Board Membership 101: Self-Evaluation

Since boards of directors are self-governing bodies, it’s important that they take the time to reflect on their performance both individually and as a group. The New York Stock Exchange requires listed companies to participate in some form of an annual self-evaluation, so many organizations already have a process in place.
Self-Evaluation

But for some of these companies, board self-evaluation can be met with an attitude of obligation rather than receptivity to the benefits of a well-executed assessment.

For other, smaller companies, the practice of yearly self-evaluations has simply been overlooked in the past. These assessments, however, provide an outstanding resource for bettering board functionality. For example:
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PwC’s Annual Board Survey Provides Board Insights

PwC Annual board surveyFortune 500 powerhouse, PwC, recently released the results from its annual Corporate Directors Survey. The assessment, which can be viewed here, offers a great deal of insight into how board priorities have shifted in recent years.

PwC also made it clear that they were interested in tracking a particular recent trend. In the report they explain, “We structured PwC’s 2015 Annual Corporate Directors Survey to gauge director sentiment on whether their boards have oriented themselves toward a longer-term governance focus in light of short-termism.”

They further explain the dichotomy between short term and long term focus by saying, “Most companies are looking down the road, focused on ‘enhancing long-term shareholder value.’

Yet they are simultaneously preoccupied with a need to look in the rear-view mirror and meet the short-term expectations of investors in the form of quarterly earnings.” The report is well worth the full read, but here are some highlights:

  • Corporate directors continue to rank financial expertise, industry experience, and operational expertise as the three most desirable attributes for board members.
  • Female board members continue to place importance on the development of board diversity at rates higher than their male counterparts (63% vs. 35% saying board diversity is “very important”).
  • Directors are overall more engaged with IT issues—with 83% saying their board is at least moderately engaged in overseeing/understanding the risks of cyber attacks.
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Four Questions About Board Surveys

The New York Stock Exchange requires listed companies to participate in some form of annual self-evaluation, so many organizations already have a board surveys in place. But for some of these companies, board self-assessments are met with an attitude of obligation instead of embracing the potential benefits of a well-executed survey. For other smaller companies, this practice has simply been overlooked in the past.
board surveys

However, there are many reasons why all boards should view annual self-assessments as an outstanding resource for bettering their overall functionality. For example:

  • Board surveys can help identify group strengths and weaknesses.
  • Willingness to self-assess sets the tone for the organization at large; it shows that board members are taking their roles seriously by reviewing their own performances through a critical lens.
  • Discussing board members’ responsibilities and goals can create a more unified and collaborative working environment.
  • Tracking year-over-year changes in board members’ responses can provide meaningful insight into a changing board landscape.

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