Education AICD Review

  • Date:01 Dec 2003
  • Type:CompanyDirectorMagazine
What are the essential things that a director needs to know to do their job? A new AICD education program is just the ticket reports Ali Cromie

Education

No entre, no sweets, just the staples

What are the essential things that a director needs to know to do their job? A new AICD education program is just the ticket reports Ali Cromie

'Iknow what I should be doing but don't get time to do it," says Susan Just, director of Playsafe Fencing. Just is one of hundreds of thousands of director-owners of Australian small companies. She, at least, is aware of her director's obligations. Like all of us, she is struggling to find the time to address the formidable list of requirements that directors of companies, small and large alike, need to meet. Like most of us she has no administration team to handle such tasks.

Directors of large corporations have had plenty to say about the demands and costs of meeting new corporate governance and disclosure requirements. Their access to media and government has made their complaints forceful but it has also acted to overwhelm the voice of small company director-owners.

For director-owners obligations remain insistent and demanding of the time and talent we need to devote to developing our businesses. To help, the Australian Institute of Company Directors is broadening the scope of its courses to cater for company directors of smaller companies.

What are the Essentials

"I say the first duty of a director is to be squeaky clean; the second duty is not to be stupid', says Kate Costello, a facilitator for Directors Essentials.

A lawyer by profession, governance specialist and director-owner of Governance Matters. Costello's colloquial squeaky clean is shorthand for a director's obligation to meet a fiduciary duty to act "at all times" in the best interest of the company.

"I cannot get over how many times people enter conflict of interest situations, that they just don't seem to understand what are conflicts of interest," she says.

Directors in small business are apt to treat their private companies as an extension of themselves. They need to realise that a company is a separate legal entity – distinct from the individual – that they must act in good faith, and treat their partners, including minority partners, fairly.

A director who does deals for private gain behind the backs of his partner will be in the dock quick smart. Likewise those who "look after No.1" at the expense of creditors when the finances are under strain.

"If your gut tells you it's not fair, don't do it!," says Costello. "Do the right thing. Follow proper process. Disclose."

Costello's second commandment to director-owners, not to be stupid, relates to the director's obligation to be sure that your company can pay its debts as they become due. Forget wishful thinking - that "it'll all be right on the morrow" – it doesn't wash.

The same goes for paper-directors; kindly family members like mum who agrees to go on the board of their adult child's company, then when it goes belly up hold up their hands to say they had nothing to do with the company

"Stupidity is not a defence," says Costello.

So how can director-owners fulfil their daunting director responsibilities?

Antoinette Rickard, director of the Business Workshop, often longs for "another me" to do the work. Nonetheless she manages the feat of wearing the two hats of manager and director by working "in" my business, but she also has have time working "on my business". This is what Costello urges of director-owners, to put on a second hat to attend to their director obligations.

Nine modules

Director Essentials comprises nine modules. These range from the fundamental obligations of a director through to coaching on financial statements and learning how to assess company performance.

Lysette Mavridis, AICD national education manager, says each module runs for half a day and directors can pick and choose which ones they attend with some available through distance learning. Complete six modules of the full course and director-owners can sit an examination to earn a Certificate in Directors Essentials.

Perhaps there are sweets after all on top of the staple diet delivered in Directors Essentials. With directors drowning in compliance laws a piece of paper validating your basic competence is a worthwhile to wave before regulatory authorities, your banker and your insurer (if you can find one of the vanishing species: an insurer prepared to cover one of Costello's 'squeaky clean' and not 'stupid' director-owners).

Ali Cromie is principal of Rigour Group, a firm specialising in probity evaluations of candidates for CEO, CFOs,

company director and senior management positions. www.rigour.com.au.

Declaration of interest: Cromie is a member of the

Assessment Review Group for AICD education programs

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