It’s not easy being a good corporate director these days. Sure the perks and prestige are still there. But the amount of Regulations, Responsibilities and Risks directors face are also at an all-time high and represent real “spoilers” in what used to be a fun job. As a result, the word is out that you should NOT consider becoming a director unless you are prepared to accept the challenges that now come with the position. So what does it take to be – or become – a good director? Having met over 2000 directors in the 10 years since I founded The Directors College of Canada, I have come to the view that there are three essential qualifications – or tests – that all directors must meet if they are to properly do their job as “governors” or “uber supervisors” of their organizations and especially their most Senior Manager, the CEO. I call them the 3C’s of great governance: Competence, Curiosity and Courage. This blog is about the first “C”.
Competence. To be sure, all Directors innately know that they need to understand the business model of the organizations on whose boards they sit; the complexity and intricacies of the industries in which their companies compete; and, the stakeholders upon whose support their organizations depend for sustainability and growth. That’s tough enough. BUT, Directors today also need to know what they are doing as board members and how their job is different from Management. They especially need to both understand – and know how to effectively execute – the basic “fundamentals” associated with their position as “directors”. These fundamentals include: their two major roles (as organizational “stewards” and “sounding boards” for Management’s ideas); their 5 major responsibilities (for CEO supervision; strategy setting; establishing their organization’s risk appetite and risk tolerance; assuring financial statement reporting integrity; and legal compliance); and their 3 legal duties (i.e. fiduciary duty, duty of care and duty of loyalty).
These fundamentals are distinct to the job of being a director. However, acquiring the competence needed to effectively execute them, does not come naturally to most board members since they typically only come to their boards as “trained managers” and not directors. It therefore would help today’s board members a LOT if they were to register in some sort of formal director education program which covers the new basics of their job (See, for example, the CGTI “Governance Fundamentals Program” which was launched in Saint Lucia this past February to rave reviews!). Such programs help diligent directors better understand their job and, most importantly, give them the confidence needed to perform their essential roles and responsibilities especially in the face of sometimes considerable resistance – whether that resistance comes from management or from their fellow board members! Accordingly, Director education is an essential qualification for anyone interested in becoming not just a good, but a really great, corporate director. If you therefore feel you currently do not have a crisp and unambiguous understanding of the “fundamentals” of being a director, then you need to get into a director education program – like CGTI’s (or even one of our competitor’s!) – and FAST! It just might be the ticket that keeps you from being sued!
I’ll talk about the other two “Cs” in a future blog. Stay tuned.