Director As Perpetual Student
By Maureen Milford

How board members educate themselves in the face of regulatory changes and an ever-changing global business landscape.


As a director of three Fortune 200 companies, Michele J. Hooper considers her board service a “profession” for which she must be up to date on a wide range of matters.

“To be an effective director who can add value to our board discussions, I need to understand governance, the industry, the company, the issues, strategy and risks, the competitive environment, the regulatory environment, etc.,” says Hooper, who is a director of UnitedHealth Group Inc., United Continental Holdings Inc. and PPG Industries Inc.

It’s an education need many directors are feeling pressure to address today.

Back to School

With more boards seeking continuous education for their busy directors, companies want to make the most of any sessions. Experts in the board-education field offer these suggestions:

• Hold general classes to educate or refresh directors on their fiduciary duties, says Matteo Tonello, managing director of corporate leadership at The Conference Board, a business and research association designed to help leaders navigate issues facing business.

• Consider a periodic tailor-made education program designed for individual directors, Tonello suggests. The program should be informed by: A skill-set map of the board that identifies areas of weakness; and the company’s risk assessment to identify specific vulnerabilities that could be addressed by education or external advice.

• Build education into the time prior to each board meeting, Tonello recommends. The corporate secretary office should consider providing a comprehensive set of resources (including educational resources) for board members to prepare for meeting discussions. “For example, if the discussion is on the adoption of a certain governance practice, in addition to the materials that are strictly needed for that decision (e.g. the text of a shareholder proposal or a letter requesting the change, the draft of a proposed bylaws, proxy advisory recommendations, etc.), the corporate secretary should consider including in the preparatory meeting materials a set of benchmarking data by a reliable data provider, illustrating whether and how peer companies have adopted that practice; or bring in an outside expert to illustrate that data and the pros and cons of the practice in question,” says Tonello.

• Stay on top of trends in potential liability and keep updating any list of flashpoints, says Kevin LaCroix, an attorney who consults with companies on directors’ and officers’ liability insurance matters. “It’s important for boards not to let the list get frozen. Things might be different in 12 months,” he says.

• Don’t consider education a vaccination against all potential pitfalls. Checking the box on director education shouldn’t lead to complacency. “I would not put education at the top of the list as a way to fix all of the problems,” said Yvonne Curl, a director of Nationwide and Encompass Health. “It’s culture.”

Boards now have to grapple with a series of reform measures enacted by Congress and the Securities and Exchange Commission (SEC) in the aftermath of scandals since the early 2000s. In some cases, the penalties can be quite severe.

This year alone, the SEC issued guidance on cybersecurity disclosures, including the requirement that companies outline the board’s role in overseeing risk. In May, strong online privacy rules went into effect in Europe with the General Data Protection Regulation. California also passed a comprehensive data privacy law in June.

In the investment community, activist shareholders relentlessly scrutinize board performance and individual members have actually been singled out by activists for removal for underperformance or lack of necessary qualifications.

Hooper says she’s “constantly in the learning mode,” attending conferences, industry events and company seminars. In addition, she reads a variety of magazines, blogs, regulatory updates and articles supplied by clipping services. “I like it all,” she says. And, thanks to advances in technology, Hooper often avails herself of online seminars.“All of these developments took place in the last two decades and explain a level of demand for director education that we had never seen before,” says Matteo Tonello, managing director of corporate leadership at The Conference Board, a business and research association that helps leaders navigate issues facing business

“It allows me to either catch a webinar online in real time if my schedule permits, or, if I’m busy, I can access archives to listen when I have the available time — at home, my office or on the road,” she says. “Continuing education is an imperative, and does not just mean in classroom sessions.”

Hooper’s learning regimen is emblematic of the new normal for board members: The corporate director as a perpetual student. Faced with far more responsibility than ever before, boards now view education as a way to meet an array of challenges, including shareholder engagement, sustainability monitoring and oversight of complex risks, such as cybersecurity and data privacy.

Consider how directors at several major companies gain knowledge.

