|  | | 2008 News and Press Releases | | |
HEADLINE NEWS:
Are CFOs Fit for Outside Board Seats?, Citigroup's intention to add directors with finance expertise raises the question: How many is too many?
David McCann,
cfo.com. April 3, 2008
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EXCERPT: Citigroup's announcement on Monday that it plans to stress finance and investing know-how in filling upcoming openings on its board of directors could be the tip of an iceberg. More financial-services companies whose earnings were hijacked by their investments in subprime mortgage-backed securities and other kinds of companies simply struggling with the current economic downturn are likely to adopt the same strategy, according to some who are familiar with the workings of corporate boards. But that doesn't necessarily mean the strategy is a sound one. … Companies in all businesses, not just financial services, can be expected to follow Citigroup's lead. "The financial people will come to the fore now," said Milan Moravec, chief executive officer of Moravec & Associates, a management consulting firm that provides expertise on the makeup of boards. "Hopefully they'll provide a better understanding of the direction companies need to go." The operative word, though, was "hopefully." Moravec told CFO.com that he doesn't really expect such decisions to have much impact. He called Citigroup's announcement "a knee-jerk reaction." Loading a board with financial people, even at a financial-services company, makes for a bad mix, according to Moravec. "You'll have a bunch of technical experts who are not really very good at communicating with one another or at bringing about the right levels of constructive conflict and differences of opinion," he said. "They'll be likely to make the same kinds of poor decisions that were made before." Indeed, having too many finance experts could undermine one of a board's chief functions, which is to ask "the dumb question," according to Keith Hall, a former CFO of Lending Tree who now sits on three boards (public company, private company, and non-profit organization). Asking and answering such questions could have insulated companies from exposure to the subprime mortgage meltdown, he suggested. |
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