Over recent years in accordance with best practice in corporate governance, listed European and US companies are now conducting board performance evaluations. This process consists of an external evaluation every three years followed by internal evaluations held annually. This best practice is now extending to large private companies and not-for-profit organisations. Board evaluation is increasingly acknowledged as a vital process for improving board performance and dynamics whatever the size, status or type of organisation. If thoroughly conducted and embraced by a board, an independent external board evaluation has the potential to significantly enhance board effectiveness, maximise strengths, identify and tackle weaknesses.
Independent Board Evaluation & Performance Programme
Board Excellence have developed a comprehensive independent board evaluation & performance programme for companies, organisations & non-profits in Ireland & the UK based on best practices across Europe and North America highlighted in Figure 1. This board evaluation and performance programme working closely in collaboration with the board members establishes a strong foundation to assess the current strengths & weaknesses of the board and drive a measurable plan of sustained improvement.
Board Excellence’s core approach is based on a passionate belief that a strong commitment by the board to continually improving its effectiveness & performance represents the cornerstone of the ability of the board to deliver significant value to the organisation’s shareholders and stakeholders
An independent evaluation, strongly embraced by the board, represents a genuine best-practice for a board in understanding its current strengths & weaknesses and lays the foundation for sustainable long-term improvement in the effectiveness & performance of the board.
Progressive PE firms globally are increasingly recognising the value of external independent board reviews as a key mechanism of optimizing the effectiveness and performance of their portfolio boards as well as establishing a strong reputation for the company in the marketplace and in the eyes of potential acquirers of the company. One of the characteristics of the very best company boards, whether a PLC, a PE backed company or standalone, is an obsession for excellence and continuous improvement of the board as a high-performance team. PE portfolio boards have in many cases quite a close engagement model between PE board members & executives with PE board members quite hands on in many cases. While this brings significant advantages and is a core strength of the PE model, this can create a level of dependency between the board and executive team which can impede the ability of a private equity board to be independent of management and for example deal with a problematic CEO in a timely fashion.
Key Focus Areas Of Board Evaluation
- Board Information Management, Process & Procedures
- Board meeting dynamics & effectiveness
- Quality of board supervision & decision-making
- Relationship with Executive Management
- Performance of individual directors & committees
- Oversight of financial reporting & internal controls
- Risk management
Phases Of Board Evaluation Programme
- Meeting with Chairman & CEO
Agree on overall objectives, scope & schedule of the programme
- Presentation to the board
Joint presentation between the chairman & independent board evaluator to the board directors
- Detailed assessment phase
- Review of the last 12 months board papers
- Confidential questionnaire completed by board members
- Individual interviews with each board member (in-person, via video or phone)
- Initial feedback & Report
Feedback meeting with the chairman on findings & initial draft report
- Presentation of overall report
Presentation by the board evaluator to the board on report & recommendations
- Follow-up phase
Presentation to the board by chairman on key issues identified, follow-up action plans and annual board evaluation cycle established
- Provide an independent high-quality assessment of the effectiveness & performance of the board
- Assess the current strengths & weaknesses of the board driving a measurable plan of sustained improvement.
- Help provide a framework to surface problematic issues which are affecting the board’s effectiveness (specifically interpersonal issues )
- Re-enforce the board’s commitment to best-in-class corporate governance & continuous improvement in the eyes of its key stakeholders
An effective high-performance board of directors represents a critical cornerstone of a organisation’s success and delivery of shareholder value. A high-quality independent board evaluation, embraced by the board and championed by the chairman, has the potential to significantly enhance board effectiveness, maximise strengths, identify and tackle weaknesses.