Assessing board effectiveness
Issued By: Treasury Board Secretariat
Contact Information: Governance Directorate
Tel: (613) 954-3937
Approval / Last update: July 2008
Section C – Functioning of an Effective Board
On this page
- Executive Summary: Assessing Board Effectiveness
- 1.0 Introduction
- 2.0 Background
- 3.0 Characteristics of Effective Boards of Directors
- 4.0 Essential Elements of a Board Assessment Process
- 5.0 Access to Individual Director Evaluations
- Annex A – Possible Assessment Approaches
- Annex B – Comparison of Possible Assessment Instruments
- Annex C – Available External Resources
Executive Summary: Assessing Board Effectiveness
Crown corporations are encouraged to ensure regular assessment of their boards and board members.
For a corporation to be successful and to ensure its board of directors has sufficient capacity/skills to provide necessary strategic guidance, boards of directors should be regularly evaluated. An effective board of directors ensures that the corporation meets all of its professional expectations, including maintaining its relationship with the responsible Minister and ensuring successful corporation management. Regular assessment of boards helps to ensure that the standards of the board are maintained and the corporation is capable of ensuring long-term viability and credibility.
Board members can be assessed on their knowledge base, ability, and commitment to fulfilling their responsibilities. This includes a solid understanding of their responsibilities under all relevant legislation, the expectations of the Government of Canada, and the environment in which the corporation functions. As well, board members can be assessed on the fulfillment of their responsibilities for the stewardship of the corporation and on whether they act in the best interests of the corporation and promote the highest standards of corporate governance.
Best practices suggests that a board assessment process should have four elements. First, the commitment of all individual directors to participate ensures there is a shared understanding and acceptance of the benefits of the evaluation. Secondly, a well thought-out systematic process ensures that there is a clear timeline and useful evaluation. Thirdly, specific, appropriately-chosen instruments ensure that the resulting information is valid, and the evaluation is efficient and accurate. Finally, follow-up after the assessment ensures that any identified areas of concern have been addressed and that evaluation information reaches the correct individuals.
The individual directors’ evaluations are considered personal information. As such, access to the evaluation reports of individual directors should be limited to the respective directors and those with a legitimate need to know.
The nature of the assessment process for board of directors varies widely and Crown corporations should choose the most appropriate methodology to suit their operations. A best practice is to have the Chair of the board choose the assessment process, with the support of the other board members. Utilizing a mixture of different assessment processes or varying them on a regular basis, is likely to provide a more detailed and accurate view of how well the board is functioning.
All parent Crown corporations and any wholly-owned subsidiaries that have been directed to report as if they were parent Crown corporations are encouraged to engage in a regular assessment program of the corporation’s board and its members.
The purpose of this document is to provide an overview of the possible processes/methodologies for assessing the effectiveness of boards and individual directors of Crown corporations, as well as providing a list of possible instruments that could be used for this purpose.
Assessment is a general term that embraces all methods used to judge the performance of an individual, group or organization. An assessment process may be undertaken by an organization for many reasons, including for developmental purposes or as a method for determining monetary compensation for individual employees.
A well-managed regular assessmentFootnote 1 program of a Crown corporation board and its members is a good corporate governance practice, in that it enables identification of areas for improvement and can thus be used as a development tool. A regular assessment process ensures the board and its individual directors examine existing structures and processes, identifying successful practices to be retained and providing the opportunity for discussion about areas for ongoing improvement.
The Review of the Governance Framework for Canada’s Crown Corporations measure #12 outlines the aspiration that federal Crown corporations will establish and implement a regular process for assessing boards of directors and individual directors:
Measure #12 of the Review of the Governance Framework for Canada’s Crown Corporations – Meeting the Expectations of Canadians states:
Measure # 12: Consistent with good governance practices, the government will ask boards of directors to establish regular assessments of their effectiveness and the contribution of individual directors as a self-development tool. The assessment of the board as a whole will be communicated by the Chair of the board to the appropriate Minister.
3.0 Characteristics of Effective Boards of Directors
Effective Crown corporation boards and member directors exhibit the following characteristics:
- Comprised of individuals with the necessary knowledge, ability and commitment to fulfill their responsibilities.
- The corporation and its business, strategic plans and operations;
- General structures and processes of the Government of Canada;
- Responsibilities under law, in particular, the Financial Administration Act (FAA)Footnote 2 and the corporation’s constituent statute;
- Expectations of the government;
- Best practices in the organization and management of Boards;
- The Crown corporation’s Code of Conduct and the Conflict of Interest Act; and
- Issues that may affect the corporation, including its sector of operations, clientele, market, public environment, competitors.
