How Boards Should Evaluate Their Own Performance

The New York Stock Exchange requires that the boards of all publicly traded corporations conduct a self-evaluation at least annually to determine whether they are functioning effectively. The purpose of the exercise is to ensure that boards are staffed and led appropriately, that board members are effective in fulfilling their obligations, and that reliable processes are in place to satisfy important oversight requirements.

Our research suggests that many board evaluations are inadequate. In a study of 187 boards we undertook with The Miles Group, a consulting and advisory firm, we found that most board evaluations fail to identify and correct poor performance among individual members. Only around half (55%) of companies that conduct board evaluations evaluate individual directors, and only around one-third (36%) believe their company does a very good job of accurately assessing the performance of individual directors.