As the corporate world becomes more global, so does the need for cross-border cooperation on governance best practice.
Rapid changes in corporate governance and the increasingly global focus of business means directors are coming under greater pressure to keep abreast of issues and legislation across many different markets. Company directors and their corporate secretaries are constantly looking for ways to ensure they are at the forefront of professional development and governance standards.
Now six national organizations from countries deemed to have the world’s highest governance standards have joined forces to help directors achieve that aim. The result is the Global Director Development Circle (GDDC), the largest network of directors in the world with a combined corporate and individual membership of more than 100,000.
Set up by leading membership organizations for directors from the US, Canada, South Africa, Australia, the UK and New Zealand, the GDDC’s aim is to operate an international governance network focused on the development needs of directors and boards world-wide. Its mission is to foster the sharing of good governance practice and professional director development.
‘Corporate governance is no longer a local or national issue for directors and businesses,’ explains Andrew Main-Wilson, chief operating officer of the UK’s Institute of Directors (IoD) and chairman of the GDDC. ‘Shareholders the world over are exerting a greater level of scrutiny and complex legislation has been introduced that must be complied with – and directors need to respond to these challenges. The GDDC aims to assist directors in both developed and emerging economies in achieving the levels of knowledge and support required for corporate governance excellence. Improving the effectiveness of boards across the globe will increase economic performance and growth as well as strengthen investor confidence.’
A unified standard
The creation of the GDDC follows initiatives by the Global Corporate Governance Forum (GCGF), a body established by the World Bank and the Organization for Economic Cooperation and Development (OECD). The GCGF encourages national directors’ institutes and corporate governance associations to set up director training and professional support services. The GDDC takes this one step further, aiming for a universal framework for cooperation and dialogue on governance.
Bernard Wilson, chairman of Canada’s Institute of Corporate Directors (ICD) and vice chairman of PricewaterhouseCoopers (Canada), expects the new initiative to bring about a greater understanding of corporate governance issues and to rapidly become a recognized force in global markets.
He says the impetus came from the World Bank and the OECD, which want to spread good practice in corporate governance to emerging markets and countries lacking the checks and balances laid out in the six founding nations. ‘They felt that if these six were brought together, they could assist other countries and raise their governance standards,’ Wilson explains. ‘But what we have also found as we worked together is that there are many ways we can collaborate because we are the six nations with the best corporate governance, by and large. We are learning from one another.’
Wilson’s claim is backed up by a global survey carried out by GovernanceMetrics International (GMI), which looked at 2,500 companies around the world and ranked them in order of corporate governance standards. It found the GDDC’s six member countries to be by far the most advanced. Of the companies surveyed, 26 were given perfect scores: 20 based in the US, five in Canada and one in Australia. British companies also ranked highly.
‘When you look at the ratings of these individual companies, it supports the proposition that these six countries are the most advanced nations in corporate governance,’ says Wilson. ‘And these markets are all very heavily involved in director education.’
International career development
The GDDC is not simply an altruistic venture aimed at helping less developed financial markets, however. The group also intends to further the international career development of directors in the six founding nations. Wilson notes that, as a chartered accountant, he could operate in the UK where his Canadian qualifications would be recognized, subject to him doing some work to become familiar with the local framework.
‘My chartered accountancy skills are transportable,’ he explains, ‘and this is what we are trying to do with governance because many directors are sitting on boards in other countries. When directors join the boards of public firms in other jurisdictions, it is helpful to them to have their credentials recognized.’
Another benefit for the members of the founder countries is training and professional development, which the network is aiming to standardize on an international basis. ‘One of the things we want to achieve is to ensure that all our members recognize the importance of lifetime learning,’ says Wilson. ‘We need to keep up with what is happening in corporate governance because it is complex and it is changing a lot.’
Rapid change in corporate governance standards came swiftly after accounting scandals erupted at companies like Enron and WorldCom. But Wilson believes the events merely accelerated developments in corporate governance that various governments were already instigating. ‘There is no doubt that each country has responded differently,’ he points out. ‘The US, which had the most notable scandals, responded by aggressively bringing in legislation such as Sarbanes-Oxley. In Canada, the response was more of a stiffening of guidelines and voluntary compliance. Each market has a different way of getting things done. We have much to learn from each other.’
Wilson says much of the leadership for the venture has come from the IoD, the world’s oldest and largest director institute with more than 53,000 members and 20 years’ experience in director training, certification and accreditation. Indeed, the IoD accounts for about half of the total membership of the six founding institutes.
The other members include the National Association of Corporate Directors (NACD), with 16,000 members and clients in the US. Its corporate governance record includes producing the Blue Ribbon commission reports and working with Nasdaq on director programs. The directors’ institutes in New Zealand and South Africa, the ICD and the Australian Institute of Company Directors (AICD) complete the circle, though there are plans for the Brazilian Institute of Corporate Governance (IBGC) to expand the network to seven.
Peter Dey, a former chairman of Morgan Stanley Canada and current senior partner at Osler, Hoskin & Harcourt LLP in Toronto, as well as a fellow of the ICD, says: ‘There is a growing respect for director education around the world and the GDDC will build capacity for improved director professionalism and competence.’
