By Shawn Cole, President and co-founder of Cowen Partners Executive Search
There is a predictable moment in many boardrooms when the numbers get uncomfortable, and audit committee meetings run long. The tone between the CFO and the audit chair sharpens in a way everyone notices, but no one acknowledges.
What follows is equally predictable. A consensus forms that the CFO is the problem. It is a convenient conclusion. It gives the board something actionable by replacing the finance leader and restoring equilibrium. Yet it is also wrong with a frequency that most boards would find unflattering to examine.
The Default Assumption is Wrong
Tension between a CFO and an audit chair is not, by default, a performance indictment of either party. It is a signal, and signals require interpretation. Sometimes the data points to a capability deficit in the finance function. Sometimes it points squarely at the committee chair’s conduct in governance. Quite often, it points to neither, but rather to a relationship that has deteriorated and now compromises financial oversight for everyone.
A board that treats this as a blame exercise will solve the wrong problem with admirable efficiency. The actual obligation is diagnosis. And most boards, if they were honest about it, are considerably less skilled at that than their own confidence suggests.
How to Spot a Failing CFO?
A failing CFO rarely announces themselves with dramatic errors. The signals are more mundane, which is precisely why they are so easy to rationalize away.
- Bad news begins arriving late. It is not withheld, but delayed just enough to strip it of its usefulness. The board learns about problems after the options have already narrowed.
- Questions that should be routine start producing defensiveness. Not outright resistance, but a detectable shift in register. Answers lengthen and lose their direction. Clarity requires more effort than it should.
- Board materials arrive polished and feel curiously hollow. The numbers are present. The judgment is not. The board sees what happened but is left to infer why and what it implies. Formatting substitutes for insight.
- Forecasts miss with such regularity that the usual explanations strain, and the explanations themselves begin to sound familiar.
- Audit adjustments accumulate at a frequency that suggests something more systematic than marginal judgment calls.
None of this requires theatrics to identify, and in fact, the more composed the CFO appears as these patterns accumulate, the more comfortable a board becomes delaying a conclusion it has already begun to reach.
The discipline most boards lack is the ability to separate discomfort from evidence. A CFO who challenges assumptions or pushes back on the board’s preferred narrative is not failing. That is frequently the job done well. The question worth asking is whether their judgment sharpens the board’s understanding or systematically obscures it.
If the answer is the latter, the board has a governance problem. It happens to be seated in the CFO’s chair.
How to Spot a Failing Audit Chair?
Audit chairs are typically the most financially literate people in the room. They have earned their credibility over decades, so when tension arises, their behavior tends to be read as rigorous rather than risky. That interpretive generosity is understandable. It is also how dysfunction goes unaddressed longer than it should.
A failing audit chair rarely presents as one. They present as detail-oriented and deeply engaged, qualities the board has been conditioned to reward, right up until the moment those qualities tip into operational interference.
The progression is recognizable.
- You start seeing a shift from oversight to execution. Questions turn into directives. Discussions about judgment become instructions on how to make the call.
- Expectations become a moving target. What was acceptable last quarter is suddenly insufficient without a clear articulation of why.
- Routine issues escalate into adversarial exchanges. Not because the underlying matter is significant, but because the tone has shifted from inquiry to challenge. Every conversation carries a hint of cross-examination.
The most corrosive behavior is bypassing the CEO entirely and going directly to the controller or to external auditors, dressed up as efficiency or diligence.
Yet it systematically undercuts the CFO’s authority and fragments the information flows the board depends on. There are circumstances where direct access is appropriate. The issue is that when it becomes habitual, it signals a breakdown in trust.
The particular irony is that most audit chairs in this position do not see themselves as the source of dysfunction. They see themselves as compensating for it.
How to Spot a Broken Relationship Between CFO and Audit Chair?
This is the scenario boards struggle with the most, because it resists simple narratives.
