What Do Boards Do, Anyway?

What Do Boards Do, Anyway?
Secret CFO
January 6, 2024
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Ass Covering in the Boardroom

For the first time in my career, I felt out of my depth.

I sat in my fourth or fifth board meeting since I took my first big CFO role (I’d already lost count).

And now here we were. With one of the most respected bankruptcy law specialists in the world on the phone, taking minutes for our board meeting.

This wasn’t a good sign.

I didn’t have the miles in the tank yet to box clever in a room like this. I was the youngest in the room by a mile. And surrounded by titans of industry.

The tone of the conversation was puzzling me.

Insolvency was being discussed as if it were inevitable.

I didn’t feel that way, nor did the numbers say that. Sure, it was difficult, and survival was far from guaranteed. But there was a path.

That path would only be successful if we all committed, though.

Time to speak up:

“If we tell ourselves this business is going to the wall, we will be 100% correct, and there is a 0% chance this business survives. If we tell ourselves we can fix this, there is maybe a 50% chance we can rescue this business, and therefore only a 50% chance we are correct. I understand we have our directors’ duties to consider, but we also have to decide what is more important… that we are right, or that we are successful?”

Clearly, the CEO had felt the same way. Shortly after I’d said my piece, he dived in, and was less polite.

“This is all just a** covering horse sh*t. If you haven’t got the stomach for this fight, why are you still here?”

That was another way of saying it, I guess …

Boardrooms, especially independent boardrooms, are complex, often political places.


During January, CFO Secrets will feature a three part season on the board of directors. This is the first part.

Why Do Boards Exist, Anyway?

The board of directors (BoD) is the ultimate governing body for a company. You will find a lot of fluffy words about the purpose of the board; setting strategy, overseeing, etc.

But the reality is clearer than that. The BoD is there to make sure the management of the company are doing what they should be doing.

In practice this means:

  • Hiring and firing the CEO (+ often the CFO)
  • Setting exec pay
  • Safeguarding against conflicts of interest

Directors of companies (i.e. formal members of the BoD) carry specific duties set by company law. Those responsibilities will be different depending on jurisdiction. But the themes are broadly the same. More on those themes later.

The Role of a Director

The type of director determines the precise role of the director. There are two axises on which to think about types of board directors:

  1. Executive vs Non-Executive

Executive Director = a member of the BoD who has day to day responsibilities in the business, beyond their formal responsibilities as a member of the board.

Non-Executive Director (also called an Outside Director) = a member of the BoD who does not have any day to day responsibilities in the business.

  1. Independent vs Interested

Independent Director = a member of the BoD who has no ‘material interest’ in the Business. This means they:

  • Own no shares
  • Have no material conflicts of interest. That means no relationships with suppliers, customers or competitors.
  • Are not dependent on the compensation they receive for their services on the board.

The assumption is that an independent director’s primary motivation will be protecting their reputation, rather than financial. i.e. their ability to ‘resign on principle’ is an important component of their independence.

Interested Director = any member of the BoD who is not Independent.

A CEO would be an Interested Director because of the materiality of the compensation to them as an individual (whether variable or not).

The following shows examples of how those two axis interact with each other:

A good ol’ 2×2 grid.

Board Design

The function, tone, format and priorities of the board will vary. It's often based upon the mix of the BoD in relation to the above grid. i.e. a board with a majority of Independent Directors (e.g. a public company) will function differently to a board full of Shareholding Directors (e.g. a PE Backed Business).

Note there is no right answer here. Only a right answer for a specific business, ownership / management structure, and time.

Regardless of the board design, the goal of the BoD should be the same. To deliver the best result for shareholders.

But what does this look like in practice? From my experience, a good BoD will do these three things relentlessly:

  1. Challenge management privately
  2. Support management publicly
  3. Enable management to get things done (often this means getting out of the way)

When a BoD is set up to do these three things, they are a great asset. When they are not, they are a tremendous liability. I’ve worked with both. The difference is stark.

Roles on the Board

The following sets out the different roles on the board and how the CFO should interact with them.

CFO - Let’s start with you. As CFO, you may or may not be a formal member of the BoD; i.e. a named ‘Director’. Whether you are or not, you will normally attend all or large parts of the board meeting.

Whether or not you are a named director is a good indicator of whether the BoD will value your opinion and judgments. As opposed to just seeing you as providing information to the board as the ‘finance guy/gal’.

In the final issue of this series, we will get into the CFO’s role in the board room in more detail.

Chair - The chair is the big dog in the board boom. They run the board. The primary duty of the chair is to performance manage the CEO. Sometimes the chair is also the CEO; often in founder dominated businesses. In this case the CEO’s interests are naturally aligned to shareholders (by virtue of being a large shareholder); so a separate chair role may not be so important.

Building a good relationship with the Chair as CFO can only be a good thing. The most tangible sign of a good relationship is that the Chair calls you directly. Rather than relaying messages via the CEO or Audit Committee Chair.

