Board Evaluation: When and How

Board evaluation has a poor reputation, and largely a deserved one. A questionnaire circulated in December, results presented in January, a paragraph in the annual report confirming the board considers itself effective, and nothing changes. Done that way it is a compliance exercise that consumes time and produces a document.

Done properly it is one of the few mechanisms a board has for examining its own performance, and it usually surfaces two or three things everybody privately knew and nobody had said. This article covers when to do it, who should run it, and what a useful evaluation actually produces.

What the Code expects

The UK Corporate Governance Code provides that the board should undertake a formal and rigorous annual evaluation of its own performance and that of its committees and individual directors. For FTSE 350 companies the Code expects that evaluation to be externally facilitated at least every three years, with the annual report explaining the process and any connection between the external evaluator and the company.

The Code applies on a comply-or-explain basis to premium-listed companies. Private and investor-backed boards are not bound by it — but its provisions have become the reference point for what good practice looks like, and investors increasingly expect something equivalent. Further background is published by the ICAEW.

One provision worth noting: the Chair should act on the results, and where an individual director’s contribution is found wanting, the Chair should address it. Evaluations that produce no consequence are the reason the exercise has the reputation it does.

When to do it

Annually as routine, and specifically at four moments.

Before appointing a new Chair or several new directors. An evaluation run before a refresh tells you what the board is missing, rather than confirming afterwards that you hired for what you already had. This is the highest-value timing and the least used.

After a significant failure. A missed forecast the board did not see coming, a governance incident, a strategy that unravelled. The temptation is to review the executive; the more useful question is what the board itself did not ask.

Ahead of investment or sale. Sophisticated investors assess boards. Evidence of a board that examines its own performance is a positive signal, and the process usually improves what is being assessed.

When the board has changed character. Founders stepping back, investor directors joining, a first independent non-executive. The board that exists is not the board the current practices were designed for.

Internal or externally facilitated?

	Internal	Externally facilitated
Run by	Chair, supported by the Company Secretary	An independent third party
Best at	Process, agenda quality, papers, committee function	Dynamics, individual contribution, the Chair’s own performance
Weakness	Directors will not criticise each other in front of the Chair	Cost, and a facilitator who does not know the business
Typical cadence	Years one and two	Year three, then repeating

The case for external facilitation is not sophistication of method. It is that directors will say things to an outsider under confidentiality that they will not say in a room chaired by the person they would be criticising. That is the whole value, and it is why the Chair’s own evaluation should always be led by someone other than the Chair — normally the Senior Independent Director.

What to actually examine

Questionnaires about whether the board has the right skills produce answers everybody can agree with. Five areas produce more useful discomfort.

What the board did not discuss. Review twelve months of agendas against the risk register and the strategy. Items that never appeared are more revealing than items that did.

Where decisions actually get made. If material decisions are settled before the meeting and ratified in it, the board is not governing. Directors know when this is happening.

Whether dissent occurs. A board with no recorded disagreement in a year is not a board that agrees; it is a board that does not challenge. The minutes are evidence here.

Whether papers support decisions. Volume is not quality. Ask directors what they actually read and what they would drop.

Individual contribution. The uncomfortable one, and the reason external facilitation exists. Attendance, preparation, whether a director’s expertise is being used, and whether anyone has stopped contributing.

Turning findings into action

An evaluation is worth what it changes. Four outputs are worth insisting on.

A short list of agreed actions with owners and dates. Three or four, not fifteen. Reviewed at the next board meeting and the one after.

Any composition implications, stated. If the board lacks a capability, that becomes a recruitment brief. If a director is no longer contributing, that is a conversation the Chair owns — and our board construction guide covers how to specify what is missing.

Changes to the agenda and the pack. Usually the quickest win available and the one most often identified.

Individual feedback, delivered. The Chair should speak to each director individually. Feedback aggregated into a report and never said to anyone is not feedback. The Institute of Directors publishes material on director effectiveness that is useful preparation for those conversations.

Frequently asked questions

How often should a board be evaluated?

Annually. The UK Corporate Governance Code expects a formal and rigorous annual evaluation of the board, its committees and individual directors, with external facilitation at least every three years for FTSE 350 companies.

Do private companies need to do this?

There is no obligation, but boards with independent directors or external investors increasingly do it, and investors take it as a positive signal. The practice is more valuable than the compliance, particularly where the board’s composition has recently changed.

Who evaluates the Chair?

The Senior Independent Director, taking views from the other directors. A Chair leading their own evaluation produces predictable results, which is why the Code separates it.

Is external facilitation worth the cost?

Periodically, yes. The value is not technique but candour — directors will tell an independent third party under confidentiality what they will not say in a room chaired by the person concerned. Alternating internal and external across a three-year cycle is the common pattern.

What should an evaluation produce?

Three or four agreed actions with owners and dates, any composition implications stated plainly, changes to the agenda and board pack, and individual feedback delivered by the Chair in person. A report with no consequence teaches the board that the exercise is theatre.