There is a requirement for listed company directors to have induction and ongoing training and development under the UK Corporate Governance Code provision (B:4) and a requirement to comply or explain any non-compliance against that code. There is similar guidance and legislation in other jurisdictions. This is likely to form part of the role of the secretariat because of the reporting requirement.

Successful induction programmes comprise a blend of legal and technical information with practical knowledge and tools.

Have you ever come across the following situations?

  • directors continuing to act only as managers after their appointment despite the new 'director' title
  • managers wanting to be directors and needing support to reach that position
  • a lack of understanding of the director role from your colleagues – especially of the role of director of a division compared to a statutory director of a legal entity in your group structure
  • directors not really understanding how the company operates and feeling out of their depth at board meetings.

Induction, when carried out well, should fulfil the following objectives, as identified by Derek Higgs in his original 2003 guidance. Induction should build:

  • an understanding for the director of the nature of the company, its business and markets
  • a link for the director with the company's people
  • an understanding of the company's main relationships
  • an understanding of the legal and best practice governance framework governing their role and the way the board operates.

Effective induction programmes therefore comprise a blend of legal and technical information with practical knowledge and tools to help the director find their feet with other employees, the company's stakeholders and in the boardroom.

Training will need to be tailored to the knowledge and previous experience of the director and will have a different focus depending on the nature of the appointment – whether a non-executive director of your holding company is being appointed or a director of a subsidiary. Programmes can get out of date and need to be revisited to ensure that they are effective and fit for purpose.

Key elements of your legal and technical directors' duties training programme – which can form part of any induction programme or refresher training – should include:

  • an explanation of core duties and responsibilities of the director role under the relevant legislation (e.g. in the UK under the Companies Act 2006) and in case law, as well as guidance and developing best practice
  • the differences between directors' duties and managers' duties
  • the actual difference between executive and non-executive director roles in practice and how these can complement each other
  • an explanation of the constitutional document that governs the legal entity the director is appointed to, setting out powers and processes for meetings and corporate actions the entity might carry out throughout its life
  • statutory compliance obligations, such as filing of information and accounts with the jurisdiction's regulator
  • what might constitute a breach of those duties and how to avoid situations where there is the risk of a breach or a conflict
  • who to go to in your company for ongoing help and support
  • sanctions and fines for breach of directors' duties.

If you would like to read the ICSA guidance note on directors' induction, please email Madeleine Cordes at madeleine.cordes@tmf-group.com.

View the Higgs report here.

(This article was previously published as an ICSA technical briefing.)

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.