CS RR director education
Directors bring many things to the boards they sit on, but they cannot be expected to be up to date and fully qualified on every latest development in...
<sup>Research Report </sup> Director education and training: Ensuring the board has what it needs
<sup>Sponsored by</sup>
<img src="https://cdn.fs.turtl.co/0jvKhV5QwfYSGYLjMNwc"width=100%
<I>
Introduction
Governance professionals report on how their boards receive the training and education they need to fulfill their duties and how they monitor and feel about those efforts
Governance professionals report on how their boards receive the training and education they need to fulfill their duties and how they monitor and feel about those efforts
Directors bring many things to the boards they sit on, but they cannot be expected to be up to date and fully qualified on every latest development in the world that impacts their company and every best practice for responding. That’s where director education and training come in.
Governance teams play a central role in making sure their board has the right information and skills to be able to fulfill its duties and oversee the organization. This can involve tailoring to the individual members of a board, but it must also account for the growing array of issues that investors and other stakeholders expect directors to be fluent in, such as ESG or cyber-security.
In this special report we present the results of a survey conducted among governance professionals such as general counsel, corporate secretaries and their teams. Their responses provide insight into who on the board oversees director education and training and who – outside of the board – provides those services.
We also look at which topics boards are receiving specific information or training on, how frequently governance teams check whether their board has what it needs and, ultimately, how they rate their board’s ability to oversee the key issues facing the company.
- Overall, almost all respondents (95 percent) say the general counsel/corporate secretary plays a role in providing directors with relevant, up-to-date information. The next-most frequently cited provider is finance (named by 65 percent of respondents), followed by outside advisers (59 percent).
- Three quarters of all respondents say their general counsel/corporate secretary conducts director training. Just over half (54 percent) use outside advisers.
- More respondents say their board has received specific information or training over the past year on ESG matters (80 percent) than on any other topic.
- Overall, approaching half of respondents say they assess on an ongoing basis whether their board members have the relevant information they need. A further 19 percent say they make such an assessment at every board meeting.
- Outside of corporate governance, respondents on average rate ESG and executive compensation as the most important areas for board members to have expertise in.
- Overall, respondents give their board’s competence based on director training and education an average score of 8.6 out of 10.
Survey demographics
This report is based on the findings from an online survey conducted between August and September 2022. A total of 226 respondents took part.
Respondents by market cap
Who is involved?
Overseeing and providing training and education
Overseeing and providing training and education
On your company’s board, which of the following has primary oversight of director education and training?
Overall, the majority of respondents 60 percent point to the nominating and governance committee as having primary oversight of director training and education issues. Almost a quarter (24 percent) say their main board has primary oversight in the area. No other committee is named by more than 3 percent of respondents.
The main board is most frequently cited by those at mega-cap companies (35 percent), followed by those at large caps (28 percent), small caps (26 percent) and mid-cap companies (15 percent). The audit committee attracts a few mentions among those at small caps (4 percent) and mid-caps (5 percent).
More than twice as many respondents in North America cite the nominating and governance committee (69 percent) as having primary oversight for training and education as do peers in Europe (30 percent).
Outside of your company’s board, which of the following plays a role in providing directors with relevant, up-to-date information?
Many parties play important roles in director education and training, with boards needing information on a variety of oversight areas from governance and finance to ESG matters and geopolitics affecting the company. Overall, almost all respondents (95 percent) say the general counsel/corporate secretary plays a role in providing directors with relevant, up-to-date information. The next-most frequently cited provider is finance (named by 65 percent of respondents), followed by outside advisers (59 percent), human resources (56 percent), internal audit (50 percent), compliance (43 percent) and the sustainability team (39 percent).
The likelihood of the general counsel/corporate secretary being involved is fairly consistent across company cap sizes and regions. The frequency with which outside advisers are cited is reasonably consistent regardless of company size.
But just 37 percent of respondents at small-cap companies say their HR team is involved in supplying directors with the information they need, compared with 60 percent of those at mid-caps, 69 percent at large caps and 71 percent at mega-cap companies.
Similarly, only around a quarter (24 percent) of small-cap respondents say their sustainability team provides information to directors, fewer than those at mid-caps (38 percent), large caps (51 percent) and mega-cap companies (57 percent).
