Board Effectiveness Survey: Places for Improvement

A new study conducted by the Rock Center for Corporate Governance at Stanford University and The Miles Group (“TMG”) reveals that while boards generally rate themselves positively in terms of skills and expertise, significantly high
negatives are a cause for concern for a large number of firms.

The results suggest that boards can improve in the following areas: Trust levels are high, but not high enough. Only two-thirds (68 percent) of board members say they have a very high level of trust in their fellow directors. Similarly, only 68 percent say they have a very high level of trust in management. Regard for fellow directors is also not high enough. The average director believes that at least one fellow director should be removed from their board because this individual is not effective. When asked how many fellow directors they would like to remove because they are ineffective, 28 percent say 1 director, 18 percent say 2 directors, and 8 percent say that 3 or more directors should be removed. Only 48 percent of board members would keep all of the current directors on their board. Directors do not give each other honest feedback. Only a quarter (23 percent) of board members rate their boards very effective at giving direct feedback to fellow directors. The process for removing directors is unstructured. Only 65 percent of boards have a process for removing ineffective directors; an astonishing 35 percent do not. Verbatim responses indicate that companies use a wide variety of approaches for removing ineffective directors and that, for most companies, the process is haphazard. Approximately half (48 percent) of directors believe that their board should have term limits to facilitate turnover.

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