A 'Waste of a Board Seat'
WSJ, October 15, 2012
By Maxwell Murphy
Chief financial officers serving as directors at their own companies are a dying breed, thanks to a push for greater board independence. Just 19 CFOs of Fortune 500 companies sit on their own boards as of earlier this year, down from 37 in 2005, according to new research by executive-recruiting firm SpencerStuart. And 11 of those CFOs joined their boards more than a decade ago, before the Sarbanes-Oxley Act of 2002 prompted U.S. stock exchanges to require that the majority of public-company directors be independent, with certain exceptions. The last appointment among the group came in late 2009, when Milton Johnson was named a director of hospital operator HCA Holdings Inc. Corporate-governance experts don't expect the CFO ranks to grow. Boards are more keen to appoint so-called independent directors—those who don't have a connection to current management. Independent boards are also seen as less likely to harbor an entrenched management team that, for example, wants to avoid even attractive mergers that would see them lose their jobs. "Boards are becoming much more independent each year," says Julie Daum, co-head of SpencerStuart's North American board and CEO search practice. Sarbanes-Oxley actually created a demand to recruit outside CFOs to corporate boards to improve board audit and finance committees, but that demand has subsided after an initial surge. Governance advocates, of course, back the idea of fewer CFOs serving on their respective company's board. Naming the sitting CFO to the board of directors is "a waste of a board seat," says Paul Hodgson, chief research analyst for governance firm GMI Ratings. Including a CFO on a corporate board calls into question the relationship with the audit committee that oversees company financials and the CFO's performance, Mr. Hodgson says. A better approach is to simply have the CFO available for questions on an as-needed basis, Mr. Hodgson...
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