Compliance teams are also cited more frequently by respondents at mega-cap companies (62 percent) than their peers at large-cap companies (51 percent), mid-cap firms (43 percent) or small caps (35 percent).
Respondents in Europe generally report more frequent involvement in the process from a wider variety of sources. For example, almost half (49 percent) of those in Europe say their sustainability team is involved, compared with 37 percent of those in North America. Fifty-four percent of respondents in Europe say their compliance team is involved, while 41 percent of those in North America say likewise.
That said, more than six in 10 respondents in North America (61 percent) report using outside advisers, compared with 54 percent of their peers in Europe.
Outside of your company’s board, which of the following conducts director training?
Training members of the board rather than supplying relevant information can be a more specialized role. Three quarters of all respondents say their general counsel/corporate secretary conducts director training. Just over half (54 percent) say they use outside advisers. Beyond that, the team most frequently cited as training directors is finance (27 percent), followed by compliance (23 percent), human resources (20 percent), the sustainability team (19 percent) and internal audit (12 percent).
Respondents at large-cap companies are more likely than others to say HR takes part in training directors (31 percent). This compares with 18 percent of those at mid-caps, 14 percent of those at mega-caps and 12 percent of those at small caps. Similarly, a third of those at large-cap companies say finance is involved, more than twice as many as at mega-cap companies (14 percent).
Respondents at bigger companies more frequently say their sustainability and internal audit teams are involved in director training. Those at mega-cap companies are most likely to use outside advisers (67 percent) while 56 percent, 48 percent and 51 percent of those at large caps, mid-caps and small caps, respectively, do so.
Those in North America (57 percent) are more likely than those in Europe (46 percent) to use outside advisers. Respondents in Europe (31 percent) are more likely than their peers in North America (21 percent) to say compliance plays a role in director training.
On the curriculum
What is being taught, and how?
What is being taught, and how?
Over the past year, on which of the following topics has your board received specific information or training?
More respondents say their board has received specific information or training over the past year on ESG matters (80 percent) than on any other topic, underlining the rise of ESG as a topic boards are taking seriously.
The next-most frequently cited topic on which boards have been provided with information or training is corporate governance (77 percent), followed by cyber-security (73 percent), compliance/regulation (67 percent), executive compensation (52 percent) and board diversity (50 percent).
The proportion of respondents citing ESG increases with company size: 76 percent of those at small caps say their board has been trained or informed about those matters in the past year, while 83 percent of those at mid-caps, 88 percent of those at large caps and 90 percent of those at mega-caps say likewise. Nine in 10 respondents at large-cap companies say their board has been trained or informed about corporate governance matters, but only 67 percent of their peers at mega-cap firms say the same.
The percentages of respondents who cite geopolitics, economic issues and domestic politics issues as topics for training and informing the board increase with each cap size.
The frequency with which topics are cited is reasonably consistent between respondents in North America and Europe, with the biggest discrepancy occurring on cyber-security, which is mentioned by 78 percent of those in North America and 68 percent of respondents in Europe.
On which of the following topics do you provide training or information to new board members?
One of corporate secretaries’ key roles is successfully bringing new directors onto the board. Part of that work involves making sure new board members have all the information and training they need. Not surprisingly, corporate governance (90 percent of all respondents) is the topic most frequently cited as the basis for training and information supplied to new directors. This is followed by compliance/regulation (73 percent), ESG issues (57 percent), litigation issues facing the company and cyber-security (51 percent each) and executive compensation and ethics (46 percent each).
More than three quarters (76 percent) of respondents at large-cap companies say new board members are trained/informed about ESG matters, more than those at mega-caps (65 percent), mid-caps (57 percent) or small caps (48 percent).
Compliance/ regulation is more frequently cited by those at small caps (83 percent), large caps (81 percent) or mid-caps (73 percent) than by those at mega-cap companies (53 percent).
More than half of respondents at mid-caps (51 percent) and large caps (59 percent) provide training on executive compensation, compared with 38 percent of those at small caps and 35 percent of those at mega-caps.
Which director training formats does your board use?
