Making Your Board a Strategic Asset

“I simply do not know where the money is!”said Jon Corzine this week while appearing at a Congressional Committee investigating the October 2011 bankruptcy of MF Global Inc, the multinational futures and bond dealer. About $1.2bn of customer funds is unaccounted for.

This is a remarkable statement from its former Chief Executive who was an ex Goldman Sachs Chief Executive, and a co author of The Sarbanes Oxley Act no less.

Giving him (for now at least) the benefit of the doubt (innocent until proven guilty and all that) this is all pretty damning. We constantly remind our clients that ignorance is no excuse, that as  directors they have, as individuals a collective responsibility (ie one person one vote) when operating at Board level. Far too many executives rely with blind faith on the Finance Director and do not avail properly of the potential support provided by their Audit Committees and external auditors.

We regularly ask CEO’s the following questions:

How do you know that your FD is doing a good job? By implication he/she knows more than you about finance so how can you be sure?

Who appraises the FD?

How does he/she keep up to date with the numerous changes in accounting standards, tax, Company Law and Corporate Governance?

What criteria did you chose for the appointment?

What succession planning is there in place?

Do you understand the link between your strategy and the resulting finance impact?

Do you understand how you are creating value for your shareholders?

In our work, we work with Boards with a view to improving the overall financial literacy. We also do more discreet one to one coaching with individual directors to get them up to speed with their financial understanding.