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Conducting board assessments and peer evaluations
Posted on November 11, 2010
By Catherine A. Ghiglieri and Jewell D. Hoover
Board assessments and peer evaluations are best practices for community banks, but board members are often unclear on the process and CEOs can be a little bit leery of the outcome. But there is a straightforward way to conduct board assessments and peer evaluations that improve the productivity of the board and eliminate some of the mystery.
What are a board assessment and a peer evaluation?
A board assessment is an evaluation by each board member of how well the board is doing its job of overseeing the operations of the bank. The results of the board assessment should be summarized in such a way as to obscure individual board member comments and should be presented in writing to the board.
A peer evaluation, on the other hand, is an evaluation of each individual director’s performance on the board. The results should also be summarized in such a way as to obscure individual board member comments and be presented in writing to the individual board member. The Chairman of the Board often discusses board member evaluations with each board member.
Peer evaluations should be kept confidential and not discussed with the full board.
Why perform board assessments and peer evaluations?
Board assessments and peer evaluations are performed in order to improve overall corporate governance processes, enhance board communication, and improve decision-making. The results of board assessments can also assist the Nomination Committee in identifying potential board members whose skill sets complement the existing board.
Peer evaluations can improve each board member’s effectiveness and identify training needs for each board member.
The board assessment and peer evaluation process may be extended to board committees to improve committee member performance and communication among committee members, as well as to improve decisionmaking of each committee.
What are the first steps?
The board of directors should first be educated on the process of conducting board assessments and peer evaluations in order to set expectations, thus ensuring a successful outcome. The board should then decide if it wants to conduct a board assessment, peer evaluation, or both. Next the board should decide whether it will need external assistance or if someone internally is capable of conducting the assessments and evaluations.
Board assessment questionnaires are then formulated to allow board members to rate such topics as the following:
• Alignment of board’s actions with the bank’s strategic initiatives
• Board participation in the planning process
• Corporate governance processes
• Level of communication among board members
• Effectiveness of board committees
Peer evaluation questionnaires focus on each individual director and evaluate such things as the following:
• Leadership style
• Value as a team member
• Quality of judgment
• Communication with other board members
• Level of participation
The process should be constructed to be as non-threatening as possible. Many times boards seek external assistance to conduct the board assessments and peer evaluations to help remove any biases and prejudices from the process and to maintain confidentiality of results.
Board assessments and peer evaluations are best practices that can transform board behaviors and board dynamics that ultimately improve the overall corporate governance of the bank.
About the authors
Ms. Ghiglieri is the former Texas Banking Commissioner and is President of Ghiglieri & Company, a bank consulting firm based in Austin, Texas. Ms. Hoover is President of Hoover and Associates, LLC, a bank consulting firm in Charlotte, N.C. She serves on a board of a Fortune 500 company and is former Deputy Comptroller for the Office of the Comptroller of the Currency’s Western District.
Ms. Ghiglieri and Ms. Hoover are co-authors of The Ultimate Guide for Bank Directors and co-founders of The Bank Directors’ College, which provides training to bank directors.
[This article was posted on November 11, 2010, on the website of ABA Banking Journal, www.ababj.com, and is copyright 2010 by the American Bankers Association.]
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