Governance, compliance and HR teams at many firms have been expanding the range of formats they use for training employees, including making better use of technology to enhance efficiency, engagement and analytics. For directors, the live approach is strongly favored, not least because it can be more efficient and effective for a small group such as a board rather than for thousands of workers. Overall, almost all (96 percent) of respondents say their board uses live presentations, either in person or online.
Online self-guided courses have a role to play, being mentioned by 29 percent of those taking part in the survey. More than four in 10 (43 percent) say their board uses online educational resources. Other formats such as using real-life examples (16 percent of respondents), blogs/newsletters (16 percent) or videos (12 percent) have gained some traction but are less widespread.
The findings are broadly similar among respondents at firms of different sizes. But 10 percent of those at mega-caps say their board uses adaptive learning technology, compared with an overall average of 3 percent.
Almost a quarter (24 percent) of respondents at the biggest companies say their board uses videos. That compares with responses in the single digits among those at smaller companies. Real-life examples are also cited more frequently among respondents at mega-cap companies (29 percent) than elsewhere.
Almost half (47 percent) of respondents in North America say their board uses online educational resources, compared with just 28 percent of their peers in Europe. Meanwhile, twice as many of those in Europe (28 percent) as those in North America (14 percent) say their board uses real-life examples.
Over the past year, how frequently have investors asked about the information and/or training your board receives?
Respondents were asked how frequently over the past year investors asked about the information and/or training their board receives. Overall, the results point to a lack of widespread focus on the issue among major shareholders. Of all respondents, almost half (47 percent) say investors have not asked about director training or information at all in the last 12 months. A quarter say investors have asked about the issue occasionally.
One in 10 respondents say investors have inquired sometimes, frequently or very frequently – but it should be noted that almost a fifth (18 percent) of respondents don't know.
By contrast, a quarter of respondents at mega-cap companies say investors have sometimes asked about director training/information over the past year. Just 20 percent say investors have never inquired. Again, it is worth noting that almost a third (30 percent) of respondents in this group don’t have an answer.
Regionally, more than half (52 percent) of those in North America say investors did not ask about director training/information over the past year. By comparison, just over a quarter (28 percent) of respondents in Europe say the same, while more than four in 10 say their investors have made occasional inquiries on the topic.
How are we doing?
Looking at the director education and training program
Looking at the director education and training program
How often do you assess whether your company’s board members have the following:
The relevant information they need
As with other governance programs and initiatives, it is important to keep track of how that work is progressing and whether it is achieving its aims.
Overall, almost half of respondents (48 percent) say they assess on an ongoing basis whether their board members have the relevant information they need. A further 19 percent say they make such an assessment at every board meeting. But more than a fifth (21 percent) say they only check once a year.
Sixty percent of those at mega-caps say they conduct an ongoing assessment of whether their directors have the necessary information, compared with 53 percent of those at mid-caps, 38 percent at small caps and 39 percent at large caps. The annual assessment is particularly common among respondents at large-cap companies (41 percent).
Results on information provision are broadly similar among respondents in North America and Europe.
In general, assessments of whether board members have the training they need take place less frequently. Overall, 30 percent of respondents say they undertake this process on an ongoing basis, 41 percent say they do so once a year and almost a fifth (18 percent) do so on an ad hoc basis.
Among respondents at small-cap companies, 29 percent assess whether directors have the necessary training on an ad hoc basis. This compares with 18 percent of those at mid-cap companies, 13 percent of those at large-cap companies and 10 percent of those at mega-caps. Eighteen percent of those at small caps make ongoing assessments, compared with 37 percent of those at mid-caps and 35 percent of those at mega-caps.
A greater proportion of respondents in North America (34 percent) say they conduct ongoing assessments than do those in Europe (23 percent). The same is true of annual reviews, with 41 percent of those in North America and 32 percent of those in Europe conducting assessments on this basis. Ad hoc assessments are more frequently reported by those in Europe.
Do your board members have the following to fulfill their duties effectively?
The information they need
The assessments governance professionals carry out appear to yield positive results: 96 percent of all respondents say their board members have the information they need to fulfill their duties effectively.
