Board Evaluations: making a fit between the purpose and the system

Abstract

Board evaluations can contribute to effective boards and improved corporate financial performance. The increasing interest in the practice of board evaluations, however, calls for a more systematic and careful approach than has been employed in the past. While most attention has primarily been focused on the content of board evaluations, this article outlines the features of various possible board evaluation systems. Based on state-of-the-art research on boards and governance, we contend that a comprehensive board evaluation system needs to include decisions about: (a) the agent who evaluates the board; (b) the content, or what the evaluation should deal with; (c) the addressee and other stakeholders for whom the board is evaluated; and (d) how the board is evaluated. These key decisions should not be seen as independent of each other as they have consequences for the kind of system that will be adopted. Following this argument, we present four different board evaluation systems: (i) board-to-board, (ii) board-to-market, (iii) market-to-board and (iv) market-to-market. The key message we communicate in this article is that there must be a fit between the purpose and the system of board evaluations. There is no universal or "one best way" to evaluate boards of directors. Board evaluations will not meet their purpose unless there is a fit between the agents, the addressees, the content and the modalities of the evaluation. It is important to know who is doing what for whom and how. Copyright (c) 2007 The Authors; Journal compilation (c) 2007 Blackwell Publishing Ltd.

Governance tools for board members. Adapting strategy maps and balanced scorecards for directorial action

“…Further, where board performance evaluation is carried out, its form and rigour can vary considerably (Leblanc, 2007;Roy, 2008;Spencer, 2009). Consequently, it has been suggested that inadequate board performance evaluation practices present a significant barrier to improving governance and accountability (Collier, 2004;Roy, 2004a &2004b;Minichilli et al, 2007). Internationally, there is a room for improvement in how board performance is evaluated.…”

“…It will also require that the board manages itself in more thorough ways using appropriate tools. Epstein and Roy (2004b), Kiel and Nicholson (2005), Minichilli et al (2007) through their studies have identified the potential benefits of board evaluations. Internationally, initiatives by security regulators have placed requirements on boards to undertake annual performance evaluation (Long, 2006).…”

Do Board Evaluations Measure Board Effectiveness?

“…Deciding on a purpose is important in order to identify relevant expectations, but also in terms of developing a process that will contribute to the purpose being achieved, conditioning who should be in charge of the process, the content, methods, and how to report on the results Huse 2007, Kiel andNicholson 2005). Minichilli et al (2007) categorize purposes as external if they are meant to satisfy external requirements such as the Codes, and internal if they relate to changing the conduct and behavior of the board in performing its work. Based on this categorization, some indicators of a board evaluation process that enable board effectiveness to be measured can be identified.…”

Evaluating the University's Governing Board: A Comprehensive Review of Its Domains and Indicators

“…What constitutes the content of the board performance evaluation has been examined widely in the literature [7,9,[11][12][13][14][15][16][17][18][19][20][21][22]. There is now a growing literature on this topic, especially outside the higher education sector, but still relatively spare within the higher education.…”

“…Measuring board performance is a difficult activity [7], however, it can help a board to identify its strengths and weakness and help them to adopt required actions that may result in improving effectiveness and/or efficiency. Therefore, improving the board's performance is likely lead to greater university effectiveness [7,8,9,10]. Like every performance evaluation, deciding about the content of the evaluation is a difficult, but critical component.…”