Keeping high-performance vehicles aligned generally requires watchful, regular maintenance, such as rotating the tires, checking the steering and adjusting the suspension. Some only need minor calibration, while others need major realignment. Like vehicles, boards may require maintenance—or in a business context, education—and alignment.
So how does an organization consider and evaluate the board’s alignment? Alignment typically begins with leadership and its engagement structure. Board and management evaluations are catalysts for measuring alignment, and for identifying or highlighting action points to achieve improved performance and collaboration.
Organizations that are not utilizing evaluations to measure board and management performance could be missing an opportunity for growth. Consider your organization’s board and management team: Is there room for improvement?
Based on the Nasdaq Governance Solutions board engagement team’s discussions with boards, the answer is typically “yes.”
Evaluations allow boards to prioritize:
• Selection and retention of top leadership talent
• Board composition and refreshment
• Approval and support for corporate strategy
• Oversight of the organization’s risk and opportunity profile
• Allocation of the board’s time to focus on key issues
Evaluations also help promote analysis of the following:
• Status of vision, mission and values
• Present tone from the board and management team throughout the organization
• Ethics and accountability
• Board composition and culture
• Board meetings and administration
• Strategy and performance measures
• Board and management team relationship
• Board’s role in stakeholder engagement
An aligned relationship between the board and management team may be critical to organizational performance and risk mitigation.
Deepened and healthy engagement sets a tone that builds stakeholder confidence and promotes diversity of input, providing better foresight to see “around the corner” and “down the road.” Like a well-maintained vehicle, alignment may ensure that the board and management team is operating at its best and heading in the right direction. Evaluations help to facilitate alignment as a “tune-up” for the boardroom.
Moreover, stakeholders have expressed a heightened focus on board and management alignment. The new era of corporate governance in which we live may require adapting to complexities driven by crises, societal perspectives, regulatory requirements, the rapidity of change and a globally connected economy. Forward-thinking boards are responding to increased demand for accountability from investors, regulators and other stakeholders. Robust disclosure of the evaluation process helps to reinforce the board’s effectiveness and commitment to its role.
Organizations now have experienced resources available to help achieve alignment and, ultimately, governance excellence. Third-party specialists like the Nasdaq Governance Solutions board engagement team have replaced processes that may be viewed as inefficient and disengaged with ones that are designed to be sophisticated and structured for the modern era. Furthermore, third parties help promote candor in feedback through anonymity in results, which in their absence may stifle director engagement and evaluation effectiveness. Just as one would consult an auto expert in tuning up a vehicle, one should also consider consulting an experienced governance professional in “tuning up” a board.
The Nasdaq Governance Solutions board engagement team helps public, private and nonprofit organizations with the design and implementation of board evaluations. The team tailors the evaluation process to meet each board’s corporate governance objectives. Plus, results reporting helps identify growth opportunities, deepen board and management team engagement and turn director feedback into strategic action. To learn more, visit nasdaq.com/solutions/board-evaluations.