In comparison, 84 percent of all respondents say their board members have the training they need to carry out their duties effectively, although 12 percent don’t know – compared with just 3 percent who are unable to answer about their board having the necessary information.
Less than three quarters (71 percent) of those at small-cap companies say their directors have the training they need, although again almost a quarter (24 percent) don’t know. Ninety-seven percent and 95 percent of those at large caps and mega-caps, respectively, say their board members have the training they need.
Overall, based on the training and information it receives, how would you rate your board’s competence in being able to oversee the major issues relevant to the company?
Respondents were asked to rate – based on the training and information it receives – their board’s competence in being able to oversee the major issues that are relevant to the company. They used a 10-point scale, where one is ‘not at all competent’ and 10 is ‘extremely competent.’ Again, the results indicate high levels of confidence.
Overall, respondents give their board's competence based on director training and education an average score of 8.6. This tends to rise among respondents at bigger companies, with those at small caps giving an average rating of 8.4, increasing to 8.5 at mid-caps, 9 at mega-caps and 9.1 at large caps. Almost half of respondents at large-cap and mega-cap companies say their board is extremely competent.
Respondents in North America give their board an average score of 8.7, compared with an 8.4 average score awarded by those in Europe.
Comments
Respondents were also asked how they would like to improve the training and/or information their board receives. Their comments include:
- 'Have more horizon scanning. Have a regular program of training adapted for current and future needs that is online as well as in person’
- 'Ingrain the training into the board calendar’
- 'By providing regular updates about our industry via newsletter and making continuing education available free of cost’
- 'Directors need to be more forthcoming with information on the training they need’
- 'More encouragement for board members to attend outside programs’
- 'Move to online platform aligned with workforce’
- 'More buy-in from the CEO’
- 'More short training sessions (outside of regular board meetings) on specific topics like cyber-security, ESG, compliance, and so on’
- 'We have given thought to tracking the external training received by our directors but have some concerns that this could be used against us in certain circumstances’
- 'Compliance training’
- 'Provide more opportunities for training facilitated by outside advisers/experts, particularly in the area of ESG’
- 'Have a more co-ordinated, comprehensive training program with set dates and subjects for training. Other than for new directors, our ongoing training tends to be a bit ad hoc, but we are working to create a more specific process’
- 'Having pertinent training materials that we could send to board members’
- 'Find sources of objective training resources, not just lawyers and consultants trying to sell services’
- 'More cyber-training’
- 'Centralize responsibility. Seek input from board members’
- 'Experience sharing sessions with peers within similar industry’
- 'Tailored individual director development pathways and programs supported by internal and external resources. Enhanced onboarding that caters to each director’s background of experience and skills (instead of a standard program). Corporate governance best practices, certified director training programs’
- 'I would include more training and have certain members attend in-person training on a more regular basis’
- ‘Focus on cyber-security training in 2023 to further increase knowledge across the board’
- ‘Determining and delivering training needs for each individual director can be difficult’
- ‘I would like to have a better method to determine the training or information individual board members need’
- ‘More full-board sessions with outside experts’
- ‘Our directors benefit from third-party presentations’
- ‘More time and attention should be allocated to education/information-sharing on the broader issues affecting our company and the role those matters play in creating shared value for all stakeholders. To do this, board members need to demonstrate more curiosity and dedicate more time to engage in these broader themes’
- ‘More automated onboarding, more individual training opportunities, more financial literacy’
- ‘Using compliance learning software’
- ‘I wish we had more time’
- ‘Ongoing program defined yearly (more systematic) and wider scope of themes (not focused on company only). For example, mega-trends and out-of-the-box thinking, outside experts, and so on’
- ‘By having better visibility of how other companies handle this – what good looks like. Also, a clearer idea on training providers that are of the right caliber to deliver training at a level appropriate to directors of a multi-billion-dollar business. More time allowed in the board’s calendar to hold live training sessions rather than relying on asynchronous reading materials’
- ‘Have more options available year-round for use when time allows, and tracking of this’
- ‘No active training program is implemented. But board members regularly receive the information they need’
- ‘A formal platform for board orientation and training would be valuable. We are starting to look into this type of educational platform’
- ‘More outside experts to come in and share perspectives’
- ‘Provide online training on corporate code of conduct and implicit bias as mandatory for board members every two years. Would like to post monthly topics of interest to board portal for review by board members’
- ‘Have available a collection of external resources (both free and paid-for) for additional training at each director’s election’
- ‘I’d like to centralize it to track it better’
- ‘Outside providers could offer brief Zoom call training’
- ‘Introduce a standing education agenda item for the governance committee and create a mandate for ongoing education with a list of resources’
- ‘Information can always do with being more concise’
- ‘Provide access to online specific aspects pertinent to group’
- ‘To customize it to directors’ needs’
Board composition
Experience and expertise needs
Experience and expertise needs
How important is it that at least one board member has specific experience of or expertise in each of the following areas?
