It was Jane Hemstritch, director of Commonwealth Bank, Tabcorp, Santos and Lend Lease, who said in 2013 that “one of the reasons Australian corporate governance is held in high regard globally is that we tend not to have a plethora of executive directors”.
It was generally agreed by several other high-powered directors at the G100 conference that Jane spoke at, that while the board table was certainly a place for the CFO to deliver financial reports, he or she should not sit on the Board of Directors.
If you have been watching the progress of Board meetings for most of your career but have been denied taking an active part in strategic decision-making, it may come as a surprise to see your pre-retirement (or retirement plan) shift to the other side of the table.
In fact, potential suitors, who see your advice as commercially beneficial, may have already eyed you off as a future board member.
After the GFC, companies took a long hard look at their Boards of Directors and in many cases didn’t like what they saw. Appointments based on golf club memberships were no longer acceptable to shareholders and the ensuing clean up has favored a new breed of non-executive directors with outstanding financial governance skills.
Enter the professional CFO, the person who can be relied upon to give accurate, strategic financial management advice and to forensically see anomalies in reports before they turn into problems.
But if the tap on the shoulder comes before retirement how would you and your current CEO feel about you sitting on the Board of Directors for one or two other companies?
For you it might represent the well-earned recognition of your skills and experience and may provide just a little bit of an ego boost. From a professional development point of view it could accelerate your business management experience and knowledge. Your exposure to different corporate strategies, to variations in reporting and new areas of business could also be applied in your current role.
As long as there is no competitive threat, the CEO should welcome the extra knowledge and experience that you are gaining which could help his or her own organisation grow. They might even like the reflected status that your additional role bring to their organisation. On the other hand, they may be wary about your time commitment and of course extra remuneration.
If you’re interested in seeking a Board, how should you start preparing?
The Australian Institute of Company Directors runs a series of highly regarded governance courses in each Australian capital city. In fact, their three day Foundations of Directorship and subsequent five day Company Directors Courses have become almost mandatory qualifications for Board entry.
While financial literacy and assessment is a part of both courses, CFOs will still find the scenario sessions on decision-making, risk assessment, strategy and compliance useful. The five day courses can also be taken over one week or over multiple weeks and arrangements can be made for those who want to study externally.
With fees varying between $6000 and $10,000 depending on whether you are a member of the AICD, there’s certainly an incentive for success, but for those seeking a career as a professional director it’s undoubtedly worth the investment.
Either way, it’s worth asking yourself, why you want to join a board of directors before jumping into anything.
The AICD’s most salient advice to CFOs looking to join a Board is to “caution” against flattery taking over from their normally careful decision-making processes.
For while you might be seeking to enhance the company’s reputation you also need to protect your own.
Prospective directors should undertake the same level of due diligence that they would in their work when assessing an opportunity.
The AICD has put together a list of ten questions that will help you better assess your suitability for a Board, and suggest that the final three questions are the most important:
- What does the business do?
- What is its current financial position?
- What legal and regulatory environment does the company operate in?
- Are there any legal issues pending that you should be aware of?
- What is the quality of information and reporting?
- Why does the Board need a new director and what skills is it specifically looking for?
- Who are the shareholders?
- Why am I interested?
- What can I contribute?
- And do I have the skills, time and capacity to do the job properly?