Improving Board Performance through Evaluation
As per the recent guidelines from regulators, board members have to go for an annual performance evaluation. For companies’ Nomination and Remuneration Committee (NRC) this is one of the most important tasks.
AID-India believes that a well thought-out and executed board evaluation process should prove beneficial even to already well-run boards by reinforcing appropriate roles and responsibilities, and giving the board and the directors a regular opportunity to review their effectiveness.
AID-India has a panel of consultants who can be called upon to help companies lay down the criteria for performance evaluation.
AID-India Board Evaluation Proposal:
AID India will use a pool of experienced professionals to oversee the process and guide you throughout. The basic appraisal service includes:
- Designing and delivering a questionnaire to all board members followed by individual interviews, analysis, and a full report
- ‘One on one’ interviews with each Board Member including Chairman
- Collating and analysing the data from the interviews and questionnaires
- Drafting the report including gap analysis and recommendations
- Presenting the findings and report to the Chairman and ratifying the report
- Presenting the general findings and recommendations to the Board
What to assess and how?
The key to success for the board is to be actively engaged in the assessment process. It is equally important to have absolute clarity about the objectives in the assessment process and what is to be accomplished by the process.
There are a few different approaches which can be mixed and matched in undertaking board evaluations depending upon the board’s needs, prior experience, chemistry and appetite for the process.
- Survey — Any survey should be carefully tailored and designed for a specific company and its board, and be constructed by drawing from the corporation’s bylaws, committee charters, the roles and responsibilities of directors, and corporate governance guidelines. The survey should produce reliable results and the feedback should usually be presented in the context of a goal-setting process with the board, intended to improve overall performance, and educate the board.
- Interviews — Interviews of the board often are used prior to a board assessment — particularly where boards have not previously done an evaluation — to gain an understanding of the issues on directors’ minds. Typically, outside facilitator interviews directors individually using a structured questionnaire that takes into account the company’s bylaws, charters, guidelines, and codes of conduct and ethics. Based on the results of the interviews, the NRC provides anonymous feedback to the board, often in the form of a narrative report that is organized thematically according to key areas for board improvement.
- Group evaluation — During a group evaluation, a trained consultant engages the board and the CEO in an interactive dialogue. Working against a backdrop of the Companies Act, 2013 and general best governance practices, the discussion focuses on how a board can improve its performance. This approach works best when directors are able to talk candidly and openly, and have a sufficient amount of time to devote to the process.
A well-planned and well-executed board evaluation that focuses on the unique culture, bylaws and needs of the board can reveal issues that hinder optimal board performance. Identifying and addressing these issues, and reinforcing the appropriate board roles and responsibilities, can yield significant benefits to the board, the company and all stakeholders.