Discussions about board composition and diversity include a growing focus on whether or to what extent boards need skills in certain areas – notably non-traditional areas such as ESG and cyber-security.
Respondents were asked to rate the importance of having at least one board member with specific experience of or expertise in a variety of areas. They used a scale where one represents ‘not at all important’ and five is ‘extremely important’.
Overall, respondents – unsurprisingly – rate corporate governance as being the most important area for having expertise or experience on the board, with an average score of 4.1, which equates to a rating above ‘very important’. The topics of next-highest importance are ESG and executive compensation, each of which attracts an average score of 3.9 and both of which are facing increased investor scrutiny.
These are followed by compliance/regulation, cyber-security and ethics (3.8 each), then board diversity (3.6). Average scores then fall to 3.2 each for litigation issues facing the company, geopolitics and domestic political issues.
Respondents at bigger companies tend to rate ESG issues more highly. Those at small caps on average rate the topic at 3.6, rising to 3.8 among those at mid-caps and 4.1 among those at both large caps and mega-caps.
Similarly, respondents at small-cap companies rate the importance of having at least one board member with specific experience of or expertise in geopolitics at 2.9. This rises to 3.3, 3.4 and 3.7 among those at mid-caps, large caps and mega-cap firms, respectively.
Respondents in Europe give a higher score to the importance of ESG issues than their peers in North America (4.1 to 3.7). The same applies in terms of the importance of litigation issues facing the company (on average 3.5 among those in Europe and 3 among those in North America), geopolitics (3.5 to 3), domestic political issues (3.4 to 3) and ethics (4 to 3.7).
<sup><i>Advertisement feature</i></sup>
<h4>ESG and the board: Adapting to new expectations
By Kira Ciccarelli, lead research specialist,
Diligent Institute
ESG and the board: Adapting to new expectations
By Kira Ciccarelli, lead research specialist, Diligent Institute
In the last few years, the pressure for organizations to take action on ESG has been mounting.
The wake of the Covid-19 pandemic brought existential issues to the foreground: a talent crisis, employee safety and well-being, addressing systemic inequality and injustice through greater emphasis on diversity, equity & inclusion, all on top of a mounting climate crisis and renewed calls for companies to operate more ethically and sustainably from employees, customers, consumers, investors and regulators.
These challenges raised more questions for the board: how should teams be structured and empowered to lead on these issues? What are organizations’ goals and how can they best be achieved? How can companies accurately and adequately report on progress? How can the board better understand and oversee strategy that now encompasses more responsibilities than ever before?
As boards grappled with these larger questions, Diligent Institute conducted research to discover what directors are doing to prepare to oversee ESG more rigorously and launched Climate Leadership and ESG Leadership certificate programs to help directors upskill around these issue areas.
Board composition and ESG
How many directors already bring ESG experience onto the board? In September 2022, Diligent Institute published its inaugural Global Modern Leadership Report in collaboration with 22 partner organizations to provide a more comprehensive view of corporate boardroom composition and diversity globally. In this report, we conduct a global analysis of some of the major dimensions of boardroom diversity, including director skillsets and expertise.
Our analysis of newly appointed board directors’ skillsets and professional backgrounds – taken from Diligent’s database of nearly 6,000 public companies around the globe – shows that new talent is being added to boardrooms.
The percentage of newly appointed directors bringing in professional experience in areas such as technology, marketing, sales, human resources, ESG and legal stood at 35 percent from January through May 2022.
