Annual board self-evaluations: A valuable aid to board effectiveness

• Jurisdiction: South Africa
• Author: Hanks, J.J.
• Date: 16 August 2019
• Citation: (2018) 4(2) JCCL&P 31
• Published date: 16 August 2019
• Pages: 31-36

31

ANNUAL BOARD SELF-

EVALUATIONS: A VALUABLE AID TO

BOARD EFFECTIVENESS

JAMES J HANKS JR

Partner, Venable LLP, USA

SHARON KROUPA

Partner, Venable LLP, USA

CHRIS PATE

Partner, Venable LLP, USA

JEFF KEEHN

Partner, Venable LLP, USA

HIRSH AMENT

Counsel, Venable LLP, USA

I INTRODUCTION

The New York Stock Exchange requires the board of directors of a listed

company to ‘conduct a self-evaluation at least annually to determine

whether it and its committees are functioning effectively’. Although

the Nasdaq Stock Market does not have a similar requirement, board

evaluations have become a general practice among public companies.

In addition, Institutional Shareholder Services Inc, in its Quality

Score rankings, considers whether a company discloses a policy of

annual board evaluations, and Glass, Lewis & Co ‘strongly supports

routine director evaluation, including independent external reviews’.

As investors, governance activists and other market participants

continue to focus on director skill sets, board composition and

board refreshment, board evaluations play a vital role in aiding the

board and its committees in improving their effectiveness and in

identifying and addressing issues and potential problems.

There is no single correct approach to the evaluation process.

Successful evaluations should take account of the particular

circumstances of a company and its board and should be carefully

reviewed and appropriately adapted each year. At a minimum, a

board evaluation process should allow for reflective consideration of

all aspects of the functioning of the board and its committees (and

(2018) 4(2) JCCL&P 31

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