CFOVILLE

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Young, aspiring CFOs, consider this your Bat Signal. Shawn Cole, president of Cowen Partners Executive Search, worries there’s “a huge crisis unfolding in the near term” as it relates to the C-suite pipeline.

“There’s not enough Gen X and millennials to fill the seats,” he told CFO Brew.

A recent Cowen survey of 50 S&P 500 companies and their CEOs’ and CFOs’ ages found a quarter of the surveyed CFOs were “within five years of retirement age,” labeling the phenomenon “the CFO time bomb.”

“When both the CEO and CFO roles face simultaneous retirement, companies are not managing two separate searches. They may lose their entire internal succession architecture in a single transition window,” the survey continued.

Amy Wang, CFO of AI procurement platform Procurify, echoed Cole’s worries, and said the succession crisis is most concentrated in the office of the CFO due to a lack of succession planning.

The growing complexity of the office of the CFO certainly isn’t helping, either. “Ten years ago, [a CFO’s job] was very much about, ‘Hey, how do we close the books? How do we report? How do we make sure we are pushing out all the right information to the broader team?’ Now, it’s very operational in nature,” Wang said: “You need to understand how the go-to-market engine works, how marketing is behaving, and how [the] product is evolving.”

The risks of not investing in CFO succession planning are significant.—DL

      

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COMPLIANCE

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The IRS has an AI dilemma, and the solution may be to fight fire with fire.

The tax-collection agency has been inundated with public comments, “sometimes tens of thousands,” to proposed rulemakings—including some that are AI-generated, according to a Government Accountability Office (GAO) report released on July 21. For example, a 2023 proposed rule related to digital assets “received more than 44,000 comments,” Bloomberg Tax noted.

“IRS has not developed policies for addressing mass public comments or comments written with the assistance of AI,” the GAO report said.

As a result, IRS officials are contemplating “potentially developing AI technology tools to help analyze public comments on proposed regulations,” according to the GAO report. The agency’s lawyers are looking into whether such a tool would meet legal requirements for reviewing public comments. The agency does not currently have an AI system capable of carrying out such a review, the GAO concluded.

A mass of public comments is taxing the agency’s capacity to review them.—AZ

      

CREDIT

Illustration: Morning Brew Inc., Photos: Adobe Stock

Just when you thought private credit’s woes were over, they’ve returned—and they’re worse than ever.

Recent quarterly reports from funds overseen by Ares Management, Blackstone, Blue Owl Capital, and Golub Capital hit their highest levels of default since at least 2021, according to a Wall Street Journal analysis. At Blue Owl, 2.8% of loans were in default in the second quarter—its highest share in at least five years—while nonperforming loans at the other three managers also reached five-year highs.

Much of the concern over the health of private credit firms has centered on their investments in software companies suddenly vulnerable to AI disruption, which account for more than 20% of the loans in many private credit portfolios. But the recent trouble has surfaced elsewhere: highly leveraged manufacturers and healthcare companies getting squeezed by higher oil prices.

Those companies are being added to what private credit firms call “watchlists”—borrowers they’re concerned may struggle to repay their debt. At Ares, Golub, and KKR, those watchlists are now the largest they’ve been in roughly four years.

Private credit players are starting to lose ground to traditional banks, Brew Markets reports.—SY

      

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market forces

Francis Scialabba

Today’s top finance reads.

Stat: Half a trillion dollars. That’s how much Nvidia is securing in its latest round of funding for AI infrastructure projects. 😳 (Bloomberg)

Quote: “As the saying goes…this ain’t rocket science, well actually, rocket science is literally our daily business.”—Elon Musk, bringing the dad jokes amid last week’s SpaceX stock volatility 🚀 (Wall Street Journal)

Read: Shein’s sales have slumped as tariffs have forced the fast-fashion retailer to raise prices. (CNBC)

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