Publication Improving board evaluation for greater board effectiveness

Executive Summary

Board evaluation is an integral part of corporate governance and helps boards operate more effectively. To further the still evolving practice of board evaluation, Tomorrow’s Company in partnership with The Chairmen’s Forum has published its latest guide, ‘Tomorrow’s Corporate Governance – Improving Board Evaluation for Greater Board Effectiveness’.

Tomorrow’s Corporate Governance: Improving board evaluation to achieve greater board effectiveness is the fifth in a series of guides and tool-kits from the Tomorrow’s Good Governance Forum for use by chairmen, boards and advisors, to help achieve practical change. This guide offers examples of good practice to help chairmen get the best value from the board evaluation process.

The origins of this guide lie in discussions held with Sir David Walker, John Barton, Geoffrey Howe, Richard Sermon and a number of leading chairs which identified that it would be helpful to capture some of the common issues and learning from the still evolving practice of board evaluation.

The guide explores best practices and behaviours focused on improving board dynamics. A guiding set of principles has been developed to get the best value from the board evaluation process. This includes:

• Defining board effectiveness and a shared view of the organisation’s purpose, value and mission to create a ‘board mandate’
• Appointing an external evaluator who is independent, experienced and consistently high quality of external board evaluators.
• Widening the sources of feedback to include non-board member executives, senior management and employees to give a more rounded view of the value of the board; harnessing the power of social media as a mechanism for getting feedback from customers and society at large.
• Capturing both quantitative and qualitative data to inform internal and external evaluations.
• Disclosing the results to create an action plan based on the results of the evaluation and learning process.

Over 30 experienced chairmen and a similar number of company secretaries, investors, leading evaluators and other specialist discussants were consulted for this guide to highlight some of the widespread and recurrent themes and issues.

John Barton, chairman of easyJet plc and Next plc, in a foreword to the guide writes:

“The board… is arguably the most important body in any company. How it exercises its duties and influences its business is probably the most important issue facing chairmen and directors today. To make sure it is effective a board must have some way of measuring and reviewing its performance with a clear path for updating and improving itself. This guide contains many useful tips on how to conduct and get value out of the evaluation process.”

 Richard Sermon, chief executive, The Chairmen’s Forum:

“This guide has been written primarily with chairmen in mind – it is for each board to determine how it undertakes ‘a formal and rigorous, evaluation of its own performance’ each year and the basis upon which it conducts ‘an externally facilitated review’ every three years. This is not an area for a ‘one size fits all’ approach and so you will find nothing which is prescriptive in these pages but rather insights, ideas and examples of ‘what good looks like’.”

 Mark Goyder, founder and chief executive, Tomorrow’s Company:

“The challenge of board evaluation lies in fulfilling both the internal purpose – which requires the privacy of the confessional – as well as the external purpose, which requires a public sharing of what has been learned and what may change. So far only a few have managed it. It is hoped that this guide will help more do so.”