Should You Be on a Board?

If you’re OK with the time investment and the risks, board service can make you a better CFO, bring new insights into your company, and enhance you...
David McCannJune 27, 2012

If you’re a CFO and think you might want to serve on a board of directors at another company, the first thing you should know is that the odds are stacked against you. Collectively, the 669 CFOs of Fortune 500 and S&P 500 companies — presumably the finance chiefs most appealing as board members ­— hold only 200 board seats, according to recruiting firm Crist|Kolder Associates, which fills openings for CFO, CEO, and board roles.

That number has changed little over the past several years, notes Crist|Kolder president Tom Kolder, invalidating predictions made after Sarbanes-Oxley was passed that it would become commonplace for CFOs to be on boards.

“The community of sitting CFOs is concerned about how full their plates are already,” Kolder says. “They are a natural fit for audit committees, but those are the workhorses of boards. Because of that reality, they’re not always encouraged to do it by their CEOs or their own boards.”

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The risks involved, given board members’ duty of care to act in the best interests of shareholders, duty to avoid conflicts of interest, and duty to avoid intermingling corporate and personal assets also inhibit CFOs from assuming board roles.

But if you can find your way onto a board, the experience likely will make you a better CFO, bring new insights into your company, and enhance your career prospects.

“It makes you better able to understand what your own board is looking for from the CFO, and it gives you a more strategic viewpoint: as a CFO you can get on that treadmill of quarter-to-quarter stuff and that’s all you’re thinking about,” says Eileen Kamerick, CFO at investment bank Houlihan Lokey and a board member for Associated Banc-Corp, a Midwest regional bank holding company, and Westell Technologies, a small communications-equipment maker.

And, Kamerick says, on a board a CFO learns to create financial reports and other documents that can be more readily understood and that include crisp, well-structured trend analyses. “When you work in a business, you get used to thinking ‘Oh, everyone knows this, everyone knows what these numbers are,’ but a director doesn’t live in the business day to day.” Gaining a sense for how to better communicate with boards can also help the CFO in other communications, such as with investors and analysts.

Executives can’t, of course, serve on boards of companies in their own industry. Many do so in a related industry; a hospital-system CFO, for example, might be a board member at a medical-device manufacturer. But any board service is worthwhile.

“As Peter Drucker said in the 1980s, ‘The future has already happened’ in some other industry or other part of the world,” offers Susan Stautberg, founder of both PartnerCom, which places women and minorities on corporate boards, and On Board Bootcamp, which helps such candidates decide whether they want to be on a board, how to prepare themselves, and how to find opportunities. “The executive’s job is to bring that future back to [his] own company,” she says.

Another motivation can be simply to serve. For Kamerick, service is the essence of her board involvement. “It’s not a one-way street; not just about what you can get out of it,” she says. “It’s also a matter of giving others the benefit of my experience. If you’ve reached the point in your career where you have the depth of experience and wisdom to help a management team get to the next level, and you have the time and energy, then you should.”

In fact, Kamerick provides an unusual amount of board service for a sitting CFO, as both boards she sits on oversee publicly held companies. “Realistically, most people can’t do more than one of those,” says Ellen Richstone, a former longtime finance chief who now serves on four boards, including that of the New England chapter of the National Association of Corporate Directors (NACD).

Richstone, too, says she enjoys being able to share her 35 years of corporate experience. For example, “I’ve bought and integrated almost 40 companies,” she says. “Along the way, you do many things right and many things wrong. I like being able to take that real-life experience and help companies avoid mistakes I made.”

She also likes giving back to the CFO community. “I’ve worked for some amazing audit-committee chairs who were there for me when I had questions and had to think through things as a public-company CFO. So my focus is on being there for those folks,” she says.

From a career perspective, being on a board is especially useful for finance chiefs with aspirations to be a chief executive. Not only do they get a better feel for how the nonfinancial aspects of companies are run, they also have an opportunity to impress their follow board members, who might pass on to their networks that they “sit on a board with a really impressive CFO who is going to make a great CEO,” says Stautberg.

Indeed, networking is by far the most important tool for finding a board to sit on. While large companies often recruit their board members, Richstone says that in board circles, it’s common wisdom that up to 80% of seats at companies with less than $5 billion in revenue are filled through networks. That doesn’t necessarily mean a search firm isn’t involved; the board may provide a list of names from its network for a recruiter to vet. “But the network is the primary driver,” she says. “If you want to be on a board, let your existing board know, and tell them why you think you’re qualified.”

Besides networking, coaching and other services for prospective board members are offered by the NACD, the Corporate Directors Group, and the Women Corporate Directors Group, as well as various universities, law schools, and business schools.

Those eyeing board service should put in as much due diligence as they would before buying a company or joining a company as CFO. “It’s like a marriage,” Richstone says. “You’re not going to get out of it easily. You’re going to spend a lot of time with it. If you can’t believe in it and be comfortable with the management and the board members, you shouldn’t join. There will always be a bump in the road, and you want to feel good about the people you’re in the boat with, that you can have real discussions with them and respect them, and they’ll respect you, too.”

There is no formula for how to gain that confidence level other than to pose a lot of questions, and pose them many times, to the board members, the CEO, the CFO, the internal and outside lawyers, the external auditors, and anyone else who may provide some insight into the dynamics of the board and its relationship with management. “They won’t all tell you the same things, but you’ll begin to get a picture,” Richstone says.

Also ask questions about the company’s:

  • Mission, vision, and strategy;
  • Market share and market dynamics;
  • Competitors;
  • Customers;
  • Financials (ask about the company’s financial position; review Securities and Exchange Commission filings, press releases, analyst reports, and other public information; understand any major historical and expected challenges with regard to the income, cash flow, and balance sheet statements);
  • Pending or threatened litigation;
  • Risk factors and how the company is managing them;
  • Shareholder relationships;
  • Global reach;
  • Product or service quality; and
  • Human resources.

No matter how many questions you ask and what answers you get, there is, of course, no guarantee the board will accept you as a member. Stautberg offers some useful tips for making that happen. First, Google yourself and see what image of you the board members will have if they do that as well. Will you look like an industry expert? Like you’ve gone beyond being a CFO who’s focused strictly on the numbers? Do you appear to be a CFO that works across company teams? If you’re not strong in those areas, you’re probably not ready to be a board member.

Second, assess what size and type of company would realistically be a good fit for you. For example, if you’re a Fortune 1000 CFO, you probably won’t land a board slot with a Fortune 50 company. Also, it’s easier to get on the board of a start-up or a company that’s in bankruptcy or other kind of trouble.

Third, have a good story for why you want to be on a board, what value you will bring, and how you’ve worked successfully on strategic matters with the board of your own company.

Finally, realize that an interview for a board seat will be much different from an interview for a job. “The job is all about you: what you’ve achieved and how you’ve led teams,” says Stautberg. “A board will be looking for how you will fit into a social and cultural entity: whether you can disagree with without being disagreeable, and whether you’re a sharp shooter or a hip shooter.”

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