Outsider/Insider
Since 2002, Tomé has been a director of UPS. She saw similarities with the Home Depot model, and figured board membership offered a chance to learn things that might help at her company.
From her experience at Home Depot in such areas as explaining medical liability reserves, Tomé says, "I brought the same rigor" to the finance department at UPS. "Drivers will have accidents," she notes.
UPS finance chief Scott Davis says his company has always felt that "our outside directors need to have a grasp of the business," leading it to plan at least two meetings a year at operational sites — including one last year in China. Typically, the board starts with a pre-meeting-day dinner attended by all 10 directors, as well as key managers and employees from the host facility. Lately, though, UPS has added "a private session for outside directors," where they learn additional information about operations from the insiders.
"I have a fairly sizable portion of the board meeting," says Davis. "There's definitely a lot of feedback from the audit committee," especially when he examines the company's risk profile. "They want to make sure resources are put in the right area." Lately he has helped the board understand package-flow technology. Davis, whose background is in technology, explains to board members how the new system "will make the drivers work smarter," by giving them the capability to time deliveries more precisely. Boards expect "the CFO to be a better businessman today than he was 10 years ago," he says.
Leadership Via Walking
"It's leadership via walking," says Vada Hill of the day he and Andrew Green spent at the Philadelphia Denny's restaurants. "As a CFO," says Hill, "you've got to get out in the field and see how your money is being used — how your strategy is playing out in the marketplace. There's no substitute for talking to a restaurant manager about what's driving the growth, and seeing the innovative things they can do." Among the topics covered in their time together: security issues for 24-hour urban operations, and one outlet's addition of a second banquet room to increase community participation.
The only downside to the restaurant visits, says Hill, may be the calories from all that testing. After the tour, he found himself thinking that "the key challenge is, how do you do it and not gain 10 pounds?"
But for this, too, the CFO may have had an answer. While the director ordered the Meat Lover's Breakfast, Green got the Slim Slam.
Roy Harris is senior editor at CFO.
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If You Can't Join 'Em
Few CFOs are being tapped as directors.
Despite steeper liability exposure and heavier time demands these days, more finance chiefs are looking into becoming directors. Financial Executives International reports that 1,000 of its 15,000 members have let FEI share their résumés with companies that are hunting, usually for audit-committee members.
But boards have been slow to draw on this willing and able talent pool.
Among Fortune 1,000 audit-committee members, only 2.9 percent are CFOs, according to an FEI analysis. That compares with 6 percent who hold academic titles as professor or dean, and 75 percent who are listed as chairman, vice chairman, CEO, COO, or president. Big-company finance chiefs seem somewhat more in demand. Recruiter Heidrick & Struggles finds nearly 19 percent of Fortune 1,000 CFOs serving on at least one outside board, and 8 percent seated on their own board.
"The challenge is finding those who will make good board members, not just good audit-committee members," says Theodore L. Dysart, a Heidrick partner with its global board of directors practice.
Why has the movement toward CFOs on boards been so slow? FEI expected an increase after it successfully lobbied for Sarbanes-Oxley to require a financial expert on each audit committee. But while "a natural choice would be current or retired CFOs," notes FEI vice president Chris Allen, the Securities and Exchange Commission later allowed CEOs and others who supervise finance experts to qualify as experts themselves. And many boards preferred to stick with CEOs instead. It's "not a supply problem but a demand problem," Allen says.
Andrew Green of Denny's Corp. and Scott Davis of UPS are among the majority of CFOs who are not on a public-company board. "The phone rings a lot in that area," says Davis. But currently, he's restricted his outside board activity to serving as a director of the Federal Reserve Bank of Atlanta and on the finance committee of the Georgia Council on Economic Education.
"I would love to join one at some time," says Green. "I know boards present greater risks for their members now, but I think it would be fascinating to be involved in guiding another company at a time like this." —R.H.
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