Get Invited Inside the Boardroom.

• Author: Livingston, Phil
• Position: Brief Article

Among the recommendations put forth and eventually adopted last year to improve the effectiveness of corporate audit committees was one I think is important to all financial executives.

I'm talking about the rule requiring NYSE- and NASDAQ-listed companies with market caps in excess of $200 million to have an audit committee comprising a minimum of three directors, each of whom is "financially literate," and that at least one member of the audit committee be a "financial expert" with accounting or related financial management expertise. Frankly, I don't think the SEC, which drove this effort, pushed far enough on this point to create stronger boards. A bolder step would have been to more narrowly define who qualifies to serve as the audit committee's "financial expert."

As it stands, a senior corporate executive with general management experience -- not necessarily with a strong finance background -- or a senior partner from a public accounting firm, say, would qualify. While this definition makes it easier for many companies to comply, it probably isn't enough to greatly improve the effectiveness of audit committees.

But to me, the best-qualified candidates are experienced chief financial officers (yes, I'm biased, and proud of it!) It's CFOs who have had the best first-hand training preparing the financial statements, working with the outside auditor, the board, the investment community and other members of the management team. What typifies a great outside director? Put simply, it's someone who can ask the tough questions. CFOs make great board candidates because they have had years of experience facing the real operational challenges of control and financial reporting, in addition to bringing extensive general business expertise to the table.

The short of it is that there's plenty of opportunity out there for experienced CFOs, active and retired, to serve on outside boards as the lead "financial expert" of the audit committee. That said, how can you better position yourself to get invited to serve on an outside board?

I think one of the first important steps is to commit to...