CSIA launch Global Board Evaluation Practices and Trends research report

26 Mar 2018 5:43 PM | Anonymous

Global Board Evaluation Practices and Trends – adding value from the top down

In the quest for extracting meaningful value for shareholders, effective boards the world over adhere to corporate governance standards, often in the absence of legislation mandating them to do so, and Corporate Secretaries are playing a progressively more important role in this process.

Annual board effectiveness evaluations are a vital element in maintaining an effective and accountable board, with recent research by the Corporate Secretaries International Association Limited (CSIA) finding that the Corporate Secretary or Governance Professional is increasingly taking centre-stage, not only in convincing the board of the value of a thorough evaluation process, but in facilitating the evaluation and coordinating the remedial actions.

The CSIA’s recently concluded global research paper titled Global Board Evaluation Practices and Trends: Lessons for the Corporate Secretary, in collaboration with Diligent - a leading provider of communication and collaboration tools for boards and C-suite executives - focused specifically on the role of the Corporate Secretary or Governance Professional, which Zahra Cassim, CEO of CSIA, said was validated by the actual research: “Our focus on the Corporate Secretary was confirmed by the research as appropriate because of the number of evaluation processes where such an individual played a crucial role.”

The research concludes with five important take-home messages for Corporate Secretaries, that PwC partner Anton van Wyk says is incredibly valuable for the board looking to stay at the leading edge of effectiveness and governance. “In South Africa, for instance, King IV says in Principle 9 that the governing body should ensure that the evaluation of its own performance and that of its committees, its chair and its individual members, support continued improvement in its performance and effectiveness. The governance codes in most territories deal with this requirement of good governance.

“The person or entity responsible for the evaluation, in most cases the Corporate Secretary, will do well to benchmark their approach against global best practice and bring the lessons outlined in this research paper into practice. He or she needs the full buy-in of the board and the insights garnered from the CSIA paper will greatly assist in this cause.”

The research paper, which was conducted among senior respondents such as executive and nonexecutive directors, CEs and Corporate Secretaries in various countries, culminated in five important findings for governance professionals as they approach board evaluations.

“The first important finding is that the Corporate Secretary plays a critical role in the evaluations process,” said Cassim. “There are also lessons to take home in the growing trend of using digital technology to facilitate evaluations because of convenience and ease, but also increased security and access to anonymous data for benchmarking, as well as the need to produce formal reports. In addition to this, research indicates that complacency can kick in if the same process without meaningful remedial interventions is followed year after year.”

This leads to the very important, but perhaps most difficult, lesson for Corporate Secretaries in the CSIA report: the need to take responsibility and accountability for the coordination of remedial action and facilitating continuous performance discussions, be these quarterly in addition to, or as part of board meeting agendas. “This will make or break the effectiveness and meaningfulness of the evaluation process,” said Cassim.

The final message for Corporate Secretaries speaks to their efforts to encourage boards to do open and transparent reporting. “Although the research indicated that many companies are still only reporting very basic information, we are seeing more corporate governance codes requiring greater detail and additional transparent disclosure of board effectiveness evaluation processes and outcomes,” says the report. The research found that while some boards merely report that an evaluation took place, the Corporate Secretary should encourage more qualitative information to be shared, thus increasing accountability and good corporate governance.

Van Wyk said that a very positive sign emanating from the report was that most respondents to the CSIA survey saw board evaluations as real value-adding activities. “It is a very positive sign that respondents indicated that evaluations are taken seriously by the board,” he said.

“Probably the most important insight here for Corporate Secretaries is to convince their boards to keep pace with the leaders globally and not merely go through the motions but actually undergo a fastidious and rigorous process that ultimately benefits everyone from the top down.”

Read the full report here.

Watch the launch event here.

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