n Journal of Corporate and Commercial Law and Practice - Annual board self-evaluations : a valuable aid to board effectiveness - research

Volume 4 Number 2
  • ISSN : 2412-2998


The New York Stock Exchange requires the board of directors of a listed company to ‘conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively’. Although the Nasdaq Stock Market does not have a similar requirement, board evaluations have become a general practice among public companies. In addition, Institutional Shareholder Services Inc, in its Quality Score rankings, considers whether a company discloses a policy of annual board evaluations, and Glass, Lewis & Co ‘strongly supports routine director evaluation, including independent external reviews’. As investors, governance activists and other market participants continue to focus on director skill sets, board composition and board refreshment, board evaluations play a vital role in aiding the board and its committees in improving their effectiveness and in identifying and addressing issues and potential problems. There is no single correct approach to the evaluation process. Successful evaluations should take account of the particular circumstances of a company and its board and should be carefully reviewed and appropriately adapted each year. At a minimum, a board evaluation process should allow for reflective consideration of all aspects of the functioning of the board and its committees (and the participation of individual directors if they are being evaluated) and promote full, honest and focused feedback.

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