Evaluating Boards: A Policy Agenda in Need of Perspective

Abstract

For at least 30 years, and with growing intensity through recurring corporate governance crises, public policy in many countries has been striving to encourage boards of directors to undertake regular evaluations. The policy push has stimulated much practical advice, many tools for evaluation, strong encouragement from professional bodies, and considerable skepticism from those being evaluated. While some scholars have sought to conceptualize the practice, we lack a fuller understanding that can help us see how the promised benefits and feared drawbacks arise. This Director Notes report reviews the policy context and practitioner accounts and builds frameworks for practice and policy analysis. The authors find that board evaluation is a multidimensional concept in which the interactions across the dimensions open paths to improvement of boards processes while also to unintended consequences. The authors then suggest avenues for future research and a shift in policy and practice toward greater experimentation.

Keywords: corporate governance, board evaluation

JEL Classification: M1, M48, G30, G34