Suggest some performance measures and methods that could be used to assess whether a board, its members, and its committees are performing effectively.

Performance Indicators

Some have suggested that the very fact that the directors have not been removed by the shareholders is enough proof that their performance must be reasonable. However, there is a weakness with this argument. Traditionally many shareholders, especially larger ones, have seemed nervous at the issues created by having to find new directors. As such, existing board members who are “average” may have done enough to avoid being sacked, even though “average” is far from being an adequate performance target.

Performance criteria are likely to be less specific and numerically measurable than typical performance measures in business, with the vast majority of measures being based on feedback from the directors themselves. Examples are suggested below.

The Board

• Quality of relationship with shareholders (e.g. measured by interviews with major shareholders, results of board proposals at the AGM).
• Staff turnover rate in the company as a whole and especially at senior management level.
• Corporate Governance compliance.

Board Members

• How prepared they seem to be at each board meeting.
• Amount of time committed to the role.
• Level of participation and contribution in board meetings.
• Level of industry knowledge.
• Skills and outside experience brought to the company.

Committees

• Relationship of committees with main board.
• Quality of succession planning (Nomination Committee).
• Improvement in Control Systems (Audit Committee).
• Feedback from shareholders on Remuneration and Performance Related Pay (Remuneration Committee).