Board Evaluations - what does good really look like? Part I | Maureen Beresford, Financial Reporting Council

Board Evaluations - What does good really look like? Part IThe Corporate Governance Code in the UK is the blueprint for corporate governance codes worldwide. Nowhere else is the practice of conducting board evaluations more advanced, and nowhere else do more boards of listed organisations conduct board evaluations on a regular basis.In this podcast, Dr Sabine Dembkowski talks with Maureen Beresford, Head of Corporate Governance at the Financial Reporting Council (FRC). Maureen’s team is responsible for the UK Corporate Governance Code and its supporting guidance.  Some of the key takeaways of the conversation include:“Board evaluations could definitely be improved…”Maureen Beresford details how, in the work she and her team do, she sees many boards making very similar statements about their evaluations – broad-brush statements such as “the board is working together effectively”.  Her concern, however, is that these do not give any concrete actions that have been taken, or detail any follow-up from the previous board evaluation.  More could be done in terms of concrete actions and following up in detail on actions taken from previous evaluations.  “An honest picture of how the board works and how its Committees are working.”  Maureen suggests there is no evidence to suggest that any particular methodology is a reliable indicator of quality, and therefore cannot suggest any specific data that should be collected.  What she does point out is that a questionnaire that does not have probing questions will not be effective.  Equally, an evaluator simply attending a board meeting and listening in is also unlikely to be effective, as participants are likely to modify their behaviour during a meeting when observed.“Board, committee and individual director evaluations topics should be customised to get the feedback that you require.” Good evaluations can elicit valuable feedback on board dynamics, structure, performance and composition. FRC guidance on board effectiveness provides insight into a list of areas that could be considered, such as succession and development plans, company culture, performance and strategy, the quality of board governance documents such as the quality and timings of papers and presentations to the board and how the board communicates with, listens and responds to investors and key stakeholders.“Set your scope, involve people, collect evidence and be clear about your outcomes.” When asked about the content of a board evaluation, Maureen cites her organisation’s guidance. For example, the evaluation should take into account succession and development plans, culture, quality of documentation and how the board listens to the concerns of shareholders and key stakeholders.  “We would really, really like to see a move away from general statements.”Improvements have been made, and companies have come a long way since evaluations were first introduced.   Maureen says that, in terms of reporting, she has begun to see some companies provide more detail on the areas that the evaluation covered, along with suggested areas of prioritisation. The three top takeaways from our conversation are:1.      Board evaluations should not be viewed as a compliance exercise as much as an opportunity for change and improvement.2.     Trust in the process and its confidentiality is critical in order for a board evaluation to be successful3.     There needs to be the desire to improve - Don’t assume that everything is fine; be open to new ideas and learn to really embrace the process