Self or other: Directors’ attitudes towards policy initiatives for external board evaluation.

Abstract

Recurrent crises in corporate governance have created policy pressure for greater attention to the effectiveness of boards. Since the 1990s there have been calls for boards to undertake regular self-evaluation. Since 2010, the UK Corporate Governance Code has urged large corporations to engage outside parties to conduct such appraisals at least every three years, a move other jurisdictions have copied. Despite its importance, little research has been conducted into processes or outcomes of board evaluation. This study explores the attitudes of directors on board evaluation, whether self-administered or facilitated by others. We interviewed 17 directors with some 50 listed-company board appointments between them. Even though their companies fall below the threshold specified in policy, all undertake board self-evaluations and evaluations using professional facilitators. We find broad acceptance of the principle and recognition of the value of board evaluation. We also find some acceptance amongst those directors who have implemented external evaluation of the benefits of using outside facilitators. Their evaluation of the evaluation process points towards a need to professionalise the practice of outside facilitation, and to conduct research into the skills and knowledge needed and the processes used.