Sending the Board Back to School

In the wake of corporate scandals and Sarbanes-Oxley, many companies are enrolling their directors in professional programs to brush up on skills

by Francesca Di Meglio

College classrooms are seeing more corporate directors these days.

That's the upshot of the recent wave of corporate scandals and demand for more accountability from corporate boards. Directors, feeling pressure to ask the right questions in order to avoid financial and ethical landmines, are signing up for specializied executive education courses in increasing numbers. And business schools are eager to have them.

"It is time for directors to step up and voice their views on corporate decisions," says David Wittrock, a director of California Micro Devices (CAMD) in Milpitas, Calif., who earlier this year participated in the Stanford Directors' Forum, a course offered at the school's Graduate School of Business. "The days of unanimous votes on every issue without any challenges to top management are over."

The SarbOx Effect

Indeed, the Sarbanes-Oxley Act, a federal law passed in 2002 to create more transparency in financial reporting and enhance accounting practices of publicly traded companies, is making education of corporate directors more necessary, not to mention more desirable, than ever. And B-schools are reforming existing executive education programs and creating new ones in response to this emerging market of students.

Companies support executive programs because they benefit from sending their directors for additional training. Institutional Shareholder Services (ISS), a provider of proxy voting and corporate governance advice for more than 35,000 companies across 115 markets around the world, has been accrediting corporate director programs for about four years. The organization also rates companies on their corporate governance practices. One of the 63 criteria for the corporate governance quotient is whether directors are being trained and educated.

The number of companies sending board members to educational programs is increasing. In January, 2004, 93% of boards at 5,400 U.S. companies did not have any directors who had participated in additional education or training, according to ISS attendance records. By October, 2006, that figure had dropped to 76%.

Approved Courses

ISS accredits programs for corporate directors based on a variety of factors, including whether the course includes at least eight hours of instruction that must be completed within a year, and the type of organization that is creating and administering the coursework. Dartmouth's Center for Corporate Governance, Goizueta Director's Institute at Emory University, and the University of Southern California's Corporate Government Summit are among the more than 60 ISS-backed classes for directors.

Stanford's program got started about five years ago, when some of the B-school faculty were talking about the mistakes made in high-profile corporate cases—and they decided they could do something about the problems. "We recognized that what we research and teach would have been helpful," says Maureen McNichols, director of the Stanford Directors' Forum.

Since then, about 55 corporate directors annually attend the ISS-accredited Stanford course. During the nearly three-day session that has the business faculty teaming up with those in the law school, participants learn about issues including CEO selection and succession strategies, litigation risks, financial reporting, and determining executive compensation. As a result of increasing demand, the course will be offered twice annually starting in the 2007-2008 academic year.

Know Your Numbers

For the last three years, Columbia Business School has offered Accounting Essentials for Corporate Directors, a three-day course in New York backed by ISS that takes place twice a year with about 20 to 40 students.