The last aspect of the board evaluation process is when the results are out and it’s the time for the board to decide and take action.
According to PwC’s Annual Corporate Directors Survey, many directors nearly around 51% of them indicate that their board didn’t make any new decisions or changes on their last self-evaluation. According to Boardroom Resources this survey suggests that many board consider these evaluations as a “check-the-box exercise”. Or “don’t have the leadership to take action, or .. don’t want to upset the applecart. And while some boards can continue to take this approach, we can almost always guarantee that a poor evaluation process will catch up to you—whether in the form of underperforming directors, poor time management at meetings, pressure from activist investors, or a disconnect between board skill sets and company strategy”. Here are three guidelines to put your evaluation results to action.
- Communicate with the board when they intended to take action.
In general, boards should have the mindset of performance managements. Also, the board members should care more about receiving feedback and engaging in decisions and introspection. This approach must be instilled “during the onboarding process for new directors. At the outset of every evaluation, board leadership must be crystal clear that the ultimate objective is performance enhancement (across the full board, committees, and individual directors).”
- Assign timelines to all action items.
Boards must set an action plan format as a draft earlier before the discussion. Then write an action plan during the discussion of the evaluation results. The action plan should include “the action item, its owner, and a timeline for completion“. According to Boardroom Resources “Boards that are taking a multi-year approach to their board evaluations (i.e., shifting their focus and methodologies on rotating years) should build flexibility into their evaluation design. This can allow the board to add questions that gauge the progress on last year’s action items—whether those entailed forming a new committee, recruiting new skill sets to the board, or improving the organization of pre-reading materials”.
- Tell your shareholders about the benefits of your evaluation process.
Your investors want your evaluation process to reflect the governance proficiency. So you should outline your process in the proxy.