“Given the criticality of the board’s role on an organisation’s effectiveness, even a small improvement in the board’s performance can have a profound positive impact on its overall success and well-being.”
Board Evaluations and Assessments
Whether it is a regulatory requirement or not, every board should, at least once every year, conduct evaluation and assessment of its activities, those of its committees, as well as self-appraisal and peer evaluation of its directors. More than a few good reasons come to mind why organisations should annually review the effectiveness of their boards, the most pressing of which is that it is a good practice and it pays off in the long run. Many other reasons abound. Shareholders and influential investors, and in particular institutional investors, are beginning to demand it. Conducting a board evaluation can clarify the individual and collective responsibilities of its directors, and enhance their knowledge of what is expected of them and areas of improvements, which can help board members to become more effective. The changing role of corporate governance has created another compelling reason to conduct board evaluation regularly. It helps to sustain the energy in the boardroom as directors are aware that they will give account of their stewardship. Appraising a board’s performance properly may improve the relationship between an organisation’s board and its executive. The annual assessment demonstrates the board’s commitment to transparency, accountability and improvement, three critical values of high performing boards. It allows the directors time for self-reflection.
Although it is crucially important that boards conduct annual evaluation of its performance, care must be taken to ensure that the review process is not controversial and not self-serving. Whilst internally conducted board evaluations might be well-intentioned, directors might be unwilling to disclose perceived or actual weaknesses of board members (adapted from HBR – Corporate Governance 2.0 by Subramanian, 2015). This could impair the effective functioning of the board. Leading practice strongly recommends that regular, independent third-party led (facilitated by external consultants) evaluation of the board as a whole and the contribution of individual directors (self and peer evaluation) be conducted as a crucial component of sound corporate governance. Above all, whether the process is done internally (self-evaluation) or third-party led (by external consultants), the result should be easily interpretable to enhance the board’s opportunity to maximise the benefit of the review. In other words, the evaluation should add real value. LeishTon has a best-in-class board and corporate governance evaluation tool, BoardEvassTM, and applies a unique framework that has the capacity to provide assurance of anonymity, preservation of board resources, great user experience and enables LeishTon’s subject matter experts to bring to bear their many years of board/corporate governance multi-jurisdiction research experience. LeishTon is your trusted corporate governance and boardroom process partner for board and corporate governance diagnoses and reviews. Our unique process enables us to work closely in consultation with boards and senior management of organisations across industries to effectively deliver on the following:
Individual board director self-evaluations enable directors to reflect on their own performance and identify areas for improvement. Self-evaluations are non-invasive in nature and are designed to educate and promote candour. Similar to the objective of our Board Evaluation process, the objective of our Self-Evaluation process is to increase board awareness and education.
Board of directors peer evaluations are perhaps the more candid evaluation of director performance in that they provide in-depth information regarding fellow directors and inner-workings among them. They promote accountability among directors: the evaluation reveals a board’s particular strengths, and areas where both directors and board as a whole lacks expertise or is performing short of expectations. Board peer evaluation can be somewhat adversarial in nature. LeishTon’s Peer Evaluation takes great care to encourage collegiality among board members. Directors are encouraged to speak frankly as they are afforded complete anonymity in taking the LeishTon’s Peer Evaluation survey.
With the increasing importance of the role of the audit committee comes an increased need for performance measurement of that important function. How can With the increasing importance of the role of the audit committee comes an increased need for performance measurement of that important function. How can
It is the mandate of the compensation committee to have oversight of the company or organisation’s compensation policies. Best practices dictate that such policies align compensation with an overall business strategy. It is also important that these policies tie compensation to long term strategic performance and enhancement of stockholder value. A performance-oriented environment should also reward achievement of internal goals. In determining the compensation of the CEO or other executives, the committee should look to performance objectives of other similarly situated companies in its own industry. Lastly, the committee should align the financial interests of its executives to those of the company’s shareholders. An annual performance review of the CEO determines if performance is in line with achievement of overall goals and objectives.
Governance and Nomination is the most influential standing committee of the board of directors. The primary purpose of this committee is to recruit new board members and ensure that board members are prepared to carry out their responsibilities on the board. Additionally, the committee, among other things, is responsible for oversight of succession planning, executive compensation, orientation and continuing education of board members, and ensuring the board engages in annual board evaluations. In some organisations the Governance Committee is separated from the Nomination Committee. In such organisations, the Governance Committee will be primarily responsible for oversight of board and CEO succession planning and evaluation whereas the Nomination Committee will be responsible for recruiting new board members.
It is the mandate of the investment committee to assist the board and the company in overseeing investments made by the company and to provide oversight on key investment policies and frameworks of the company. The committee discusses, reviews and approves investment strategies of the company. It also considers and approves
proposal for investment up to certain thresholds.
Relevant corporate governance codes in Nigeria require the board to establish a committee responsible for the oversight of risk management. The mandate of the risk management committee is to assist to consider the enterprise risk management (ERM) framework, risk management policy and plan and monitor the risk management processes. According to the CBN Code of Corporate Governance, the Chief Risk Officer (CRO) must report directly to the Risk Management Committee. The performance of the committee should be evaluated alongside those of other committee annually.
For deposit money banks (DMBs), the credit committee has the mandate to consider and approve all insider credits applications pertaining to directors and top management employees, as well as parties related to them. The credit committee should comprise board members knowledgeable in credit analysis.
Boards of organisations may decide to establish other committees that have not been specifically mentioned in this brochure such as finance committee, ethics committee, compliance committee, research and development committee, strategy committee, fundraising committee, public relations committee, marketing committee and operations and technology committee or ad-hoc committees to assist boards in their oversight roles. LeishTon’s evaluation approach and process for such committees are the same as those for the more traditional committees such as audit committee and nominations committee.
The LeishTon Not-for-Profit evaluation is similar to the LeishTon Board Evaluation but designed specifically for not-for-profit organisation’s board. Not-for-profit boards are encouraged to periodically review their effectiveness with a view to taking steps to improving the quality of governance, boardroom discussion and decision making.
This questionnaire examines a not-for-profit board’s mission, vision, financial oversight, conflict of interest and ethics, highlighting the board’s strengths, weaknesses and operational effectiveness.
The LeishTon’s Short-Form Evaluation covers all the major areas of a board evaluation. This short survey can be
provided online or electronically in MS Word format. This fully customisable self-evaluation tool is simple and
Evaluating strategy is integral to enterprise success. The company’s board of directors is responsible for monitoring and supporting management’s execution on strategy. A client, usually the board Chairman or Company Secretary, works with LeishTon’s experts, who inputs the company’s customised strategy evaluation into the BoardEvass tool and on the basis of which the evaluation is conducted. Our reports provide insights and actionable outputs.
Of all the risks that directors have to evaluate and oversee, cybersecurity is among the most quickly evolving and potentially hazardous threats to the enterprise. For this reason, the LeishTon team develops and administers cyber-security questionnaires designed to help companies’ boards evaluate their level of cyber-security expertise and to understand their companies’ alignment with the latest in cybersecurity protocols and practices.
Whether a quick review of team status or a deep dive into management team dynamics and strategic execution. The TM LeishTon BoardEvass platform is a sophisticated, user friendly, and low cost solution. Choose from our questionnaire library, add custom questions, and initiate the evaluation in less than a week. Our unique reporting provides insightful and actionable output.
Management and board alignment offer a higher probability of success. The board has a mandate to 0 monitor management performance. A 360 style approach is to also offer a management evaluation of the board enhancing the bi-lateral interaction of board and management that enhances the opportunity for communication and alignment.