Even the best of us can use some coaching. In the CFO suite, that often 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 California-based Informatica, acts as mentor to his compatriots at the two companies on whose boards he sits. In dealing with Central Pacific Financial’s Dean Hirata and Xactly’s Steve Wong, says Fry, part of his responsibility is to help “develop their skills through an open relationship and offer them a non-threatening 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 bank holding company.
Fry must often direct his attention to special needs that require the help of a director with finance experience. As a director of 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.
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 the better outcomes of new regulatory requirements such as Sarbanes-Oxley. The requirement for boards to seek outside finance experts, who are often finance chiefs at other companies, introduces another finance voice for management to consider. In that light, a rapport between the company CFO and the finance-trained director is “absolutely essential,” she says.
Hack prefers that approach to the model in which a strong-willed outside director clashes with the 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.
Nonetheless, most corporate finance chiefs say they benefit greatly from the presence of a CFO on the board. Jean-Yves Dexmier, CFO of California software provider Openwave Systems, joined the board of nearby online tech company LookSmart, in April. He and LookSmart CFO and COO John Simonelli have been meeting for breakfast about once a month, tossing around business ideas, catching up on sports and discussing their families.