THE professional development of directors of publicly listed companies has evolved with changes in the regulatory and business environment. In the recent review by the Corporate Governance Council, it is proposed that the Listing Rules will henceforth require the induction of first-time directors with training in the roles and responsibilities of a director of a listed company as prescribed by the Singapore Exchange (SGX).
This is consistent with Provision 1.2 of the revised Code which states that directors should understand the company's business as well as their directorship duties. Towards this aim, directors are to be provided with opportunities to develop and maintain their skills and knowledge at the company's expense.
The move by Singapore's regulators to require first-time directors of listed companies to "receive comprehensive and tailored induction on joining the board" is consistent with most Asian markets where an induction course is either recommended or mandated for newly-elected directors.
However, there is a lot less clarity in the regulations on the issue of continuing professional development for directors.
When you consider that directorship is a profession, it is clear that the development of directors does not and should not stop with the induction of a director. There is a continuing need for directors to learn new skills as they progress in their directorship and update themselves as the regulatory and business environment changes.
The fact that the Singapore Institute of Directors (SID) conducts over 100 training sessions a year attests to the range of development courses that are needed and available to directors.
How much is enough?
The biennial Singapore Board of Directors Survey by SID and SGX indicates that only 76 per cent of the respondent companies in the 2017 survey said that they provided or arranged training (other than orientation and induction) for their directors. For the remaining 24 per cent of companies, the directors take care of their own training needs. This is an improvement from 2015 when only 67 per cent of the respondent companies provided or arranged training for their directors.
The survey also indicates an increasing trend in the number of directors attending training (other than orientation and induction). In 2017, 30 per cent of companies polled indicated that more than 80 per cent of their directors attended professional training which was arranged by them. This was up from 25 per cent two years prior.
While these survey results suggest positively that firms are taking more responsibility for providing or arranging training for their directors and a higher percentage of directors are attending training, it is still far from satisfactory.
The survey further indicates that spending on directors' training is relatively low. More than half of the respondents in the 2017 survey indicated that they spend less than S$500 on training for each director. As a benchmark, a four-hour course conducted by SID costs about S$500 or less for its members. Using this as an estimate, spending less than S$500 per director means that a company invests only about four hours or so of training on each of its directors per annum.
The good news is that SID members are required to commit to a minimum of 60 hours of training and development over a three-year period; this works out to 20 hours per annum. This is quite easily fulfilled as SID's comprehensive professional development curriculum provides a full spectrum of courses for the different types of directors in the different stages of their directorship journeys.
SID's requirement is consistent with that of other director institutes. The Hong Kong Institute of Directors requires 20 hours per annum of continuing education, while the Australian Institute of Company Directors requires its members to undertake 60 units of director professional development over a three-year rolling cycle. The US National Association of Corporate Directors has a point system requirement for the types of training that its members have to attend each year.
Director training is emerging as a best practice across the world.
The Stock Exchange of Malaysia requires that all directors must complete a Mandatory Accreditation Programme within four months of being appointed. It may also prescribe training for all listed directors from time to time.
The Shanghai Stock Exchange requires independent directors to participate in at least 30 hours of classes to obtain qualification prior to appointment and subsequently at least 30 hours of continuing training every two years. In Hong Kong, it is a comply-or-explain requirement that directors engage in continual professional development.
Nominating committees should re-evaluate the amount invested on training and the training hours per annum per director when reviewing their training programmes for directors. It may also be necessary to review whether minimum hours of training should be prescribed in the Code or at least be recommended best practices. This could help nudge boards to increase their investment in director training.
Director induction and orientation programmes are important, but even long-serving directors need to keep up-to-date with a constantly changing business landscape, and a system of continuing professional education is just as important. Directorship is a lifelong journey and requires commitment and ongoing education.