Governance Playbook
Director education and training:
How to prepare your board for the road ahead
In this special report, Governance Intelligence provides actionable advice from and for governance professionals to help them ensure their board has the information and training to be successful
Director training and education are necessary to ensure that boards are able to fulfill their duties while adapting to ever-changing circumstances affecting the company.
Corporate secretaries and other governance professionals play the central role – as ‘a clearinghouse for education,’ one says – in arranging for the necessary information to be passed on to the board, either directly by the governance professionals themselves or through the provision of advice from advisers from both within and outside the company.
Don’t operate in a vacuum
Experts time and time again offer this advice when looking at best practices in this field: be collaborative, adaptive and proactive. ‘Don’t operate in a vacuum,’ recommends Angela Grant, chief legal officer (CLO) and corporate secretary at insurer Palomar.
There is no one-size-fits all approach to board education and training, terms generally used interchangeably. But there are many important lessons to bear in mind to help the board succeed and avoid potential disasters. In this special report, we examine issues such as identifying both the evergreen and emerging topics that need to be addressed in education and training, who should be involved, how education and training can best be delivered and the role of technology.
In a rapidly changing world, it is more important than ever for board members to be prepared to meet an array of current and looming challenges.
Quite simply, education and training are essential elements to making sure the board can fulfill its fiduciary duties and other responsibilities, including implementing good governance, overseeing management and taking part in strategic decisions and planning. Directors must also be ready to respond when problems and opportunities arise.
Regardless of their backgrounds as CEOs, CFOs, general counsel or other roles, directors need to be initiated and refreshed on the basic tenets of their role as well as kept updated on relevant details affecting their company and their own work.
‘Value is tied to having a board apprised of the current landscape of corporate governance, which is changing all the time,’ says Grant, pointing to issues such as ESG, SEC rules and cyber-security.
If a director speaks to an institutional investor and isn’t prepared, it can have implications for the organization
Linda Riefler, who sits on the board of directors at CSX Corporation, summarizes the role of a board in terms of oversight, having a focus on the future and adding value to management. The importance of education, she points out, is that in order to fulfill these tasks, a board must have collective insight and processes. It also needs to be dynamic and organic, she adds.
The upsides to having an effective director education program are significant in providing a foundation for having a high-functioning board that is able to oversee strategic and financial success for the firm, its shareholders and its other stakeholders, such as employees.
The downsides of failure are also great. ‘When things go wrong, there can be catastrophic consequences if the board isn’t educated,’ says Christine Brown, vice president of learning product at SAI360. Such problems might arise from situations such as insider trading, antitrust violations and a harmful workplace environment involving either the company or its directors, she notes.
Make sure your board is engaged and understands the issues your company is facing
‘If a director speaks to an institutional investor and isn’t prepared, it can have implications for the organization,’ says Joan Conley, board member at EJF Acquisition Corp and Tigo Energy and former corporate secretary of Nasdaq.
Board education can also be the subject of regulation. For example, the NYSE requires listed companies to include it in their corporate governance guidelines. There can be government requirements in certain industries, too.
‘Make sure your board is engaged and understands the issues your company is facing so that it can oversee the company,’ says Richard Gluckselig, vice president, associate general counsel and assistant secretary at Regeneron Pharmaceuticals.
When things go wrong, there can be catastrophic consequences if the board isn’t educated
A starting point for creating a board education program is identifying the topics directors need information about, either as an update, refresher or first look at an emerging issue.
Corporate secretaries and other governance professionals are the starting point for this exercise. They can generate ideas for new educational elements from an array of sources, such as keeping tabs on new SEC rules, following media and analyst coverage of developments in the company’s industry or seeing whether the board needs updating on specific events such as a geopolitical crisis.
Governance professionals say the best way to make determinations in setting the agenda is collaboration with the board itself. Experts advise the corporate secretary to discuss with the chair of the nominating and governance committee and lead independent director what educational needs the board has in the short term and over the course of the year. This may take place through the corporate secretary handing over a file on training and receiving feedback and/or through more informal communications.
Corporate secretaries can also ask for feedback from directors in board assessment questionnaires, such as by asking what topics they
feel have not been addressed sufficiently, and through conversations with individuals. Pulse surveys can provide more frequent insights outside of annual assessments. Such feedback can help better align future efforts with the board’s needs.
In early 2024, governance professionals report a wide range of topics fueling demand for board education. These include:
The SEC’s new cyber-security rules
AI risks and opportunities
Delaware court rulings. Respondents replied before the Delaware ruling regarding Elon Musk’s Tesla compensation package, but that would appear to be an issue of great interest to boards more broadly
Human capital management disclosures
Taking corporate positions on social and political matters, particularly in a US election year
Climate change reporting requirements
Economic and geopolitical concerns
Promoting ethical corporate cultures, including with respect to workplace harassment and diversity issues
Addressing conflicts of interest, antitrust and insider trading.
Nasdaq recently compiled from conversations with corporate secretaries and general counsel a list of emerging issues for boards in Q1 2024. In summary, these are:
Global geopolitical instability requiring frequent board updates on the effects on corporate strategy, goals and operations and US-based company review of strategy ahead of the presidential election
Data governance on cyber-security, privacy and AI, such as board education and management reporting/updates on cyber-security threats and response plans
Sustainability, including monitoring global and state developments regarding disclosures of sustainability goals and metrics
Shareholder and other stakeholder engagement
Human capital management, succession and executive compensation
Risk management, including board education on company risk register and mitigation, and contingency plans and director participation in crisis simulations
Regulation, including compliance with the new SEC cyber-security rules and pending human capital management rules
Digital transformation and digital assets oversight, including board education and discussion of digital transformation strategy and opportunities for the business and risk oversight.
