Increasing Value from Board Self-Assessments

Lawyers from Weil Gotshal in a recent memo offer some insights into corporate board self-assessments based on their public disclosures, including actions boards implemented after their evaluations. The memo can be helpful to fund boards as they consider refreshing their evaluation process or the content of their self-assessments, although it must be noted that fund boards are not required to disclose publicly the data or information gathered from their self-assessments. The Weil Gotshal lawyers note that structuring an assessment can be challenging since there is little regulatory guidance on the topic. For fund boards, the SEC requires at a minimum that boards annually assess the effectiveness of their committee structure and whether the number of funds overseen by each director is appropriate and that boards include the substance of the board’s discussion of the results in the board minutes. The Weil Gotshal lawyers recommend that boards vary their evaluation format periodically to encourage “new perspectives and illuminate actionable areas for improvement.” The common evaluation formats of written questionnaires, interviews facilitated by a third party, or interviews facilitated by the lead director, can be invigorated with additional questions and by alternating the methods used year over year, for instance.  The memo lists several actions corporate boards took after their evaluations including:

• Enhanced director orientation and education programs
• Changes to board structure
• Changes in composition and director tenure or retirement age limits
• Improvements to the format and timing of board materials
• Changes to the board’s agenda with more time allocated to key strategic issues