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Directors want to see more faces at board meetings, but not necessarily more data.
Alix Stuart, CFO.com | US
March 12, 2010
With board members more concerned about risk management and succession planning these days, CFOs should make sure they — and their staffs — have a strong presence in the boardroom, a group of retired CFOs-turned-board members told financial executives attending the CFO Rising conference in Orlando last Wednesday.
"The board wants to make sure they hear all opinions," said Ellen Richstone, former finance chief of several public companies, including Sonus Networks, and now on the board of Blue Shift Technologies. "They don't want to hear just the CEO." If the CFO and other members of the management team aren't available to the board, it sends up a red flag, she said.
In fact, Martin Welch, former CFO of Kmart and United Rentals and chairman of Delphi's audit committee until last year, went so far as to say CFOs "need to be in the boardroom at all times," with the exception of meetings that exclude management in general, of course. "If you're not listening to the debate, you really can't make the [right] decisions" about what should be disclosed in the 10-K, for example, said Welch.
The directors were also unanimously enthusiastic about having members of the finance and accounting teams in the boardroom. Particularly for the audit committee, it's a good idea "to have presentations by the lowest-level person who is competent," said William Hernandez, who retired as CFO of PPG Industries last October and is on the boards of Eastman Kodak, USG, and Black Box. Such a presentation accomplishes two things, he said: "it exposes the board to the competency of the people [in your organization], and two, it trains your people to make presentations to subsets of the board," something that will serve them well in their careers in the future.
While there may be a natural connection between the finance team and the audit committee, it's also important to develop relationships between board members and other executives. Richstone said one company whose board she served on had a practice of matching directors with executives across functions. As part of the audit committee, for example, she was matched with the vice president of operations. "It wasn't an everyday thing — management was still running the business — but in the meantime, the board got to know members of management," she said. "It kept the relationship between the board and management very strong."
That being said, finance professionals at all levels should consider their audiences before diving into the weeds. CFOs often "use too much jargon and shorthand," said Hernandez, while many board members "may not be as analytical as [they] are." And even when board members are the analytical type, finance chiefs "need to remember that board members are only coming in eight times a year or so, and there's a bit of a learning curve at every meeting," he said.
Indeed, in a separate panel on Wednesday, Accenture CFO Pamela Craig said she had recently taken on the task of "deacronymizing" financial data for her board, which includes both former JPMorgan Chase CFO Dina Dublon and former Hannaford Brothers CFO Blythe McGarvie. "It was just getting to be too much," said Craig.