Self or other: directors’ attitudes towards policy initiatives for external board evaluation

Abstract

Recurrent crises in corporate governance have altered board practice and created policy pressure to assess the effectiveness of boards. Since the 1990s, boards have faced calls to undertake regular, formal evaluation. Since 2010, the UK Corporate Governance Code has urged large corporations to engage outside parties to conduct them at least every 3 years, a move that other jurisdictions have copied. Despite this policy importance, little research has been conducted into processes or outcomes of board evaluation. This study explores the attitudes of directors on evaluation, whether self-administered or facilitated by others. We find acceptance of the principle but reservations about the value and even honesty in questionnaire-based approaches. We find scepticism about, but also acknowledgement of, the benefits of using outside facilitators, especially for their objectivity and because their interviewing elicits insights into board dynamics. As this practice expands beyond listed companies to non-listed ones, charities, and even governance branches of government, our findings point to a need to professionalise outside facilitation.