A selection of one page flyers about Board Evaluations

1. Good Governance Creates Value
B Board Evaluation
Demo information
May 2011

3. » International perspectives
with Sharon Constancon
Sharon Constancon is Chief Executive of Genius Methods Ltd
An outside view
terms of Codes and best practice;
responses to questionnaires or interviews
should be totally unattributed and not visible
to internal colleagues;
the feedback process should be handled
externally and confidentially, ensuring more
open input.
In addition, there should be a clear separation
between:
an evaluation of the board’s effectiveness;
the appraisal of each individual director’s
competence; and
the individual director’s contribution to
the team.
The confusion of these distinct elements
often leads to frustrated participants and
poor insights.
In order for an evaluation to be successful,
interaction and interviews should be tailored
and focused on the relevant issues, at the
same time as exploring new territory. This
requires the right person-to-person match
Effective board evaluations in character, knowledge, respect and trust.
External evaluation is independent from the
company, therefore it ensures that the difficult
produce value. questions are asked and valuable feedback
received, without risking any existing business
relationships.
W
hy do boards resist external prescriptive solutions imposed by outsiders. The final collation process is critical and the
evaluation? It is true that most However, there really is little to worry about. level of detail disclosed must be appropriate
FTSE boards have an internal It is well-known that effective board evaluations for different groups of internal and external
self-evaluation process in place, produce value and improve board performance. stakeholders. All information must be of value
however many industry sectors still fall short Company secretaries are frequently pivotal in and definitive, with no ‘boilerplate’ output. It
of best practice. It would seem that external educating boards with regard to the true nature is vital that: responses are unattributed; there
evaluation is required, therefore, to ensure that and value of sensitive and well-conducted is an understanding that not all the findings of
standards are maintained. external board evaluation. an evaluation need be in the public domain and
Consider, for example, the reasons why an So how do boards progress from suspicion that evaluation outcomes belong to each and
annual board evaluation is now required of to satisfaction? The most important step is every board member.
the largest companies in the UK, with one in to identify for the board why an externally External board evaluation brings invaluable
three to be externally facilitated. An analysis of facilitated evaluation is a vital step towards insight into the workings of the board from
costly corporate and banking failures indicates the continuous improvement of the board’s the perspective of an outsider. It is designed to
that it was neither the unitary board model nor effectiveness, enabling an unbiased assessment facilitate open and honest review of the board’s
the principles of the then Combined Code that of the current board’s structure and workings. workings, rather than to point the finger of
were at fault; some boards simply did not carry There are several steps which, if taken, blame. As such it is a process to be embraced
out their duties effectively and did not adopt a will help to remove the invalid suspicion of rather than feared as part of a wider drive to
culture of good corporate governance. evaluations, such as: improve board effectiveness.
Why then does hostility and resistance
manifest when boards are faced with an an external review of the scope, content » About the author
external evaluation? In our experience, such and wording of any internally produced
Sharon Constancon is Chief Executive
evaluations are often perceived as imposed, questionnaires or interview guidelines.
of Genius Methods Ltd. For more
intrusive and unnecessary. This reaction is human This ensures that these documents achieve
information, please visit
and understandable: few people take kindly to their objectives and are fit for purpose in
www.geniusmethods.com.
18 w w w . c h a r t e r e d s e c r e t a r y. n e t

5. Key Genius Methods USP’s

6. Board Evaluation
Menu from which to tailor to requirement

8. The Specific situation
A Board Evaluation and Governance Review was undertaken for a
major internationally listed conglomerate (confidentiality requested).
The company was established in 1978 and floated in 2005 with a
market capitalisation in the region of £950 million
 The founder, who has maintained a hands on role, and family
have retained 62% of the shares.
 Fellow directors and employees hold 10% of shares.
 The balance of 28% of the shares are listed on the stock market.
 The Board Evaluation and Governance Review were conducted Adding value
simultaneously.
“Board Evaluation is an important
 The nature of the regulated industry had embedded high annual exercise that adds
standards of governance in the organisation. The Board was
considerable value to all
reasonably balanced and directors communicated well.
organisations, regardless of size.
 Controls were robust and the Board was compliant with key UK
It is neither process-heavy nor
governance standards.
hugely time-consuming.
Whether or not a company is
Need for Board Evaluation affected by the Walker Review or
the UK Corporate Governance
 Being family owned and run since inception, external input was
Code, there is merit in spending
needed to refresh thinking
time in preparation for a Board
 Ownership is skewed Evaluation and securing the
benefits that flow from it”.
 No governance regulatory demand in listing jurisdiction
 All companies benefit from an objective view of governance Neville Bain
practices Chairman of the Institute of Directors
For further information please contact Sharon Constançon
Email: sconstancon@geniusmethods.com Telephone : 01494 565 947
© Copyright Genius Methods Ltd 2011 www.geniusmethods.com

