Moving Toward Better Board Assessments

Board effectiveness strategies continue to be a challenge for directors of corporations as well as mutual funds. At the MFDF’s upcoming Fund Governance and Regulatory Insights Conference, panelists will discuss what makes a fund board effective, and attendees will have the opportunity to discuss their own board effectiveness strategies among peer directors. The conference will be held on March 5-6 at the Four Seasons Hotel in Washington, D.C. Registration is available here. Meanwhile, consulting firm Russell Reynolds in a recent paper contends that “not enough boards are doing impactful board and individual director assessments.” According to the consultancy, one in seven Russell 3000 companies, and fewer than one in three S&P 500 companies, have an annual review process for individual directors. Additionally, the “survey-centric approach” used by most boards tend to be lacking in candor and thus hold little value in providing the data needed to improve board performance. Russell Reynolds proposes a different approach to director assessments that eschews the traditional one-year evaluation and unhelpful surveys. “The next step to enhancing board performance and effectiveness is the development of a multiyear, integrated board and individual director assessment system,” the firm writes.  The multi-year evaluation system, which the paper describes in detail, “would measure performance, culture leadership and regulatory issues, and enable both the board and investors to chart progress over successive years.”