Few governance-related issues are more difficult than evaluating board performance. The assessment of board performance is more of an art than science since there is a synergistic link between the firm, management and board results. It’s also not always simple to define. A board might be doing a good job of governing a company but shareholders are not happy about the low return on their investment. The board may have inherited corporate, management or governance problems and be working hard to fix the problems. It may also have invested in new strategic initiatives and developed a turnaround plan.
In other situations, a board may become too involved in operational aspects and take decisions that should be left to the management. These situations are made worse when the board fails to utilize a proper method of reviewing its members. It is easy for minor issues to turn into major problems, which can affect the effectiveness of a board.
The board could have developed an informal culture that doesn’t see its performance assessment responsibilities seriously. This could be http://www.boardroompro.net/managing-conflict-of-interest-at-board-level-4-things-to-know/ because it doesn’t have the systems in place to gather performance data, or because it is unable to find the necessary boardroom expertise to effectively carry out its evaluation responsibilities.
Boards need to not only possess the necessary skills, but also open to the findings of the evaluation. The board should identify areas of improvement and collaborate with management to create a plan for action. This could include arranging regular board training on relevant subjects to increase knowledge levels across the board, and address information gaps.