Board Evaluation - Explained
What is a Board of Evaluation?
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What is a Board Evaluation?
Board Evaluation refers to measures that aid effectiveness, transparency and accountability of board members, especially in the aspect of board governance. Organizations, whether profit or non-profit need to periodically evaluate the board, check their activities in order to be certain that the board is geared towards an effective corporate governance. Evaluating the performance of the board is an important mechanism for scrutinizing the activities of the board and enhancing their transparency and accountability to stakeholders.
How Does a Board Evaluation Work?
Board evaluation is crucial for every company that strives for excellence and coordinated governance. For non-profit organizations, the board may feel incompetent to carry out evaluation or stay without evaluation until the organization is in crisis. However, there are certain ingredients that can gear a board into carrying out evaluation. Most importantly, there must be standards or benchmarks for board evaluation in every organization. The standards that steer a board into an effective board evaluation include;
- The presence of clear and precise job descriptions for the board.
- Availability of corporate strategies.
- Presence of a board chairman and competent senior staff.
- Corporate governance that aligns with the vision of the organization.
Board evaluation and assessment is quite important. The organization or the board does not need to wait for the period of crisis before evaluation takes place. Board evaluation is directly linked to the level of success of results that the organization would record, it is also linked to the performance of the organization. The importance of board Evaluation are; effective corporate management, good organizational results or outcomes, effective financial stewardship, accountable and competent leadership, teamwork, regard for work norms and culture, minimized conflict, positive interaction between stakeholders and employees, among others. One important factor that fuels board evaluation is the desire of owners of founders of an organization to make board members effective and accountable. Board evaluation is important for improved organizational performance.
Board evaluation process involves the assessment of the board in relation to the roles and performances. Areas relating to corporate governance are evaluated by the board while consultants or members of staff evaluate programs and services in an organization. The major areas that evaluation process focus on are; board management, board development, board goals, missions and strategies and senior staff. Evaluating board management include an assessment of board meetings and the evaluation of how individual directors perform in the board as well as their collective performance. When the development of the board is being evaluated, cogent areas are focused on such as governance structure and processes and aid the development of the organization. Quite a number of board evaluation processes exist. Below is a highlight of a six-step evaluation process that an organization can adopt;
- Determine why the evacuation is important, the purpose of the evaluation.
- Select an appropriate evaluation model or structure.
- Get an evaluation design.
- Gather relevant information that will enhance an effective evaluation.
- Analyze the information gathered
- Carry out implementation.
The six processes listed above are essential for board evaluation. In the aspect of analyzing the data gathered, an organization might need the expertise of an independent or external consultant. The results of the analysis alongside other factors would then inform the decision of an organization and the steps to take.
Board Evaluation Questions
Questions are not randomly selected for board evaluation, they are often well-thought out questions aimed at achieving certain purposes in the board evaluation process. Through the use of interviews, questionnaires and surveys, board evaluation questions are prepared. Questions for board evaluation can be derived from this variety; the participation level of board members in board meetings, level of preparation for the meeting, contributions during the meeting, strengths and weaknesses of board members, impacts of decisions made in meetings in the performance of the organization, and the overall success level of the meeting. Usually, board members should undergo periodic self-assessment, the results of the assessment can be kept confidential by the board chairman or the committee for an overall evaluation of the board. During a board evaluation process, there are certain items that will be considered as important aspects of the evacuation. These are;
- Board job descriptions
- How well board members understand their individual roles as members of the board.
- The missions and visions of the board
- How the board executes its missions and achieves its visions.
- Orientation practices in the board
- Recruitment practices
- Risk management policies
- Execution of the organization's plans
- Overall accomplishments and actions responsible for the accomplishments.
- Corporate Governance Law (Intro)
- What is Business Governance?
- Berle-Means Thesis
- Corporate Governance Rating Definition
- Who are the members of a corporation?
- Corporate Charter
- Shareholder Register
- Common Stock
- Preferred Stock
- Par Value
- Authorized Shares
- Issued Shares of Stock
- Unissued Shares of Stock
- Outstanding Shares
- Institutional Shares
- Dual Class Shares
- What is a closely-held corporation?
- Close Corporation Plan Definition
- What is a Private Company vs a Public Company?
- What is the role and purpose of the corporation?
- What is the Agency theory of corporate governance?
- Shareholder-Centric Perspective
- Shareholder Value
What is the Stakeholder theory of corporate governance?
What is the role & rights of Shareholders in the corporation?
- Shareholder Democracy Definition
- Quorum Definition
- Class Voting Shareholders
- Changing the Voting Rules
- Supermajority (Voting)
- Shareholder Sponsored Proposal
- What are the variations on attributes of Ownership structure?
- Stock Split
- What are the fiduciary duties owed by shareholders?
- When is a shareholder personally liable for corporate obligations?
- Appraisal Rights
- Dissenter's Rights
- Say on Pay Rights
- How can shareholder enforce their rights (direct and derivative actions)?
- What is the process for bringing a Derivative action?
- What are corporate vote Proxies?
- Proxy Statement
- Proxy Fight or Contest Definition & Explanation
- What is Shareholder Activism and the significance of Institutional Investors?
- Activist Investor
- Overview of Board of Directors
- Board Decision Making
- Advisory Board (Observer Directors)
- What is the role of the Board of Directors?
- Board of Trustees
- Board of Governors
- Outside Director
- Outside Director or Non-Executive Director Definition
- Independent Outside Director
- Budget Committee
- Audit Committee
- Compensation Committee
- Nomination Committee (Corporate Board)
- What standards govern the actions of the board of directors?
- Duty of Candor Definition
- Board Evaluation Definition
- What is the Business Judgment Rule?
- What is D&O insurance?
- Codetermination (Foreign)
- What is the role of Managers of the corporation?
- What standards govern manager actions?
- Chief Executive Officer (CEO)
- Chief Financial Officer
- Chief Information Officer (CIO)
- Chief Investment Officer (CIO)
- Chief Legal Officer
- Chief Operating Officer
- Chief Risk Officer
- Chief Security Officer
- Chief Technology Officer (CTO)
- What are the primary state and federal corporate governance laws?
- What is the role of the state in corporate governance?
- What is the role of Securities Laws in corporate governance?
- What is the role of the Foreign Corrupt Practices Act in corporate governance?
- What is the Sarbanes-Oxley Act (SOX) effect on corporate governance?
- Sarbanes-Oxley Act (SOX)
- What is the Dodd-Frank Wall Street Reform and Consumer Protection Act effect on corporate governance?
- Corporate Monitors
- What industry organization standards affect corporate governance?
- How do proxy advisory firms affect corporate governance?
- What is the role of ethics in corporate governance?
- What are the major causes of corporate governance issues?
- What are the access to information issues?
- What are decision-making structure issues?
- What are the power struggle or competition issues?
- Holding Company
- What are hostile takeovers and defenses to hostile takeovers?
- Williams Act
- Staggered Board
- Delay-Tactic Defenses?
- Legal Lockup Defenses?
- White Knight and Pac Man Defenses?
- Jonestown Defense
- Lady Macbeth Strategy
- Macaroni Defense
- Yellow Knight
- Back-end Plan Definition
- Backflip Takeover Definition
- Dead Hand Provision Definition
- Kamikaze Defense
- Operating Company Property Company Model
- Scorched Earth Policy Definition
- Revlon Rule
- What are benefit-alignment issues?
- Cadbury Rules Definition