Every year, Kurt M. Landgraf, a director of Corning Inc. and Louisiana-Pacific Corp., completes online training modules for service on both boards, he says. At Corning, training in cybersecurity and other issues includes an annual four-hour review of do-and-don’t behaviors and communications. Landraf has also attended multi-day conferences.

Yvonne M. Curl, a director of Nationwide Mutual Insurance Co. and Encompass Health, aims for targeted education. As a highly experienced director, blocking out two days for a conference may not be the best use of her time. What’s more, at bigger forums audience members will have mixed experience, which can result in discussions less valuable to long-serving directors, she says.

 “I have found multiple forums and tools to be effective: seminars, director councils, white papers, company on site board education sessions, board and committee consultant briefings,” Curl says.

But for Julie Fasone Holder, a director of W.R. Grace & Co. and Eastman Chemical Co., off-site conferences allow her to broaden her lens. Meeting people from other companies, listening to peer leaders and hearing what investors are saying, gives Holder new insights, she explains.

Now, she has a goal of attending one off-site program a year. She also receives regular education from experts at directors’ lunch and dinner meetings and reads newsletters targeted to boards of directors.

 “We’re so busy, so heads down, it’s so easy not to lift your heads up. There’s such advantage to having an outside perspective,” Holder says.

From passive to active

Fifty years ago, the job of corporate board member was so passive, some companies didn’t provide directors with a meeting agenda, supporting materials, detailed financial reports or other data, according to the late Myles L. Mace, who in 1971 published the landmark “Directors: Myth and Reality,” which was based on interviews done in the late 1960s.

“Those days are gone,” notes Hooper, who is active in National Association of Corporate Directors. “We can’t live by the same practices we had back then.”

Most trace this change in director engagement to the scandals of the early 2000s, starting with Enron Corp., and WorldCom. Then came the financial meltdown in 2008. More recently, Wells Fargo & Co., Facebook Inc. and Twenty-first Century Fox Inc. have faced their own scandals.

“The question everyone asks — from news reporters to governance commentators to regulatory agencies — is: Where was the board? Could it really not have known? All of these cases of boards of companies making headlines for falling short of expectations most certainly puts pressure on the directors’ community,” says The Conference Board’s Tonello.

If the buck stopped at senior executives 30 years ago, it now lands in the boardroom, Tonello adds.

Today, roughly 25% of companies in the S&P 500 and 15% of companies in the Russell 3000 require their directors to attend an outside director education program, according to data from The Conference Board.

The National Association of Corporate Directors (NACD) holds more programs than ever before and educates roughly10,000 directors annually, according to Erin Essenmacher, NACD’s chief programming officer. The association has expanded virtual learning options, offers master classes for advanced leaders and provides experiential learning opportunities, such as field trips to The Consumer Electronics Show, and more. In the spring, NACD held its first international event.

“Directors want to be good stewards. The boards are both telling us what they need and relying on us to be out in front and to help them understand what’s coming around the corner,” Essenmacher says.

Companies themselves regularly seek to educate their board members by bringing in outside experts and consultants to inform board members about specific topics or issues.

The boards Landgraf serves on will pay for directors to attend NACD sessions on board governance and programs offered by top business schools. At Corning and Louisiana-Pacific, new directors undergo a formal orientation, which includes visits to plants and divisional overviews by the division presidents, he says.

“I have seen coaches employed, but commonly new board members are assigned to an existing board member to provide ‘mentoring,’” he adds.

A plethora of educational opportunities

Directors don’t have to search hard for educational opportunities.

“You could go (to programs) all the time if you wanted to,” adds Holder, who works to educate women for corporate leadership with Paradigm for Parity advocacy group.

Internally, so-called “onboarding” activities, which educate new directors about the specific needs and challenges facing the company, have become prominent, Tonello says.

In the end, the best way to deliver education is still a matter for each board to determine, directors say.

“I don’t think there’s a one-size-fits-all,” explains director Curl. “No board is the same, no culture is the same. Every board has to figure how to get education to the board members.” 

Maureen Milford is a Delaware business writer focused on corporation law and corporate governance matters.


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