The Market for Corporate Directors - INSEAD Corporate Governance Centre (ICGC) - Report - Page 17
itself. We got confounding answers from directors who did not mention what the impact of the evaluations
was. Comments ranged from “results not presented yet” or “ongoing process,” to “no impact in real life” or “they
did not drive any change in corporate governance practices.” We observe evaluations are not enough common
practice, and even when existing, for most of the boards they might lack the driving power necessary to push
them towards better practices and improve their governance. In the worst case scenario, they have no impact
at all, or fail to be implemented in a way directors see meaningful.
Directors monitoring vary with the type of boards they sit on
We wanted to go beyond these observations, and investigate if evaluations carried not at the board level, but
at the director level, would be more meaningful and compelling as a driver for good governance and practices.
So we asked directors about such evaluations and found out that with only 95 boards reportedly conducting
individual evaluations, we went down from 49.7% of boards evaluating the quality of their governance to 33.6%
where directors’ individual contribution was evaluated. An evaluation that drops to 26% in private companies. In
the case of family firms the difference is slim; they carry as much governance evaluations as individual ones.
While we could regret this practice is even less wide spread, on the positive outlook they bear direct consequence
for directors. Thus, 27.4% of the evaluations carried have an impact on directors’ appointment or non-renewal
term. They can also affect their remuneration, their nomination on committees, and chairing role.
Many boards have recognized the importance of these evaluations.11 Yet, the practice is far from being
implemented consistently, and this, despite recommendations for their inclusion in corporate governance
frameworks. With the idea that being a (professional) director requires commitment, and being accountable
for one’s decisions and their consequences for the company, there is no way around evaluations. They are
a necessary part that shall lead to better governance. Consistently with the New Paradigm preconizing the
development of evaluations at the board level, it is necessary that directors are regularly (at least once per year)
assessed on their individual contributions as well.12 This responsibility falls to the chair who beyond its leading
role also has to monitor and assess the board. As reported by the directors we interviewed, in 52.4% of boards,
chairs are in charge of evaluating the effectiveness of the governance and in 54.6% of boards, they are in charge
of monitoring directors’ individual contribution.
Our study highlights boards are lagging behind to implement evaluations, but also sheds light on a pitfall
that will need to be avoided. These evaluations should not be just a tick box at the risk of becoming useless
and a waste of time. Boards shall rather see them as a tool to improve, for them to be more efficient and
become a force for good and better corporate governance. This also implies that the chair is not just a director
that sit on the top of the others for the sake of organizing board’s meetings and agendas. The chair has
supplementary duties and responsibilities, and just like professional directors, it takes specific skills and talents
to be a –professional– chair.
and scandals stir better
governance practices, but assessment at the board
level are still from being systematically conducted.
Mentor or sponsor
Evaluation of the
quality of governance
Key Take Away
Boards must carefully run succession planning and set recruitment processes to hire directors that will bring
added value through their vision, their strategy, and the diversity of their profiles
Despite an increase of directors’ diversity, stark contrasts persist between men and women such as the number
of boards they sit on
Search firms are gaining relevance in scouting ideal directors’ profiles, but managing networks is vital, especially
professional connections that lead to most of appointments
Setting onboarding processes including mentorship is critical to get directors up to speed and help them to
deliver value for impact
Directors at any stage of their career, will face the 3C challenges (context, company, collaboration) to understand
the company and its industry, to deal with a changing environment, and to manage relationships with other
Sitting on a board is better understood as a continuous process allowing directors to develop their knowledge
and skills, which results in a win-win situation for them and the board
Considering growing expectations for governance, directors who deciding to professionalize will require training
OECD. (2018). Board Evaluation: Overview of International Practices.
Martin, L. (2017, January 11). Corporate Governance: The New Paradigm. Retrieved from Harvard Law School Forum on Corporate Governance and Financial