Few governance issues are as difficult as assessing the performance of boards. The symbiotic relationship between firm management, the board’s performance and its results determines whether a board’s performance is more of a science than artand often not clear. A board could be doing a good job of managing a business however shareholders are dissatisfied over the poor return on their investment. The board might have inherited management and governance issues and is working hard to make the situation better. It may have also invested in new strategic initiatives or formulated an exit strategy.
In other cases the board may be getting too involved in operations and making decisions that should be left to the management team. These situations are made even more challenging when the board fails to utilize a proper method of evaluating its members. It is easy for small problems to become serious issues, which could affect the effectiveness of a board.
The board could have cultivated a culture where it doesn’t take performance assessment seriously. It could be because the board doesn’t have the proper systems to gather performance data or the boardroom expertise required to fulfill its evaluation responsibilities.
In addition to having the proper boardroom skills Boards must be open and willing to address the results of the evaluation. The board should prioritize areas that need improvement and work with the management team to create a plan of action. This could include regular board training to increase knowledge across the board.
