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Missing earnings targets: career consequences

Filed in archive risk by leon on September 30, 2008

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Last year, I did a blog entry looking at how firms with restatements had bigger turnovers of chief executive officers and chief financial officers.

Now that's supported in a new study, CEO and CFO Career Consequences to Missing Quarterly Earnings Benchmarks. The study found that CFOs who miss analyst consensus forecasts are likely to have a bonus cut of 8%, and a 0.62% higher chance of being sacked. For CEOs, it's a bonus cut of 14% and 0.61% higher probability of being forced out. And their position is more precarious in the post Sarbanes-Oxley environment.

The paper says: "Interestingly, most of these career penalties for missing earnings benchmarks have increased in the post-SOX environment. Moreover, firms that give earnings guidance and miss the analysts' consensus estimate are associated with bigger career penalties for the CEO and the CFO. Bonus cuts for the CEO are higher if the firm has a long history of meeting analyst expectations in the past."

Still, the other way of looking at is that if you beat the benchmarks, your pay just soars.






Permalink: Missing earnings targets: career consequences
Tags: CEO  and  CFO  Career  Consequences  to  Missing  Quarterly  Earnings  Benchmarks    Rick  Mergenthaler  Shiva  Ra 

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