If boards operate effectively, they provide critical and necessary oversight of an organization and accountability of management — helping oversee the strategic direction of the company, setting in motion CEO succession plans and providing risk oversight. One way to ensure boards remain an effective governing body is through routine and rigorous board and committee evaluations. Now, with most boards meeting virtually due to the pandemic, firms are looking at ways of embracing a 21st century approach to digital evaluations.
Historically, the exercise is often viewed by directors as time consuming without producing meaningful and actionable results. It can become a check-the-box compliance activity, mandated by the New York Stock Exchange and expected from many investors and proxy advisory firms.
Directors are right to bemoan traditional approaches to board evaluations that require significant time and expense, often involving legal counsel to conduct them. On the other hand, boards that appoint their own members (e.g., nominating and governance committee members) to conduct the evaluations are more likely to inject subjectivity into the process and show skepticism that the results are unbiased.
We are already seeing a shift as more boards have moved from paper to digital evaluations and discovered new benefits: Digital assessments are secure, more convenient, require fewer resources and tend to produce more actionable results. Plus, results can be viewed objectively year-over-year, giving boards measurable feedback on progress made to improve governance effectiveness.
While technology was already changing board evaluations, the COVID-19 pandemic is accelerating this trend. With many boards now functioning in a virtual environment even as they help their companies navigate unprecedented challenges, directors are taking a hard look at ways they can work better together.
What can you do today to prepare?
If you haven’t already, consider how your board can improve the evaluation process.
Boards of directors face significant demands and need modern tools in this challenging environment but thoughtful digital performance assessments empower boards. The COVID-19 crisis, along with ever-increasing governance accountabilities, requires more of boards. Directors must be fastidious in their efforts toward continuous improvement; adopting a solid board evaluation process is a critical first step.
The Importance of Evaluations for CEO Succession Planning:
About the Authors
Laura Wanlass is a Partner and Senior Consultant in Aon’s Rewards Solutions practice. Laura leads Aon’s Corporate Governance practice which helps clients understand and assess their potential exposure under the multitude of corporate governance and executive compensation policies and guidelines established by proxy advisory firms and institutional shareholders.
Laura provides guidance on a broad range of executive compensation matters, including short and long term incentive plan design, executive pay levels, employment agreements, Securities and Exchange Commission compliance, listing exchange requirements, change in control, severance, and corporate governance matters.
Laura received a J.D. from the Lewis and Clark Law School and a B.S. in economics from the University of Utah. Laura is also a frequent speaker on corporate governance and executive compensation related topics.
Abby Adlerman brings more than 25 years of governance and board experience to Boardspan. She was part of the senior leadership team at Russell Reynolds Associates, the global executive search & assessment firm. Abby previously served as CEO of a venture-backed e-commerce business, and she spent 15 years on Wall Street advising board & C-suite clients on a range of corporate finance and M&A transactions. Abby has served on numerous corporate and nonprofit boards, and she is a frequent public speaker and blogger on boardroom topics.
Boardspan’s mission is simple: to build better boards. Their cloud-based SaaS platform – which delivers Software and Service – helps boards and board members stay informed, connected and effective.