- Comply with applicable legislation, Part X of the FAA, any regulations issued pursuant to Part X of the FAA, the Crown corporation’s charter, the by-laws and any directive given to the Crown corporationFootnote 3;
- Where applicable, comply with the Crown corporation’s enabling statute or any other specific statutes relevant to the corporation;
- Keep abreast of the Crown corporation’s public policy objectives and their impact on the corporation;
- Ensure independence from management is maintained;
- Ensure adequate training and education is sought out;
- Ensure the highest ethical standards of integrity and probity are upheld;
- Ensure a high level of personal integrity in all dealings with, and on behalf of, the corporation, including ongoing responsibility to disclose conflict of interest;
- Accountable to the responsible Minister for the stewardship of the corporation; and
- Support effective relationships with the responsible Minister and his/her portfolio department.
- Act honestly and in good faith with a view to the best interests of the Crown corporation;
- Exercise the care, diligence and skill that a reasonably prudent person would exercise in comparable circumstances; and
- Promote the highest standards of corporate governance and seek compliance with the provisions of the Code (of conduct) whenever possible.
Instruments chosen to undertake an assessment of the effectiveness of boards and individual directors should capture to what extent the board and its members meet or exceed the above characteristics.
In addition, board assessment processes also offer the opportunity to gauge board satisfaction with the operation of the board (e.g., number of meetings, discussions, quality of equipment, attendance, interactions with senior management etc).
4.0 Essential Elements of a Board Assessment Process
Best practice for the effective assessment of boards and individual directors includes four important elements:
Commitment on the part of individual directors to participate
A thorough assessment process requires time and directors are busy individuals. For an assessment to be more than an act of checking boxes, it is important to have a commitment on the part of individual directors to actively and objectively participate throughout the process. It is a best practice for the chair of the board to hold a round table discussion with directors before initiating the assessment process, to ensure there is a shared understanding and acceptance of the potential benefits of either (or both) the board and individual director assessments.
A well thought-out, systemic process
To be useful as a means for board improvement, an assessment process takes careful planning. Assessors need to establish a clear timeline for assessment and ensure participants are aware of and understand the steps in which they will participate. The assessment process can also provide an opportunity for board members to express their level of satisfaction with the operation of the board (e.g. number of meetings, equipment utilized, attendance, communications and interactions with senior management).
A few basic dimensions to be considered when planning a process for assessing the effectiveness of boards and individual directors are: internal versus external assessment; qualitative versus quantitative assessment measures; and peer versus self-assessment (see Annexes for details). Assessment instruments can be utilized in isolation or combined for a wider evaluation scope and a more fulsome evaluation.
Many private sector organizations make use of an Assessment Committee that is given the mandate and responsibility to plan and implement the assessment process. Such a committee helps to ensure: directors understand and are committed to the assessment process; a well thought-out, systemic process is in place; each assessment phase is completed; peer-assessment results are compiled anonymously and disseminated to individual directors; a follow-up process is initiated; and actions are undertaken to address any areas needing improvement.
Due to the small size of many Crown corporation boards, utilizing a committee composed of board members to direct the assessment process could potentially result in confidentiality issues. Without careful planning, committee members could come into contact with assessment information focused specifically on individual directors. Confidentiality issues can be avoided through establishing processes that allow for the anonymous compilation and dissemination of peer and individual assessment results. The Chair of the board is often given the role of compiling peer and individual assessment results and disseminating them to individual board members. In addition, Crown corporations can also utilize an external consultant to compile individual and peer results, or an online survey application that allows for the anonymous submission of assessment materials.
Specific, appropriately-chosen instruments
Careful choice and design of assessment instruments will be important in ensuring the resulting information is valid for assessing and enhancing board effectiveness. The instruments chosen should provide adequate opportunity to judge the strengths and weaknesses of the board and its individual directors, without assessment becoming a burdensome process.
There are various types of instruments available for measuring the effectiveness of boards and individual directors and each has its advantages and disadvantages (see Annex B). Due to the varied nature of Crown corporations, assessment instruments may need to be tailored to adequately assess the effectiveness of the particular board and its directors.
Checklists and round table discussions of the board in general provide a good starting point for the assessment process by helping directors to re-examine the general structures, roles and responsibilities of the board and their own roles within it. Peer-assessments and self-assessments of individual directors can follow to provide the advantage of multiple viewpoints and a broader assessment scope.
For a list of instruments for assessing boards and individual directors please refer to Annex C.
Assessment plans normally also include a well-defined follow-up process as an ongoing means for appraising performance. An example of a basic follow-up procedure could be the repeat administration of an assessment tool to verify whether any identified areas of concern have been addressed.
