Should CFOs have a seat on the board?
- Aurel Ghidoveanu
- Mar 1, 2023
- 1 min read
Updated: Apr 11, 2023
Pros & Cons
A seasoned and experienced CFOs has what it takes to help an average company become high-performing, no doubt about it. On top of that CFOs' contribution to business strategy is key. They also play crucial roles in major transactions such as mergers & acquisitions. On the flip side:
When CEO is already a Board member he is the main representative of the management team. Adding a second executive director (possibly the CFO) may trigger concerns about Board independence. The audit committee oversees the financial statements of the company. As such they evaluate CFOs' performance in their role.
Having the CFO of the company sitting on the audit committee may impact the functioning of the committee. Appointing a CFO on the Board of their Company needs to be carefully thought out.
The Board should look at both the pros and cons before taking their decision. But there is still good news: -CFOs can make great additions to other companies’ boards. -former CFOs and retired CFOs can add tremendous value to the Board of their former companies -moreover with their financial expertise they are valued members to audit committees at other companies
Six boardroom trends in choosing board members
When it comes to appointing new Board members there are several trends currently at play:
Board directors are no longer required to have previous Board or CEO experience
There are several industries backgrounds that are "most wanted" on the Board
technology sector, consumer, and financial services are top 3 preferred industries
Succession planning is now a concern
With 30 years of market economy in Romania, successful entrepreneurs are thinking about retirement these days. Always a good time to onboard new directors.
Board self-evaluation is no longer “nice to have”. Boards are involving third specialized third parties in their (board members) effort to assess their own performance
CFOs are represented on Boards across many industries having an adaptable expertise. In addition, audit committees need financial experts.
The main way to get new directors on Boards remains to be recommended by a Board member
It's about time to build & activate their own valuable board members network
Communicate clearly what you bring to the (Board’s) table
Less than a quarter of CFOs (23%) at companies in the Fortune 500 hold board positions, down from a high (of 32%) in 2009, according to Spencer Stuart. This includes CFOs who sit on their companies’ own boards.
The main reason is that Boards are now open to a wider range of experiences and skills. Finding a seat at the table based on financial expertise alone is getting difficult. But there is a growing concern for diversity in the boardroom; there is also a revived interest in burning themes like cybersecurity, climate change, or human capital. This means you need to clearly communicate your USP. This means you have to position that "something" that is relevant, on top of your financial expertise. Think about it: you may be an expert in initial public offerings, or in setting up holding structures, or your understanding of complex financial regulations, or your experience in the financial restructuring of a group of companies, or you successfully dealt with a number of M&A's, or maybe listed companies to stock exchange …
Tips for winning a Boardroom seat as CFO
- Stay on top of issues getting Boards’ agenda nowadays.
- Build a strong and valuable network
- Identify knowledge gaps that boards might have and prove you can bring complementary skills to the Boardroom
- Joining charity Boards may break you into a business Boardroom.
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