Board of Directors Development
Board Assessment
The annual board and committee assessment process can become a powerful tool to align the members of the board and the CEO in a clear, unified view of the company’s long-range objectives and the strategies to achieve them. In the process, it immeasurably improves the board’s effectiveness and strengthens dynamics among directors and between board and CEO.
Too often board and committee assessments focus on the past. While not ignoring the past, our approach includes a focus on the company’s future. Do all directors understand the company’s strategies, as well as the risks that can impair them? Is the board organized to maximize value if an unsolicited buyout offer materializes? If dissident shareholders join the board, does the board have a unified focus, or will new directors find disarray? Does the board have mechanisms to improve individual director performance, or to prevent or resolve conflict - among directors, with the CEO, or between board and shareholders - if it develops?
We approach assessment as a development tool that goes beyond the perfunctory questions about meeting schedules and logistics. Skillfully handled and tailored to the board’s and company’s needs, the assessment can bring together the diverse voices and viewpoints that comprise today’s independent boards. It can also provide feedback about individual director performance, but by doing so with constructive observations and comments. We avoid judgmental rankings of board and individual director performance. Instead, our approach identifies areas on which the board is performing well, as well as issues that warrant further attention and work. This process can encompass individual evaluations of directors, if desired.
To achieve optimal results, we structure assessments with four baseline principles in mind. First, candor among directors is essential to surface thorny issues and unspoken sources of tension. Second, directors will be candid only if their responses will remain anonymous and if the process will not publicly embarrass any individual. Consequently, we report directors’ thoughts only on a not-for-attribution basis, without publicly revealing negative, potentially embarrassing comments directed at individuals to anyone other than the individual involved.
Third, we do not steer respondents’ answers. Our methodology permits respondents to raise issues which they feel important.
Fourth, we include a follow-up session, perhaps using the board or committee retreat, to consider the information that the assessment uncovers and to formulate action plans to implement practices upon which the board or committee agree. This follow-up process is important to clear misunderstandings and meld contradictory views into a unified board.
The two most often used methodologies involve surveys and individual interviews. When we conduct surveys, we construct the questionnaire so as not to limit or steer responses, and we provide many opportunities for comments elaborating on answers or raising additional issues important to the respondents.
Interviews permit respondents greater leeway to surface and expand upon issues that they consider important. Assessments utilizing interviews can be particularly valuable when the board or company have recently faced transformational issues, such as a change in the board’s composition, a new CEO, merger, regulatory problems, or pressure from a dissident shareholder. Interviews provide a forum for directors to express their views on complicated subjects in depth.
We will be pleased to discuss assessments and methodologies best suited to your board at your convenience.
Jon J. Masters 212-879-0872
Alan A Rudnick 804-355-3000