An important part of the follow-up stage is ensuring the information garnered from the assessment process reaches the correct individuals. Results from peer-assessments, submitted anonymously to the assessment committee, chair or an external consultant, can be amalgamated for each individual, with directors each receiving a copy of the reports assessing them. The chair and/or the assessment committee can then retain a copy of each individual director’s report to use as a development tool for helping plan future director training. The chair of the board is responsible for communicating the assessment of the board as a whole, to the appropriate Minister.
5.0 Access to Individual Director Evaluations
The individual directors’ evaluations are considered personal information. As such, access to the evaluation reports of individual directors should be limited to the respective directors and those with a legitimate need to know in accordance with the provisions of the Privacy Act.
Annex A – Possible Assessment Approaches
When planning an assessment process and selecting instruments for assessing the effectiveness of boards and individual directors there are a wide variety of possible approaches that a Crown corporation can consider:
An assessment of the quality of performance of an organization (or its individual members) carried out by experts who are not connected to the organization being evaluated.
More objective assessment
Advanced assessment experience, tools
Less knowledge about corporation, board
An assessment of the quality of performance of an organization (or its individual members) carried out by individuals within and connected to the organization that is being assessed.
Knowledgeable about corporation, board
Less costly than engaging external assessor
Often limited assessment experience
May be less objective than outside assessor
Qualitative Assessment:Footnote 4
Analysis involving the interpretation of “subjective” measures that do not lend themselves to quantitative, numerical measures. Qualitative measurement is generally used to obtain responses in a narrative form.
|May provide richer, deeper answers||
Somewhat time consuming to complete
Harder to compile results
The use of numerical and statistical techniques rather than the analysis of “subjective” measures of behaviour. Quantitative measurement is generally used to obtain responses in a numerical form.
Quick to complete
Easy to compile answers
Less depth to answers
May miss important information not captured by questions
Process of critically reviewing the quality of one’s own performance; examining one’s own work in a reflective manner to identify strengths and weaknesses.
|Enables individual directors to re-examine board/individual performance, mandate, roles responsibilities etc.||
Offers only one perspective
Individual reporting bias
A process in which individuals provide feedback on the amount, quality or success of the performance of peers of similar status (i.e. colleagues assessing each other).
Chance to assess peers
Discomfort of assessing peers
Newer board members may have lack of information on peers, their roles
Annex B – Comparison of Possible Assessment Instruments
Grading (Using preset scale)
|Short/Long Answer Questionnaire||
Informal: (discussion with Chair or assessment committee)
Formal: (Interview with consultant or committee)
|Round-Table Discussions/ Work Sessions||
Annex C – Available External Resources
General Resources on Assessing Board Effectiveness
- Board Assessment: Designing the Process (PDF, 76 KB). The Corporate Board, November/December 2004.
- Determining Board Effectiveness: a handbook for directors and officers. The Conference Board.
- Evaluating the directors: the next step in boardroom effectiveness. Ivey Business Journal, September/October 2002.
- Your key to Board and Director Evaluation, Orientation and Education. Fasken Martineau Corporate Governance Series, December 2003.
- Institute of Corporate Directors (ICD) Key Competencies for Director Effectiveness – Competency List.
- Structural Options for Board Self-Evaluations. Source: The Effective Board.
- Agency Self-Assessment Tool. British Columbia Ministry of Finance.
- A Board Evaluation – Quick Assessment. Source: Abaris Consulting Inc.
- Board Effectiveness Checklist. Source: Boardroom Metrics Website.
- Governance Information Check-Up. Source: Governance Information: Strategies for Success, Canadian Comprehensive Audit Foundation, 1996.
- Governance information Environmental Assessment. Source: Governance Information: Strategies for Success, Canadian Comprehensive Audit Foundation, 1996.
- Board Self-Evaluation. Source: National Association of Corporate Directors (NACD) Blue Ribbon Commission on Director Professionalism.
- Commonwealth Association for Corporate Governance (CACG) Board Evaluation Questionnaire (Source: CACG DRAFT Board Evaluation Guideline, Annex 1).
- Director Evaluation Questionnaire. Source: Commonwealth Association for Corporate Governance (CACG) DRAFT Board Evaluation Guideline, Annex 1.
- Effective Leadership: an assessment tool. Source: Conference Board of Canada.
- Governance Effectiveness “Quick Check” Online Questionnaire. Source: Institute of Governance Website.
- Individual Performance Score Card. Source: Brown Governance.
- Team Performance Scorecard: Evaluation tool for the Board as a whole. Source: Brown Governance.
- Team Performance Scorecard: Evaluation tool for committees of the Board. Source: Brown Governance (Team Performance Scorecard: Evaluation tool for the Board as a whole.
Round Table / Work Session
- Board Evaluation: Facilitated Work Session. Source: Boardroom Metrics Website.
Report a problem or mistake on this page
- Date modified: