Add this to the list of lessons learned from the financial crisis: Boards of directors often have trouble standing up for shareowner interests. Balancing knowledge of the business with a degree of independence from the conflicted interests of management or dominant shareholders has always been challenging, to be sure. And while corporate-governance reforms have largely focused on minimum numbers of independent directors to assure objective representation, these independent directors must have the ability to make sense of a tremendous amount of information, much of it technical or specific to an industry, and effectively relate it to strategy and the overall business environment. At least some of the abysmal performance of financial institutions in the crisis can be blamed on boards that failed at risk management oversight, which requires financial acumen and an ability to ask the right questions.
The Hong Kong office of CFA Institute has just released a study of director training requirements and programs in key Asian markets, where the challenge is especially acute given many board relationships that reflect strong family and social ties. There is growing recognition in the region of the need for directors who are well prepared to be effective stewards, especially in the financial sector. CFA charterholders in the region may be especially well positioned for director positions given their demonstrated command of a broad financial and investment curriculum. Objectivity and expertise – a great combination in the boardroom.