You can have a capable CFO and a competent audit chair who together produce poor governance outcomes. Not because either lacks skill, but because their interaction has degraded. Boards find this uncomfortable precisely because it cannot be resolved by replacing one person or coaching another. It requires the board to reckon with a dynamic, which is considerably harder work.
The signals here are subtle, which is why they persist.
- Communication becomes formalized. Everything important happens in scheduled meetings, supported by decks and delivered with precision. What’s missing are the informal conversations where context is built and misunderstandings are resolved early.
- Both parties stop extending basic good faith to each other. Questions are received as challenges, and clarifications are heard as evasions. Intent is assigned negatively almost by default.
- The CEO starts getting pulled in, not because the issue requires executive escalation but because someone needs to translate. That’s a red flag most boards ignore. The CEO should not serve as the intermediary between the CFO and the audit chair.
- Executive sessions generate energy and no movement. Concerns are aired. Frustrations are shared. Everyone returns to the following meeting and resumes the same pattern.
At this point, the board is no longer overseeing financial governance. It is observing a stalled dynamic and implicitly hoping it resolves itself.
What Boards Should Do
The instinct in these situations is to react to the most recent incident, such as a tense meeting or an uncomfortable exchange with auditors. That is not a diagnosis. That is pattern blindness dressed up as decisiveness.
1. Look For Patterns
The first obligation is to step back and look for consistency across time rather than intensity in a single moment.
- Is the issue recurring?
- Is it directional?
- Is it concentrated in one relationship or distributed across interactions?
A pattern is evidence.
An incident is noise until it isn’t, and the board’s job is to know the difference.
2. Separate Style From Substance
Separate communication style from judgment quality. A blunt CFO may still be right.
A meticulous audit chair may still be distorting the committee’s priorities. Style is what surfaces first and tends to dominate the room’s attention. Substance is what the board is there to assess.
3. Make Role Boundaries Explicit
What decisions belong to management? Where does oversight begin and end? Under what conditions is it appropriate for the audit chair to engage directly with finance staff or external auditors?
If those boundaries are assumed rather than stated, the conditions for conflict have already been established, and the board has no standing to be surprised upon arrival.
4. Reset Expectations Directly
Reset expectations openly by directly aligning the parties involved. It will feel uncomfortable, but that discomfort is generally confirmation that the conversation is overdue.
5. Use External Perspective When Needed
Bring in an outsider perspective when internal diagnosis stalls, not to outsource judgment but to stress-test it. A seasoned external voice can identify patterns that insiders have long since normalized and stopped seeing.
6. Hold the Board to the Same Standard
Be willing to change committee leadership. Boards have a persistent reflex to treat management as the variable and the board itself as the fixed point. It is a convenient assumption and is also frequently wrong. When the evidence implicates the audit chair in the dysfunction, that finding warrants the same structured response the board would apply to a CFO performance issue.
Governance credibility rests on that symmetry. A board that holds management accountable while exempting itself from equivalent scrutiny is not practicing governance. It is practicing convenience.
Final Remarks
Misdiagnose the problem, and you will fix the wrong thing with considerable confidence. Replace a CFO when the dysfunction originates with the audit chair, and you have done nothing except reset the clock. Retain a CFO when the evidence is clear and accumulating, and you have compounded the risk.
The market will not be interested in how measured the internal discussions felt or how collegial the process was. It responds to outcomes. It is indifferent to intent.
And outcomes in this domain are shaped well before the decisive moment arrives. They are shaped by how clearly the board sees the problem in the first place, which is, in the end, the only governance question that was ever really on the table.
About the Author
Shawn Cole is an executive search leader, entrepreneur, and boardroom advisor whose work focuses on helping organizations secure transformational leadership. As President and Co-Founder of Cowen Partners Executive Search, he has spent years working with boards, investors, and executive teams to identify leaders capable of navigating complex growth environments and organizational transitions. His perspective sits at the intersection of strategy, leadership, and talent—three forces that increasingly shape how modern companies compete.
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