Topics:   Corporate Governance,Director Education,Featured

Topics:   Corporate Governance,Director Education,Featured

April 11, 2019

NACD Director Certification—Why and How

April 11, 2019

Later this year, after more than four decades as the nation’s leader in director education, NACD will blaze a new path by launching the first-ever certification program for board members in the United States. Here’s more on why and how.

Background

NACD was founded with the objective of equipping directors with the knowledge they need to serve with confidence in the boardroom. Just as with every other profession, directors benefit from best practices, research-driven education, and shared experiences. As fiduciaries overseeing enterprises, directors need to understand both the companies they serve and the environment around them, as well as the particular demands of their oversight and advisory roles.

Much of that preparation comes from a director’s own career experiences, combined with the “on the job” training they will have received while serving on a particular board. But today, given the pace of change in business conditions, shifting stakeholder expectations, and the growing number of first-time directors serving on boards, external director education is needed more than ever. That is why we developed a director education framework in 2015 to provide an established foundation that underpins the content for our thought leadership and for NACD’s 300 local and national director education programs.

Why Certification?

So why are we taking director education a step further now with a certification program? Ira M. Millstein, chair of the NACD Blue Ribbon Commission on Director Professionalism, noted in his 1995 pioneering article on the “professional board” that “while we should not hear any significant calls for requiring ‘official’ director certification in the United States, many US boards will do their own certification simply through the process of selection and periodic performance reviews. They will seek competent, credible, knowledgeable candidates who are capable of, and willing to, do their homework.” 

This informal process of board certification has worked for many years, as has our long history of providing director education and credentialing via our Fellowship program. But today the expectations that directors must meet or exceed are greater than when Millstein wrote his article. As a result, we are formalizing director education with a nationally recognized credential that will serve as a seal of approval affirming that new directors have the knowledge, skills, and abilities needed to serve competently on a board. While we can never certify a director for his or her ethics, we can certify competency in a baseline body of knowledge, bolstered by additional continuing education requirements (which incidentally do include ethics as part of the curriculum).

Here are four reasons why we have taken this additional step in our evolution:

  1. Exam-based certification is a way for directors to test and prove their growing knowledge. Our 2018–2019 NACD Public Company Governance Survey showed that 69 percent of respondents said that their board dedicates resources to continuing education, and 59 percent agreed that education is “necessary for director effectiveness.” The survey showed that directors on average are already devoting 20 hours per year to learning more about their responsibilities in the boardroom, but they lack formal evidence of their knowledge and competence. By providing formal testing and certification, NACD’s certificate will provide such evidence.
  2. Our many years of building a community of directors has enabled us to create a test by directors, for directors, based on the real issues encountered by boards that seek to be effective. Furthermore, thanks to ongoing advisory and evaluation work, we have reached a point in our evolution where we understand as never before the real issues facing boards. Our Board Advisory Services has guided more than 1,000 board self-evaluations since beginning formal evaluation services in 2000, and our membership community has passed the 20,000 mark. Had we developed tests earlier in time, they may not have had the same realism as the ones we are developing now.
  3. NACD’s store of knowledge, after decades of development, is now fully comprehensive. Our two dozen Board Resource Centers on topics ranging from audit committee issues to sustainability show the breadth and depth of what directors need to know. These resource centers did not emerge overnight; they build on more than a quarter of a century of convening Blue Ribbon Commissions and conducting surveys. For decades, NACD has been convening the brightest minds in governance to create the materials supporting this credential, informed by such resources. This new certification and the rigor it provides is in many ways a culmination of this work.
  4. Last but not least, certifying directors helps us live up to our “world class” status as we participate in a global community of directors where exam-based certification is already a practice. As the newly elected chair of the Global Network of Director Institutes (GNDI), I am familiar with the practices of the 20 other members of the GNDI. Many of them already have exam-based certification, and we can learn from their experiences—both positive and negative—now as never before.

How Will It Work?

Our first step in moving toward certification has been—in collaboration with hundreds of board members serving on the boards of all types of companies—to develop a comprehensive overview of the knowledge, skills, and abilities (KSAs) that are required for corporate directors to lead with confidence in the boardroom. Next, we are working with select members of our community of more than 20,000 members to help create an exam that verifies those KSAs. Exam registration also comes with a comprehensive study guide that will help certification applicants prepare for the test. 

To provide guidance and direction for the new certification program, NACD has formed and is leveraging a steering committee of highly experienced corporate directors and corporate governance practitioners that includes these distinguished individuals:

  • Dennis Beresford, Former Chair of the FASB; Former Director, Fannie Mae, Kimberly Clark, and Legg-Mason
  • Michele Hooper, Director, PPG Industries, United Continental Holdings, and UnitedHealth Group
  • Glenn Hubbard, Director, Automated Data Processing (ADP), MetLife, and BlackRock Closed-End Funds; Dean of Columbia Business School
  • Simon Lorne, Director, Teledyne Technologies; Vice Chair and Chief Legal Officer, Millennium Management; Former General Counsel, US Securities and Exchange Commission
  • Bill McNabb, Former Board Chair and CEO, Vanguard; Director of UnitedHealth Group; Executive in Residence at the Raj & Kamla Gupta Governance Institute, LeBow College of Business
  • Myron Steele, Former Chief Justice of the Delaware Supreme Court; Partner, Potter Anderson & Corroon LLP
  • Dona Young, Lead Director, Foot Locker; Member of the Supervisory Board, Aegon, NV; Director, NACD

This is an impressive group of some of the best minds in board governance, and I am honored that they have agreed to devote time to this historic effort.

With directors like these on our steering committee, our members who have volunteered to inform the test development process, and with all the leading-edge resources NACD has developed through the years, I sincerely believe we are creating a meaningful and effective credential for directors.

I invite you to be part of one of the most important initiatives in NACD’s history to help elevate the profession of directorship, and to advance good governance in America. Visit www.NACDonline.org/Certification to learn more. 

Comments