The activity of the board of directors is carried out during meetings. Therefore, the overall productivity of the work of the board and the company in general largely depends on how the board meetings are prepared and held. So, how to measure the board meeting effectiveness? Here is about it.
Preparation and holding of the board meetings
Following the current legislation, meetings of the board of directors can be held both in person and in absentia, but for this, the company's charter must define the possibility of making decisions of the bard by absentee voting, and it is also expedient in the company's internal documents regulating the work of the board directors, determine the procedure for conducting absentee voting. In addition, when developing the company's charter, it is advisable to decide on the possibility of taking into account, when determining the presence of a quorum and voting results, the written opinion of a member of the board of directors who is absent from the meeting.
The preparation of the board meeting begins with sending its members a notice of the meeting on the set date, and a package of information materials on the agenda items, allowing them to prepare for the discussion of these issues. The notice and materials for the meeting – the information package – must be sent within a timeframe that provides members of the board with sufficient time to prepare for the meeting. As practice shows, a sufficient period is a receipt by members of the board of notices and materials at least 7-14 days before the day of the meeting. If complex issues will be considered at the meeting (reorganization, business plan, strategy, major transactions, a new charter, etc.), information on these issues should be sent to the members of the board at least a month before the date of the corresponding meeting.
How to evaluate the board meeting effectiveness?
Foreign standards of corporate governance best practice suggest limiting ourselves to conducting a subjective assessment. But in general, there are two ways to measure board meeting effectiveness:
- A subjective assessment is carried out by filling in a questionnaire by each member of the board of directors, in which a member of the board expresses his subjective opinion on the issues of the practice of the boards. The opinions expressed are summarized and the results obtained are approved at one of the meetings of the board of directors or the HR and remuneration committee.
- An objective assessment is carried out by analyzing the company's internal documents, including the work plans of the board of directors and committees of the board of directors, minutes of meetings of the board of directors, and committees. Conclusions regarding the improvement of the council's work practices are made taking into account the company's development strategy and the stage of development of its corporate governance. Objective and subjective assessments are carried out according to the same criteria, and the results of the assessments do not always coincide. General information on the evaluation results is subject to inclusion in the Company's Annual Report.
The combination of subjective and objective assessment gives a more complete picture of the work of the board of directors and ways to improve its effectiveness. Using the results of the evaluation involves making adjustments to the work of the board of directors, committees of the board of directors, and individual work of the board of directors.