CFO career journey

3 reasons why CFOs are in demand for boards

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3 reasons why CFOs are in demand for boards

It isn’t news to report that CFOs make good candidates for the board. But what is interesting is the extent to which the demand for both serving and former CFOs to take on board roles is increasing.

In the current economy, shareholders, boards and regulators want board members who have the right skills, perspective and judgment.  And, the CFO is uniquely qualified for the job.

“Finance skills alone do not necessarily make someone a good board director, but financial expertise is desperately needed,” says Andrew Kakabadse, Professor of International Management Development, Cranfield University School of Management.

We’ve found that three main factors are driving this increasing appeal:

1. Changing regulatory requirements make finance experience desirable, if not mandatory

In many countries, changes to the regulatory environment — enacted since the corporate governance scandals at the beginning of the century — have increased the demand for finance expertise on boards. For example, since 2003, public companies listed in the US must disclose whether they have at least one “financial expert” independent of management on their audit committees. If they do not have this expertise in place, they have to explain why.

2. Macroeconomic environment brings the CFO’s traditional skills to the fore

Since 2008, companies have faced a highly challenging macroeconomic environment: growth trajectories of developed and rapid-growth economies continue to diverge, financial markets are still volatile and banks face acute funding pressures. These challenges require companies to focus on cost, risk and cash-flow management — three areas that fall squarely within the CFO’s skill-set.

3. The increasing breadth of the CFO role has made them more valuable to boards

Perhaps most importantly, the evolution of the CFO role over the past decade has significantly broadened the contribution that finance leaders are able to make to board positions. The modern finance leader has a broad and complex role, encompassing strategic contribution, business partnering, internal and external stakeholder management, as well as operational responsibilities — far beyond the core technical and financial capabilities that once characterized the role.

This article was excerpted from CFO and beyond: the possibilities and pathways outside finance.