Key Takeaways

  • Whether the CFO should sit on the board depends on governance needs, board independence, and company strategy.
  • Benefits include stronger financial oversight, improved risk management, and direct access to financial expertise.
  • Drawbacks include potential conflicts with board independence and reduced ability of the audit committee to hold management accountable.
  • Alternatives include involving the CFO in board meetings without formal board membership or appointing a former CFO as a director.
  • The trend varies: some markets expect the CFO to remain independent from the board, while others see value in their strategic insight.

“Should CFO be on board of directors?” is a common consideration among companies with a board of directors. Chief financial officers (CFOs) with extensive financial knowledge and experience may be the factor separating a high-performing company from an average one. Presently, CFOs are assuming more roles in companies, overseeing acquisitions and mergers, digitization, and cybersecurity. Also, they often take on the role of chief risk officer (CRO) in organizations that do not have one. Learn more about what a cybersecurity lawyer does.

Benefits of Having the CFO on the Board

The main benefit of having the CFO on the company's board of directors is that he or she is mainly responsible for preparing the financial statements, which are important documents that are regularly produced for the general public and investors. These statements are approved by the board, meaning that they are accountable for any problems that may arise. Sometimes, a company's directors may fail to detect errors in the accounts.

An example of such a company is Centro Property in Australia. The directors of this company relied on its finance department and external auditors to review its financial statements, but the court nonetheless convicted it for failing to exercise due care and diligence. In such a situation, it may be useful to have the CFO on the board to ensure that he or she will be held responsible for the company's accounts.

In addition, having the CFO on the board gives the company stronger financial oversight. In 2010, academics from Northwestern University conducted a study on New York Stock Exchange (NYSE) and NASDAQ companies. They found that the financial statements of companies with a CFO on the board generally had fewer material weaknesses.

Other than the chief executive officer (CEO), the CFO is probably the executive with the clearest oversight of the organization and its operations and strategies. If the CFO can contribute to the business strategy of the company and play a vital role in important decisions, such as mergers and acquisitions, it can be significantly beneficial to have him or her on the board.

Additional Strategic Advantages

Beyond compliance and financial accuracy, having the CFO on the board brings unique strategic advantages. A CFO often has a panoramic view of risks—financial, regulatory, and operational—and can help the board balance growth strategies with risk management. Their expertise supports sustainable decision-making in areas like capital allocation, investor relations, and long-term planning.

In global organizations, CFOs also help boards navigate international tax regulations, digital transformation, and ESG (environmental, social, governance) reporting. Their ability to translate complex financial data into actionable strategy can enhance boardroom discussions, particularly in times of economic uncertainty.

Disadvantages of Having the CFO on the Board

An increasing number of companies are reluctant to have their CFOs on their boards because of a number of issues. The issue of greatest concern is board independence. The main purpose of the board of directors is to lead and control a business organization. This role involves overseeing management and ensuring that the company is managed in the best interests of stockholders and stakeholders.

Usually, the CEO is already on the board and serves as its main representative. Adding a CFO or another executive director to the board may dilute board independence. Likewise, the audit committee, which has taken on a wider role in recent years, may have difficulty functioning independently with the CFO on the board. The role of this committee includes overseeing the company's financial statements and implicitly overseeing and analyzing the performance of the CFO.

In any case, whenever the company requires sound financial analysis to make major decisions, the CFO can always be asked to join board meetings to provide financial counsel. He or she can fulfill this role without being part of the board.

However, it is not uncommon for companies to have their former CFOs on their boards. By doing so, they can benefit from the knowledge and experience of a financial expert without having to deal with the conflict of interest that potentially results from having a current CFO on the board.

Governance and Regulatory Considerations

Some governance codes emphasize that the board should remain independent of management, with only the CEO as an executive director. In these cases, asking “is the CFO on the board of directors?” often results in “no” because their presence could undermine the board’s objectivity.

Audit committees, in particular, need the ability to independently review financial reporting and internal controls. If the CFO is on the board, it may create a perception of reduced oversight or conflicting loyalties. This is why in certain regions—such as the UK Corporate Governance Code—best practice generally discourages the CFO from holding a board seat.

How a CFO Can Better Support the Board and Vice Versa

Regardless of whether or not he or she is on the board, a CFO should help the board of directors better understand the company's strategy and define value creation in relation to past financial outcomes and forecasts of future financial performance.

This works both ways. A CFO should try to establish better relationships with the board of directors, especially with the audit committee chairman, who can share external insights and become a sparring partner and thought leader. This can be achieved by:

  • Becoming more confident when anticipating questions from the directors.
  • Providing the required information to help the board make operating and strategic decisions.
  • Collaborating with other executives more actively to provide the board with a unified perspective.

Alternatives to Board Membership

Even if not a formal board member, the CFO can play a critical role in governance. Common alternatives include:

  • Regular Board Participation: Attending meetings to provide insights without voting rights.
  • Former CFOs as Directors: Companies often appoint retired or former CFOs to the board, leveraging expertise without conflicts of interest.
  • Advisory Roles: CFOs can serve as strategic advisors on audit or risk committees, contributing expertise while maintaining independence.

This approach balances independence with access to expertise, allowing boards to retain strong financial guidance without jeopardizing oversight.

Frequently Asked Questions

  1. Is the CFO usually on the board of directors? Not always. In many companies, only the CEO is a board member, while the CFO attends meetings to provide financial expertise without holding a seat.
  2. Why would a CFO join the board? A CFO may join to enhance financial oversight, support strategic decisions, and provide direct accountability for financial reporting.
  3. What are the risks of having a CFO on the board? It can compromise board independence, weaken audit committee oversight, and create conflicts between management and governance duties.
  4. Can a former CFO be on the board? Yes. Many companies appoint former CFOs as directors to benefit from their expertise while avoiding conflicts with current management.
  5. What alternatives exist if the CFO is not on the board? Alternatives include having the CFO attend board meetings, serve in advisory roles, or contribute to specific committees such as audit or risk.

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