It did not require the failure of Enron's board to mitigate the company's collapse to persuade Canada's Institute of Corporate Directors (ICD), in partnership with the University of Toronto's Rotman School of Management, to create a training program for board members. But the bad news has clearly filled the training program's classes in a hurry.
The ICD Director Education Program has already been launched in Toronto and will roll out in Montreal, Calgary and Vancouver. The ICD, an association dedicated to enhancing the quality of governance acumen that its members provide to the corporations they serve, will form partnerships with universities in each of those cities. The ICD is supported by PricewaterhouseCoopers LLP and other well-known partners.
"Formal training for boards was something we were looking at before the corporate scandals in the United States," says Bernie Wilson, Partner, PricewaterhouseCoopers LLP, and Chairman of the ICD. "But, the front-page news was certainly a call to action".
While allegations of fraudulent conduct in the U.S. landed at the feet of corporate management executives, the current push for global reform is particularly centred on boards of directors. Critics of boards paint pictures not only of chummy groups dominated by the chief executive officer's demands, but of well-intentioned board members who are simply over their heads in today's business world. However, the truth of the matter is that most professional board members are accountable and have always taken their board responsibilities very seriously. What's new is the gravity of the consequences for boards and other stakeholders when management oversight fails.
"Shareholder scrutiny is no longer limited solely to a company's financial performance but, increasingly on non-financial indicators such as transparency and governance structures," says Chris Clark, FCA, National Managing Partner at PricewaterhouseCoopers LLP. "PricewaterhouseCoopers commends the ICD's leadership in establishing the Director Education Program. PwC's support of the ICD is in line with our other national sponsorships, such as Canada's CFO of the Year Award, which are founded on promoting accountability, integrity and reinforcing public trust in our capital markets."
"Being on a board is far more complex today," affirms Wilson. "There are more regulations and, appropriately, a heightened sense of accountability. Shareholders want to know their money is being well spent — with all due attention paid to risk."
Indeed, if every manager needs specialized training today, why not the people charged with management oversight? To that end, ICD partnered with the Rotman School of Management to create the ICD Corporate Governance College (ICD College). In November 2003, the ICD College launched the Director Education Program, in Toronto: a four-module, 12-day training effort for participants.
"We think that there is an opportunity here to create the profession of director," notes Beverly Topping, President and CEO of the ICD.
While the United Kingdom has had an Institute of Directors involved in such education for many years, North America has had only a scattering of elective courses on governance at business schools. "I believe the next generation of directors will not be just CEOs, and that there are many qualified board candidates at the senior management level," notes Topping.
"Professionalizing the position of board director could also have the effect of diversifying the role based on merit," says Topping. "While just over 11 per cent of corporate board members in Canada are women, for example, ICD's first training program last November included 14 women out of 34 participants."
Moreover, director training needs aren't limited to the corporate sector, says Wilson. "The same needs hold true for Crown corporations, for local school boards, for not-for-profits. There are boards functioning in every sector of the economy, and we've never trained people to fulfill the role of director."
Far from being an affront to seasoned business people already long established on corporate boards, the ICD College not only sold out its first several sessions but has attracted the likes of former Premier of Newfoundland and Labrador Brian Tobin and Ontario Securities Commission Vice-Chair Susan Wolburgh Jenah.
"Probably the biggest push for governance education came when the NYSE started to focus on it," observes Carol Hansell, Partner at Davies Ward Phillips & Vineberg LLP, and a leading authority on corporate governance. "Both the NYSE and the TSX Group have now created programs. They're saying it's important and are actively playing a role."
"The collapses in the high-tech sector really laid the groundwork for this initiative," says Hansell. The momentum that corporate failures have created for the ICD College's Director Education Program is undeniable."
"When there is a downturn in the markets and people lose value in investments they thought were safe, there is a demand for accountability," says Hansell. "In the most recent downturn, there are so few investors who were unaffected, and so the demand for accountability this time is even more acute."
Spaced over four weekends, with an enrollment of about 35 people per session, the ICD College course, which Hansell likens to a mini-executive MBA, covers such ground as guiding strategic direction and risks; monitoring financial strategy; disclosure; guiding human performance; assessing enterprise risks; and directing extreme and unique events.
"The strong buy-in from participants in our program has exceeded my expectations," says David Gavsie, Chair of the ICD College and a Senior Partner at Ogilvy Renault in Toronto.
"There are two broad categories of students", Gavsie adds. Some are existing board members who feel the rules and practices have changed so much that they would benefit from formal education. Others are aspiring board members who are perhaps concluding some other phase of their management careers.
The emergence of a professional training program for board members is part of an opportunity for change. As in so many other fields, a generational shift is occurring in directorship. "We're losing a lot of directors just to retirement," remarks Hansell. "Others are not stepping forward because of the risk to personal reputation — and the fact that the workload associated with being a director has increased significantly. Those who are prepared to serve know that the key to making a constructive contribution in the boardroom is being prepared for the job."