“Education is a lifelong journey.” “A mind once stretched by a new idea never regains its original dimensions.” Such clichés have been a staple of the greeting card and bookmark industries for decades, but there is more than a grain of truth to each. Indeed, no corporate director would say “no” to a little extra knowledge, especially in this economic environment, which is why director education programs continue to be a fundamental component of executive enhancement.
Today’s corporate education programs have attained a level of diversity and comprehensiveness unimagined by previous generations of executives. The modern global business climate has opened up vast sections of fertile territory for new exploration and interaction. The complexities of modern markets have necessitated a new approach to mastering the ever-expanding requirements of finance, risk, and strategy. Technological innovation presents numerous opportunities for growth and expansion as well as challenges. In short, the business world has changed and continues to change at an impressive rate, and the continual accumulation of new knowledge is and will always be an absolute necessity.
The most important reason to look towards executive education programs, however, may not be entirely based on enhancing the skill set of executives and directors, but rather on the all-important goal of appeasing their bosses: the shareholders.
A significant lasting effect of the financial crisis has been that shareholders have become increasingly concerned about the qualifications and personal character of those board members and executives in whom the well-being of their portfolios is entrusted. Now directors and C-suite executives are being called upon, either directly or indirectly, to prove their worth as leaders, and executive education programs can be a valuable tool in demonstrating to shareholders the development of new and relevant skills necessary in a changing economic landscape.
Making the Grade
In fact, executive education’s new justification may be one that the architects of such programs themselves are just beginning to come to grips with: regulators may require these programs. As shareholders watched resentfully, and sometimes vocally, as their portfolios diminished, the first scapegoats often have been directors and executives. Clearly, directors and executives have to prove themselves in different and more convincing ways than pre-Lehman collapse.
The backlash stemming from the financial crisis is that shareholders and regulators are pushing for increased disclosure of the background and qualifications needed for service in the top ranks of a public company. The Securities and Exchange Commission’s proposed Proxy Disclosure and Solicitation Enhancements would require directors to provide more information on their backgrounds and qualifications on proxy forms. With this in mind, the kind of development offered by executive education programs may be just what directors need to prove their mettle to the company’s owners.
“No one school can teach all that’s required to be a director…If you have a board, and you want to make it work more effectively, we can do that.” —Harvard Professor Jay Lorsch
“The issues facing director accountability are very broad, but [executive education] may be persuasive to some shareholders in establishing a director’s value,” says Stanford University Professor Joseph Grundfest. Though directors may face skepticism from shareholders who doubt a company’s management capabilities, enhancements offered by executive education programs can go a long way in convincing shareholders about the commitment and training of their directors.
Harvard’s Jay Lorsch is more skeptical: “No one school can teach all that’s required to be a director.” Lorsch says that while his school’s programs are invaluable in sharpening the skills needed to serve on a board, there is no replacement for years of on-the-job experience; in fact, he says, shareholders may not take such programs into consideration when evaluating directors. “If you’re on the board of a bank, and you don’t know anything about banking, we can’t fix that,” says Lorsch. “If you have a board and you want to make it work more effectively, we can do that.”
One significant, tangible perk of executive education is that many agencies actually will endorse certain programs by granting higher rankings to boards whose directors have participated in such educational opportunities. In fact, ISS Corporate Governance Services, which administers proxy ratings for RiskMetrics, bases its proxy ratings in part on a board’s completion of approved educational programs. (ISS credits can also be earned by attending programs provided by the National Association of Corporate Directors and by Directorship.)
Peer Exchange
For executives with years of experience in a high-pressure daily working environment, time spent on the job is certainly more valuable than hours spent in a classroom setting. There is no substitute for experience, but the vast possibilities offered by new and innovative means of learning can add a new dimension to experience. One significant advantage to executive education, for example, is the opportunity to connect with new people and ideas. “The peer element is crucial,” says Gordon Armstrong, director of marketing at Duke Corporate Education. “Just engaging these smart people in conversation and giving them new ways of thinking about what they already know is very valuable.” Stanford’s Grundfest agrees: “Directors learn a great deal from talking with other directors, and these interactions are a very important element of the work.” It may simply be a matter of new ways of viewing things, says Assistant Dean Whitney Hischier at the UC Berkeley Center for Executive Education: “Oftentimes, if people have been in a particular industry or company for a while, they may have not been exposed to differing points of view. There is a humbling aspect to realizing we don’t all know everything.”
In addition to the engaging minds found among classroom peers, the range of professors in today’s executive education programs is broad—and doesn’t necessarily follow the traditional mold of yore. Though most schools do rely on a core faculty, more often they are bringing in specialists from a variety of fields. “Our professors come from real-world arenas, including international politics, securities studies, environmental politics, and international law,” says Dean Deborah Nutter of the Fletcher School at Tufts University. “And they all bring with them a vital international perspective.”
Engaging the Globe
The curriculum offered by today’s executive education programs reflects the diverse challenges facing today’s executives, directors, and middle managers in a complex and interwoven business environment. The issues of risk management, regulatory compliance, teamwork, problem solving, audit, crisis management, succession planning, asset allocation, and executive compensation that confront today’s business leaders are those which an educational faculty can help tackle. “The world is changing very rapidly,” says Nutter, “and we’re always staying on top of changes in the world to help shape our curriculum.”
Besides the unique educational and networking opportunities afforded by the collaboration of savvy business minds, today’s director education programs focus intently on the new global business frontier. A majority of these programs display an international character, with faculty and curriculum directed towards the possibilities offered by the worldwide market. “We once led a program for Ericsson,” explains Armstrong, “where the executives were faced with a new market in South Africa that they were not at all familiar with. We had them meet with leaders of South African NGOs (non-governmental organizations) and really gain a new cultural understanding they otherwise wouldn’t have had access to.”
“It’s absolutely valuable to do a little exploring of the unknown,” says Hischier. She describes one program in which executives from a Norwegian petroleum company were taken to Brazil, one of their countries of operation. While there, the executives were taken into the field to meet with local oil suppliers, officials with the energy ministry, and community organizations to better understand the day-to-day life of a country that before had been merely a source of product. The field experience, far removed from the confines of the classroom, allowed company executives to see first-hand the reality of a country that until then had been an abstraction.
“If the world were stable, then our programs wouldn’t do much,” says Grundfest. “But the business world now changes so rapidly that even the most experienced directors have more of a reason to spend time educating themselves about these new developments.” Grundfest likens the new opportunities for directors to those available to an experienced surgeon: new techniques, instruments, and drugs that are constantly being developed make continual education a necessity.
Looking Ahead
While traditional educational pathways focus on the lessons to be learned from the past, executive education programs are very much designed towards the future and its possibilities. With the world in flux thanks to a generation-defining recession, directors, executives, and managers at all rungs on the corporate ladder must acclimate themselves to the unique challenges posed by a global marketplace and a regulatory environment far less forgiving than that which nourished the downturn. “There is a broader scope of content to cover now,” attests Hischier. “Our programs are becoming more multidisciplinary in response to a changing world.”
“The job of a director is dynamic and the obligations are changing rapidly, especially in terms of legal exposures,” says Grundfest. “As a result, our programs are changing. We reinvent them every year in response to what’s changing in the world.” While most program directors are still determining how their curriculum will be updated in response to the changes in the market, the most obvious impact is a greater emphasis on risk and its related disciplines. As director and executive education programs change, tomorrow’s leaders would be wise to consider such programs to stay abreast of new and valuable methods of adaptation, innovation, and success.
Excellent article. Are there specific executive education programs focusing on directorship that you can point me to?