Putting directors in the classroom.

• Author: Sweeney, Paul
• Position: Idirector Education - Boards of directors' training

Last year, when the big Southern California utility now known as Sempra Energy wanted to sharpen the skills and broaden the knowledge of its board members, it opted for what some in the corporate governance field call "home schooling."

The San Diego-based corporation spent six months designing a comprehensive director-education program. It hired a veteran accounting professor who had taught at Stanford University's graduate school of business and asked him to lead the entire board through three days of intensive seminars and workshops at a conference center in Phoenix. Using case studies and slide shows, the curriculum delved into everything from understanding financial statements to the minutiae of accounting for energy derivatives.

By all accounts, the event was an unqualified success, says Sempra CFO Neal Schmale, who admittedly is not an unbiased observer: Schmale was the architect of the program and a big believer that Sempra should conduct in-house training rather than employ an "off-the-shelf" program.

"By going with the more focused program," says Schmale, "we were able to go into an in-depth understanding of the critical accounting rules that affect the business that were in. We wanted to be absolutely sure," he adds, "that we had a high-quality program and were not wasting three days of our directors' time. We wanted to be sure that we were productive every minute that we imposed on them."

Whether companies employ internal "home schooling" as Sempra did or select any of the external programs that are offered by a myriad of vendors--including law and accounting firms, universities and consultancies--director education is emerging as a key component to good governance. Indeed, continuing education programs are increasingly seen as an important complement to new laws, such as Sarbanes-Oxley, stepped-up oversight from regulators and the stock exchanges and increasing scrutiny from activist institutional shareholders and an aroused business press.

"If you look in our policy statement on our Web site, you'll see that we call for directors to continuously take steps through director education to improve their competence and understanding of their roles and responsibilities," says Linda Scott, director of corporate governance at TIAA-CREF, the huge New York-based pension fund with $314 billion in assets under management. "And we also call for disclosure of whether companies are participating in such programs" (for more on TIAA-CREF, see...