The appetite of shareholders and boards for CFOs to serve on corporate boards is big and getting bigger.
Seventy-nine percent of the 800 CFOs surveyed for this report agree that their financial expertise means that they are more in demand than ever for board-level roles. Analysis of how board composition has changed in the world’s top companies over the past decade supports this.
In 2002, 36% of CFOs from the world’s largest companies held non-executive directorships. A decade later, this proportion has increased to 46%.
"The language of boards is the language of finance and value. It's a very easy environment for a CFO to fit into and make a contribution." - David Grigson, Chairman of Trinity Mirror and former CFO of Reuters and Emap.
As companies grapple with the aftermath of the financial crisis and a two-speed global economy, they want executive and non-executive leaders who can provide comfort and confidence in an uncertain world.
With their unique combination of analytical, technical and strategic capabilities, CFOs are very well placed to provide it.
Should serving CFOs take on non-executive directorships?
27% of CFOs surveyed have already taken on one or more part-time or non-executive positions, in addition to their CFO job. A further 40% are interested in doing so.
The pressures of a CFO’s day job make it extremely challenging to fit external roles into the schedule. Yet, despite the obvious constraints, part-time positions can bring powerful professional and personal benefits for those who can find a way to juggle their responsibilities.
Understanding board dynamics from a different perspective is the principal benefit of serving on a corporate board according to 75% of the CFOs surveyed. Most CFOs spend a lot of time engaging with their own board members but it is only by sitting on the other side of the table they can fully understand how the boardroom works. Over half see it as an opportunity to gain exposure to another company or industry, which enables them to learn lessons that have valuable applications in their core role.
For those CFOs that are fortunate enough to serve on the board of a very large, well-respected company, there is also a "halo effect," whereby the organization on which a CFO serves in their executive role also benefits.
…but lack of time is a major constraint
More than 40% of CFOs think that it is inappropriate for them to take on part-time roles. For many, the demands of their core responsibilities are simply too great and the risk of overstretch too significant.
As corporate governance legislation becomes more stringent, the time required to be an effective non-executive director is increasing. Despite CFOs’ appetite to take on non-executive roles, there is a growing mismatch between the amount of time they feel able to dedicate to such a role – on average around four hours a week – and the time recommended by corporate governance best practice to fulfill the role appropriately.
Which means that candidates for board positions must choose the right role and time it well.