Board Buddies

Directors with finance expertise often form bonds with management's CFO.

Even the best of us can use some coaching. In the CFO suite, increasingly that coaching comes from the finance expert serving on the company’s board of directors.

With 17 years’ experience as a CFO, Earl Fry, finance chief of Redwood City, California-based Informatica Corp., acts as mentor to his compatriots at the two companies on whose boards he sits. In dealing with Central Pacific Financial Corp.’s Dean Hirata and Xactly Corp.’s Steve Wong, says Fry, part of his function is to help “develop their skills through an open relationship and offer them a nonthreatening arena” for testing ideas.

“It’s comforting to deal with someone who’s in the same shoes and faces very similar issues,” says Hirata, who is also vice chairman of Central Pacific Financial, a Honolulu-based bank holding company.

Often, Fry must direct his attention to special needs that require the help of a director with finance experience. As a director of San Jose, California-based Xactly, for example, he provided Wong with an alternative viewpoint during a recent round of venture-capital negotiations. “I was able to help the CFO by [telling him] what kind of input he needed to get from the venture firms, and explaining how I would deal with venture firms,” Fry recalls. “Since most of the other board members were from venture-capital firms, they might not have been as objective.” The financing round closed successfully in April, he says.

In addition to formal communications — Fry is on Central Pacific Financial’s audit committee — he uses impromptu phone calls and casual lunch and dinner meetings to keep in touch with Wong and Hirata.

Friend or Foe?

Lorraine Hack, a financial officer recruiting specialist at Heidrick & Struggles and a former CFO, thinks that the development of a coaching relationship between a board-member CFO and the company’s finance chief is among Sarbanes-Oxley’s better impacts. The requirement for boards to seek outside finance experts, who often are finance chiefs at other companies, introduces another finance voice for management to consider. In that light, rapport between the company CFO and the finance-trained director is “absolutely essential,” she says.

Hack much prefers that approach to the model in which a strong-willed outside director clashes with management’s finance leader — a relationship most companies would rather avoid. Of course, directors have “a responsibility to play devil’s advocate and probe and push management on issues,” she acknowledges. “But there’s really no downside to having a good relationship between a board member and the CFO.” (Informatica’s Fry says there is occasionally a difference of opinion at the two companies he serves, but that he tries “not to forget that it is management that is running the company.”)

Beyond major disagreements on issues, says Hack, the greatest barrier to achieving the kind of informal, collegial relationships she recommends is simply a lack of time; board members and management are often too busy to develop close working relationships.

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