Erin Essenbacher of the National Association of Corporate Directors explains the importance of director credentials
How can organizations clearly demonstrate that their boards of directors are – and, indeed, will remain – qualified to fulfill their leadership and fiduciary responsibilities? How can boards withstand scrutiny in an environment characterized by rapid change and sudden crisis? How can they demonstrate to investors that they possess the critical skills needed for leading their organization?
One answer is for boards to establish their commitment to continuous learning by earning recognized director credentials. Erin Essenmacher is the director of education for the National Association of Corporate Directors (NACD). Corporate Secretary asked her to explain what director credentials are and how they help organizations stand up to questions about their boards’ qualifications.
What is a director credential?
A director credential is a symbol. It symbolizes that a director has met a specific set of requirements for learning. Once earned, directors must maintain their credentials each year. Exceptional directors never stop learning.
A board with director credentials is a board that demonstrates a tangible commitment to both leading best practices and continuous learning, both of which are becoming increasingly important to investor groups and regulators. They want to be reassured that boards are constantly preparing themselves to meet their future – as well as their current – responsibilities.
What boardroom challenges do director credentials address?
Director credentials address any and all boardroom challenges. The role of the board is to lead an organization in setting strategy, targeting opportunities, mitigating risk and maintaining long-term viability. To do those things, directors need information on everything from the evolution of governance to the impact of outside forces such as new regulations, market changes or disruptive technologies.
Earning and maintaining a credential exposes board members to a wide range of learning opportunities – and to other directors who have faced similar challenges. This helps get trending issues and challenges on the radar early, while there’s still time to do something about them.
What makes credentials credible? Are they difficult to earn?
A credential can’t be a rubber stamp; otherwise, it would be like buying your degree from a diploma factory. The credibility of a credential depends on the substance of the knowledge it conveys as well as the reputation of the organization that confers it. In terms of knowledge, it has to be provided by topical experts.
Who qualifies as an expert?
At NACD, our credential programs are delivered for directors by directors. In addition to our director advisers, we provide access to leading subject matter experts. Both are backed by more than 35 years of research and a reputation as an objective authority on board leadership. Board directors who have earned and maintained an NACD Fellowship credential demonstrate a commitment to education.
That sounds rigorous – is it?
We believe earning a credential has to be challenging in order to be worthwhile. It should stretch a director’s skill and mind set – that’s the point of it. ‘Challenging’ shouldn’t mean ‘time-consuming’ or ‘rigid’, however. Board directors are incredibly busy people, so the process of earning a credential has to remain flexible and adaptable. We have to give directors many different ways in which to earn their NACD Fellowships.
Why should a general counsel or corporate secretary advocate for director credentials?
Directors bring tremendous skills and experience to the table, but the point investors are trying to make is that a static level of intelligence doesn’t mitigate risk.
Is that because challenges and opportunities keep changing?
If your perspective doesn’t evolve, you’re actually increasing risk as it becomes more likely that you’re missing something serious – that’s why you must have continuous learning in the boardroom. The question is: how do you do it efficiently? How do you accommodate the time constraints and learning preferences of all the different board members? How do you make it timely but not onerous? How do you make sure it actually gets done?
So credentials provide structure?
A really good credential program essentially serves as a best practices framework for continuous learning. It marries corporate governance with flexibility. It allows you to set objectives, give directors many different ways to meet those objectives, and minimize the amount of administration involved. That’s good for the board, and for the corporate secretary who’s worried about regulatory compliance and pressure from activist investors.
How did NACD design its Fellowship credential program?
We have two types of credentials. The NACD Board Leadership Fellowship is for experienced directors and the NACD Governance Fellowship is for new directors. As you can tell from their names, they emphasize very different subject areas. Where the Board Leadership Fellowship focuses on advanced topics and emerging challenges facing boards and committees, the Governance Fellowship gives new directors a solid grounding in the fundamentals of director professionalism.
How does the process work?
Aside from the different subject matter, the process is the same. Directors must complete a foundation class and a certain number of elective credits to earn their Fellowships. To maintain their Fellowships, they must complete additional elective credits each year. There are many different ways to earn Fellowship credits; it’s always a mix of online and in-person programs. Networking with other directors is an essential part of the process.
Any final thoughts?
It’s clear that director education isn’t just a nice-to-do. It’s fast becoming a mandatory responsibility for every board director. Many other professions have continuing education requirements, too.
Are credentials being accepted?
Investors, regulators and directors all recognize that boards of directors operate most effectively when they make an active commitment to ongoing knowledge. That’s why almost 2,000 directors have earned or are now earning NACD Fellowship credentials.
About NACD
The National Association of Corporate Directors is the recognized authority on leading boardroom practices. Our programs are delivered by the deepest, most diverse roster of director advisers in the world. Our methods are based on more than 35 years of NACD research and draw upon the real-world expertise of more than 14,000 NACD members. Learn more about our organization at www.nacdonline.org.
Contact: Lori Whitehand
Email: lwhitehand@nacdonline.org
