There are many requirements for the conduct regular reviews to assess the performance of the board, its committees and individual directors. This is of great benefit to an organisation as it ensures an effective board performance that aligns with the company strategy.
As this becomes commonplace in most developed countries, specific requirements of these reviews will likely continue to be refined and expanded upon.
To ensure compliance and more importantly, performance, “lite touch” board reviews can be used to fill the gaps left between the two or three yearly deeper dive external reviews. Read on to learn more about this and why you should consider them as a part of your board review strategy.
Current requirements and practices for good Corporate Governance
Stock exchange listed entities are required in most jurisdictions to disclose the process they use to periodically evaluate their board’s performance. This includes a review of committees and individual directors. Whilst many jurisdictions require that the review of the performance of boards of listed entities must be carried out annually many also require that an externally facilitated independent review be conducted at least every three years.
Regulated entities like banks, pension funds and insurers are subject to separate laws and regulations in most global jurisdictions. Those laws and regulations in relation to the review of board performance often set a bar that is higher than the bar set by the local stock exchange or securities commission for listed companies.
Government entities in most countries are also required to regularly review the performance of their boards, board committees and individual directors. The laws and regulations for board evaluations can even vary by different states in different countries. An example of such requirements could be that the board of a public entity must ensure that adequate procedures are in place for:
- The assessment of individual director’s performance
- A process for dealing with poor performance
- A process for resolving disputes between directors
- A way to assess its own performance
The evolution of the board review
Board reviews have developed to include one-hour interviews of directors and executives after the completion of a benchmarked Board Effectiveness Survey and the synthesis of findings and recommendations from the external party. These will often be written and delivered via an expert’s report that is presented to the board.
Some reviews can be extended to include documentation reviews such as:
- Board and committee charters
- Board packs
- An observation of the board in session
The validated benchmarked Board Effectiveness Survey that also includes a limited survey of committees and directors can also be used, without interviews, as an affordable alternative for smaller organisations.
The benefits of the “lite touch” review
The reviews that take place in between the “deeper dive” external reviews are known as “lite touch” reviews because they take little time and effort of directors. By carrying out a “lite touch” review between the deeper dive externally facilitated ones, enables your board to measure and monitor changes in performance and effectiveness and to embed continuous improvement.
“Lite touch” reviews can come in many forms, such as:
- A structured discussion: This is normally facilitated by the Chair and determines the extent to which the recommendations from the previous externally facilitated review have been well executed
- An internal survey: Surveying directors using paper, Excel spreadsheet, or online survey allows for trends to be monitored. Survey responses are returned to the Chair or Company Secretary to create a report that can be discussed by the board.
- A validated benchmarked online survey: Using the same online survey that was used for the externally facilitated board evaluation enables changes in effectiveness and performance between years to be visible – and for each area of effectiveness to be benchmarked against similar companies.
In the case of surveying directors, some companies will have an independent party collect the survey responses and preparing the report. This can help instil confidence in directors that their anonymous answers are protected, leading to more honest responses.
How to find an affordable third party
Board Surveys online, validated, and world-class benchmarked surveys can help organisations run an affordable board survey each year. This survey is becoming an integral part of externally facilitated board reviews and Lite touch reviews or companies all over the world.
The “lite touch” review is carried out in-between any externally facilitated reviews and has returned a number of benefits for companies of all sizes, including:
- A simple, streamlined and unobtrusive way to understand board performance
- The utilisation of surveys that are benchmarked (read here to see why this is important)
- Reports that include comparable figures for each item and factor of the survey, ensuring transparency across improvements or pitfalls
- A short Committee Effectiveness Survey Module or Director Effectiveness Survey Module for extra information
This form of board survey, when working in conjunction with committee and director surveys, will often meet the main requirements of the annual review for board performance as a whole. In addition, performance of committees and individual directors are also accounted for.
Survey responses will be collected by Board Surveys, independent of your organisation, allowing directors and executives to be more candid in their responses. Get the real picture of your board’s performance today with our help.