9. “The ABI’s leading role in corporate
governance stems from our members’
Process followed belief that well-governed companies will
produce better returns for shareholders
The Board members completed a questionnaire which covered
over time. This piece of research, using
various governance, structure, communication, behaviour,
leadership, risk, succession planning, management data generated by our own Institutional
development and committee specific issues. Voting Information Service (IVIS), does
show a clear connection between good
All directors answered each question and were encouraged to governance, company performance and
provide comments to whichever questions they chose. The last
investor return. One important
section was purely for director written contribution.
conclusion, not highlighted in other
From this information further structured discussions occurred research, is that good governance
with key individuals on the Board, senior non-Board executives, reduces volatility of returns. Moreover,
internal and external audit. This ensured a rounded view given good governance is also a precursor to
the imbalance of stakeholders.
good performance rather than vice
versa”.
A report was compiled which was discussed by the directors
and a schedule of improvements was defined. Stephen Haddrill
Director General,
Association of British Insurers
Results
Against the backdrop of a highly successful and profitable The new UK Corporate Governance Code
company, well run and widely respected, an objective, external requires that all premium FTSE 350 listed
assessment was able to make a valid contribution to adding companies to have an external Board
further dimensions to management excellence. Evaluation at least every third year. Under
the “comply or explain” principle, they will
The following areas were identified for improvement. These have to “explain” if they do not.
were all implemented over the following six month period. The
This standard is Best Practice for all other
implementation was monitored and reported on at each Board
listed and non-listed companies
meeting in the intervening period.
The Walker Review for Banks and Financial
Further improvements were also noted that are in the process Institutions which lead to the new UK Code,
of being implemented. identifies good business principles that add
real value and thus provide guidance to
All recommendations were accepted by the Board. Board Boards in effectively conducting its affairs
dynamics improved as a result of the evaluation. The Board and leading the business.
away day significantly improved Board cohesion and team
spirit.
For further information please contact Sharon Constançon
Email: sconstancon@geniusmethods.com Telephone : 01494 565 947
© Copyright Genius Methods Ltd 2011 www.geniusmethods.com

10. Findings and actions taken
One of the three subsidiary companies needed an additional director to
provide a better balance of skills.
This director was identified and appointed.
Directors did not have clear terms of office.
This has now been corrected. Valuable Insights
Independent directors did not have an annual review with the
Chairman. “I was initially reluctant to conduct
The process has now been put in place and voted to be mutually this on two counts.
beneficial
First, I was afraid this was just
The strategy process was relatively informal in that each Board
another box-ticking time wasting
agenda had items of significant strategic importance but there was no
full strategy overview. process.
The company has now put in place a full strategy process with a full
Second, as the person that built this
Board day off-site to address strategy; the independent directors
contribute at stages in the process and the final strategy is more a business from infancy to the
reflection of the full Board. current time, I felt that I knew how
to run the Board.
Management development and succession planning needed to be
considered given the family ownership and high shareholding.
I was wrong.
This is being addressed and is now more thorough and has been
elevated to the status of an important annual Board agenda item The exercise has been very helpful,
The agenda structure and time allocation to strategic issues needed to conducted by an excellent
be addressed to ensure adequate time was given to these important consultant with really valuable
matters.
insights.
The agenda has been re-shaped so that the important and strategic
items are first on the agenda and the routine items relegated to the I have fully endorsed the action
end. Time allocation has materially improved.
plan and this will be a regular
annual exercise in our company”.
Further recommendations for improvement
Chairman and
The coherence of the strategy process and an external analysis of the
operating environment. This was missing and therefore a risk that was Company Founder
not adequately addressed
Process of appointing independent directors needed to be formalized.
This would help clarify succession issues
Director annual appraisals
Timely information flow for Board packs and information flow to the
Board
For further information please contact Sharon Constançon
Email: sconstancon@geniusmethods.com Telephone : 01494 565 947
© Copyright Genius Methods Ltd 2011 www.geniusmethods.com