Corporate board training becoming necessary
With the business of business becoming more difficult because of global competition, rapid technology development and government regulations, many corporations are turning to professional directors to lead the way.
"I do believe, in general, especially for very large companies, there's really a move towards looking for ... people who really understand what it means to be a director and what the responsibilities are," said Marsha Everton, a corporate director and adviser who lives in Dover, York County.
Everton, who serves on the National Retail Federation Board in Washington, D.C., took a course at the National Association of Corporate Directors. The NACD's "How to Become a Director" course is recognized as one of the best, Everton said, and teaches all the skills needed to serve on corporate boards.
Successful students earn accreditation and must take continuing education courses. NACD also hosts "master's classes" for more-experienced directors, said Peter Gleason, managing director and CFO of NACD, and it delivers specialized programs on site when requested by clients.
"The environment that directors operate in today is much different than it was 15 to 20 years ago," he added. "There's a lot more demanded of directors now."
Everton took the course in 2008 and went on to serve on the Bon-Ton Stores Inc. board for several years. While NACD is a leader in the field, it is far from the only training source for prospective corporate directors.
"Training somebody how to serve on a board is also big business," Everton said. "Nearly every university or college has a program. Especially with the baby boomers and this large group of people who are about to turn 60 and looking for something to do with their lives. Certainly, the training market has responded to that."
With NACD for nearly 14 years, Gleason said he began noticing increased demand for training around the time the federal government prosecuted Enron for shady corporate accounting. The Sarbanes–Oxley Act of 2002 set new or enhanced standards for all U.S. public company boards with regards to financial management and accounting.
"That's when our education programs began to pick up, and that's when we tried to tailor them more to the market needs," Gleason said.
The Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010 further tightened the financial regulatory environment. Financial reporting, risk and related factors make up a large part of the NACD training curriculum, Gleason said.
As a result, directors serving on nomination and compensation committees need to be especially prepared, he added.
"We recognize that everybody on the board is not going to be a CFO, so financial training is always big," Gleason said.
Vilmos F. Misangyi, associate professor of management and organization at the Penn State's Smeal College of Business, said the pool of potential directors is divided among those pursuing full-time positions as corporate directors and those who have separate careers in other areas.
"I guess you would have to treat those directors a little bit differently," he said of the latter group.
Companies often develop very good training programs in-house, Everton said. After all, nobody knows the company culture better than those inside the building.
Many companies are still run by family members, and that often requires its own set of coping skills for board members, she added.
"It's very important in board work to make sure that you understand and think through the different roles of family, shareholders and employees," Everton said.
The two primary functions of a corporate board member are to provide advice and counsel and to act in an "oversight" role, Misangyi said.
Acting in the latter role doesn't necessarily require a lot of training, he added. The director just needs to acquire information and have the fortitude to ask the tough questions.
"You need some directors who can be in there and at least sense that something is wrong and ask questions about it," he said. "There are studies that show that directors who speak up and ask questions are ostracized by the rest of the board."
When it comes to delving into business matters, Everton said, having training in the law and government regulations is crucial. A responsible director needs to know the risk-management scenarios associated with the company he or she is serving, she added.
"When you're a director, you're supposed to have your nose in and your hands out," she said.