Chapter 7Assessing Board Performance

  • The Evolution of Board Assessments
  • Examples of Board Assessments
  • Customizing the Assessment Process
  • Finding Your Own Best Practice
  • Conducting Peer Reviews
  • Chapter Summary and What's Next

Asnoted in Chapter 1, “The Changing World of Board Governance: How We Got Here,” 2002 was nothing short of a watershed year for board governance practices, mainly due to two events. First was the passage of the Sarbanes-Oxley Act (SOX), which focused on governance activity within corporate boards and audit committees. Second was a significant change in the New York Stock Exchange (NYSE) Listed Company Manual (303A.03), requiring that “nonmanagement directors meet at regularly scheduled executive sessions without management.” These changes to governance practices were in direct response to public outrage over corporate malfeasance and greed that had been so unabashedly exhibited by three high-flying corporations at the time: WorldCom, Enron, and Tyco.

This chapter discusses another important 2002 change to the NYSE Listed Company Manual, which requires annual performance reviews of the board and its committees. As provided in Section 303A.09 of the NYSE Listed Company Manual, boards “should conduct a self-evaluation at least annually to determine whether it and its committees are functioning effectively” as well as “an annual performance evaluation of the required committees of the board—Nominating/Corporate Governance, Compensation ...

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