New or aspiring directors on public company boards will soon be able to test their readiness for the role by taking an exam.
The exam is for a first-of-its-kind credential that the National Association of Corporate Directors is launching this fall.
NACD, the largest member organization for directors in the U.S., is bringing together a team of sitting directors to help write the test, which will cover topics such as director duties and financial literacy.
The association aims to tap into growing demand for director education as corporate boards look beyond their traditional candidate pool and bring on more first-time members. One-third of directors joining S&P 500 company boards in 2018 were first-timers, up from about a quarter in 2008, according to data from executive search firm Spencer Stuart.
“More and more boards are reaching for different kinds of people,” Bill McNabb, former chairman and chief executive officer of investing giant Vanguard Group Inc., said in an interview. The S&P 500’s incoming director class includes more women and minorities than in the past, as well as directors that are more digital-savvy.
“The flip side of that is some of those folks need further education around being a board member,” said McNabb, who sits on a steering committee for NACD’s new director credential. He likened it to the CFA Institute’s sought-after credential for the investment industry, saying that some companies could encourage, though maybe not require, their board members to be certified.
The certification is geared toward directors who’ve sat on a public company board for less than a year, along with other NACD members sitting on nonprofit or private company boards who are potential candidates for a public board seat. Having the credential on their LinkedIn profile or their resume could help prospective directors stand out in online board searches.
“This certification program will help with our goal of getting more people into the boardroom,” said steering committee member Michele Hooper. Hooper, a former Target Corp. director, currently sits on the boards of companies including PPG Industries Inc. and United Continental Holdings Inc.
“But we still need to expand the pool of talent that we are pulling from,” she said.
More experienced directors could get the credential too as a way to stay relevant, according to Dona Young, who serves on the steering committee. Young, who retired as chair and CEO of the Phoenix Companies Inc. after nearly 30 years at the company, has been on or around boards for most of her career. She plans on taking the test and becoming NACD-certified.
She said the certification program could further professionalize directorships as the job becomes more demanding and as investors bring more scrutiny to board performance.
“The bar has risen for board members,” Young, now lead director at Foot Locker Inc., said. “It is truly a professional pursuit.”