A number of business practices that have emerged during the pandemic will need to be further evaluated as the health risk recedes. Some temporary board responses will need to be reassessed as a new hybrid virtual and in-person operating environment becomes more widely accepted.
For boards committed to governance performance improvement, now may be an appropriate moment for introspection while revisiting board processes, structure, composition, and goals. A board assessment is the natural tool for this purpose, and given the seismic level of change at hand, an externally assisted assessment would be most likely to deliver additional insights and fresh perspectives.
Many boards have been routinely conducting self-assessments using a standard set of questions that typically reinforce the status quo. But if the events of the past year have taught us anything, it is that this moment may be too pivotal for the same old approach.
Board leaders should rightfully ask: Do we truly believe that what we are doing today is sufficient to help us move the bar on governance going forward? Is our current assessment process helping us learn anything new? Has it led to new thinking or innovative changes to the way the board works?
Any number of leaders might raise these questions, including the board chair, the governance committee chair, the CEO, or the general counsel. From our perspective, the general counsel is best positioned to provide assistance to board members who are contemplating a more robust approach.
External support might be retained from a law firm or a consulting group. Their processes serve different goals. One delivers a process designed to insulate or to satisfy legal standards. The other delivers a consultative process that first assesses boardroom dynamics and then collaboratively creates a custom board development plan.
The process should begin with an in-depth assessment of the full board and each committee that includes quantitative performance metrics and qualitative feedback focused on the key drivers of governance performance. Board improvement actions are prioritized, addressing board structure, the scope of committee responsibilities, board composition, communications, culture, board succession planning, and stakeholder engagement. Once alignment is achieved, a new annual governance cadence is developed for the board.
Never has more been expected of boards. That is true for companies that are public or private, large or small. Yet, at this time of rapidly evolving board responsibilities, consider the recent surge in popularity of special purpose acquisition companies, or the emergence of promising early-stage life sciences and fintech organizations. Newly formed boards and management teams need time to develop their own governance processes and to learn to work alongside each other. In our experience, even at start-up companies, the board plate becomes full very quickly, and the need to adapt the work of the board is critical to the long-term success of the company.
An internally conducted assessment might suffice for those boards only looking for a retrospective survey of director viewpoints and a mention in the proxy, but it is unlikely to produce responsive and lasting change in practices, capabilities, or behaviors. Is something more needed at your company?
This article was co-authored by Lee Udelsman at Major, Lindsey & Africa