As institutional investors and activists continue to focus on board composition, we’re seeing increased interest in the board evaluation process: How are boards using their evaluation process to improve performance and align board composition with strategy? Are directors giving enough consideration to board refreshment?
Too many boards, however, still view the board evaluation as a compliance or check-the-box exercise rather than an opportunity to collect valuable feedback and improve performance.
In this episode, host TK Kerstetter and regular guest Doug Chia, Executive Director of The Conference Board Governance Center, discuss the current state of evaluations in today’s boardrooms. “The standards have changed,” explains Chia. “With the attention of activism and board members being targets, there’s this heightened sense of what performance means–and whether someone’s actually contributing to a board.”
In 2017, PwC’s Annual Corporate Directors Survey reported that 46% of board members believe someone on their board should be replaced, while 21% feel that two or more directors should be replaced.
I think that everyone has their story where one board member is underperforming…but the chair or the lead director is just really uncomfortable having the tough conversation with that person. So they just carry that person on, year after year…They figure, ‘What’s one weak board member?’
In this episode, Kerstetter and Chia dig into the reasons why, then discuss best practices and potential solutions in a modified rapid-response format:
- How should boards make decisions between internal vs. external facilitators?
- Which evaluation formats should be utilized (surveys, interviews, combinations)?
- Should boards conduct peer-to-peer reviews as part of the evaluation process?