The board of directors should be able to comprehend their responsibilities, identify and assess risk, and foster an environment that encourages value creation. In order to do that boards must be effective, and yet too many are evaluated in the past, i.e. after an incident occurs.
So, the best-in-class boards don’t have a focus on reporting and compliance and instead work with management to design the future and keep up-to-date. To achieve this, they are examining their governance structures and processes. In this regard they are conducting rigorous tests to determine their current state of effectiveness.
These assessments often uncover various challenges and issues, ranging from simple operational complaints regarding meeting length or agenda composition to more complex issues like the effectiveness of the board’s role in making strategic decisions as well as gaps in knowledge or competencies, as well as director and executive succession planning. Most often, these evaluations involve self-evaluations of directors individually and the board as a whole as well as third-party facilitation.
The most effective evaluations, whether conducted by the board or independent consultants hired for their neutral expertise and perspective are holistic and look at the entirety of winning board structure, its processes and people. They also include one on one interviews with directors in order to gather specific, sensitive, and candid feedback which may not be able to be gathered by questionnaires. They also offer actionable recommendations that directors are obligated to implement within a reasonable amount of time.
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