How to Evaluate Board of Directors Effectiveness

The board of directors play an essential role in the supervision and management of a company. The most effective boards work to be as well-prepared as they can, remain aware of the latest governance issues and look for ways to improve their performance so they can bring strategic value to the business.

In order to achieve this, the board needs to have sound information practices and be able turn information into action items that help drive a company toward its goals. The effectiveness of a board depends on its ability to establish and maintain a positive dynamic between directors. This requires an agreement to respect and trust. This is grounded in an unambiguous mission of engagement, a model for engagement and a vision for excellence, which is outlined in the governance guidelines of the board.

The evaluation process is key for allowing the board identify its strengths and weaknesses. It should be a formal and rigorous process that includes the board and committees in some way as well as individual director interviews (conducted by the chair who is independent or the lead director or an outsider) to elicit candid views. The aim of the assessment is to determine the specific steps that the board can commit to take within a specified time to increase its effectiveness.

Evaluations of the board can also provide valuable information into the composition of the board, revealing whether there are gaps in the board’s knowledge or skills and if the board is the right mix of directors to support the business effectively. It is also possible to determine how much time is used in meetings on discussions and deliberations and how the board balances this with reviewing material from the board and hearing presentations from independent advisors and management.

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