Board Effectiveness, Evaluation and Development
What the exam tests
Evaluation is a governance requirement, not an HR nicety. Expect questions on what is evaluated, by whom, how often, and what happens to the findings.
The framework
- A board charter and role descriptions for the chairman, CEO, committee chairs and individual directors set the benchmark for evaluation.
- Evaluation should cover the board as a whole, each committee, the chairman and each director annually. The NCCG 2018 expects periodic external facilitation - commonly at least every three years for public companies - to counter self-assessment bias.
- Criteria: composition and skills, quality of information, conduct and challenge in meetings, oversight of strategy and risk, succession, stakeholder engagement and culture.
Development
Induction for new directors (business model, financial statements, risk register, regulatory environment, site visits) and continuing professional development for all. A director who cannot read the financial statements cannot discharge the duty of care. Succession planning should be a standing agenda item, not an emergency.
Worked example
An evaluation shows directors rate information quality as poor and admit they rarely challenge the CEO. Findings are converted into an action plan: earlier circulation with a one-page summary, a standing CEO performance item, non-executive sessions before each meeting, and chair coaching. The next cycle measures whether behaviour changed - an evaluation without follow-up is worthless.
Traps
- Evaluating the board but not individual directors, so weak performers are re-elected automatically.
- Self-assessment only, with no external challenge ever.
- Confidentiality failures that destroy candour.
- No link between findings and re-election, training or succession.