Director, Educate Thyself

I am getting a hearty response to my editor's note in the February e-Briefing about the need for director education. I told the Directors & Boards readership about RiskMetrics Group's official announcement on Jan. 26 that it was getting out of the business of accrediting director education programs — a development that I gave an early warning line about in my blog post of Jan. 14.

As I wrote a couple of weeks ago, this is a curious, and seemingly counterintuitive development — to be downplaying director education at a time when so much new is coming at directors on the legal, investor, and regulatory fronts. This kind of unsettled environment is when you want to be encouraging directors to avail themselves of educational opportunities to get better up to speed.

For some validation of this sentiment, I turned, as I often do, to a voice of reason from among my past authors — Jean Head Sisco. Jean was a remarkable women in governance: a director who served on 22 corporate boards over the course of a distinguished career as a retailing executive; the National Association of Corporate Directors's "Director of the Year" in 1999; and author of "Director, Educate Thyself," an article in Directors & Boards in 2000. (And for those of you who knew Jean — who sadly passed on in early 2000, shortly before I published her article — you will know what I mean when I say, "Those outfits! Those hats!" Stylish, she was.)

Here is what Jean said in her article back then:

"Continuing education for directors — we need it now more than ever. Yes, experienced directors may say, 'You can't teach corporate governance,' or, 'I already know governance.' I find, however, after my many decades, that governance can be taught and learned, and there is always something new and valuable to teach and learn. If continuing education is mandated for other groups such as lawyers, accountants, and doctors, why can't it work for directors? Shouldn't stockholders expect well-informed directors?"

Truer words could not be spoken today, with or without the impetus supplied by any governance ratings agency.

[Photo: Jean Sisco receiving the NACD's "Director of the Year" Award in 1999, presented by (left to right) Thomas Horton, then NACD chairman; Roger Raber, then NACD CEO; and John Peterson, then the CEO of Aon Financial Services Group, sponsor of the award dinner]

No More Credit for Director Education?

In the wild takeover days of the 1980s, business columnist Dan Dorfman, who had his ear closer to the ground than anyone in picking up the M&A drumbeats, used to qualify his tips on who was about to get hit with a takeover bid with this disclaimer: "This is what I hear, not what I know."

This is what I hear: RiskMetrics Group is about to stop giving credit in its governance ratings for director education. That is, it will cease reviewing director education programs or track director attendance at what had been accredited programs, and will no longer include "Director Education" in its Corporate Governance Quotient (CGQ) scoring system for rating a company's governance.

RMG, the 800-pound gorilla in the governance ratings game, seems set to announce shortly a new tool that replaces the CGQ, one which will include variables that it considers more important than director education.

This is a significant development for all the purveyors of governance programming — think of all of the director institutes and centers for corporate governance and all their conferences and events, plus the programming conducted by service firms for director education. And it surely represents a rather monumental restatement of philosophy by RiskMetrics about how it regards the importance of director education.

My initial reaction is one of bemusement. If RMG proceeds down this path of no longer tracking and crediting director education, this seems to be a startlingly counterintuitive move.

The job of a board director is getting increasingly complex, especially in the area of enterprise risk management. This kind of environment normally is when you would want to encourage directors to avail themselves of educational opportunities to get better up to speed. If you have any kind of an orientation to increasing shareholder value through governance rigor, you don't want to be taking away incentives to growing a board member's knowledge base and competencies.

This move by RMG is what I hear. More news to come.