12.3 The current landscape of board evaluation

Question 1

Which report first recognised the possibility of a UK requirement for introducing formal procedures to assess both a board’s collective performance and that of individual directors?

Answer 1

The 1998 Hampel Report

Question 2

What report triggered the introduction of a requirements for boad evaluation within the 2003 UK Corporate Governance Code?

Answer 2

The 2003 Higgs Review

Question 3

Which UK Code was the first to recognise the value of external evaluators for FTSE 350 companies?

Answer 3

The 2010 Code

Question 4

What is the requirmeent in the 2018 UK Code for evaluation in FTSE 350 companies?

Answer 4

The board evaluation should be externally facilitated at least every 3 years.

Question 5

What were some reasons for not completing a board evaluation given in a 2018 study by the Companies Secretaries International Association (give 3)?

Answer 5

• not required by regulation
• only conducted every third year
• something the organisation had never considered
• although the board knows about evaluations, it did not feel important
• cost

Question 6

What are the four different types of external board evaluation provider?

Answer 6

Independent consultanticies (e.g. Independent Audit)
Search Firms (e.g. Wickland Wescott)
Auditors (e.g. KPMG)
Governing bodies (e.g. IOD, ICSA)

Question 7

Why must external evaluation providers disclosre their connection, if any, to the company?

Answer 7

To ensure a reasonable degree of independence.

Question 8

FRC 2018 Guidance on Board Effectiveness offers the following direction on external evaluators:

1 Be clear on what the evaluation will offer
2 Evaluate the skills, c_______ and references of the individuals involved
3 Be mindful of existing commercial r_________
4 Agree with the evaluator the o__________ and scope of the evaluation

Answer 8

competencies
relationships
objectives