BOARDROOM BEST PRACTICES

UK Board Evaluation Process and the Board Administrator

The board administrator is often caught in a challenging relationship with board of directors who at times view board evaluations as menial – yet nothing could be further from the case. The board administrator is an important observer of the board’s composition and actions. The administrator is well-placed to drive efficiency for the board of directors and to take part in the evaluation of its performance. Here are some questions which the administrator or company secretary should make part of the board assessment process.

Board Administrators and Directors – A Challenging Relationship

The UK Corporate Governance Code recommends that FTSE 350 companies have externally facilitated board evaluations at least every three years. Board evaluations are obligatory in the UK for all listed companies and for the largest private companies. Often, UK administrators and company secretaries often find themselves in a challenging relationship with the directors they serve, and this makes the board evaluation process particularly fraught.

The administrator and company secretary, whose role it is to help the board stay efficient, often gets pushback from directors who don’t want to be bothered by what they – mistakenly – see as a kind of menial, according to a report from Board & Administrator magazine.

Yet the administrator and company secretary are very well placed to judge which board members are displaying leadership and providing value. The administrator, who deals with the pragmatic aspects of the board agenda, sees clearly who is driving the agenda (and perhaps who is not).

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Board Administrators and Effective UK Board Evaluations Processes

Board evaluation is a legal obligation in the UK. Yet a number of observers have expressed concern about the effectiveness of the UK board evaluation process.

A recent study by the Berkhamsted, UK-based Ashridge Business School shows board process changes were among the priorities for the improvements needed on many boards.

The administrator is also well-placed to determine if boardroom decisions are being effectively implemented by management, as his role includes helping the company secretary make that happen.

These are areas where the boardroom administrator has expert knowledge and can make a valuable contribution to more effective board evaluations.

Board Evaluation Process – Questions for Board Evaluations

Here is a list of questions for boardroom administrators to pose in board evaluations:

1. Are board members facilitating the boardroom processes, such as the organisation of meetings, agendas and decision-making?

Few companies have formal, individual feedback between the administrator and each director, the study showed. Poor organisation on the part of directors can cause woeful delays to the implementation of new policy for an organisation. There is an opportunity here for boards to give leadership to the rest of the organisation on performance management and personal responsibility.

2. What about implementation? Has the right follow-through to implement the decisions taken by the board been established?

The board administrator is directly involved, along with the company secretary, in communicating these decisions in a useful format, and can, in setting up future agendas for board meetings, introduce follow-up items to review implementation.

3. Are board members taking a hard look at the organisation’s weaknesses?

In the process of preparing agendas and subjects for discussion, the administrator has the chance to take a hard look at where the organisation as a whole shows weaknesses. These areas should be addressed during the boardroom discussion, and the administrator should check on this process in the board evaluation.

4. Are there board members with conflicts of interest?

The board administrator works closely with the company secretary and the chairman to formulate boardroom composition and then to fill the board with members who have the relevant skills. Often board members come from companies in the same sector, and this can mean that conflicts of interest can arise. The administrator is well-placed, given that person’s knowledge of the directors and their backgrounds, to watch for potential conflicts of interest and to make them visible in the evaluation process.

5. Are the board committees performing effectively?

The administrator takes part in supporting the work of the board committees, such as the audit committee and the nominations committee. This means that the board administrator is particularly apt to review the work of the board committees in the board evaluation.

6. Are board members acting on the information and documentation provided to them?

The board administrator, working with the company secretary, ensures that the board is provided with insightful information and analysis, as well as forward-looking information, trend analysis, leading (as well as lagging) performance indicators, financial and non‑financial metrics, and soft (as well as hard) measures. Does a familiarity with all of this information inform boardroom discussion? Are some directors not taking the time to brief themselves – this could put the company at risk. The board administrator can include all of this in the evaluation process.

7. Are there board development needs?

It should become clear to the board administrator in what areas the board needs beefing up. For example, the administrator, who is directly involved in cybersecurity for the board, should notice if the directors do not have the skillsets needed to manage this key function. The board administrator should then use the board evaluation process to bring this gap to light, so that the chairman and the company secretary can take action.

8. Is the board evaluation process effective?

With the board administrator directly involved with the board evaluation process, it is logical that the administrator take part in reviewing the evaluation itself. The board administrator is well-placed to compare the previous year’s evaluation with the one in process, and to see if it is effective. The administrator may also be able to benchmark the evaluation process with those of other organisations.

 

See how you can improve the board evaluation process for your board of directors with this board evaluation white paper

Diligent Board Evaluations enables board administrators to perform more effective evaluations

To help board administrators perform more effective evaluations of board members, Diligent Board Evaluations offers a complete package.

Does your board culture and composition need an adjustment? Are policies and procedures following the necessary governance best practices? As part of our Governance Cloud ecosystem, Diligent Board Evaluations helps your organisation answer these questions by putting valuable board self-assessment data at your fingertips.

It’s a convenient alternative to cumbersome spreadsheets and off-the-shelf surveys, making it more cost-effective than hiring outside consultants. Every aspect of its functionality has been informed by Diligent’s experience with corporate, non-profit, healthcare and financial/banking boards worldwide.

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