Find a reason to be in your Chair’s part of town and take them for lunch once in a while.

CEO - The CEO may be the leader of the business, but not in the board room. If a CEO is not feeling challenged by the BoD, the BoD is weak. Normally, the CEO will also be a formal member of the BoD.

Working well with your CEO in the board room can be difficult. Never blindside the CEO in the board room.


That doesn’t stop you disagreeing with them, even publicly. Especially if you are a named member of the BoD. Just make sure they see it coming.

Seriously… get this wrong badly once, and it will wreck your relationship with your CEO… and then what?!

Non-Executive / Outside Directors - Often these are people who have been there and done it. They will likely have experience as CEOs, CFOs, COOs etc. from other businesses.

They may have a day job working in a business as an exec, with one non-executive side-gig.

Or, oftentimes they have retired from exec work, and have a portfolio of BoD roles. ‘Going plural.’

They bring a specific skill set, network and experience.

Bringing real value, whilst not over-reaching into management, is a difficult balance.

But the magic tends to happen when they successfully combine the perspective they have with their experience, and network.

Maintaining a functional relationship with these folk is important. But you can also tie yourself in knots. You are better concentrating efforts on the directors who are most influential; i.e. The Chair and Audit Committee Chair.

Sub-Committee Chairs - Public companies, and large private companies, will have subcommittees of the board. Audit Committee, and Compensation Committee are two particular examples.

The committee chairs (normally outside directors) will often act as the right and left hand of the board chair.

It’s important you keep them onside. The audit committee chair opines on whether your numbers are right. And the comp committee chair decides what you are paid.

Keep them both just a short friendly phone call away.

More on how these committees work next week.

Corporate Secretary - Normally not a formal member of the BoD. But they play an important role in supporting the Chair in ensuring the proper function of the BoD.

Their responsibilities include preparing minutes and record keeping. They also provide advice on the function of the BoD. They normally have a legal background.

This is another important relationship. They usually have a direct reporting line to the Chair as well as CEO/CFO or GC. They have a good inside line on board dialogue and support the Chair. That means deciding the board calendar and agenda. These are things you want to influence.

And when sh*t is going down, they might know more than the CEO and CFO. Your new best friend, right?

Directors’ Duties and Liabilities

The responsibilities of directors of companies are hard wired into law. These are called fiduciary duties. Fiduciary duties should act as a true North for the conduct of directors.

The specifics vary by country, and company type (private v public, etc.), but the essence is often as follows:

  • Director’s duties are owed to the corporation itself, and its shareholders as a collective. Not one individual shareholder, employee, creditor, etc.
  • They must avoid conflict of interest, and safeguard the business against conflict of interest. Their sole loyalty is to the company
  • Demonstrate a high level of skill, care and diligence
  • Act in good faith

There are circumstances where director’s primary duty of care switches to the creditors as a collective, rather than shareholders. This applies to situations of distress where creditors will not get paid as they fall due. This is a particularly complex area, fraught with personal liability risk for directors.

If you find yourself here, you need an insolvency lawyer in your corner. Careers can get destroyed in a heartbeat by not doing this properly.

Good directors take their fiduciary responsibilities seriously. And so they should. The penalties for breaching directors' duties are harsh. It can include fines, director disqualification, and even personal liability for company debts.

One lawsuit from an aggrieved shareholder could result in huge legal fees. This is where directors and officers (D&O) insurance comes in. The company pays for the directors and officers of the business to be personally insured against those risks.

You should never join a BoD without first understanding the D&O insurance cover. I once heard a horror story of a director who got personally sued by a disgruntled shareholder with deep pockets. And without D&O insurance, the legal bills alone sent them bankrupt.

And if you breach your fiduciary responsibilities, you expose yourself to the biggest risk of all… reputational destruction.

It takes 20 years to build a reputation and five minutes to ruin it. If you think about that, you'll do things differently. - Warren Buffett

Reputation risk drives the discourse on public company boards. It’s rarely said out loud, but it’s back of mind for every independent director, moving to the front when things get hard.

As a CFO and responsible board director, your fiduciary responsibilities should be sacrosanct. Being a good director of a complex business is difficult. Especially in public companies. A minefield of conflicts of interest, politics and protocol.

Next week in Part 2 of this series we’ll get into the detail of how board’s operate, how they make decisions, and how public boards differ from private boards.

Important disclaimer: Company law is complex and varies by jurisdiction. I’m not a lawyer, just a miserable old CFO giving their perspective. You need to take your own advice. This is for entertainment purposes only.


  1. If you’ve worked with one board you’ve worked with precisely that … one board. They are all different. Know what you are walking into.
  2. As CFO, you are assumed to be the guardian of ‘fact’ in the board room. Protect this reputation at all costs.
  3. Focus on your relationship with the Chair and Audit Committee Chair. Get those right, and the rest will fall in line.

This post was originally published on https://www.cfosecrets.io/.


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