The Importance of Board Analysis

Board analysis is the examination of the composition of a board, its structure, and operation. Its purpose is to determine if a board is equipped with the proper balance of outside and inside knowledge as well as experience and objectivity to monitor and advise management and formulate strategy. It also seeks to understand the way a board works as a collective and if the board is in fact supporting the CEO and assisting in driving the company’s growth.

The best boards are characterized by a dynamic of trust, openness, and collaboration. They are aware of the organization’s ecosystem and they are able to ask management crucial questions. They are focused on the long-term health of the company and are able to identify risks and opportunities. They work with stakeholders so that the board can understand their stake in the company, make changes in corporate behavior and contribute positively.

According to McKinsey’s 2021 global survey of more than 800 executives and directors the most effective boards have an experienced mix of non-executives (NEDs) and executives with a deep knowledge of the business. They have an organized structure and a set of policies to guide their decisions, and they are focused on improving the efficiency of the board and its committees.

A board evaluation can be an effective tool for a board to evaluate its performance and provide feedback to the CEO or Chair. However it is not the case that all boards have taken this as a top priority. Through conducting an objective third-party evaluation board members will be more aware of potential dangers.

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