But through May 2022, just 1.7 percent of new director appointees had ESG or sustainability expertise. In 2021, this figure was only 2 percent, and was lower relative to the percentage of directors being added to boardrooms who bring other domain skillsets included in this analysis. In spite of recent increases in the percentage of directors with ESG experience being added to the boardroom, the percentage of directors bringing these backgrounds is still relatively low.
Board structure and strategy around ESG
Knowing that the number of director appointees with prior ESG or sustainability expertise is low, what are boards doing to upskill current members? In May 2022, Spencer Stuart and Diligent Institute published a report entitled Sustainability in the Spotlight, which sought to dig deeper into board oversight, structures and upskilling around ESG.
According to our global survey results, strategy is the most common area where ESG goals and metrics have been incorporated, at 71 percent of respondents. Integrated risk management is next at 52 percent, followed by director appointments at 48 percent. Meanwhile, 32 percent are incorporating ESG into director onboarding and training, and 34 percent into board evaluations.
Directors are only moderately confident in their organization’s alignment of ESG goals with overall strategy, ranking it a seven on our 10-point scale. They rate their board’s fluency and competency around ESG at a 7/10 as well.
Organizations are also employing a wide variety of methods to increase their board’s ESG knowledge. More than four in 10 (42 percent) are bringing in outside experts or consultants, followed closely by board training for directors at 38 percent. Only 15 percent are doing nothing to upskill the board.
Additionally, a similar survey being fielded right now in partnership between the Diligent Institute and the Institute of Directors in Ireland shows that surveyed directors believe the full board should be able to oversee ESG strategy, and that each director should have a solid understanding of ESG issues rather than bringing in only one ESG or sustainability expert.
Diligent Climate Leadership and ESG Leadership certificate programs
In summary, boards are incorporating ESG goals and metrics into many aspects of their business. They are also thinking about ESG when it comes to director appointments, but the percentage of directors already bringing in this expertise is relatively low. How can you work to upskill the board to face these new challenges?
Diligent’s certificate programs in Climate Leadership and ESG Leadership equip modern leaders with the skills and knowledge needed to address the most pressing modern corporate governance challenges and opportunities. The certifications are entirely virtual eLearning programs with plentiful networking opportunities, access to the teachings of world-renowned speakers and experts in ESG and sustainability, and 12 months’ access to course curricula.
Signing up for both certificates qualifies the registrant for a $500 discount with code PackageMGS2022 off the combined cost of $5,000. Registrants may also sign up for individual programs at $3,500 per participant.
‘The Diligent Climate Leadership Certification course offers comprehensive and relevant content on climate risk and strategy – an important topic in the boardroom today. The course provides a valuable skillset for board members, enhancing their ability to assess the business risks and opportunities that climate change presents. The certification is challenging, but implements a common-standard level of education on climate for corporate leaders around the world’
– Linda Addison, independent director, Globe Life and KPMG
Questions for your next board meeting
- How confident is the current board in its ability to understand and oversee the organization’s climate strategy?
- How many directors currently possess a background in climate or sustainability, or ESG more broadly?
- How can the board upskill around climate and ESG? What educational courses are available?
- Once the board is brought up to speed on climate and ESG, how can directors stay informed as issues evolve?
Sponsor’s statement
Learn more about Diligent Institute
Diligent Institute informs, educates and connects leaders to champion modern governance.
We provide:
- Original, cutting-edge research on the most pressing issues in corporate governance
- Certifications and educational programs that equip leaders with the knowledge and credentials needed to guide their organizations through existential challenges
- Networks that convene directors and corporate executives to share best practices and insights
- Awards and recognition programs that celebrate the accomplishments of those who champion modern governance.
Founded in 2018, Diligent Institute acts independently as the global corporate governance research arm and think tank of Diligent Corporation, the global leader in modern governance.
Diligent provides SaaS solutions across governance, risk, compliance, audit and ESG. The company partially funds Diligent Institute as part of its broad mission to improve corporate governance. Serving more than 1 mn users from more than 25,000 customers around the world, Diligent empowers transformational leaders with software, insights and confidence to drive greater impact and lead with purpose.
Learn more
