Few governance issues are as difficult as assessing the performance of boards. The symbiotic relationship between firm management, board results and management makes evaluating board performance more art than science- and rarely clear-cut. The board might be doing a good job of managing http://boardroompro.net/managing-conflict-of-interest-at-board-level-4-things-to-know a business however shareholders are dissatisfied with the low return on their investment. The board might have inherited governance, management and firm issues and be working to fix the problems. It may also have invested in new strategic initiatives, and created a turnaround strategy.
In other cases the board could become too involved in the operational aspects and take decisions that should be left to management. These situations can be exacerbated if the board isn’t employing a proper method to evaluate its members. Without a formalized system for evaluation in place, it is easy for mild issues to escalate into serious issues that compromise the effectiveness of the board.
The board could have cultivated an informal culture that doesn’t take its responsibilities for performance assessment seriously. This could be due to the fact that it doesn’t have the right systems in place to collect information on performance, or it’s unable to gather the necessary skills required for a boardroom to effectively carry out its duties of evaluation.
Boards must not just have the necessary abilities, but they should also be open to the findings of the assessment. The board should prioritise areas that need improvement, and work with the management team to develop an action plan. This could include arranging regular board trainings on relevant topics in order to increase knowledge levels across the board and to address information asymmetries.