With no fewer than six prior CFO positions on his résumé, not to mention experience as an investment banker and as a CPA-wielding auditor at KPMG, Kenneth Goldman looked to be a shoo-in for the CFO position at Salary.com. But after a couple of weeks of interviews with everyone from the CEO to the controller, there was one more hurdle he had to clear: the board of directors. Goldman met with three members individually to assure them that “the person they saw on the résumé was the same person they’d see in the boardroom.”
Goldman’s experience is fast becoming the norm in the CFO hiring process. “Five or 10 years ago CEOs just picked who they wanted,” says Peter Crist, founder of executive recruiting firm Crist Associates. But over the past 18 months, he says, he has seen boards play a role in every public-company hire that he’s been a part of.
Greater board involvement is just one new wrinkle in the hiring of CFOs in a post-Enron world (Goldman says he also underwent a background check for the first time in 25 years), and it serves a number of purposes. Goldman describes his meetings with board members as a combination of “‘getting to know you’ and them doing their due diligence.” Crist says that boards want to make sure their CEO is backing a candidate who can handle external issues, can think strategically beyond finance, is sensitive to reporting and regulatory demands, and has the deal-making skills relevant to their business and industry.
Feeling the Pressure
While this greater scrutiny of candidates is done primarily with the health of the company in mind, to some degree it’s also to provide peace of mind for the directors. A recent survey found that 73 percent of board members believe their risk as directors has increased since Sarbanes-Oxley. That law makes directors responsible for their companies operating financially in accordance with sound financial practices and legal requirements. It also holds them responsible for accurately reporting their companies’ financial operations and conditions. Therefore, a CFO candidate who fails to inspire confidence in a board may face an uphill battle in landing the job. (For tips on how to interview with a board, see “Talking It Over” at the end of this article.)
That’s not to say that boards have usurped the CEO as the ultimate decision-maker. “Boards are giving more input and CEOs are listening more carefully to what they have to say,” says Kenton Sicchitano, a former senior partner at PricewaterhouseCoopers and currently a board member at MetLife, PerkinElmer, and Analog Devices. “But boards have to be careful not to manage the company on a day-to-day basis.”
It’s clear, however, that boards are no longer content to rubber-stamp a CEO’s pick. In fact, some are getting involved in hiring before any actual candidates are identified. At software giant CA, which just lost its CFO after a mere 15 months, board member Jay W. Lorsch says the board will have discussions with CEO John Swainson in advance of hiring, to make sure there’s a “meeting of the minds” about what constitutes the right stuff. (Lorsch knows a thing or two about corporate governance, having taught the subject at Harvard Business School and co-authored Back to the Drawing Board: Designing Corporate Boards for a More Complex World [2004, Harvard Business School Publishing].)