These topics will vary widely between companies and industries and will also depend on the expertise of board members. A look at the board’s skills matrix can help determine whether individual directors may need additional training in certain areas. Aside from emerging issues, directors need training on fundamental and evergreen issues, which are addressed in the next section of this report.
The board’s annual agenda provides many options for determining when education and training should take place.
In terms of scheduling over the course of the year, some corporate secretaries arrange for educational sessions to take place outside of regular board meetings, while others use the opportunity of having the board together – virtually or otherwise – to make a presentation. Others have an extensive annual session, while peers have smaller sessions at each regular meeting and others do so on an ad hoc basis, or a combination of the various options. There is little consensus on a single best practice. The answer as to what works best may lie in director preferences and their usually hectic schedules. A combination of options is generally seen as ideal.
Professionals further point to the importance of supplementing scheduled education and training should a specific topic arise, either internally or externally. One such situation is if the company is involved in a material M&A deal, for example.
Chris Gaskill, executive vice president, CLO and corporate secretary at Summit Materials, notes that in these cases it is important to provide additional training on directors’ duties related to a merger and what to do if they are contacted by the media or investors about the deal or by another company that may want to insert itself.
Either way, ‘there’s an educational element to every board meeting’ as directors learn about the company and the issues its faces, Gluckselig points out.
Corporate secretaries recommend that boards receive annual refreshment training on core governance and compliance matters ranging from their duties and responsibilities to the company’s ethics code and insider trading rules, which the SEC updated in 2023. Other topics might include developments from the proxy season, including around executive compensation.
Conley suggests that a good time for a detailed board orientation session is directly after the company’s AGM. This is an opportunity to address, for example, company values, corporate strategy and mission, business model, director duties and legal developments such as court rulings from the past year on the business judgment rule, she explains.
New to the boardOnboarding a new director is an essential process but one that removes variables around timing and topics.
Research conducted by Governance Intelligence in late 2022 found that 90 percent of respondents say onboarding at their firm includes training on corporate governance, followed by compliance/regulation (73 percent of respondents), ESG issues (57 percent), litigation issues facing the company and cyber-security (51 percent each) and ethics and executive compensation (46 percent each).
Materials, meetings and a mentor
Riefler says education is particularly important for new directors who have never previously sat on a board. Even if they’ve led a firm, a board is a ‘different space,’ she notes.
At Gaskill's firm, each new board member receives a four-hour training session on governance and company matters, including topics such as fiduciary duties and the role of committees and the board. He also shares company policies that board members are subject to, such as those on insider trading and ethics.
There’s an educational element to every board meeting
Conley is an advocate of the importance of onboarding, her motto being: ‘Materials, meetings and a mentor.’ This process can last up to two years after a director joins the board and involves learning from other directors, external advisers such as executive compensation consultants and auditors, and meetings with business leaders at the firm.
Governance professionals also face an array of choices when it comes to determining how and by whom board education and training should be delivered. Again, there is no one-size-fits all approach for all boards – or even all board members. Professionals need to assess what works for those involved. Sensitivity and human skills are key.
The choices include whether to use an outside or internal management expert to brief the board and whether to do training as a group or to encourage directors to pursue their own interests. In many cases, directors and corporate secretaries like to get the board together for training sessions.
The advantages of doing so include members being able to ask each other questions either during the session or more informally before or afterward, and being able to engage with the presenters, whether they be in-house or external.
Grant comments that a group in-person session is more suitable for broad topics that affect the board as a whole.
Interaction among board members is also helpful for sharing their own experiences and independent study – for example, by letting fellow directors know about helpful online or in-person training courses, webinars, conferences, podcasts, articles or white papers they have come across. Corporate secretaries are advised to research and share similar suggestions.
Training that directors undertake on their own is advantageous for those who prefer that mode of learning. Directors are generally time-poor and can find it easier to schedule online or in-person training sessions in their calendar as an individual. This approach also enables them to focus their training on more narrow issues they may feel they need additional help with.
Governance professionals and directors see significant value in bringing in outside advisers to lead board training sessions. ‘They love outside speakers,’ Gaskill points out. ‘Having a different perspective drives engagement.’
Seth Gastwirth, deputy general counsel and assistant corporate secretary with Jones Lang LaSalle, says bringing in an outside expert can be helpful in terms of getting an independent take on a topic. Some topics really lend themselves to this approach, such as the market’s view on shareholder activism, he adds.
Governance professionals advise choosing speakers carefully to ensure they align with the board’s needs.
The corporate secretary must be clear on advisers’ approach to presenting and exactly what content will be covered. It is important to make sure before speakers enter the boardroom that they won’t waste directors’ time by talking about matters that are irrelevant – or that the board is already aware of, Gluckselig points out.
Internal subject matter experts are also a useful resource, not least because they understand the company best and it is helpful to have links between the board and the management team.
‘I’m passionate about marrying the two – external and internal [presenters],’ Conley says, adding that it is useful to get feedback from the board after a training session.
They love outside speakers. Having a different perspective drives engagement
Technology is playing an increasingly important role in governance across many fields, including board education and training. It can be particularly helpful for directors who wish to engage in training on their own, enabling them to arrange short and effective sessions as suits their schedule, perhaps if they have an unexpected time window during an otherwise busy day, Brown says.
Online training sessions can also be targeted and configured to an individual’s needs and interests, she adds, and can track in aggregate how directors performed in certain areas, potentially highlighting a topic where further education is needed.
Board portals feature prominently in education and training as a repository of documents and recommendations for webinars, reading, podcasts and events such as seminars that are uploaded by both the corporate secretary and fellow board members. Directors can share their notes from their outside education, too.
Additionally, there is potential for AI to play a role, perhaps in distilling lengthy educational documents or selecting available materials and events on offer.
