Managing Board Orientation & Training

Situation

One of the most important attributes of good corporate governance is an empowered and accountable board of directors. Director orientation and on-going training and development is absolutely necessary to maintaining a high-functioning board. In order for boards to perform at the highest levels, each board member must understand the company and its business, as well as his or her role on the board.

Challenges

Counsel need to prepare corporation-specific orientation materials and undertake the coordination of orienting and training new and continuing board members.

Approach

For new director orientation, which should take place soon after a new director is elected, the topics can be divided into internal and external subject matters. Counsel should coordinate all training activities and work with other members of management to provide all of the necessary internal training. External training may come from internal counsel or other sources such as outside counsel, trade organizations, regulatory bodies or companies that specialize in board training.

Orientation Program

A recommended first step in developing an orientation program is the creation of a company-specific glossary of terms and acronyms used by the company and in the industry. Internal training topics should include:

Understanding the Business of the Company (Duty of Care)

• Board structure/committees
• Board governance policies and procedures
• Introduction to/discussions with management
• Tours of facilities/business operations
• Strategic plan and other relevant plans, e.g. risk management, product development, marketing
• Key drivers of business performance
• Competitive environment
• Compliance programs/policies; compliance risk areas
• Financial statement competency
• Directors and officers insurance; indemnification provisions in the charter/by-laws
• Knowledge of and commitment to company's mission and philosophy
• Previous minutes (board and committees)

• Conflicts of Interest
• Code of conduct
• Independence criteria

• Sarbanes-Oxley Act
• Stock Exchange Rules
• Business Judgment Rule and other applicable state corporate law
• Federal Securities Law
• Insider trading rules and policies
• Section 16 reporting
• Rule 144 of the Securities Act of 1933
• Regulation FD
• Basic understanding of laws governing company's industry

• On-going governance training
• Industry/sector informational programs
• In-house and expert training at meetings and retreats
• Education sessions at board meetings on critical industry and strategic issues