Unprecedented demand for CFOs to serve on corporate boards

          Unprecedented demand for CFOs to serve on corporate boards

- Benefits of additional roles outweigh risks of being overstretched if the
right choice and timing of the role is made

- 79% of CFOs see an increase in demand for their expertise on corporate
boards

- 75% state understanding boardroom dynamics as principle benefit

PR Newswire

LONDON, Nov. 6, 2012

LONDON, Nov. 6, 2012 /PRNewswire/ --The demand for CFOs on corporate boards
is undergoing an unprecedented rise driven by regulation, difficult economic
conditions and the CFOs' broadening skill set, according to a new Ernst &
Young study, CFO and beyond: the possibilities and pathways outside finance.
The report found that many CFOs – both serving and former – are interested in
taking up roles that can improve understanding of boardroom dynamics, generate
cross-sector ideas and provide exposure to different corporate cultures.
However, this interest level is tempered by concerns about the professional
risks and distractions from their primary fiduciary duties. Those leading CFOs
who have successfully managed the balance, advise candidates for board
positions to choose the right role, and time it well.

The report  is based on a global survey of 800 CFOs, a study of the career
paths of group CFOs at 347 of the world's largest companies (annual revenues
over US$5b) over the past decade, and a series of interviews with leading
CFOs, governance experts and academics.

Rising demand for growing number of CFO competencies
Seventy-nine percent of respondents agreed their financial expertise means
they are in more demand than ever for board level roles. The study also shows
14% of board members from the world's largest companies studied were serving
or former CFOs, up from 8% in 2002. The proportion of audit committee chairs
who are serving or former, CFOs has doubled in the last decade (41% in 2012,
up from 19% in 2002), perhaps reflecting the demand for increased transparency
on company balance sheets.

Jay Nibbe, Ernst & Young's EMEIA Markets Leader, says, "Regulatory pressure is
driving a major increase in demand around the world for CFO experience on
boards. In many countries, a CFO's financial expertise is not only highly
valued, but also mandatory. Additionally, as companies grapple with a volatile
economy and the diverging growth trends of developed and rapid-growth markets,
they increasingly want good insights and support for cost, risk, and cash flow
management – three areas of focus that fall squarely within the CFO's skill
set."

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.

Jay Nibbe says, "Although they are crucial, financial skills alone don't
necessarily make for a good board member. Many CFOs today have the financial
skills as well as a unique combination of analytical, technical and strategic
capabilities. This combination of CFO skills makes for a strong addition to
the board."

Benefits of CFOs taking on non-executive roles
Those leading CFOs interviewed for this study, talked about using the
experience of an additional board role to enhance their performance as a CFO.
Understanding board dynamics from a different perspective is the principal
benefit of serving on a corporate board according to 75% of the CFOs surveyed.
Most CFOs spend a lot of time engaging with their own board members but it is
only by sitting on the other side of the table they can fully understand how
the boardroom works. Over half see it as an opportunity to gain exposure to
another company or industry, which enables them to learn lessons that have
valuable applications in their core role.

Jay says, "Experience in a different sector is seen by many CFOs as
particularly valuable, with the opportunity to gain knowledge and transfer
best-practice across industries. There can also be a 'halo effect' for those
companies whose CFO is serving on the boards of large well-respected
companies."

Professional risks and distractions from core role can be a deterrent
While most CFOs recognize the benefits, more than 40% think it is
inappropriate for them to take on part-time roles. Board directors are often
personally liable if it can be demonstrated that they have neglected their
executive duties. For some, the demands of their core responsibilities are too
great, and the risk of being overstretched is too significant. As corporate
governance legislation becomes more stringent, the time required to be an
effective non-executive director is increasing.

Despite the appetite of CFOs to take on non-executive roles, there is a
growing mismatch between the amount of time they feel able to dedicate to such
a role and the recommendation by corporate governance best practice. More than
half of CFO respondents confirm that they can only spare five hours or less
per week on a supplementary role, yet the minimum recommendation from the 2009
UK Walker Report (30 days per year) corresponds to at least that.

CFOs should adopt a long-term view and anticipate board composition changes
Among the CFO respondents, those who identified themselves as long-term
planners were significantly more likely to have taken on additional roles than
more opportunistic CFOs. CFOs are also taking on board positions at a younger
age than they were a decade ago. The increase in those CFOs from the companies
studied who have taken on non-executive directorships is most marked among the
younger generation – those aged between 40-49 years old.

Jay Nibbe concludes, "CFOs and future finance leaders interested in taking on
a board level role should start early – competition for roles and expectations
are rising so career planning is critical. They should do the research and
choose the right role carefully and for the right time. They should also
expect that, over the next decade, boards will increasingly value knowledge of
rapid-growth markets, analytics and other dynamic technologies such as social
media. Finally, board recruiters are now looking for deep technical know-how,
such as M&A and capital markets. Building deep experience of a particular
domain will give candidates a good chance of being matched up with certain
positions on certain boards."

Notes to Editors
CFO and beyond addresses the growing demand for CFOs to serve in roles on top
of their job as finance leader, and as an onward step. The study explores some
of the possibilities and pathways, provides insight into the appetite for CFOs
in these other roles, and how those who have gone before have navigated the
transition. The study is based on a survey of 800 CFOs, a study of the career
paths of group CFOs at 347 of the world's largest companies over the past
decade, and a series of in-depth interviews. Copies of the study can be
requested from www.ey.com/cfoandbeyond. The study follows earlier reports, The
DNA of the CFO (what it is to be a CFO today) and Finance Forte (what it is to
become the CFO of tomorrow).

About Ernst & Young
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John La Place
1-201-872-1951
John.LaPlace@ey.com

Daniel Cusworth
Ernst & Young Global Media Relations
+44 (0) 20 7980 0402
daniel.cusworth@uk.ey.com

SOURCE Ernst & Young

Website: http://www.ey.com
 
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