At a recent working group of company directors we discussed the merits of a Board Evaluation
and reasons for Director’s resistance to embracing the process.
Merits of a Board Evaluation
(Including points given at a presentation in December 2010 by Neville Bain, Chairman of the IoD)
A Board Evaluation allows the Board to look at process and structure and similar governance issues but more importantly it looks at the team as a leadership unit. The ability of the team to perform under stress, manage risk and protect its reputation. 2010 saw numerous high profile disasters occur to large global companies – no companies are immune from these risks.
The new UK Corporate Governance Code has improved on the Combined Code in that it covers many new areas including culture and behaviour of the Board, risk management responsibility, remuneration, committee responsibilities, knowledge, diversity, challenge, independence, decision making, communication and evaluation of the Board and the Directors.
Neville referred to the personal reputation of a Director and stated that it can be lost “in a twinkling of an eye” in tandem with the loss of reputation for the company. Good Board level controls, team working and leadership are needed to create a reserve of goodwill for the days when things do go wrong. This reserve will give you a buffer and a well run Board at the helm of the company will mitigate many risks. A key message was communication strategy, if this is not clear and well thought out in advance of a problem; any risk mitigation plan is out of the window.
A Director is bound by the Companies Act 2006 which defines the duties of the Director which apply irrespective of the size of the company.
This applies equally to ALL directors on the Board.
A Board Evaluation is an annual process of adding value by determining where the Board is, where it would like to be and setting a plan of achieving improved leadership.
A process of discussion, evaluation, contribution and evolution, be each Board member, in a way that feels right for them, their culture and their company.
A process driven by the company.
Summary delgates feedback on Board Evaluations were –
1. It is seen as work
2. If we highlight issues, someone will have to take responsibility
3. Nothing would come out of it of value
4. Nothing would change
5. Waste of time
6. SME’s would gain nothing
7. Personal fear
8. We as Directors know it all, so why do one – we would ensure these issues are dealt with during the year at no additional cost
9. I would never get the key stakeholder / Chairman to agree
Please see the attached document – “Why would you not do a Board Evaluation” which gives a detailed response to each of these points above.