One of the most challenging (and sometimes frustrating) responsibilities of a CFO is to successfully manage their relationships and interactions with the Board of Directors. After all, the influence of a board on the day-to-day responsibilities of a CFO can be complex, and let’s be honest, even a bit dysfunctional at times.
On Wednesday, May 25th, the CFO RoundTable gathered a group of senior financial executives and board experts to discuss the intricacies and best practices of working effectively with boards, including David Pierson, Partner, Foley Hoag LLP, Rick Darer, Board Member, Management Dynamics, RewardsNow, and Stylesight, Steve Wasserman, CFO, Memento, Inc., Willow Shire, Owner, Orchard Consulting Management, and Nina Saberi, Managing Partner, Castile Ventures.
Overall, the message to CFOs was clear:
- Boards expect CFOs to be honest and diplomatic brokers of information, and to always act in the best interest of the company, not of that of the CEO or the board themselves
- With planning, preparation, and ongoing communication outside of the board meeting, CFOs can proactively position themselves as a go-to resource for company information, while also helping to avoid surprises during board meetings
In particular, the panel discussed:
Board Expectations of CFOs
When discussing the value of the CFO to the board, the panel agreed that the CFO is one of the most important resources within a company. Not only are they counted on to sustain the company, but also to provide complete and accurate information on the health and well-being of the organization. More often than not, a board member will reach out to the CFO more often than the CEO to conduct periodic check-ins, simply because the board views the CFO as independent from the interests of the CEO and the board themselves, and is the go-to source for accurate information.
In turn, the panel agreed that they are always cognizant of the relationship between the CEO and the CFO, and cannot afford to inflict damage or undue strain. It is in their best interest to not only support a healthy, productive relationship between a CEO and CFO, but also facilitate a healthy relationship between themselves and the CEO.
Reporting and Communication
The transfer of accurate, complete, and quantifiable information is the key to a successful board /company relationship. Most times, companies choose to drown their board in data to offset any chance of missing a crucial piece of information the board may want; however, it was agreed by the panel that the ‘less is more’ strategy often works best for boards. In particular, the panel suggested:
- Keep the reporting at the ‘surface level,’, and back up your points with the data. There is a thing as too much information!
- Consistency is key: do not wildly deviate in reporting formats from one board meeting to the next. Remember, the board sees things in snapshots, whereas you see them every day. Get a good agreement up front on the metrics and reporting packages the board will receive, and stick to it.
- Track the action items from the board meeting (your board members will!) and stay consistent.
The panel also agreed that the communications between board meetings is more important than what actually happens at the board meetings. Board members are the most confident in those companies who continually communicate relevant developments on a timely basis.
Therefore, don’t wait until board meetings to communicate big news, such as a new marquee client, or major hiring/firing decisions. Alert the board on the event and debrief them during a conference call. Not only will this practice help to diffuse any element of surprise during board meetings, but will also help your board feel more involved in their investment.
Handling Difficult Situations or Unrealistic Expectations
While a relationship with a board can provide a number of opportunities, managing that relationship is not without its challenges. While these instances can be few and far between, a little diplomacy and tact on part of the CFO can go a long way in serving them throughout their career. A few best practices mentioned included:
- Be open and direct with both the CEO and the board – there should be no surprises that unfold at the board meeting. If you are asked a direct question by either party, answer them honestly and tactfully.
- Always make sure to copy your CEO on emails to the board.
- Make sure to get your board materials out well in advance of board meetings – not only does this allow your board enough time to digest the information presented, but also allows you and your CEO the opportunity to presell any big news, whether it’s good or bad.
- On the whole, the panel agreed that a CFO’s loyalty lies to the company and its shareholders, not to the board or CEO. Therefore, if a material issue needs to be brought to the attention of either the CEO or the board, it should be done so in a neutral and tactful way.