CFO Lessons Learned And Benefits From Being An Outside Board Director


CFO Lessons Learned And Benefits From Being An Outside Board Director

I was recently asked to join a Board of Directors at a local Community Bank that operates in Arizona, Nevada and California. The experience has been a valuable one for me; starting with the interview process and up to our most recent meeting.

The interview itself was an interesting process. I met with all the board members in various settings several times as well as the CEO over a two-month period. During this process, the board members and CEO were very upfront regarding the operational and financial challenges the bank faced. This gave me comfort they were being straightforward and honest. They were clearly passionate about the bank’s success. It became apparent they wanted to do the very best job for their shareholders. Many of these board members have been on the board since the inception of the bank so their historical perspective was fascinating. Lesson 1 – join a Board where the directors and CEO exhibit integrity and honesty.

I was referred to this opportunity by a friend of mine who was the outgoing “financial guru” board member and remaining board members wanted to replace their outgoing board member with another individual who had a similar pedigree. My friend felt I met those requirements as I have been a CPA for over 20 years with a mix of accounting, financial reporting, tax, technology and human resources. The board agreed. In addition to my financial experience, I have been a CFO for various companies the past 8 or so years, including a publicly traded company on the NYSE which had significant financial and operational challenges. Lesson 2 – Have the right experience for what the Board needs.

My fellow board members have various backgrounds and expertise, none of which is accounting, technology, risk management or human resources. The board consists of a Chairman who is a very successful farmer, the Vice Chairman is a CEO of a technology/medical company, a family medical doctor, and a businessman in the Hemp industry. Each impressed me with their years of experience in the boardroom and passion for the bank they jointly created. Each of them has strong sales/loan development and operations experience, with deep appreciation for the bottom-line economies of the bank’s performance. Lesson 3 – verify there is sound Board leadership for all key Board duties.

What are some of the benefits I have enjoyed from my involvement at this financial institution? First and foremost, I find myself very fortunate to have been able to get to know this group of very successful entrepreneurs and management team by being a member of the Board of Directors. I have learned over the years that different individuals with different backgrounds bring different perspectives and learning from others is another huge benefit. Lesson 4: being on a Board may provide excellent networking and learning opportunities from other Board Members.

I have learned very quickly there are many ways to provide board packages to board members. In my past CFO positions, I provided board packages via pdf to the board members a few days prior to each of our standing Audit Committee, Governance and Board of Directors meetings. At this financial institution, they provide the board packages on and nothing is distributed at the meeting that hasn’t been already been electronically provided. The Bank’s management team organizes their respective deliverables into operational or financial. Sometimes, I have noticed that due to my heavy accounting and CFO work experiences I have very specific ideas on how certain things should be presented. For example, I often find that I must remind myself I am there for my strategic perspective, not to get into the weeds of the detailed numbers. For example, not having portions of loan commitments appropriately classified between their short-term and long-term obligations is not that important in the board level discussions. Lesson 5 – preparing the Board with all the information they require before the meetings is an essential part of the lead finance director’s role. Lesson 6 – the duties of an operating manager and a Board Director are very different.

During the first couple of board meetings, I found myself focused on the detailed financial data. While I think my comments were well received by Management, I am not certain the true amount of board value was provided at that time. Since then my focus has been on larger issues with more strategic implications. I also dove head-first into the annual review of board policies. Many of the policies were governance and operationally focused with no significant changes over the years. This provided additional comfort about the maturity of the overall internal control environment, which appears to be functioning well. Lesson 7 – a director’s role is more strategic than tactical. Lesson 8 - learn about the board rules and policies straight away.

CFO Lessons Learned And Benefits From Being An Outside Board Director

In the last several meetings, I realized my predecessor was more focused on financial and strategic direction than a microscopic view of the financial packages as well as the policies and procedures of the bank. Whether a few “blips” occur or not, really doesn’t matter in the overall picture for these shareholders. The bigger issue lies where is this financial institution going in the future and what is Management’s role in getting our community bank to the next level. Lesson 9 – ditto lessons 6 & 7.

Another benefit of being on an external board of directors is the perspective that board members have an extremely limited focus and attention span. In their respective executive board level summaries, Management VPs are asked to provide a summary of their area. Being on the receiving end of the management presentations provides me with a new perspective on how I should be crafting my messages to the Board of Directors of companies I am working for. Keeping the summary to less than a page and simple to understand makes it a much easier read for a board member. Using graphs and explaining trends is much more important to a board member than providing all the details of the data. Lesson 10 – sitting in a Directors chair provides a new perspective on how to deliver managements messages to the Board.

In the verbal portion of the presentation one must assume all the board members have read the executive summary and as a result, Management shouldn’t just read their summary line by line, word by word. To be the most effective, a Manager should engage the board members by highlighting one or two items that they feel are the most important portions of their report. This often includes giving board members information about trends and not dwelling on the past information and discussions. What Management feels are the most important and pressing issues moving forward should be the focus of the VPs when presenting to their Board of Directors. It’s easy to ramble on and get caught up in the moment of a discussion. As CFOs, we are exposed to a myriad of items that could be shared with the board members but sometimes, less is more. Lesson 11 - Be discerning, share what the Board needs not everything you would like them know.

Besides the great Management and fellow board members I have had the pleasure to work with and continue to work with, I find that joining a board of directors is extremely advantageous in so many ways. While businesses and key decisions should be data driven, the board of directors expects that Management has completed these tactical steps already. Boards want to address strategy, trends and try to foresee the future.

Remember, less is more.

Thanks to our Guest Contributor, Adam B. Remis, CPA, CISA, MSIM, for sharing his insight on the benefits to finance leaders of taking a Board position with another company.

For more on this topic watch Risk Management for CFOs - The Three Pillars of Prevention: Governance, Internal Controls and Risk Management

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