CFOs Find It Harder to Land Board Seats as Companies Seek Change

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Companies are increasingly looking to fill their boardrooms with experts in areas such as ESG or cybersecurity

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“Financial experts are increasingly competing with other skill sets like technology or human-capital expertise,” said Joel von Ranson, who leads Spencer Stuart’s global functional practices, adding that finance chiefs remain sought after to chair audit, compensation or governance committees.

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With many boards undergoing a refreshment cycle, their size is growing, resulting in boards at S&P 500 companies having an average of 11.2 board members now, up from 11.1 in 2021 and 11.0 in 2020, according to ISS Corporate Solutions, a data and analytics provider . Meanwhile, the average tenure on a board has shortened to 7.7 years in 2021, down from 8.7 years in 2011, Spencer Stuart said.

“We are seeing a rise in demand for people with different backgrounds: racially diverse directors, people with cybersecurity experience, experience in how to deal with climate change, or in human-capital management,” said Brianna Castro, a senior director of governance research at proxy advisory services company Glass, Lewis & Co. A recent SEC proposal on new cyber disclosure could boost the demand for such experts further, Ms. Castro said.

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Marija Kramer, head of ISS Corporate Solutions, said that given the increase in sustainable investing and the rise of ESG corporate ratings, “it’s no surprise we’re seeing demand for prospective corporate directors with ESG credentials.”

These shifts mean CFOs have to communicate clearly to boards about what they can bring to the table. “It’s about positioning yourself as a two-for: You bring the financial expertise, and you bring something else,” said Spencer Stuart’s Mr. von Ranson.

Amy Butte, the former CFO of the New York Stock Exchange, said she is positioning herself as an audit chair for boards and an expert for initial public offerings. “This has helped with differentiating from others,” she said, adding that “if you are a generalist, it is hard” to do that.

Ms. Butte sits on several boards, including of DigitalOcean Inc., a cloud infrastructure company; Bain Capital Specialty Finance,

a business development firm; and BNP Paribas USA, the US arm of the French bank. “It is really about the experience” that one brings to the company, Ms. Butte said.

Joan Hilson, the CFO and strategy officer of Signet Jewelers Ltd.

earlier this month joined the 10-person board of Advance Auto Parts Inc.,

a Raleigh, NC-based retailer listed on the Fortune 500. “We are both multi-unit, we are both looking into fleet optimization. We are all trying to integrate physical and online capabilities, so there is a nice match here,” Ms. Hilson said, comparing Signet and Advance Auto Parts. “I want to be able to bring perspective,” she added. “That is really important, that we are both gaining from the experience.”

Judy Brown, a board member at electronics company Belden Inc.

who previously served as CFO of Perrigo Co.

, said she brought international management experience and knowledge on how to handle mergers and acquisitions to her role. “As a board member, your job is focusing on the business model and the strategy of the company,” Ms. Brown said.

Boards should have at least one qualified financial expert, say corporate governance advisers, and this role is often performed by a CFO or an accounting professional. Many boards go beyond that and have two CFOs or former audit partners. “CFOs add an incredible amount of value to boards,” said Maria Moats, who leads PricewaterhouseCoopers LLP’s governance insights center, pointing to CFOs and their broad remit in overseeing companies’ finances.

Nancy Albertini, global board practice leader at executive search firm Kingsley Gate Partners, said that CFOs “understand how to identify anything that could be a potential issue, including material weaknesses, and make sure that the regulations are being followed.”

Other skills, including CFOs’ ability to interpret complex financial metrics, meet filing deadlines and their understanding of regulation, also make them useful assets, said Anita Pramoda, a former CFO who sits on the board of privately-owned Duly Health and Care, a medical group, and Health Catalyst,

a provider of data analytics technology for the healthcare industry. “As a CFO, you have to live under the gun of a calendar and you bring that experience to the table,” Ms. Pramoda said.

Some CFOs say they want to join boards because it allows them to share their knowledge and experience, especially those that are on the cusp of retiring from their current role. “People who have worked their entire life have a lot of capacity,” said Ms. Albertini.

Recruiters and directors recommend that CFOs wishing to join a board should focus on building a strong network and identifying gaps that boards might have. “You have to bring complimentary skills to the board, ranging from expertise in mergers and acquisitions to industry expertise and functional skills like finance, sales or engineering,” said Jim Frankola, the former CFO of software firm Cloudera Inc., who sits on the boards of software companies Cvent Inc. and Ansys Inc.

Both boards have nine directors, including Mr. Frankola.

Some advisers say sitting CFOs shouldn’t be on more than one public company board, and should refrain from holding a seat on their own company’s board. Many sitting CFOs therefore hold only one or two board positions at maximum, while retired CFOs often serve on two, three or more boards.

Proxy firms such as Institutional Shareholder Services advise investors to vote against “overboarded” directors who sit on more than five boards, and against chief executives that sit on two boards outside their own company.

Finance executives shouldn’t wait until they retire before taking on their first board seat, said William Hernandez, a former CFO of paint maker PPG Industries Inc.

who sits on the 13-person board of Northrop Grumman Corp.

a defense contractor that is part of the Fortune 500.

“When I retired [as CFO], most boards had a mandatory retirement age of 70,” Mr. Hernandez said. “Since then, many have at least moved to 72, but would still prefer a runway for board service of at least 10 years.”

Write to Nina Trentmann at [email protected]


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