We’d like to see something a little more specific than “periodically.” We also think that self-evaluations, even conducted by independent firms, can only go so far. The board rating system at our former firm, GMI Ratings, now part of MSCI, has been validated by data and results for nearly 20 years.
A litany of corporate governance failures, here and abroad, provide ample evidence that it is typically the behaviours and dynamics among directors that derail the effectiveness of corporate boards, not their formal processes and structures.
That’s why robust board evaluations need to go further than assessing corporate governance processes and structures to address the real behavioural aspects and interpersonal dynamics at work and how they help or hindering board effectiveness.
The UK Corporate Governance Code 2018 (‘the Code’), which applies to many publicly quoted companies in Ireland, recommends that FTSE 350 companies conduct externally facilitated board evaluations at least every three years.
Chairs of private companies, or companies who seek to comply with the Code, are also encouraged to conduct external board evaluations periodically. A good board evaluation will call out the opportunities and challenges, supporting the evolution of the board in tandem with the evolution of the business and the industry it occupies. The output from the process can provide a level of comfort to the board that it is on the right track and that its composition is setting it up for success.Directors’ behaviours are often the root cause of corporate board failings – Independent.ie