The Secret CFO

The Secret CFO



The hardest thing about my first big CFO role was learning to manage the Board of Directors I worked it out … EVENTUALLY. Here are the 5 things I wished I known from the start 🧵

First a recap on how Boards work in large companies. The day to day operations are run by ‘Management’ led by the CEO. Some of the most senior members of management sit on the Board; i.e. one or more of CEO, CFO, COO, etc… Also referred to as ‘Inside Directors’.

Boards of large companies also have ‘Outside Directors’. Also known as Independent Directors, or Non-Executives. They are normally people who have been C-Suite in a similar company elsewhere. They can be useful. They can also be a never ending ass pain…

They work 10-20 days each year, and are there to make sure the management are doing their job. The mix of inside / outside directors depends on the business. In a public company, there will be more outside directors than inside directors. This is important ...

... because it gives the outside directors a majority vote over management. In other words they can cock block a proposal from management. This is a key protection for public company investors, and helps stop management going rogue. Having good outside directors is crucial

The Chair leads the Board. The big dog. They are normally a titan of industry, capable of coordinating the egos of the board room, and giving the CEO a slap when necessary. They tend to work 2-3 days per week, and are responsible for setting the board agenda. More later...

The Board are responsible for setting what does and does not need approval by the Board. (By vote if necessary). It's then up to the CEO and CFO to enforce that mandate in the business. Don't f*ck it up, they don't like management operating beyond its mandate.

So how does a CFO survive a Board Room like this? It’s not easy, and I definitely underestimated how hard it would be. Especially at first, as I was the youngest in the room by a long way. But, it would have been a sh*t ton easier if I had have known these five things:

1. The Board Meeting is not the Board meeting So, the monthly Board meeting must be where all the big boy stuff gets done, right? Wrong. Formal board meetings are generally uneventful.

The big issues have already been discussed to death in side meetings and whatsapp groups, emails, etc. By the time it gets to the formal Board meeting it's normally a case of formalizing what has already been discussed / agreed. Understanding how this works is important...

If you need a decision, and it’s not straight forward, you gotta put that lobbying work in before the meeting. It's annoying. But it's the game you signed up for. Get good at it.

And the most interesting meeting... The REAL board meeting. Is one you will never be invited to. It happens in the car park, or in the hotel the night before the formal Board meeting. The agenda item? You. More specifically, you and whether you are doing a good job or not

Here they’ll decide whether you should be given a pat on the pack, or be fired. Whether you are paid too much or too little. Whether they could do a better job as CFO than you "if only they had the time." Whether we should "engage [insert their fav Big 4] to conduct a review"

2. Know your Guard Whether you know it or not, you have been allocated a man to man defensive guard. To keep you in check. In this case, it will be an outside director.

When the topic of whether you are a genius or an asshole arises... (Which it will, every f*cking month) They will be the person the other directors turn to and hear from, before the others nod along and agree. This is often a former CFO with experience in your industry.

For a CFO your man mark will often also be the audit committee chair. I'll do a separate thread on how you navigate an audit committee. You don't have to like this person, but there must be a mutual respect. And you need to make sure they are prepared to listen to you.

If they are good at their job, they will - be challenging privately - be supportive publicly (including with other Directors) - enable you to do your job - otherwise keep out of the f*cking way

Cultivate the relationship. Buy them dinner (they f*cking love a free lunch). Ask their advice in a way that guides them back to the answer you want, and makes them feel like you worship their experience. Make them feel loved. Feed their ego.

3. Build relationships with chair The chair is the god of the board room, not the CEO. They are responsible for the effective running of the Board. I once worked for a billionaire bootstrap founder (and 100% shareholder) who was intimidated by his own Chair.

If there is a toxic influence in the board room, you need the Chair to deal with it. You need their ear. I had a bad relationship with an audit committee chair in my first CFO role. He was an asshole, and I was just too f*cking cool for him. No … really.

Through some careful dialogue with the Chair, he got knifed. I look back and realize if I hadn't have built a good relationship with the Chair, I would have had my c*ck cut off. It needed dealing with though. It only takes one turd in the pool to stop everyone swimming.

4. Pre-read and prepare This is a boring, but important one. Boards LOVE their pre-read. More specifically, they HATE not having it. For most Board members, they will judge you and the legitimacy of your finance credentials, based on your board pack. Stupid but true.

Make sure the Board pack is of a good quality, and they get it 5 days minimum before the meeting. Invite questions and challenges before the meeting. Remember point 1, the real work is done before the meeting.

Outside directors don’t do it for the money. In fact their ability to resign on ceremony (if necessary) is an important part of their independence. So why do they do it? They do it to keep themselves busy, to look and feel important, and for a free lunch once a month.

They definitely won't take a spot of risk on their otherwise unblemished reputation. They will guard their reputation fiercely, so the level of ass covering through board documentation / minutes is extraordinary. So much easier to manage if the materials are good and timely.

5. Influence agenda A lot of board management is about administration. Meeting dates, minutes, sub-co don't want to be dealing with this sh*t. The corporate secretary is responsible for this. This role normally reports to the CFO or General Counsel.

Crucially though, they also have a close role with the chair, setting the agenda and the board cycle dates. It’s way easier to get the right materials in front of the board at the right time, if the meetings have been timed correctly around your reporting cycle.

A close relationship helps you manage this from the inside. Taking an interest here is smart, even though it's f*cking boring stuff. It puts you in the right place to get the meetings at the right time, the right things on the agenda. Also a good way to get close to the Chair.

Good Boards are very powerful. They drive clarity, accountability and performance, throughout the business from the top down. Bad boards are fractious, unproductive, and grind business to a halt. As CFO you need to nudge it in the right direction, and rely on a strong Chair.

TLDR For a CFO in a large / complex Board 1. All the real decisions are made outside the board room 2. You will have a babysitter. Get close to them 3. Get to know the chair 4. Good Board packs, on time, every time. 5. Stay close to the corporate secretary

That's Boards / Boreds! If you enjoyed this thread: 1. Follow me @SecretCFO for more of these 2. RT the tweet below to share this thread with your audience

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