One of the more challenging and divergent areas of sound governance practices is evaluating the performance of the board of directors and its committees. Yet boards are coming under increased fire for not effectively fulfilling their duties. The reality is that boards and their committees should be subject to proactive evaluations just like management. A well-defined and periodic performance evaluation protocol is suggested. While a great deal of scalability and flexibility of the evaluation tool is fine, all boards should have an answer regarding ‘who’ will conduct the evaluations, as well as ‘when,’ ‘why’ and ‘how’ objective board and committee evaluations will happen. Our evaluations are designed to satisfy NYSE and Nasdaq corporate governance listing requirements.
A company’s core objective is to create and increase wealth for its shareholders. Directors provide leadership toward this objective through two primary functions, decision making and executive management oversight. Decision making includes approving corporate policy, approving strategic goals, evaluating and selecting top management, approving major expenditures, and acquiring and disposing of material assets. Inattentive boards and committees were a common thread behind the parade of financial frauds to hit corporate America this past decade. As a result, executive teams were able to freely walk down risky paths and circumvent controls to detect and prevent fraud. It is important for boards and their committees to understand where their risks and opportunities reside. Independent evaluations can go a long ways towards this goal.
Time Efficient and Effective
Our evaluation tools are tailored to best meet company needs based on their industry, size and operating environment. We typically suggest an anonymous survey tool to be completed by all board directors. With potential assistance from in-house legal counsel, we can independently collect survey responses, analyze results, provide recommendations for improvement, and help establish performance benchmarks for realizing strong boardroom practices. For streamlined services we can confidentially collect individual evaluations, aggregate them and report cumulative results. On the more robust end of services, we have our ‘Board Evaluation Program,’ which assesses the board’s performance through a preliminary questionnaire, an anonymous survey and a facilitated session.
Compliance and Regulatory Issues
Consider Kral Ussery as your independent resource for board and committee evaluations.