EY: Boards are Improving their Self-Evaluations

As a year of staggering challenges comes to a close, more directors may be considering their performance evaluations. A recent survey found that many boards have evolved the self-assessment process to bring about measurable changes, including changing committee structures or adding more skills and expertise. EY, in a recent article, writes that boards can enhance a culture of continuous improvement by routinely having board members share and receive candid feedback from each other, as well as from senior executives and external parties with whom they regularly interact. “This feedback can bring about important adjustments to board dynamics, agendas, processes, meeting materials and resources, and board and committee composition.” While fund boards are slightly different in their approach to self-assessments, EY’s article can help fund boards move toward getting the best out of the self-assessment process.  Some trends EY noticed in the area of board evaluations:

• Evaluation of individual directors is increasing: Since 2018, more boards are expanding their evaluation process to include individual director evaluations, EY noted. Almost half of 2020 Fortune 100 proxy filers disclosed that they performed individual director evaluations along with board and committee evaluations, up from 24% in 2018.
• Using both questionnaires and interviews continues to increase: “Questionnaires can elicit thoughtful qualitative responses or quantitative ratings that can be completed without attribution and analyzed to identify matters for discussion and action on improving effectiveness.” EY noted.
• More companies are emphasizing ongoing assessments. In 2020, 21% of proxy filers in the Fortune 100 disclosed that they address certain evaluation matters and proactively seek feedback on an ongoing basis, beyond the formal annual evaluation—more than double the 9% that did so in 2018. “Spotting and addressing issues in real time avoids deepening problems and enables continuous improvement,” EY wrote.