When making investment decisions, investors tend to give primacy to who the CEO is and who may be the successor, not to who sits on the company’s Board of Directors (the “Board”). Typically, the CEO is perceived as more determinative for company success than the Board or any of its members. At the same time, who serves on the Board is far from inconsequential. First, in many jurisdictions the Board plays a final or at least a critical role in selecting and dismissing the CEO. Wrong decisions here could lead to a low-achieving or even value-destroying CEO being chosen or tolerated. Second, with the duty to provide oversight, the Board has to perform a daunting ongoing balancing act, often under shifting business conditions. It has to monitor the CEO closely enough to detect early any signs of underperformance or mismanagement. But it has to do this in a way that does not unduly curtail the CEO’s operational latitude or stifle entrepreneurial initiative. Third, in the task of looking after the company’s long-term interests, Board members enjoy a privileged vantagepoint. This derives not simply from their independence, experience, or healthy distance from the company’s daily ups-and-downs. It also relates to the often-longer office tenure of Board members compared to CEOs. Fourth, as the company’s highest organ, the Board has ultimate accountability for company strategy and performance. When a company fails – even when the failure may be more attributable to actions by executives – investors and regulators are prone to ask, “Where was the Board?” Paradoxically, when a company succeeds, few are those who applaud the Board’s contributions. Own-Work Cognition Given these formidable Board accountabilities, investors and other stakeholders have an interest not only in how a company chooses its Board members. They also care about how well these Board members deliver once in office. In light of this, it should also matter to stakeholders how self-aware a Board is of how good a job it is doing and how it evaluates its progress. Shortcomings in this regard could result in the Board recognizing too late a particular weakness or misjudging the overall quality of its work. Yet this angle of corporate governance continues to be insufficiently explored. Post-mortems of company failures typically point to Board deficits such as inadequate oversight of management, misguided decisions, or poor Board composition. But the analyses rarely probe deeply enough into the degree of self-cognition by the Board of the caliber of its work or the robustness of the methodology it employs to monitor and appraise its actions and accomplishments. For example, following the 2019 WeWork scandal commentators criticized the Board for having failed to challenge the CEO sufficiently on his financial assumptions, to recognize his conflicts of interest, and to bring members with more diverse experiences onto its ranks. But the analyses did not explore the extent of Board performance self-awareness or the nature and quality of the Board assessment process. Might WeWork Board members have thought they were doing a good job? More rigorous approaches in this area can also aid a Board to deal timelier with internal differences. This can prevent disruptive outcomes such as in a real scenario playing out at the time of the writing of this article. In this case, a Board member of a major company carried out in effect a “noisy withdrawal”, accusing fellow Board members of ignoring serious problems at the enterprise. Some reports suggest that personal interests may also be involved. But once the dust settles, it will be revealing to see what the Board had been doing to identify and address any own-performance weakness areas. The Five Step-Ups The author’s work with Boards around the world suggests five essential “step-ups” when the Board is looking to elevate its performance self-awareness and earnestly answer the question, “How do we know how well we are doing?” 1. Make the Sporadic Regular Boards of regulated or quoted companies in many jurisdictions are required to conduct periodic own assessments. How often and in what depth can differ. Even where no such rule exists, a Board eager to enhance its own-work cognition recognizes the value of regular assessments. In some instances, carrying out the exercise every two years suffices,9 while in others a yearly process is de rigueur. Factors that support higher frequency include: A higher company risk profile Material new business challenges Changes in the company’s strategic direction Frictions in the Board-Management relationship Significant alteration in Board composition such as a new Board Chair or investor representative Evidence of unresolved Board internal tensions Evidence of any Board members not carrying their own weight Company or market changes requiring new skills or experience on the Board Need to increase Management or Board succession readiness One effective practice for bringing discipline to the self-assessment cycle is to define it in the Board’s operational rules, multi-year plan, or similar Board document. This has the advantage of securing a place for assessments on the Board’s calendar. To bring more value, the timing of assessments is aligned with other major Board activities. For example, if the tenure of one or more Board members is expiring, it is sensible to hold the assessment well in advance of such expiration. The findings can help inform what qualities and expertise to look for in the search for a new Board member. Another benefit of regularity in Board assessments is that it permits multi-year tracking of Board progress. In this regard, it is important for the Board to establish the means to preserve each year’s findings, learnings, and methodology employed. This will ensure that the company’s future Boards will also benefit from the insights. 2. Pivot to Active Performance Management Board assessments traditionally have been positioned as an assurance check that the Board is meeting its legal and other prescribed obligations. Some call this a hygiene or boundary condition test. But this approach detracts from the equally important question, “How much added value is the Board’s work generating?”. Thus, a fundamental mindset shift is needed, from mere duty fulfillment to
