A quality board is important to shareholders and stakeholders. In these days of economic volatility, shareholders and regulators demand and expect companies to compose strong boards and committees that work well together and that have all the right skill sets.
Diversity, especially as it pertains to gender, is high on the list of priorities for a well-composed board. Good governance requires corporate boards to have diversity in race, gender, ethnicity, age and experience. Regulators and shareholders hold the expectation that boards will present a diversity of perspectives in the boardroom and that board directors will have a diverse set of skills, talents and abilities.
Publicly traded companies are required to conduct self-evaluations of boards and major committees annually to prove that they have capable boards. The main goal of board assessment surveys is to identify areas in which the board could be performing better.
The quality of the evaluation depends in part on the quality of the self-evaluation process. Diligent’s Board Assessment Tool enables boards to create quality questionnaires and gives them multiple ways to analyze the results for the most comprehensive and accurate results.
What Can Boards Learn From a Board Assessment Survey?
Regulators may only require boards to evaluate the board and the major committees, but boards that invest a little more time and energy can learn a whole lot more. Boards can also learn a lot from assessing their individual directors, board processes, and how boards and managers interact with each other.
To conduct accurate assessments, boards need to have some means to assess what criteria against which they’re measuring. The standards that boards choose can be used to assess current and future boards. Boards and shareholders value board directors who can think well on their feet and grasp concepts quickly. Board directorship requires board directors who are staunchly independent thinkers and who won’t give in to groupthink. Board directors need to be able to challenge management after getting all the facts. Today’s boards can’t afford to have directors who sit quietly in the background. Assessments should reveal that all board directors participate and contribute regularly and help to keep the boardroom a productive, trusted and collegial place. As the board directors’ answers come forth, boards need to evaluate them as they relate to emerging economic and technological trends to make sure the board has competent members. Collectively, the board’s skills and attributes should allow them to practice adequate oversight over its various operations and departments.
What Issues Should Boards Be Looking For?
Besides looking for individual and collective skills and abilities, boards can gain much from taking the perspective of how the results relate to board duties and responsibilities. Specifically, boards should be looking to see if the board’s skills and expertise match the strategic direction and plan for the company.
Boards should also evaluate whether they get enough information to support their ability to assess risk, guide the future of the company and provide detailed expectations from management. In evaluating board processes, boards should be looking for whether the information they get allows for sound planning and decision-making, and whether managers are carrying out the board’s intentions as expected.
Evaluation results should affirm that board and committee chairs are performing their roles effectively. If they don’t, board members need to make decisions about increasing their education, providing mentoring or replacing them through the process of succession planning.
The results of the evaluation should demonstrate that boards and managers work and communicate well together, and if there needs to be improvement, should indicate which of them needs improving.
Overall, the evaluation results should give boards an indication of what steps they need to take to get better results at the next evaluation period.
Diligent Electronic Board Evaluations
Board directors don’t always look forward to the annual board self-evaluation time. Manual processes are as time-consuming for board directors to complete as they are for board administrators or corporate secretaries to create, organize, distribute, collect and analyze. There’s an easier way to complete the process from start to finish, and it’s one that gets far better results.
Diligent’s Electronic Board Evaluation Tool streamlines the process for board evaluations and makes the process faster and easier while providing more accurate results.
Boards can use the board evaluation software for board, committee and individual evaluations. The software allows the board evaluation coordinator to easily create and distribute any type of questionnaire with the flexibility of various question types.
Board directors receive their questionnaires in the security of Diligent’s board portal, and they can complete the evaluation at their convenience, any time of day or night. If their desktop or laptop isn’t handy, they can finish their evaluations later using a tablet. The platform allows board directors to complete their evaluations anonymously, which allows for the most candid feedback. When the evaluation is completed, board members simply sign and submit the evaluation electronically. It couldn’t be easier.
Perhaps the most daunting part of board evaluations is navigating through the wealth of data to arrive at some type of meaningful results. Diligent’s Board Evaluation Tool revolutionizes how boards evaluate their assessment results.
The administrator of the evaluations can use the evaluation tool to consolidate lots of data into clear analytics in the form of graphics, charts and reports. The results will provide a clear picture so that boards can easily identify and understand their strengths, weaknesses and gaps. Using this information, they can effect immediate change and use it to drive more value for the organization.
Boards can use these results to get material ready for print or in-person presentations so that others can get the big picture view of how the board is performing. Obtaining clear and meaningful results also makes it easier for auditors and shareholders to access the results at a moment’s notice.
Diligent’s Board Evaluation Tool is also cost-effective. In addition to saving on paper, ink and distribution costs, boards won’t have to seek and fund an outside evaluation facilitator.
In conclusion, board meetings are essential to good governance, strong leadership and healthy companies. The quality of what takes place in board meetings has a strong effect on the company’s overall performance. That’s what makes board evaluations such a vital component to good corporate governance.