Few governance issues are as arduous as assessing the performance of boards. The assessment of board performance is more an art than science since there is an underlying link between the management, firm and board performance. It’s also rarely easy to determine. A board could be doing a good job of governing a company but shareholders are not happy with the low return on their investment. The board might have inherited firm, management and governance problems and be working hard to turn things around. It may also have invested in new strategic projects and devised a turnaround strategy.
In other instances boards can become too involved in the operational details and make decisions that should be left to management. These situations are made even more challenging when the board doesn’t employ a suitable method for the evaluation of its members. It is very easy for minor issues to escalate into serious issues, which could affect the effectiveness of a board.
The board could have developed the culture that isn’t taking performance assessment seriously. It could be because the board doesn’t have the proper systems to gather data on performance or the boardroom skills required to perform its duties of evaluation.
In addition to having the appropriate boardroom skills Boards should also be willing and open to deal with the results of the examination. The board must identify areas for improvement and collaborate with management to devise plans for action. This could include arranging regular board training sessions on relevant topics in order to increase knowledge levels across the board and address information inconsistencies.
