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Working With Board of Directors: The Art of Board Diplomacy

Working With Board of Directors: The Art of Board Diplomacy

These days, chief financial officers of companies around the world have been forced to wear a variety of hats that they may not have been used to wearing in the past.

Specifically, with the economic downturn affecting company bottom lines from the U.S. to China, CFOs have taken on more strategical responsibilities, as it becomes even more clear that the financial strength of the business dictates its ability to grow and expand into emerging markets.

With these responsibilities come new challenges, in particular building relationships with other executives and leaders within the specific company. While the CFO has long been a confidant for the chief executive officer - mentoring when necessary and keeping the chief executive abreast of the company's financial situation - the relationship between the finance chief and the board of directors has taken on a greater emphasis in recent years.

According to a CFO Roundtable post, successfully navigating and maintaining one's relationships with the board of directors can be one of the most difficult tasks a finance boss can face these days.

Earlier this year, the CFO Roundtable brought together a number of finance chiefs and board experts in order to dissect this relationship, the publication noted. While responses inevitably varied in some form from person to person, the gathering did clarify some of the most important points of contention for such relationships.

First, members of the board of directors have certain expectations of CFOs, including that the finance chief will be upfront about financial reporting and the direction the company appears to be heading. Particularly, the board of directors wants to ensure that the CFO is thinking in terms of the big picture for the company, rather than the best interests of themselves or other executives, the Roundtable noted.

One of the most pressing topics addressed during the discussion was the ability of both the CFO and board of directors to handle tough situations, including potential unrealistic expectations that can be placed on the executive.

Some of the specific recommendations coming from the discussion that CFOs can likely benefit from include copying in the CEO on all emails to the board of directors, offering informational materials well in advance of meetings to give time for the CEO and board of directors to examine them thoroughly and being open and honest when confronted with difficult questions.

Clearly, each of these guidelines stems from a shift towards transparency within companies and keeping everyone on the same page. This should also be the case from the executive level down to staff members.

While managing relationships with the board of directors has become a critically important task for CFOs, such an ability can make a difference if and when finance chiefs attempt to make it onto the board themselves.

According to CFO.com, only a very small percentage of S&P 500 companies have directors that are or have been finance chiefs. In order to potentially reverse this trend, the publication suggests that CFOs become more visible, putting themselves out there for opportunities either within the company or throughout the industry. Signing up for databases for hopeful board members and networking with others in the same industry are both ways to increase visibility, and therefore one's chances of being named to the board.

One recent example of a CFO experiencing this career mobility is 57-year-old Stephen M. Lacy, chief executive and chairman of the board at Meredith Corporation. Lacy, who was also recently named to the board of directors at Hormel Foods Corporation, began working at Meredith as chief financial officer in 1998, before being elevated into his current roles last year, according to a release from Hormel.  

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