National Association of Corporate Directors
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The National Association of Corporate Directors (NACD) is an independent, not-for-profit, section 501(c)(3) founded in 1977 and headquartered just outside of Washington, DC, in Arlington, VA. NACD's membership includes the entire boards of 1,400+ corporations as well as several thousand individual members, for a total of more than 20,000 members. Membership is open to individuals serving on boards of public, private, and nonprofit organizations from both the United States and overseas. The organization is registered with the National Association of State Boards of Accountancy as a sponsor of continuing professional education on the National Registry of CPE Sponsors.
|Founded||December 19, 1977|
|Type||National Director Membership Organization|
|Focus||Director Education, Board Development, Director Recruitment Services, Credentialing|
|Method||Public, Private and Nonprofit Company Surveys, Educational Events, Conferences, Publications|
|Reatha Clark King, Barbara Hackman Franklin|
NACD operates at both a national and local level, with more than 20 chapters across 35 major metropolitan cities within the United States providing educational programs and networking opportunities.
The organization collaborates with various other organizations such as Heidrick & Struggles, KPMG's Audit Committee Institute, Marsh & McLennan Companies, Pearl Meyer & Partners, and Sidley Austin.
NACD was founded in 1977 with the goal to educate directors. In 1978 it announced the first comprehensive Director Education Program. Ten years later, NACD recognized the first Director of the Year. In 1993, NACD published its first Blue Ribbon Commission Report, offering ten principles to guide audit committees and their oversight of the financial reporting process, as well as risk management and internal and external auditors. In the early 2000s, NACD's Blue Ribbon Commission Report on Board Evaluations helped optimize board composition, while the organization helped shape Sarbanes-Oxley and influence the new New York Stock Exchange (NYSE) & NASDAQ listing rules. In 2004, NACD co-found the Global Director Development Circle, launched in response to the need to keep directors ahead of international corporate governance and legislation. This program led NACD to globalize the Certificate of Director Education program in 2006. The program has since evolved into the Global Network of Director Institutes. In 2010, NACD acquired Directorship magazine, a magazine dedicated for today's corporate officers and board of directors.
NACD's mission, as stated on their website, is to elevate board performance by providing the information and insights that board members need to confidently navigate business challenges and enhance shareowner value.
NACD serves as a resource during the legislative process by regularly sending research, publications and comment letters to the United States Congress, the United States Security and Exchange Commission and the Public Company Accounting Oversight Board. NACD employees have testified and conferred with key committees as they prepare for Congressional hearings. Research provided by NACD is cited in the legislative and regulatory arenas, providing statistics regarding boards as well as leading practices addressing key issues, such as boardroom compensation.
NACD's programs consists of different director learning and networking opportunities that provide members with resources and reports, as well as encourages members to partake in various professional education classes, peer exchanges and webinars.
NACD Fellowship Programs: Board members can earn credentials to be considered an NACD Board Leadership Fellow or NACD Governance Fellow by attending NACD Master Class, NACD Director Professionalism courses, Conferences and Forums.
Battlefield to Boardroom: a board development program that prepares and transitions military flag officers and general officers from military service to boardroom service and creates employment opportunities for veterans. The Battlefield to Boardroom courses are designed to teach attendees how to serve in the boardroom and provide the opportunity for retired officers currently serving on boards to mentor a new generation of ex-military directors.
Global Board Leaders' Summit: NACD's annual conference convenes directors, governance leaders and industry experts to help boards identify both opportunities and challenges that could impact a company's strategy and vision.
NACD Director Compensation Report: analyzes annual pay levels and practices among 1,400 companies across 24 industries with revenue from $50 million to more than $10 billion. NACD and Pearl Meyer & Partners annually release the NACD Director Compensation Report.
NACD Fortune 500 Committee Chair Advisory Council Briefs: NACD regularly convenes Fortune 500 board committee chairs, investors, regulators, and leading governance professionals to discuss key issues impacting the audit, compensation, nominating and governance and risk committees.
NACD Directorship Magazine: the official magazine of NACD, reporting on current issues of importance to directors and boards.
