Why external board evaluation matters

London, 5 March 2015 – Addressing students at Cass Business School yesterday, ICSA Chief Executive Osborne stressed the importance of impartial board evaluation as boards control major resources and shareholders seek reassurance that companies will not be mismanaged.

“Formal evaluation is a valuable tool for improvement,” said Simon “and chairmen should support it. Carrying out an evaluation just because the UK Corporate Governance Code requires boards to undertake annual evaluation of their own performance and that of their committees and directors could be damaging. It is particularly important that a formal and rigorous external evaluation is carried out at least every three years as this guarantees impartiality and independence.”

External facilitation can be particularly useful for new chairmen, for ‘old’ boards, when the tenure of certain directors is being challenged or when there is a known problem requiring tactful, impartial handling.

Simon stressed that chairmen must have thought through beforehand what needs to be achieved – a radical overhaul; a health check; to address a problem; or as a guard against complacency or inertia. The board must also understand the process at least in outline.

“It is clear from the work that ICSA Board Evaluation has carried out that more attention should be paid by the board to risk identification and management,” stated Simon. “Succession planning remains a concern and directors are not really keeping up to date with personal development. Audit committees are being overworked and boards are taking insufficient interest in the work of committees. I would also recommend that more attention should be paid to subsidiary governance, cyber risk and social media policy.”

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Notes to Editors:

  1. ICSA (Institute of Chartered Secretaries and Administrators) is the chartered membership and qualifying body for professionals working in governance, risk and compliance, including company secretaries. Our members work in all sectors and at every level of seniority. With over 120 years of experience, we champion high governance standards by providing qualifications, training, high-quality guidance and support (including technical resources, publications and software), and through our work with regulators and policy makers.
    Website: www.icsa.org.uk 
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