Board evaluation is a useful corporate governance practice for organizations and companies.
Why evaluation matters
Reviewing governing bodies and their members can provide objective feedback on the work completed over a period, including the board , its committees, and individual directors.
The results can show strengths, areas to improve, and their relative priorities.
Start by defining each body's responsibilities and asking how effectively it fulfills them.
A clear profile for each position can make individual assessment more consistent and reliable.
How to evaluate organizations
A common problem is performing evaluations without using the results. If findings do not guide improvements, the exercise adds little value.
After evaluating the board and its committees, group improvement opportunities by the effort and investment needed to act on them.
Key processes to assess
An evaluation and compensation committee may review management proposals and make recommendations to the board. Transparent annual reporting can build confidence. Performance assessment may consider:
- Management processes.
- How the person responds to the role's responsibilities.
- Oversight of their area of work.
- The impact of outcomes and execution.
- Internal and external relationships that benefit the organization.
The governance code cited in the source article discusses committee responsibilities such as:
- Recommend criteria for appointing or removing the chief executive and senior officers.
- Propose criteria to evaluate and compensate senior leadership.
- Recommend criteria for severance arrangements for senior leaders.
- Check that organizational talent and structure align with the approved strategy.
- Recommend profiles and criteria for hiring, evaluating, and compensating directors.
- Review management proposals on staff structure and compensation.
- Review and present the Code of Ethics, misconduct reporting system, and protections for people who report concerns.
- Oversee the effective operation of reporting and reporter-protection arrangements.
- Propose a formal succession plan for the chief executive and senior leaders and monitor its implementation.
Organizations need leaders with technical ability and a commitment to ethical, thorough compliance across the business.
EthicsGlobal's view of evaluation
At EthicsGlobal, we believe evaluation and compensation require ongoing, objective review programs. Results can inform pay practices that reflect leaders' responsibilities to stakeholders.
Senior management plays a central role in achieving strategic goals. Contact EthicsGlobal to discuss governance practices that may add value to your organization.
You have read Board Evaluation and Corporate Governance. Connect with us on Facebook, Twitter, LinkedIn and YouTube.