Company Secretaries and Improving Board Assessment Questionnaires

Board evaluations are obligatory in the UK under the Corporate Governance Code. Most boards evaluate internally, and this makes the company secretary a central figure in performing and reporting the evaluations. The use of a board assessment questionnaires or a board assessment survey is best practice for these evaluations and company secretaries should consider communication, skillsets, effective coordination and priorities in the questions.

Importance of Board Assessment Questionnaires for UK Boards

In the UK, board evaluation was first recommended with the 2003 version of the Corporate Governance Code. In 2010, the new version of the Code made board evaluation an annual requirement, along with an obligatory external evaluation every three years.

The obligation to evaluate stems from a recommendation by the late Sir Derek Higgs, who provided some of the first guidance for UK Corporate Governance. The Higgs Guidance intended the evaluation to be used as “a mechanism to improve board effectiveness, maximise strengths and tackle weaknesses”.

In 2010, the Financial Reporting Council (FRC) (responsible for the UK Code) improved on the Higgs Guidance in that version of the Code. It included the guidelines that:

  • Boards should state in the annual report how performance evaluation of the board, its committees and its individual directors has been conducted;
  • Board evaluations of FTSE 350 companies should be externally facilitated at least every three years, and any other connections between external consultants and the company disclosed; and
  • Non-executive directors, led by the senior independent director, should be responsible for performance evaluation of the chairman, taking into account the views of the executive directors.

Responsibility of the Company Secretary

According to Spencer Stuart’s latest UK board survey, in 2015, 55.3 per cent of companies conducted a board evaluation using internal resources and only 43.3 per cent used an external facilitator.

“Compliance with the Code is, as always, on a comply-or-explain basis,” commented Vanessa Jones, former Head of Corporate Governance at the London-based Institute of Chartered Accountants in England and Wales (ICAEW). “Many companies prefer to explain why they don’t require an external evaluator.” Jones noted that this puts extra pressure on the company secretary.

Read about building a best practice board evaluation environment with our white paper.

Importance of a Board Assessment Survey

With most companies relying on internal evaluation, the role of the board administrator for board evaluations is particularly significant. Using a board assessment questionnaire or a board assessment survey to collect data for evaluation is one of the most tested and reliable means of obtaining the data needed to make an intelligent judgment on board-member performance, according to a study by Professor Geoffrey Keel at the University of Queensland.

The company secretary should work with the chairman to define the objectives, and then to share these objectives with the entire board. There should be a consensus on the criteria for evaluation in coordination with the company’s mission and its plans. A clear consensus helps ensure willing collaboration.

The consensus should also include the scope of the evaluation. Data should be collected on: board performance as a group, individual directors (including the chairperson), board committees.

Regular board-as-a-whole evaluation can be seen as a process that ensures directors develop a shared understanding of their governance roles and responsibilities. Board-as-a-whole evaluation helps to establish criteria for individual director evaluation, so that contributions to overall objectives can be scaled.

Read about building a best practice board evaluation environment with our white paper.

Effective Board Assessment Questionnaires

Criteria for individual board member evaluation may include:

  • Balance of skills. There should be a good balance of skills, experience and diversity on the board, and if the results show otherwise, the gaps should be identified, together with the attributes required in any new director(s). Part of this activity should involve succession planning, making certain that the pool of skills required is being brought in.
  • Priorities and delivery. Gaps between strategic priorities and delivery, and any other inadequacies in the way in which the board discharges its responsibilities, should be identified. The quality of the board’s discussions about risk should be commented on as well as the effectiveness of risk management processes at board committee level. Another key area to cover is the quality of the governance of subsidiaries and the robustness of the internal control regime.
  • Effective coordination. Evaluation should determine whether people and skills are being used effectively. Questions should relate to relative ease or difficulty of communication, how one director has been of help to another, etc. If there is stress between one or two board members, this should be brought out by questions.
  • People, procedures and practice. It is important to know whether directors are content with board practices and procedures, the timeliness of board meetings, the planning of the forward agenda, and the relevance and objectivity of information. Evaluation of the company secretary and the board administrator is part of this evaluation, and that the secretariat is providing the board with service and support of a high quality. This part of the board assessment questionnaire or board assessment survey should deal with all of the functioning structures the board makes use of – including an eventual board portal.

Collating and Reporting on the Board Evaluations

Once the board assessment survey are filled out, the company secretary must collate the results, and then report them – and the report may be integrated into the company’s annual report. The review should outline the key elements of the process, an outline of key findings, lessons learned, and follow-up actions agreed on by the board.

Diligent Evaluations – Make the Process Easy

To facilitate evaluations, Diligent’s Board Assessment Tool generates board assessment reports with just a few clicks. Multiple report formats are available so that information can be shared in the most convenient form.

With Diligent, company secretaries can:

  • Work in the intuitive board assessment questionnaire creation interface
  • Generate custom reports in just a few clicks with the Export Wizard
  • Draw from user-tested question and answer types, including rating tables and multiple selections
  • Incorporate reference information securely and efficiently with appendices and linkable questions
  • Monitor completion status, set and change assessment close dates, and more

Diligent’s powerful assessment creation tools offer multiple question types, innovative solutions for glossaries and supplemental information, and e-signature sign-off.

With safe, secure record keeping, it’s possible to view past evaluation results with just a few clicks. And support is available at any time of day or night. The Diligent environment is always protected with the highest grade of security, and security is constantly updated. See how Diligent can help maximise your board’s performance.

Board Portal Buyer’s Guide

With the right Board Portal software, a board can improve corporate governance and efficiency while collaborating in a secure environment. With lots of board portal vendors to choose from, the whitepaper contains the most important questions to ask during your search, divided into five essential categories.

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