Should You Need a License to be a Corporate Director?

You need a license to be a doctor, attorney, accountant – and a massage therapist, hairstylist and private investigator, too. But you do not need a license to be a corporate director.

Even though directors are elected by shareholders to oversee management, and the companies on the New York Stock Exchange alone have a value of some $30 trillion, you do not need a license to be a corporate director.

Most directors have been successful and are arguably well qualified. And while licensees are not necessarily excellent at what they do, a license does confirm that someone has fulfilled certain requirements as determined by a reputable authority. I share many people’s frustrations with excess regulations, but I do believe that a license for directors would increase confidence in corporate governance.

Because effective directors can come from so many backgrounds, an appropriate education requirement is difficult to define. However, capable directors must be thoughtful and mature. Therefore, an age and experience requirement is a possibility: perhaps a director ought to be at least 35 years of age with 10 years of full-time work experience. A test could include sections on topics including legal standards, basic accounting and finance principles, and ethics, including rules regarding conflicts. Continuing education, while pursued by many directors, should also be required, as standards change, and directors ought to be required to stay current on the business and governance environment.

The National Association of Corporate Directors (NACD) offers a Directorship Certification. Harvard Business School and the Stanford Graduate School of Business offer corporate director programs as many other schools and organizations do. While the NACD has over 24,000 director members and is highly regarded (I am delighted to be a member), and Harvard and Stanford business schools are generally the most highly ranked business schools, none of these institutions is a legal or regulatory body, and so their programs, while perhaps a model for a national license, are not currently serving that function.

I raise the idea of a license for corporate directors in my new book, On Board: The Modern Playbook for Corporate Governance. I would be delighted if you would preorder my book on Amazon. Please subscribe below and follow me on LinkedIn and Instagram (@jonathan_f_foster) for more snippets of what is to come in my book and thoughts on current governance topics.

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