Governance and Board Performance Problems

Few governance issues are as complex as measuring board performance. Assessment of board performance is more art than science because there is an interconnected link between management, the firm and board results. It’s also not always straightforward. A board may be doing a great job of overseeing a company, but shareholders are unhappy with the low return on their investment. The board could have acquired management and governance issues and is working hard to make the situation better. It might also have invested in new strategic initiatives or formulated the turnaround plan.

In other cases the board could be getting too involved in operational details and making decisions which should be left to the management team. These kinds of situations can be made more difficult by the fact that the board does not have a method that is suitable for evaluating its members. It is easy for minor issues to turn into major problems, which can damage the effectiveness of an organization’s board.

The board might have created an informal culture that doesn’t consider its performance assessment responsibilities seriously. It could be because the board isn’t equipped with the tools to collect data on performance or the boardroom skills necessary to carry out its evaluation duties.

Boards need to not only possess the right abilities, but they should also be open to the findings of the evaluation. The board should identify areas that need improvement and work with management on an action plan. This could include regular board meetings to improve the knowledge of the board.