It's back to school for corporate directors

As rules tighten, two new certification programs aim to teach board members how to do a better job

By MICHAEL RYVAL
Special to The Globe and Mail

UPDATED AT 6:21 AM EDT

Thursday, Oct. 9, 2003

David Gavsie is going back to school.

A senior partner at law firm Ogilvy Renault in Toronto, Mr. Gavsie has served as a director of several not-for-profit organizations. Now, he wants to acquire skills and knowledge to qualify him as a director of a public company.

He hopes to gain them by becoming one of 35 students who have enrolled in an inaugural three-day course at the ICD Corporate Governance College, a joint venture between the Toronto-based Institute of Corporate Governance and the Joseph L. Rotman School of Management at the University of Toronto, which will start in November.

It's one of two new certification programs created in the wake of tightening corporate-governance regulations and codes of conduct to help experienced and aspiring directors learn how to do a better job.

The other, also starting next month, has attracted about 30 students to its first 2½ day session at the Directors College in Niagara-on-the-Lake, Ont. It's a joint venture between The Conference Board of Canada and McMaster University's DeGroote School of Business.

"In matters such as audit committees, director independence and executive compensation, directors have to go back to school and learn the new rules and how they should deal with them," Mr. Gavsie says. "That isn't to say the vast majority are not doing an excellent job. But when the rules change, you need to go back to school."

At the new Directors College, "we are trying to address the urgent and pressing need for director education in Canada," says Christopher Bart, lead professor and a professor of strategy at the business school. "Scratch the surface in Canada, and you'll find there are a lot of problems with respect to directors knowing exactly what they are supposed to be doing."

For example, Mr. Bart says that many directors are uncertain about the degree of their involvement in corporate strategy. "The problem is there is so little in the way of best practices that we have a big job ahead of us," he says. "We have strong evidence to say to directors, 'What you thought was appropriate in the past needs to be revisited.' "

The U.S. scandals made more people question the quality of corporate directors. While Canada has been relatively scandal-free, "the call went out to boardrooms everywhere, 'Get your house in order. The rules have changed.' "

The move to educate directors is one element of a larger picture, says Tim Rowley, academic director of the ICD Corporate Governance College. "Capital markets depend on shareholder confidence, which is a global issue, not just a Canadian one," he says.

There are, he observes, three so-called pillars around corporate governance: the regulatory environment, the structure of boards, and the quality of directors. The latter is "where our program comes in," says Mr. Rowley, adding the college targets seasoned, novice and aspiring directors of for-profit and not-for-profit organizations.

Mr. Rowley has investigated other comparable programs in the United States and Britain and says most are "how-to" courses. "Our focus is that being a director is difficult. There are many gray areas and let's talk about them."

The Directors College is charging $20,000 for five two-and-a-half day sessions spread over six months, while the ICD/Rotman program is charging $12,000 for four three-day sessions over seven months.

The former has no connections to membership-based organizations and is drawing upon the resources of academics and business people from across Canada. The latter is closely linked to the ICD, a 650-member national body dedicated to directors and raising corporate-governance standards. It will draw upon academics at the Rotman School, CEOs and seasoned corporate directors.

Students who complete The Directors College's program will receive the "Chartered Director" (Ch. Dir.) designation. Participants at the Rotman School program will receive a certificate of completion.

Both schools share an emphasis on exploring the dynamics of boardroom conduct, dealing with real-world examples and using simulation exercises.

Both also aim to help meet a pressing need: More than half of the 1,800 directors who sit on the boards of companies listed on the TSX are over 60 years old and will retire over the next five to seven years, says ICD chief executive officer Beverly Topping.

"There is going to be a huge void of experienced directors, unless we fast track the development of interested people," she says.

"Where we will get 1,000 directors?" Mr. Rowley asks. "We have to get people up to speed because the health of our capital markets depends on it."

Board director Jim Glover has heeded the call. An investment director with BDC Venture Capital in Toronto, he's enrolled in The Directors College.

"I want someone to help me build a 'toolkit' with knowledge that I can use," says Mr. Glover, who sits on the boards of two telecommunications start-ups. "I consider that I am doing an adequate job now, but ask myself, 'Can I get better?' "

Frank O'Dea is also anxious to improve his knowledge. An Ottawa-based entrepreneur who sits on the boards of several for-profit and not-for-profit organizations, Mr. O'Dea has also signed up for the Directors College.

"The guidelines and rules are evolving, and I want to stay absolutely current," says Mr. O'Dea.

Another student is Claude Lamoureux. Even though the CEO of the Ontario Teachers Pension Plan Board is a seasoned director, he is keen to expand his knowledge when he attends the ICD/Rotman program.

"Take compensation as a subject. There aren't too many college courses that go into depth on issues like that," he says. "What do you get when you have good teachers? You get a summary of lot of research you would not get otherwise."

Some observers applaud the emergence of such programs. "It's a great idea," says Bill Mackenzie, head of Fairvest Corp., a Toronto-based proxy advisory firm that tracks the level of director education in its internal corporate governance ratings. "It puts more focus on the value of directors. And it prepares us for the next generation."

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