Assess your company’s corporate governance with these 10 tests from Nicolaas Koster.
Does your board’s annual self-assessment lay bare all the strengths and weaknesses in your corporate governance? Include these 10 tests to perform a deeper assessment of corporate governance performance.
Most boards use annual self-assessments to identify areas for improvement. Self-assessments aim to “kick the tires” on the corporate governance of a company and check whether the board is composed of the right directors, is led effectively and carries out its oversight responsibilities appropriately. Most often, the self-evaluation process is overseen by the general counsel or an outside consultant.
Unfortunately, research suggests most annual self-assessment fall short because they fail to identify and correct weaknesses among individual directors and the survey approach which asks directors to rate themselves.
We developed 10 tests that boards can use to complement the annual self-assessment. These tests aim to address two shortcomings in self-assessments. First, they draw the board’s attention to a set of performance indicators usually overlooked in self-assessments. Second, it addresses some of the bias inherent in self-assessments by including questions that can be answered with objective facts. The tests described here may help formalize a process that some boards may already be doing implicitly.
Key points include:
- Relations with shareholders
- Board meeting productivity
- Addressing conflicts of interest
Read the article, Have you tested your company’s corporate governance lately?, on LinkedIn.