Eighty percent of finance chiefs hired at major firms to date this year were white, according to the Cowen study of 264 newly-named CFOs at Fortune 500 and other notable companies. Executives of color comprised just 20% of the CFOs hired at major firms, women comprised 36% and males made up well over half (64%) of the freshly-minted cohort. 

“When you consider that in 2021 only 15% of CFOs were women, this data trend is quite impressive,” Cole said in a statement. “Based on daily conversations with clients, we expect this steady incline of female representation to continue. Demand for female CFOs and CFOs of color has never been stronger as companies focus on building more diverse teams.” 

The higher percentage of female CFOs could partially reflect that the push for racial diversity at the top of companies has come a little later than the focus on gender parity, Cole said. 

That’s resulted in more female executives being in the pipeline and in positions like controller and vice president of finance which are often stepping stone roles to the CFO seats, he said. At the same time, more companies are sharpening their definitions and no longer considering a white woman as a diversity candidate, he said. 

The study’s findings also point to a trove of talented candidates from diverse backgrounds that companies likely already have in their ranks. It found that first-time CFOs of color who are internally promoted are disproportionately more credentialed when compared to their white peers, as the majority held an MBA (63%) or were CPAs (63%), while only 40% of their white counterparts held an MBA and 30% were CPAs. 

“Oftentimes companies want an expert CFO but the reality is if we want more diverse leadership, we need to understand how they get there,” Cole said.