To Find a CFO, Many Firms Turn to Their Own Board Members
Directors recruited for executive jobs say such moves remain rare, but perhaps shouldn’t be, amid the need for financial expertise.
Erstwhile Crocs Inc. CFO Jeffrey Lasher began looking for a new job when the company placed Carrie Teffner, a well regarded former finance chief, on its board of directors in June.
Earlier this month the Colorado footwear maker named Ms. Teffner, former CFO for PetSmart Inc., as its next finance chief. Crocs said in September that Mr. Lasher would join boating-equipment retailer West Marine Inc. this month.
He said he didn’t know if his CFO position at Crocs was actually in jeopardy, but “there was a threat from Carrie, perceived or true,” based on her experience. “She’s an exceptionally strong executive,” he added.
The situation highlights how recruiting top-notch financial talent can be a tricky business, especially when the logical successor is a board member. Sarbanes-Oxley regulations have led to more CFOs on boards. Now some of those companies are tapping directors to fill executive positions.
Ms. Teffner and a Crocs spokesman both declined to comment before she officially assumes the CFO role in December.
Executives who have made the jump from a board they served on say such a move remains rare, but perhaps shouldn’t be, as the need for high-level financial expertise grows.
“Sarbanes Oxley was ‘The Employment Act for CFOs,’ ” said Steve Vintz, referring to new laws opening up opportunities for top financial talent to join external boards. Mr. Vintz is CFO of Tenable Network Security Inc., a closely held cybersecurity firm based in Maryland.
Companies are increasingly looking for directors who could become executives if need be, said Peter Crist, chairman of recruiting firm Crist|Kolder Associates. Shifting a former CFO from the board to management is “an easy play,” he said, and he’s fielding more requests for recently retired CFOs to become directors.
While that works on “a number of levels,” Mr. Vintz said that being a CFO is “an all-consuming process” that might make him shy away from a board role that effectively put him on the bench.
Appointing a new chief executive from the board is more common. DuPont Co. recently named board member Edward Breen as its permanent head, after tapping him as interim CEO last month. Mr. Breen was previously CEO of Tyco International PLC.
Naming someone from the board as an executive, even if it is a perfect fit, can suggest a company’s internal bench of potential candidates is too thin. More than three-fourths of CFOs surveyed last year by management consultancy Robert Half said they didn’t have a successor in mind.
Asset-management company Legal & General Investment Management America Inc. didn’t have the bench to pick a leader internally, said CEO Robert Moore, who served on the company’s board for seven years before being asked to take over in March.
Mr. Moore was CFO at another company and said he wasn’t thinking about moving, but as the board was trying to identify a successor, the chairman asked, “Should we have that conversation [about] having you as a candidate?” he recalled.
The decision to turn to board members also hinges on whether a former CFO wants to get back into the game. “If that person was from the industry and has been retired,” the move might seem smart, according to James Drury IV, a consultant with board recruiter James Drury Partners. He said more companies “than normal” are turning to directors for top positions.
That is “indicative of the importance of CFOs” and other executives like chief information officers who were previously seen as “data geeks,” said Barbara Gomolski, a managing vice president at technology consulting firm Gartner Inc.
But some say the practice might never become a trend, because it could curb a company’s willingness to let their CFOs serve on an external board, often seen as a path to gain more experience in preparation for a bigger role, Mr. Drury said.
But Mr. Moore at Legal & General claims that move could backfire. “A truly talented person will never want to be artificially held back,” and those that do are likely to see it as a company effort to “avoid their destiny.”
Saul Reibstein, CFO of Pennsylvania-based casino operator Penn National Gaming Inc., said his transition from the board to the C-suite was different than most, because he was its external audit partner more than 20 years ago.
He was asked to take the CFO seat in 2013, after serving the board since 2011.
“Your relationship changes with both the management team and your former board colleagues,” he said. While he called the move “unusual,” he also wondered why it doesn’t happen more often, not just in finance but with legal and human-resources and other executives.
“If I’m the CEO or chairman of the board, where I’ve established a relationship” with a good CFO on the board, he said, “I’m going to explore that opportunity.”