Boards are facing pressure to diversify their ranks, be it by demand from consumers and investors, or by mandates as states and countries require a set number of women and people of color sit as directors of public companies.
The National Association of Corporate Directors is working to help position the next generation of board candidates, and announced efforts to make sure potential board members have the requisite skills, and to create opportunities for non-traditional candidates to network with people who are in positions to help get them board appointments.
Peter R. Gleason, chief executive of the NACD, talks about what the organization is doing, the importance of expanding the director talent pool, and why people should pursue board service.
What led to the formation of this director education initiative? What does NACD hope to achieve?
PG: Even before the pandemic, the complexity of board service was increasing with alarming velocity. As we continue to call on directors to do more and know more, we want to find ways to make the very highest level of educational programming for directors more available and more accessible. Pairing NACD's director education programming and certification with leading executive education programs from around the United States and the world will help us to provide more directors with the latest strategies and knowledge.
By collaborating with select, world-class universities, we aim to elevate the level of governance programming across the board. This is our goal: better prepared and more knowledgeable directors who will guide their boards in creating successful outcomes for their companies.
What do potential directors need to learn before they can seriuously be considered for a board seat?
PG: Before they can be seriously considered for a board seat, potential directors, including current executives and senior leaders, should understand the fiduciary duties of being a board member. [Those are] duties of care, which means acting diligently and competently; and loyalty, which entails placing the interests of the company first, and for which directors are responsible both ethically and legally.
Deep knowledge of finance and executive compensation is critical. Directors must also understand the roles and expanding requirements of key board committees--nominating and governance, compensation, and audit--where the heavy lifting is done on the board. Furthermore, board members should understand how to apply their real-world insights to the effective oversight of the company's short- and long-term strategy, culture, and talent development/retention.
Finally, a board member's role differs from that of management, as it is focused on overseeing rather than "doing." As we often quip, the board's role is "noses in, fingers out," which is a metaphor for this oversight role. Directors must effectively oversee--noses in--the work of senior management/leadership team, but should not overpower management, and should not become involved--fingers out--in the company's day-to-day work. We at NACD often find one of the most difficult challenges for new directors is transitioning from the management role to the oversight role.
NACD also started a program to expand the diversity of talent being considered for board roles; what is this about?
PG: Because NACD recognizes the need for a strong, diverse, and highly qualified pipeline of executives to serve as tomorrow's directors, we launched NACD Accelerate, a pathway for nontraditional director candidates to pursue board work through education and networking. This is the only program NACD offers that does not require current board service.
NACD Accelerate provides these talented candidates with the foundational education necessary to succeed in the boardroom--such as access to our expert-led, live education programs--in addition to more than 300 events a year through NACD's chapter network. Accelerate provides an opportunity for participants to make connections that will expand their networks and potentially facilitate an opportunity to serve on a board.
How does this NACD Accelerate education program differ from the education initiative?
PG: Both programs are designed to meet the challenges boards are facing now and into the future. NACD Accelerate looks beyond C-suit roles to identify qualified executives who have incredible potential to serve their boards with their own distinctive experiences and points of view. These high-potential executives will gain exposure and education through NACD Directorship Certification, which will greatly increase their visibility and provide an important network from which they can grow.
The NACD Education Network provides an opportunity for certified directors to complete their recertification credits at a growing number of universities, beginning with Stanford University, Columbia University, and Drexel University. Not only will this increase accessibility for continuing education for directors, but we also hope that by working together with leading providers of executive education, we can continue to raise the level of programming and education directors need.
California and other places are mandating that a certain number of women and people of color sit on a public company board; is this the right way to bring about change? Do laws need to be in place to push a majority of companies to do this?
PG: While NACD does not believe in mandating quotas, we do understand that successful businesses have targets and goals. We have also seen time and time again that diverse groups provide better outcomes. As such, ethnic and gender diversity, along with other forms of diversity, are important factors that should be considered in a board's own composition. These factors should also be considered as the board ensures that the executive team is setting and meeting organizational targets to attract and retain diverse talent.
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About the Author
Joined LRN in October 2018 after 30 years as a journalist, including seven years at The Wall Street Journal, including Risk & Compliance Journal and was a creator of the WSJ Crisis of the Week column. In 2015 was named one of the 100 most influential people in business ethics by Ethisphere Institute. Spent 14 years as a reporter in Hawaii, 11 with The Associated Press.More Content by Ben DiPietro