Role in the Corporate Governance MovementEdit
In 2001 and 2002, the unexpected bankruptcies of Enron and WorldCom brought increased public and government attention to corporate governance and the role of the board of directors. In February 2002, Roger Raber, former CEO of NACD, was called to testify before House Energy and Commerce Committee, chaired by Billy Tauzin (R-LA), regarding the failure of Enron Corporation. At request of Committee, Raber submitted 10 suggested standards, based on the Report of the NACD Blue Ribbon Commission on Director Professionalism (1996/2001/2005), for public company governance, submitting same to the New York Stock Exchange (NYSE) and the NASDAQ on May 1, 2002. In November 2003, the Securities and Exchange Commission approved new listing requirements for both, which were influenced by NACD's recommendations.
The ten core recommendations are as follows:
- Boards should be composed of a substantial majority of independent directors. At a minimum, these directors should meet the definition of “independent director” as defined under relevant SRO standards, although boards may consider adopting even more stringent standards of independence. Furthermore, boards should formulate and adhere to clear conflict of interest policies applicable to all board members.
- Boards should require that key committees—including but not limited to audit, compensation, and governance/nominating—be composed entirely of independent directors, and are free to hire independent advisors as necessary.
- Each key committee should have a board-approved written charter detailing its duties. Audit committee duties, at a minimum, should include two key elements: a) oversight of the quality and integrity of financial reports and the process that produces them; b) oversight of the management of risk. Compensation committee duties should include performance goals that align the pay of managers with the long-term interests of shareholders. Governance/nominating committee duties should include setting board and committee performance goals and nominating directors and committee members with the qualifications and time to meet these goals.
- Boards should consider formally designating an independent director as chairman or lead director. If they do not make such a designation, they should designate, regardless of title, an independent member to lead the board in its most critical functions, including setting board agendas with the CEO, evaluating CEO and board performance, holding executive sessions, and anticipating and responding to corporate crises.
- Boards should regularly and formally evaluate the performance of the CEO, other senior managers, the board as a whole, and individual directors. Independent directors should control the methods and criteria for this evaluation.
- Boards should review the adequacy of their companies’ compliance and reporting systems at least annually. In particular, boards should ensure that management pays strict attention to ethical behavior and compliance with laws and regulations, approved auditing and accounting principles, and with internal governing documents. In addition to meeting the current requirements for disclosure of management compensation, boards should disclose the total value of each director's compensation, including the value of any stock options or grants awarded during the year.
- Boards should adopt a policy of holding periodic sessions of independent directors only. These meetings should provide board and committee members the opportunity to react to management proposals and/or actions in an environment free from formal or informal constraints.
- Audit committees should meet independently with both the internal and independent auditors.
- Boards should be constructively engaged with management to ensure the appropriate development, execution, monitoring, and modification of their companies’ strategies. The nature and extent of the board's involvement in strategy will depend on the particular circumstances of the company and the industry or industries in which it is operating.
- Boards should provide new directors with a director orientation program to familiarize them with their companies’ business, industry trends, and recommended governance practices. Boards should also ensure that directors are continually updated on these matters.
NACD and the Securities and Exchange CommissionEdit
- 2003-2004 Former NACD CEO Roger Raber and former NACD Chair B. Kenneth West co-signed three letters on Re: File Number S7-19-03 “Security Holder Director Nominations” (34-48626). December 22, 2003; March 9, 2004; and March 26, 2004. During this time NACD Board member Warren Batts appeared at an SEC Roundtable devoted to the topic.
- 2005- 2006 NACD Director Michelle Hooper wrote a letter (March 31, 2005) and participated twice at SEC-PCAOB Roundtables (April 2005 and May 2006) regarding internal control reporting and auditing provisions of Section 404 of the Sarbanes-Oxley Act. Another NACD Director, the Hon. Barbara Hackman Franklin, has similarly participated, under her own name, rather than as an NACD representative.
- 2009 NACD President and CEO Ken Daly and Chair Barbara Hackman Franklin co-signed a letter to Elizabeth Murphy, Secretary of the U.S. Securities and Exchange Commission, commenting on the proposed rule on proxy disclosure and solicitation enhancements.
- 2011 NACD President and CEO Ken Daly testified before the U.S. House of Representatives Subcommittee on Capital Markets and Government Sponsored Enterprises, commenting on the legislative proposals to address the negative consequences of the Dodd-Frank whistleblower provisions.
- 2013 NACD President and CEO Ken Daly and Chair Reatha Clark King co-signed a letter to Elizabeth Murray, Secretary of the U.S. Securities and Exchange Commission, commenting on the proposed rule for pay ratio disclosure, issued by the SEC on September 18, 2013.
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