Board performance evaluation
An evaluation to assess the performance of the board as a whole, its committees and that of the individual directors is conducted on an annual basis with the aim of improving the effectiveness of the board and its members and the performance of the group.
This year’s review was led by the Senior Independent Director, who provides feedback to the Chairman, and took place in the final quarter of the financial year.
A discussion guide was put together and circulated to each director and the Company Secretary. Key areas of the evaluation included:
- board structure, organisation and dynamics, including the environment for effective discussion, key board relationships and non-executive director involvement and challenge;
- board efficiency and effectiveness, including agenda content, quality of debate, decision-making process on significant proposals, and leadership by the Chairman;
- strategic review and debate;
- risk management and governance;
- people issues, including succession planning;
- business performance, including level and quality of reporting measures;
- board committees; and
- key issues and improvements.
There was also a particular focus on how much progress had been made in implementing the recommendations arising from the previous year’s evaluation and how well the board is working in the context of the FRC’s Guidance on Board Effectiveness issued in March 2011.
The Senior Independent Director then undertook a confidential, unattributable interview with each director and the Company Secretary based on the discussion guide. The interview with the Senior Independent Director was conducted by the Chairman. Following the meetings, the Senior Independent Director produced a written report which was discussed with each of the Chairman and the Chief Executive, before being sent to board members and discussed at the following board meeting.
There was a strong sense of progress in implementing proposals arising out of the 2010 evaluation.
Actions implemented arising from the 2010 evaluation include:
Objective | | | Achievement |
| Enhanced debate | | | The length of board meetings has been increased which has allowed more time for reflective debate and discussion, particularly after presentations to the board. |
| Review development of strategy | | | Strategy has become a more frequent item on the board agenda. |
| Greater scrutiny of risk assessment procedures | | | The Chairman instigated board agenda reforms which have led to more frequent review of cross-divisional issues and a regular cycle of risk reviews of specific areas leading to enhanced board oversight and understanding. |
Based on the results of the evaluation process in 2011, the board considered that overall it was operating effectively and that each of the directors continues to make a valuable contribution with proper commitment to their respective roles, including of time. The board’s principal committees were also judged to be functioning efficiently and effectively.
A full list of recommended action points was drawn up and agreed upon and is being implemented under the direction of the Chairman including actions set out in the table below.
Areas identified for action from the 2011 evaluation include:
| Value creation | | | Review of investment returns from recent major projects to be a particular focus of board agendas. |
| Strategy development | | | Continuing review of priorities for long-term development opportunities. |
| Risk management | | | The amount of time devoted to risk issues on the board agenda to be increased. |
| Succession planning | | | Further development of succession planning processes including the issue of diversity. |
2012 evaluation
The board intends to appoint an external facilitator to lead the 2012 annual evaluation of its performance and a shortlist of possible external facilitators is being drawn up for this purpose.