As Wall Street has become leery of even the smallest surprise in quarterly performance at publicly traded companies, chief financial officers have gained a bigger role than ever: managing investor expectations and delivering accurate results. But according to this month’s CFO Forum, few are judged important enough to merit a seat on their company’s board of directors.
Just 9.5 percent of the CFOs surveyed currently sit on their own boards, though virtually all of their CEO bosses do. However, a strong majority of finance chiefs - 58 percent - believe that CFOs generally should rate a board seat.
Roughly one third hold directorships at other for-profit companies, and a small segment of this group (11.5 percent) sit on at least three outside boards. And 45.7 percent of CFOs say they have negotiated directly with shareholders on such issues as poison pill takeover defenses, staggered terms for directors and director retirement programs.
Why aren’t more CFOs on their own boards? Perhaps they’ve run up against the recent movement by securities regulators and shareholder activists toward smaller, more independent boards that are less likely to protect the vested interests of management. Indeed, 44.1 percent of CFOs say their company’s board is composed of ten or fewer members and that less than 10 percent of the directors are insiders.
It appears that the drive for independence falters a little further down. Although 83.3 percent of CFOs say their board’s audit committee operates without a company officer as a member, comparatively few of the respondents’ governance (25 percent) or ethics (6 percent) committees are free of insider participation.
As the senior financial executive at your company, do you also sit on the company’s board of directors?
Yes 9.5%
No 90.5
If you are on the board, is this a new or established practice at your company?
New practice 0.0%
Established practice 50.0
Depends on the CFO 50.0
Do you think CFOs should be members of their companies’ boards?
Yes 58.0%
No 42.0
Which officers serve on your company’s board?
CEO 98.8%
COO 29.6
CFO 9.9
Senior-level vice president 11.1
General counsel 3.7
CIO/MIS 0.0
How many seats are there on your company’s board?
Fewer than three 2.4%
Three to five 1.2
Six to ten 40.5
11 to 25 56.0
26 to 35 0.0
More than 35 0.0
What percentage of board members are insiders?
None 2.4%
1 to 10 percent 41.7
11 to 25 percent 38.1
26 to 50 percent 13.1
51 to 75 percent 1.2
76 to 100 percent 3.6
If you serve on the board, are you also on the audit committee?
Yes 15.4%
No 84.6
On your company’s board, which of the following committees operate independently (without company officers)?
Audit 83.3%
Compensation 69.0
Governance 25.0
Ethics 6.0
None of the above 13.1
If your company has been the subject of shareholder resolutions, have you dealt directly with shareholders in negotiations related to those resolutions?
Yes 45.7%
No 54.3
If so, which resolutions?
Poison pills 29.4%
Staggered board terms 17.6
Director compensation 5.9
Director retirement programs 17.6
Term limits 5.9
Other 47.1
Has your company adopted stock-based compensation for directors?
Yes 74.4%
No 25.6
Does your company require directors to retire at a certain age?
Yes 74.1%
No 25.9
Is your company’s chairman of the board:
The CEO? 69.2%
An outside director? 17.9
Other company insider? 12.8
Do any of your company’s retired CEOs serve on the board?
Yes 24.4%
No 75.6
Do you serve as a director of any other for-profit companies?
Yes 32.5%
No 67.5
If so, how many?
One 80.8%
Two 7.7
Three to five 11.5
More than five 0.0
The results of CFO Forum are based on quarterly surveys of a universe of 1,600 chief financial officers. Because of rounding, responses may not total 100 percent.
