Evaluations of Board of Directors Effectiveness

The board of directors of a company should be aware of its duties, be able determine and evaluate risks, and provide an environment conducive to value creation. In order to achieve this boards must be efficient. But, too many are evaluated only in the past, after something has gone wrong.

Thus, the best boards don’t focus too much on compliance and reporting, but instead partner with management to design the future and keep up-to-date. To accomplish this, they examine their governance structures and processes. To accomplish this they are conducting rigorous assessments to determine their current levels of effectiveness.

These evaluations reveal a variety of issues and obstacles. They can range from simple operational complaints about meeting length and agenda composition, to more difficult issues such as the efficiency of the board in strategic decision-making or in assessing knowledge gaps and competencies, or director succession plans for executive and directors. These evaluations typically consist of comprised of self-evaluations by directors as well as the entire board, and third party facilitation.

Whether it is conducted by the board or by independent consultants who are hired to provide neutral expertise and perspective, the best evaluations are holistic, looking at all dimensions of a yourdataroom.org/streamlining-due-diligence-with-data-room-software/ winning board structure, process and the people. They also include one-onone interviews with directors to elicit important, precise candid and sensitive feedback that cannot be collected by questionnaires alone. They also offer actionable recommendations that directors are obligated to implement within a reasonable amount of time.