How to Evaluate Board of Directors Effectiveness

The board of directors is an essential player in the control and governance processes of a business. The most effective boards work to be as prepared as possible, stay abreast of emerging governance issues and seek ways to improve their performance to ensure they can add strategic value to the business.

To achieve this, the board must to follow good information practices. They must also be able to convert information into actions that can aid the company in achieving its goals. The effectiveness of a company’s board is also dependent on its ability to establish and sustain a positive environment among directors. This requires an effort to build mutual respect and trust. This is rooted in the clear mission of engagement, a model for engagement and a vision for excellence as outlined in the governance guidelines of the board.

The evaluation process is key to enabling the board to discover its strengths and weaknesses. It should be a formal, rigorous process that involves the board, committees and individual director interviews. (Conducted by an independent director or chair) or a third-party who can provide honest opinions. The aim of the assessment is to determine specific actions that the board can undertake within a certain time frame to increase its effectiveness.

Board evaluations can also provide valuable insights into the composition of a board. They can help determine any weaknesses in knowledge or abilities or if it is the right mix of skills to support the business. It is also possible to determine how the board is spending its time in discussions and deliberations at meetings, and how they balance that time with reviewing materials for the board and hearing presentations from management and independent advisors.

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