Examining the relationship between CFOs and directors.

• Author: Cunningham, Colleen
• Position: President'sPAGE

FEI and the National Association of Corporate Directors (NACD) have co-sponsored several forums over the last few years on "What the Board Expects from the CFO." These forums have been well attended by both CFOs and board members (and some CFOs who are also board members).

Our last forum was held this June in San Diego and covered topics such as the new era of corporate governance, sustaining Sarbanes-Oxley Section 404, audit committee effectiveness/best practices and heightened elements of risk for board members. These forums are highly interactive, and I really look forward to participating at these programs and understanding the current top-of-mind issues for CFOs as they relate to their jobs.

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CFOs all agreed that over the past few years, they are spending a lot more time with their boards. The board packages are more timely (generally sent out a week or two weeks in advance of the board meeting) and contain more relevant, proactive information for board members. In the past, the packages offered more of a rote reporting of how the company did financially. Now, there is more discussion of risk and the potential financial impact of decisions.

The audit committee is meeting more often and discussing items like the choice of accounting policies more robustly. The CFO is spending more time "training" the board members on the unique financial aspects of the business. Many CFOs, in fact, are meeting with directors one-on-one to explain the financials and the risks to them individually.

Many directors have said they insist on meeting with the CFO one-on-one, and in some cases, they meet with the general counsel and the chief accounting officer one-on-one as well. These directors indicated that these meetings are informative and enable them to understand the company's inner workings and decision-making process more fully. These meetings have helped build trust between directors and management.

Unquestionably, more time is being spent on internal controls. No one can argue that a strong internal control environment is not of vital importance to financial reporting, yet most agree that the effort and cost of implementing Section 404 far outweighed the benefits. Now, as many public companies are moving to a "sustaining" or maintenance mode, audit committees are becoming increasingly concerned with escalating audit fees. CFOs can be helpful in this area by providing benchmarking data to enable the audit committee to make more...