Nigerian Code of Corporate Governance 2018 – Principle 13: Induction and Continuing Education for Directors

A robust onboarding programme for new Directors is imperative for a smooth integration to the Board and an understanding of the business of the Company. Principle 13 of the Nigerian Code of Corporate Governance 2018 (“the Code”, “NCCG Code”) provides, “A formal induction programme on joining the Board as well as regular training assists Directors to effectively discharge their duties to the Company.”

A formal Induction programme is a planned event to introduce new entrants into a system, place or organisation.

While many organisations have an informal process of induction in place, it is important to ensure that such a process is formalised to provide consistency in the approach and information provided to new Board members as they take up their roles.

It is required that the induction should focus on familiarising the new directors with the Company’s strategic plan, operations, business environment, Senior Management, and the Directors’ fiduciary responsibilities.

The Code recommends that Director Development programmes should be at the Company’s expense but should not be such that put undue strain on the Company’s finances

There is an assumption that “experienced” Directors do not require an induction as they have “seen it all”. For those experienced Directors, a refresher on their duties and responsibilities is always useful given the emerging trends in Board leadership and the peculiarity of regulatory requirements of each business sector.

Thus, the induction package should include a discussion on the expectations of the role, the regulatory landscape within which the business operates, the governance structure of the organisation, Board policies and a high-level introduction to the business of the Company.

The induction should also provide new Directors with an opportunity to meet with Senior Management and where appropriate, visits to the Company’s operational locations should be incorporated into the onboarding programme.

The Board chair working with the Company Secretary should ensure that new Directors go through the induction process as soon as possible after their appointment. It is good practice for the Chairman to sit through the induction programme so that he/she can provide practical guidance and insights as well as such clarification as shall be required. The onboarding session should also incorporate some informal interaction to give new Directors a “feel” of organisational culture.

The Code also recommends that all Directors should participate in periodic, relevant, continuing education programmes to update their knowledge and skills and keep them informed of new developments in the Company’s business and operating environment. This emphasised the point that serving as a Director for years does not obviate the need for periodic training given the dynamics of the operating environment.

Read also: The Nigerian Code of Corporate Governance (Principle 12) – Appointment to the Board

Emerging trends including Cybersecurity, Artificial Intelligence, Blockchain, the future of work, etc. should remain top-of-mind for Directors and periodic training on these is imperative.

The Board also needs to keep abreast of new legislation, regulatory requirements and guidelines to give appropriate context to its oversight responsibilities. Thus, it is appropriate to facilitate a targeted Board Training when new guidelines or regulations are issued that will impact the organisation’s operations or processes.

The Code further recommends that the outcome of the performance evaluation of the individual Directors should be taken into account in developing Board training programmes.

If effectively administered and delivered, the Board and Director performance appraisal typically identifies knowledge gaps of individual Directors or indeed the entire Board that can be bridged by specific training.

The Chairman and Company Secretary are also well placed to identify the development areas of the Board and individual directors and as such recommend appropriate training. To ensure maximum participation, it is good practice to identify suitable training for the year in good time to enable Directors diarize and plan to attend.

The Code recommends that Director Development programmes should be at the Company’s expense but should not be such that put undue strain on the Company’s finances. This recommendation clearly underscores the proprietary of affordability from the Company’s perspective.

Thus setting a benchmark of “annual foreign training entitlement” per Director as is the case in some organisation, without due regard to the financial capability of the Company, relevance and expected outcome, is not in the best interest of the enterprise and not in sync with the Directors’ fiduciary responsibilities.

The training needs of the Board and individual Directors, affordability and value addition should be primary considerations in developing a robust Director Development Programme.