Certification programme for company directors slated

New certification standards for company directors have been attacked by a member of the professional body which introduced them and the Shareholders Association.

Changes to the institute's certification programme had resulted in a self-serving "diploma mill", said long-standing Institute of Directors (IOD) member Sandy Maier, who is on the board of 10 companies, including Mighty River Power.

"The IOD has found a way to create a major new revenue stream by simultaneously lowering professional standards and putting in place a compulsory tax on any of its 3800 members who wish to gain professional certification."

Earlier this year the institute introduced two new standards - accredited membership for experienced applicants and a provisional accreditation for less-experienced applicants.

According to the institute's website the purpose of accreditation was "to enhance corporate governance standards in New Zealand by providing a register of directors who can show evidence of their professional status in terms of their knowledge and experience".

But Maier said the new standards were unique compared with those in other countries in that they did not require any test or course.

"Only in New Zealand is there no assurance of any minimum standard of formal preparation."

IOD accreditation is gained by completing an application form, providing a CV and two letters of reference and then attending a 20 to 40-minute interview with a panel of three or four experienced directors drawn from the IOD's 20-strong accreditation board. The application costs $250 on top of IOD members' $310 annual subscription.

Shareholders Association chairman Bruce Sheppard questioned the "elitist composition" of the IOD's accreditation board.

He believed it should include external parties to have credibility, "so that it's not some old boys' mutual back-slapping exercise".

Both Maier and Sheppard were critical of the fact the new accreditations came with a disclaimer that they were "not intended to be a certification of the competence of a member".

Sheppard said the criteria on which candidates were judged needed to be reasonably rigid, transparent and robust "so that it is understood by the people using or judging this certificate so that they know that it means more than 'This man has been certified'."

Maier was also unhappy that a criminal conviction did not automatically disqualify applicants and that information about those who had accreditation was not more readily available.

Despite his misgivings, Maier said he supported the IOD and believed it was the right body to set standards for directors, but he regarded the new system as "a major opportunity lost".

Sheppard believed the accreditations as currently formulated "would die a natural death ... Most senior public company directors that I have talked to are not interested in it".

IOD chief executive Nicki Crauford, herself a provisionally accredited member, said the system was never intended to be a certification of competence.

"If you take your driving licence it doesn't say you're a competent driver, it says that on the day you took your driving licence you understood the rules of the road and that you should know what you're doing.

"But it doesn't guarantee that every time you come up to a junction that you will make the right decision."

Nevertheless, she said, the certification was intended to show that an accredited person "understands the roles and responsibilities of being a director and that they have experience of actually practising as a director and therefore shareholders, board members and the general public should have confidence that this person is competent at being a director".

Crauford defended the interview process as "enlightening" and "useful" for judging directors' competence.

The profession was not one that would be suitable for testing by examination.

"There isn't one textbook that tells you how to be a director. It's not a paint-by-numbers profession."

She also said it was unlikely that someone with a criminal offence would gain accreditation, "but there may be circumstances in which there is a reasonable explanation".

Crauford also said the institute's fees were "significantly cheaper" than other schemes around the world.

The IOD came up with the accreditation system after consulting widely with members and stakeholders, including sharemarket operator NZX, the Crown Company Monitoring and Advisory Unit and the Securities Commission.

ACCREDITED IOD MEMBERS

Bill Baylis

Peter Drummond

Bill Falconer

Paul Hargreaves

Sam Maling

Kerry McDonald

Alison Paterson

Sam Robinson

Tim Saunders