Notable particularly in the context of pressures on companies worldwide to ensure the conduct and disclosure of robust board evaluations, the ICSA (Institute of Chartered Secretaries and Administrators) - : prompted by the UK's Department for Business, Energy and Industrial Strategy (BEIS) - published this Consultation on the quality and effectiveness of listed company independent board evaluations. The UK Corporate Governance Code provides that FTSE 350 companies should conduct an externally facilitated evaluation every three years and disclose the identity of the external evaluator, the evaluation process and methodology, outcomes and actions taken, and more.
The Consultation summarizes current board evaluation practices among the FTSE 350 based on public disclosures, and invites comment on whether to adopt specific measures designed to increase the robustness and objectivity of externally facilitated evaluations, and better position companies to support those attributes in their disclosures.
The proposed measures are:
- A voluntary code of practice for independent board evaluation service providers (see draft code in Appendix C) - possibly supported by some form of accreditation and/or oversight
- Voluntary good practice principles for companies when engaging an external facilitator that address the facilitator selection process and board evaluation scope, process, and disclosure (see draft in Appendix D)
- Disclosure guidance for companies on how the board evaluation was conducted, outcomes and actions taken, and the impact on board composition (see draft in Appendix E)
US-based and other companies (wherever located) may want to review and consider voluntarily adopting certain of the proposed non-UK-specific evaluation process and disclosure practices set out in Appendices D and E, many of which are generally indicative of good practices regardless of company size, industry or governing regulatory scheme.
The ICSA's analysis of current FTSE 350 practices reveals: (i) overall company compliance with retaining an external facilitator every three years; (ii) a board evaluation service provider market with many - but dominated by a few - players; and substantive disclosure on key topics (evaluation process, methodology, and outcome and actions) by a minority of companies.
Next steps: ICSA will publish a report with recommendations based on its analysis of the Consultation responses and submit the report to BEIS, which will then consider whether - and how - to act on the recommendations.
Access additional information & resources on our Board/Director Evaluations page. This post first appeared in the weekly Society Alert!