Few governance issues are as challenging as assessing performance of the board. The assessment of board performance is more of an art than science, as there is an underlying link between the management, company and board performance. It’s not always clear cut. A board might be doing a great job of governing a company but shareholders are not happy about the poor return on their investment. The board may have been inherited by the company’s management, governance and firm issues and be working to make things better. It could also have invested in new strategic initiatives and formulated a turnaround plan.
In other instances the board can get too involved in operational details and make decisions that should be left to the management. These situations are made even more challenging when the board does not use an ideal process for the evaluation of its members. Without a formalized system for evaluation in place, it is easy for minor problems to become major issues which can compromise the efficiency of the board.
The board could have developed an environment that does not take performance assessment seriously. This could be due to the fact that it doesn’t have the proper systems in place to collect information on performance, or it’s unable to gather the necessary boardroom skills to effectively carry out its evaluation duties.
Boards must not just have the appropriate skills, but also be open to the results of the assessment. The board should determine areas that need improvement and collaborate with the management team to formulate an action plan. This could http://boardroompro.net/managing-conflict-of-interest-at-board-level-4-things-to-know include regular board trainings to improve the knowledge of the board.
