Board Assessments

Both the NYSE and NASDAQ require members companies to conduct an annual Board Assessment. Neither exchange provides specific guidance on what is considered a good Board Assessment, or case examples of ‘best practice’ assessments. Some third party organizations, like ISS, also provide limited guidance.

Many companies check-off-the-box on this requirement by having someone in the legal department do an internal self-assessment. Typically this involves a survey being sent to Board members for completion on which they rate Board effectiveness on a variety of dimensions. In some cases survey results become a topic on a Board meeting agenda — in other cases they are emailed to Board members for their review.

Literature on Board assessments suggests that the emerging best practice is to have an external and independent 3rd party conduct the annual assessment. The methodology can include a survey with feedback to the Board, a mix of a survey and Board member interviews, or solely interviews.

VIA offers a range of Board Assessment methodologies to suit your specific needs. The most comprehensive of these options typically involves 90-minute live interviews (Skype is an option) with Board members, and with members of management who spend substantial time with the Board. This typically is the CFO, General Counsel, and HR leader.

Prior to conducting interviews we typically ask the client to share Board agendas, presentations, and meeting notes from several recent meetings. We also review prior assessment reports (if any), the Board Charter, company strategy documents, and other relevant background material.

Interviews are then conducted using a structured interview guide that focuses on:

• Fiduciary responsibilities
• Board structure and roles
• Committee performance
• Board process
• Board culture

In addition to these areas, we ask several open-ended questions soliciting ideas on improving overall Board efficiency, effectiveness and member contribution.

In some cases Boards also ask us to include 360-degree performance feedback on all Board members or those whose terms are up for renewal.

In these cases, we typically use a three-part Board member feedback process.

First, verbal feedback is provided to each evaluated Board member privately. Second, we review verbal feedback on all evaluated Board members with the Chairman, Lead Independent Director, or head of the appropriate committee (typically Nominating & Governance). Finally, summarized verbal feedback is provided to the entire N&G committee to consider in the re-nomination process. There are several variations on this theme that are not uncommon and we favor customization of this process based on client needs.

A presentation with assessment findings and recommendations is then presented at a Board meeting with a facilitated discussion leading to action items or changes. Finally, a report is submitted to the appropriate committee for compliance purposes.

Our experience is that Boards often do not need this comprehensive of an assessment each year. If this year’s assessment is comprehensive, next year might be simply a survey completed by Board members, with feedback solicited in the survey on Board members who terms are up for renewal. The results can be shared with the Lead Independent Director or the Chair of the Nominating & Governance Committee.

As recognized by the NYSE and NASDAQ, the role of Board is both vital and complicated. We believe our approach, interpersonal skills, strategy background, comfort with senior executives, and facilitation skills make VIA an ideal choice to conduct your next Board Assessment. Let’s talk about how to build or improve your current assessment process.