Rationale for The Directors College

Issues of corporate governance have never been more important. Following the corporate scandals in the U.S., many directors in Canada have been questioning what direction Canadian companies should take. The US initiatives, such as the Sarbanes-Oxley legislation, tend to be "rules based". This emphasis may be appropriate for the US situation. Much of the focus of the recent governance debate in Canada -- as seen at the Conference Board of Canada's 2003 National Governance Conference -- concerns striking the right balance between rules and principles. Canadian boards, corporate executives and other stakeholders have been calling for a uniquely Canadian effort to strengthen corporate governance. The Directors College will build its professional development programming around the need for defining rules within a context of widely accepted principles. The curriculum will therefore recognize both the "hard" (rules-based) and the "soft" (principles-based and behavioural) sides of directorship.

The Conference Board of Canada and the DeGroote School of Business at McMaster University have formed a unique partnership to develop Canada's first Directors College*. The plan is based on both a future vision for - and a history of research in - corporate governance by the two partners, as well as input received from a host of parties, including board members, directors, investors and others.

The Conference Board is one of the most respected think-tanks in Canada, with over 30-years of experience in research on issues of corporate governance. McMaster University is one of Canada's premier universities and is renowned for innovation. The DeGroote School of Business at McMaster was approached by the Conference Board to contribute its expertise in curriculum development, its faculty, and its certification.

The need for certification of the Corporate Directors

The need for the "professionalization" and certification of a corporate director has never been greater. While there are many talented and highly experienced individuals currently serving in this capacity, there are also a growing number of issues and concerns arising from the manner in which independent directors are trained and judged qualified to serve - principally in the area of corporate governance. Some of the more prominent problems that have been identified are as follows:

• The current system for the selection of the independent director can be fraught with difficulties and is often prone to bias in favor of "buddy-boards"
• The background of skills and abilities in the current cadre of independent directors is not of a consistent or uniform nature
• The current system of training for the independent director is voluntary, sporadic, infrequent and haphazard
• The growing list of corporate failures (or wrong-doings) that are attributed to compliant and complaisant independent directors is growing - thereby signaling the need for a more accountable and professional role.
• Numerous regulatory and professional organizations have called for a review - and overhaul - of the methods used to select, train and qualify independent directors (e.g. TSE)

To help bring about the (eventually mandatory) certification of the corporate director requires a plan of action that meets the following criteria:

• The road to certification must not displace the existing cadre of corporate directors
• The certification process should take advantage of the many talents and tacit knowledge which current directors have (and which could be shared with those new directors seeking certification)
• The certification of independent directors should involve specific and comprehensive training which meets the highest professional standards and which creates public confidence in their role
• "Chartered Director" should become a professional designation recognized by regulatory authorities. It should eventually become a mandatory requirement for appointment as an independent director to a Canadian public company or government Board. The use of "Chartered Directors" should also be "strongly encouraged" in the case of selected private corporations of a certain size.

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