For more than 18 years, Directors’ College has been the nation’s premier executive education program for directors and senior executives of publicly traded firms. With guest speakers from the very top of American business and government—including Charles Munger, Kenneth Feinberg, Mary Schapiro, and Meg Whitman—the program addresses key issues facing today’s public companies, such as boards’ roles in setting business strategy, CEO succession, and techniques for controlling legal liability.
The most recent Directors’ College took place on the Stanford campus in June 2012, and 300 attendees had their choice of more than 65 sessions on topics ranging from “Building a Better Board” to “Health Reform: Implications for Business” and “Corporate Governance and Proxy Trends.”
As the flagship program of the Rock Center for Corporate Governance at Stanford University—a joint endeavor between Stanford Law School and the Stanford Graduate School of Business—Directors’ College is now reaching an international audience. In 2011 and 2012, one-day versions of the executive education program were held in Brazil and Chile. In June 2012, a successful program was organized for China. And later in 2012, the Rock Center will add Australia and New Zealand to the list of international destinations.
Unlike the U.S. Directors’ College events, which last three days, the inter- national versions are one-day programs. Epstein says corporate governance executive education seminars are still a rarity in many developing markets. When organizing an international event, he looks for local organizations to partner with—either universities or institutions dedicated to issues of corporate governance. Then, during the one-day program, the U.S. faculty teaches U.S.-based research and best practices, and local regulators, academics, and practitioners speak to local governance issues.
According to F. Daniel Siciliano, JD ’04, associate dean for executive education and special programs and faculty director for the Rock Center for Corporate Governance who has taught at all of the Directors’ College programs, international directors have a “fairly serious appetite” for hearing U.S. academics speak on corporate governance, particularly from a global perspective.
“Our approach is to have a blended program, not to push the U.S. worldview,” says Siciliano. “We present global and local governance standards in addition to the U.S. ones.” However, he has found that international attendees are very interested in what makes capital markets in the United States work. “Yes, there are IPO activities in Brazil, Hong Kong, and China, but the U.S. markets are the dominant capital markets of the world. It’s a practical necessity for emerging markets to find out what’s going right and wrong here,” Siciliano says.
Why expand the very successful Directors’ College? “Some international markets are growing very fast—the economies are growing at a much faster pace than ours and they are in the process of modernizing their legal and regulatory systems,” says Epstein. “For example, Brazil created Novo Mercado, a new listing segment of its stock market with increased corporate governance standards, and it has been updating and adjusting the regulations for companies that trade in public markets and go public.”
Directors in these countries are becoming more sophisticated, Epstein says, “and they look at the United States as a country that has gone through an evolution in governance and want to learn from our experiences.”
The curriculum is thus a blend of local, global, and U.S. governance issues. For example, in Chile one of the keynote speakers was the chairman of the local securities and exchange commission, who spoke about local governance challenges following a couple of high-profile corporate governance scandals as well as efforts at implementing a new board self-evaluation regulation. Then, Stanford’s Michael Klausner, Nancy and Charles Munger Professor of Business and professor of law, talked about U.S. experiences with governance in controlled versus dispersed ownership companies. Both topics resonated with the audience, says Epstein.
Indeed, Siciliano has been struck more by similarities directors share around the globe than by differences. “They all share an anxiety about failing in some way, about damaging the companies they want to do well by,” he says. “They are genuinely concerned about doing a better job and not experiencing a catastrophic failure or problem.”
One big difference between the United States and most other countries, is that in the United States governance has primarily focused on agency problems due to the separation of ownership and control, protecting shareholders from management excesses and wrongdoing; whereas in most other countries, governance has had a stronger focus on protecting minority shareholders from the potential excessive extraction of private benefits of control by controlling shareholders. “The role of boards has been different, and the rise of independent directors in both systems has tried to curb the excesses either by management or by controlling shareholders,” says Epstein, who added that globalization was changing the dynamics of international markets. “When you look at the capital structures of companies in these countries, you see many issues that will be useful to explore jointly, especially regarding growing companies.”
Members of Stanford’s faculty, both from the law school and the business school, have been enthusiastically participating in these international programs. In addition to Siciliano and Klausner, Kenneth E. Scott, LLB ’56, the Ralph Parsons Professor of Law and Business, Emeritus, and a senior research fellow at the Hoover Institution, emeritus, taught in Brazil and Chile in 2011; Francisco Perez-Gonzalez, assistant professor of finance at the Stanford Graduate School of Business and a faculty research fellow at NBER, taught in Brazil and Chile in 2012; and David Larcker, the James Irvin Miller Professor of Accounting at the Stanford Graduate School of Business and a senior faculty member of the Rock Center, will teach in Australia and New Zealand later in 2012.
Directors’ College China was the most challenging, according to Epstein, because of the cultural differences as well as the novelty of director executive education in China. “I believe we were the first U.S. university to hold a director-level program on governance in that country,” he says. The program was held on Friday, June 8, 2012, at the new Stanford Center at Peking University. With partner NASDAQ OMX Group, Inc., Directors’ College China brought together board members and senior executives of Chinese companies listed—or planning to list—on U.S. exchanges. “Chinese companies do not have a tradition or practice in sending their boards to any director education programs, and many of these boards seem rather passive compared with their international peers,” says Epstein.
Siciliano found two topics in particular resonating among the various international venues. First, directors were very interested in hearing what global institutional investors like BlackRock and CalPERS look for when investigating potential investments in emerging markets.
“What do these investors want? What do they expect? Given the hundreds of billions of dollars at play, this really resonated with directors,” says Siciliano.
A second hot topic was how boards can get in trouble by not effectively managing or processing information given to them by management.
Both Epstein and Siciliano stress that the flow of information during the Directors’ College programs goes both ways. Stanford faculty listen and learn in significant ways and benefit as much as local directors, academics, and practitioners from the comparative nature of the sessions.
Siciliano’s own research into governance in closely held versus distributed ownership companies has been impacted by his participation in these international programs. “I got a lot of insight from Chilean companies, which are mostly family owned. By seeing how they’ve operated and managed succession planning, capital management, and human resource management, I’ve come away with a different take on governance in family-run companies,” he says. It’s not clear that opening up the company to external investors is always the best next step to promote growth and profitability, Siciliano adds. He was persuaded after seeing closely held mining companies in Chile planning what was best for their businesses 20, 40, even 50 years out. “At best, you get an influx of capital, but at worst, you have a serious distraction from your core business.”
So successful have the early programs been that Directors’ College will expand further this year with new programs in Sydney and Melbourne, Australia, and in Auckland, New Zealand.
“From there, who knows?” says Epstein. “We’re very interested in expanding to other countries where an exchange of corporate governance research, experiences, and best practices would be beneficial to all parties.” SL
For more information go to http://rock center.law.stanford.edu/. Alice LaPlante is an award-winning fiction writer who was a Wallace Stegner Fellow and a Jones Lecturer at Stanford. She has written for Forbes, Businessweek, Stanford Business, and other publications.
Categories: Public Policy