Look Before You Sit

A seat on a corporate board can be a great opportunity, but choose carefully.
Laura DeMarsNovember 1, 2006

When Howard Atkins, CFO of San Francisco–based Wells Fargo, was asked to join the board of Ingram Micro, a $30 billion technology distribution and sales company, he asked himself many questions and did plenty of homework before accepting the post in 2004. “I had to determine whether the time commitment was worth it for me and my company,” he says, “and whether what the company needed matched what I could bring to the table.”

He also wanted to make sure he had a
level of involvement that suited his interests,
so he joined the executive and
finance committee and the compensation
committee, rather than the audit committee,
which already had a sufficient number
of financial experts. While his financial
acumen would no doubt have made him a valuable
addition, he was primarily interested in addressing
strategic issues.

That combination of caution and focus is a good model for other CFOs as offers to join corporate boards continue to roll in. As a generation of board members approaches retirement age, and as improved corporate-governance practices prompt companies to transform their boards from cozy collectives of insiders to (in theory) more-active advocates for savvy management, CFOs find themselves in high demand.

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Between 2003 and 2004 the number of board
members with CFO or accounting backgrounds nearly
doubled, from 5 percent of seats to 9 percent, and
it has held at that level since. Today, approximately 40
percent of new audit-committee heads have a CFO or
accounting background, up from just 10 percent as of
2003, according to figures from Spencer Stuart.

While new rules mandating the presence of a “finance expert” on boards have partly driven the demand for CFOs, executive recruiter Peter Crist says that would-be candidates should not feel that it’s the audit committee or nothing. “We are now conducting a search for two very large companies that want to add CFOs to their boards,” he says, “and they have wisely said that the CFO does not need to sit on the audit committee. They want someone with financial acumen, and don’t want to scare away potential candidates by having specific committee expectations.”

Crist says that, in this seller’s market, a
CFO weighing a board offer should consider
everything from board cohesion to
company reputation to time commitments.
And because the primary rationale
for accepting a boardroom gig is the
personal and professional growth it
affords, he believes candidates should not
be shy about asking themselves whether
they “find the company interesting and
will derive some intellectual benefit” from
lending their skills to its mission.

Lately, it seems, the promise of such
stimulation hasn’t been enough to win
over CFOs. While newly named audit-committee
heads are often CFOs, only
4 percent of audit-committee chairs overall
are current CFOs, and the growth rate
that followed the passage of Sarbanes-
Oxley seems to be abating. “It’s still just a
trickle, rather than a stream,” says Dennis
Beresford, a former Financial Accounting
Standards Board chairman and professor
of accounting at the University of Georgia. He cites the time commitment as the
biggest roadblock, estimating that a nonchair
board position requires at least 300
hours a year to be done properly.

As a board member at both Roper
Industries and ArvinMeritor, David
Devonshire, CFO of Schaumburg, Illinois-
based Motorola, knows all too well
about the time crunch. In addition to
Motorola’s board meetings, Devonshire
attends 12 meetings a year between the
two boards and devotes a significant portion
of his free time to board work. “Whenever I have some time on the
weekends or at night, I’ll do research or
review board paperwork,” he says.

Those who do it insist that it’s worth
the effort. “It’s valuable because you gain
insight into what’s happening with the
economy and in other industries,” says
Wells Fargo’s Atkins. “You also see what
types of strategies different companies
use.” The Ingram Micro opportunity
appealed to him, he says, because “the
board had just done a complete reengineering
and refocusing of the company
after the tech bust of 2000, and I thought
I could be of value in terms of advice
about strategy and growth.” Devonshire
recommends that CFOs seek board
assignments in industries other than their
own as a way of expanding their horizons
and maybe bringing different perspectives
and ideas to their own companies.

Recruiters say they are now constantly
on the phone with CFOs discussing
boardroom openings. If your phone isn’t
ringing, Beresford says, there’s nothing
wrong with letting recruiters know that
you’re interested in such positions. But
don’t be too interested. “You don’t want to
jump at an offer,” he says. “You have to do
your homework,” a process that should
include researching the biographies of
current board members; reading the
financial statements of the company and
catching up on its history; meeting with
the board, CFO, and CEO; and spending
time touring company operations. “Do
everything you would do if you were considering
becoming the CFO of the company,”
adds Devonshire. Beresford also recommends
networking through programs
like the National Association of Corporate
Directors, which offers training on how to
be an effective board member.

Despite the fact that a board position
may require heavy research and a sizable
time commitment, it is not a second job
so much as an extracurricular activity.
Therefore, Devonshire says, CFOs should
join boards not because they feel pressured
to do so but, in the end, “because
they enjoy it.”

Laura DeMars is a reporter for CFO.

Why They Say Yes, and Why They Say Good-bye

Top Reasons for Accepting a Board Position:*
Reputation of company and its financial position: 62%
Comfort with the CEO: 34%
Composition/membership of board: 21%
Experience can be applied to own company: 21%

Top Reasons for Leaving:
Change of control: 32%
Overload/lack of time: 14%
New opportunity/time for a change: 8%
Conflict: 8%

Source: Spencer Stuart/Corporate Board magazine, May 2006. Survey of 350 past and present board members in S&P 500 companies.
*Multiple answers permitted

CFOs on the Move

Rodney Carter, former CFO of Petco Animal Supplies, is making tracks over to Zales, where he will be group SVP and CFO…. Cathy Smith is remodeling her career with a jump to home-builder Centex from Kennametal, a tool and construction products manufacturer. She replaces Lel Echols, who left in June…. Gregory Deavens must have had it with the Yankees. He’s trading his post as SVP of financial analysis and budgets at New York Life Insurance for the CFO role at Massachusetts Mutual Life Insurance…. Linda Dimopoulos has had her fill as CFO of Darden Restaurants. She will retire next month and will be replaced by the company’s controller, Brad Richmond…. Morris “Sam” Smith is sticking to his knitting, switching from Stroud Oil Properties to Cano Petroleum, an oil-and-gas producer…. Insurance group Progressive has named Brian Domeck to succeed CFO Tom Forrester, who is retiring…. Wayne Lee won’t have to go far to fill the CFO post at Travelzoo. The former VP of finance there succeeds Ralph Bartel, who remains chairman and CEO…. Jody Feragen will continue to mix it up at Hormel Foods, succeeding the retiring Michael McCoy as CFO…. Bixby Energy has renewed its finance team with the addition of Michael Brodeur. He joins the company from McKessen Medication Management.