Dr. Richard Leblanc created this week’s video to discuss his board assessment tool that addresses a key deficiency in corporate governance: namely the review of board and individual director performance. Surveys show that many or most boards of directors self-review their own performance, and possibly the performance of individual directors, or do not do so at all. Management often unduly influences and facilitates internal board reviews, setting and managing questions and data, and disincenting director candor.
Proxy advisory firms are criticized for using external metrics that lack predictive validity. Boardexpert’s tool addresses the shortcomings of self-assessment, management assessment, and external assessment of boards, such as those by proxy advisors. It canvasses the views of directors who know which of their colleagues is performing and where the board’s key deficiencies lie. The tool results in prescriptive recommendations for improving governance, and, as applicable, which directors or members of management should be replaced. Application of the tool has resulted in director and CEO succession, as well as less radical improvements.
The tool is a useful replacement for retirement age and regulatory tenure limits because it assesses actual performance in an objective, rigorous and systematic manner, rather using chronological age or years of service as a proxy for performance, since those factors have little or no necessary relationship to actual performance. The tool can also forestall regulatory imposition of mandatory third party reviews and intervention by shareholders.
The tool’s use and implementation is designed achieve systematic improvements to corporate governance in the interests of the company and its shareholders, not necessarily incumbent management or directors. Award-winning NYSE and TSX boards have found it helpful, as have state-owned and non-profit boards.
Boardexpert.com utilizes subject matter experts for advice, review and commentary based on the engagement, nature of the project and jurisdiction. These advisors include academics, auditors, compensation consultants, environmental experts, investment bankers, lawyers, researchers, risk experts, security experts, shareholders, technology experts, and of course current and retired leading executives and directors.