The post-Sarbanes-Oxley world of corporate boards is full of regulations and risk. Yet, landing a coveted board seat remains a top goal for many CEOs and CFOs. A panel of both board members and CFOs shared their tips and insights on how to prepare for a board position while presenting at a FEI New York City Chapter program.
Skill set: what it takes to become a corporate board member
Many executives spend the majority of their careers in a particular industry, and can find it daunting to join a board outside of that industry. But a fresh perspective is often just what a board is looking for. “It’s important that the board as a whole has some skills in the industry that the company is involved with," Richard Randall, a board member for Steve Madden, Ltd. shared at the program titled “Landing that Coveted CFO Position or External Board Seat.” “However, if every member is from the same industry, it doesn’t work.”
In recent years, there has been a push for more independent directors, oftentimes leaving out management and the CFO. S. Colin Neill, Board Member, FEI New York City, weighed in on the CFO’s exclusion. “My personal view is that the CFO of a sitting company should not be on that company’s board. He should be for the board, not of the board.”
Michael Mardy, EVP and CFO at Tumi and a FEI New Jersey Chapter board member did not entirely agree with the distinction, “Only because of my fifteen to twenty years of experience as a board member was I able to take Tumi public and run an effective board meeting. I generally think it’s okay for a CFO to also be on the board of a company, but it’s a delicate role.”
As a former CFO, Randall, now retired, spoke of lessons learned after sitting on eight corporate boards since leaving his management responsibilities. “Sitting on boards gives you a third perspective from what you usually see. Most of us have been in public accounting and see the client from that perspective. Then, going to industry, you see the company from another perspective. The board is a totally different perspective. Unfortunately, too many people sit on boards who do not understand their responsibility.”
Due diligence: finding the right fit and staying there
When it comes to finding an opportunity, “luck has a lot to do with it,” Neill admitted. “But another factor is going through life not making enemies. Asking tough questions in a non-threatening way.” Mardy agreed, “A lot of it is your personality and simpatico nature and your ability to deal with conflict.”
Frank R. Gatti, board member at the National Association of Corporate Directors, urged those considering joining a board to pay close attention to the personalities of both the existing board members and the company as a whole. “When you add people to a board, there are a lot of intangibles that you have to take into account. Every board has its own culture. The best boards are those that are high-performance teams that can bring independence of thinking but in a collaborative way.”
Certainly, not all boards are worth joining. It’s critical to do thorough diligence on a company and its board and to address any red flags before you make any decisions. Gatti recommends creating a one-page due diligence list of documents you want to see. This list should be presented only after the invitation has been made to join the board.
Strategy and risk: be careful what you wish for
The days of a cushy board seat are behind us. Post Sarbanes-Oxley, board membership has become a tightly regulated, formal affair. “It’s critically important that there be a very tight linkage between strategy and the enterprise-wide risk profile of a company. Board members must understand how to move from preserving value to creating value for stakeholders,” shared Gatti.
Mardy cautioned the crowd, “Sitting on a board sounds like a good idea. But when you have a fiduciary responsibility, what sounds like a good idea can becomes a bad idea pretty quickly. Frankly, when I talk to people about being on boards I say be careful what you wish for because you may find it. As a board member, you have a responsibility to be an activist, before someone else with an entirely different agenda (other than building long-term shareholder value) gets you in their sights. At the same time, you have to be as supportive of management as you possibly can be, so it’s no easy tightrope to walk.”
To learn more about the speakers and view upcoming events, visit the FEI New York City Chapter homepage.