Steps CFOs Take to Get Appointed to Corporate Boards

By Ted Knutson06.29.2020

Imagine investing some of your time in an endeavor that could boost your status as a financial and strategic leader and provide substantial income well past the traditional retirement age of 65.

Sound too good to be true? It probably is.

For even the most cut-above-the-rest CFOs, a prized seat on a corporate board — which can mean a significant boost in added income — is a dream often destined to be unfulfilled.

The supply of candidates far exceeds demand.

With little turnover, in any given year, there are thousands of executives in hopes of just hundreds of openings on boards of public companies.

And as there aren't any job boards for openings, upping your networking is about the best thing you can do to increase your visibility among the search committees and to a lesser degree the recruiters who can help put you where you want to be.

One of the very best ways to network is to get a meeting with your CEO and ask him or her to introduce you to two or more CEOs they know, said veteran board and CFO recruiter David Arnold. "It takes time, but it is effective," he said. 

Other good doors to knock on are principals of private firms and venture capitalists who are establishing boards for companies they plan to take public.

Getting the Word Out

Preparation to put yourself on the road to a lucrative seat on a board not only requires networking, it also necessitates letting your CEO and board know of your ambition. 

Jenna Fisher, who has successfully completed more than 300 CFO and board searches for Russell Reynolds Associates' corporate officers sector, recommended waiting at least a year into your job to let your board and CEO know to give you sea legs.

She said the right time to bring up your desire is when your chief asks you what your goals are going forward.

Boards are much different than they were 20 years ago when they saw their primary responsibility as not to get into management’s way, says KPMG Audit Committee Institute leader John Rodi.

Because of their expertise, CFOs are often put on audit committees and frequently as the heads.

Rodi emphasized audit committees have evolved into default committees overseeing the increasing number of risks from cybersecurity to IT to ESG to third-party vendors and now COVID-19.

Because of the multitude, complexity, and necessity of risks an audit committee must handle, the time it takes to be on one has "exponentially increased" over the years, recruiters say. 

Prepare for Time Commitment

CFOs interested in going on an audit committee need to seriously look into whether they have enough time to devote to the endeavor given that the responsibilities on their day jobs have undoubtedly multiplied, cautioned the KPMG Audit Committee Initiative chief. "You don't want to be stretched too thin," he warned.

The Sarbanes-Oxley Act, passed in 2002 in the wake of the Enron scandal, was instrumental in making CFOs an integral part of many audit committees because the law requires the panels to include at least one financial expert. 

A number of committees currently have two financial professionals to provide a backup.

"The audit committee is supposed to hire and oversee the auditor," says Consumer Federation of America Director of Investor Protection Barbara Roper. "Auditors are required to communicate information to audit committees necessary for them to fulfill that role, but PCAOB inspection reports and SEC enforcement actions suggest they don’t always do that, even though audit committees bear significant responsibility (along with auditors) for ensuring the audit is independent."

Rodi says it can be hard for an incoming board member to determine how well she will function with the rest of the others. "The larger that group, the more difficult it becomes," he warns.

Probably in no place in corporate America is age considered more of a virtue than corporate boards, claimed National Association of Corporate Directors Director of Board Services Rochelle Campbell.

The average age of someone who sits on one is 62 with eight years a typical tenure.

Most public companies have an age limit of 72 to 75-years-old, but in many cases the boundary is waived.

A seat on a board at another company can help you do your day job better, Arnold said.

He explained it can give you insights into best practices you may not be aware of from anything from governance to systems to operational metrics. 

But the main thing you should know about joining a board, said the recruiter, is not to get your hopes up.

"Every CFO I meet wants to go on a board but very few are selected," said Arnold.

He added he rarely hears complaints from CFOs he’s recruited to boards after they have been there awhile.

The biggest drawback, he noted, has been when boards are static — that is, when they are not being listened to by management.

Arnold said an effective way to uncover board culture is to look at the minutes, which will show if it has good, healthy debates around critical issues or is merely rubber stamping the chairman’s wishes.

"You can start to see patterns," the recruiter said.

Reprinted with permission from CFO Dive, an industry publication operated by Industry Dive that reports on the latest news and developments in the CFO industry.