CONDUCT OF BOARD EVALUATION BOARD EVALUATION SEMINAR 27TH -29TH JULY 2016 REEF HOTEL, MOMBASA The Institute of Certified Public Secretaries of Kenya   CONDUCT OF BOARD EVALUATION 0725519058 /+254 - 041 2311060 waihenya@jwmadvocates.com/ jackeewmaina@gmail.com CS Jacqueline Waihenya Maina

Outline Who & What is being evaluated Board Evaluation Tools Process of Board Evaluation

Who & What is being Evaluated A board evaluation should provide guidelines for effective board of director performance It should answer the question, “are we as a Board contributing to the Company’s ability to meet its purpose”.

Focal Points to Evaluate Organs to evaluate:- Board; Committee; Individual director evaluations; Chairman CEO; and Governance Practices. Key factors to consider:- Who has the overall responsibility for the process (usually the Chairman) Who is going to have input into the process The structure and content of the process What the reporting is going to take place and to whom, and Most importantly, how the outcome will be acted upon by the Board

Who & What is being Evaluated All areas the Board is responsible for: Membership Accountability Governance Board Operations Legal Responsibility Financials Planning Board/Members Relations Possible Parameters Attendance Contribution Participation Preparedness Commitment Connections financial skills Business acumen etc

What should the Evaluation Cover? All areas the Board is responsible for: Membership Accountability Governance Board Operations Legal Responsibility Financials Planning Board/Members Relations

What qualities should the evaluator possess? Knowledge of the company’s history and strategic direction; Experience with and understanding of the Board members’ roles; Capacity to listen and read body language; Ability to focus on constructive ideas; Ability to stay calm, be objective and avoid arguments; Ability to trust and to respect confidentiality

Process of Board Evaluation

Example of Step-by-Step Evaluation Get agreement to the evaluation concept from board members; Define the duties of the Board; Establish the evaluation core criteria; Questionnaire design; Undertaking assignments; Analysis of results; Findings and recommendations; Feedback session; Organising post evaluation board training; Ongoing monitoring

Board Evaluation Tools Full Board Self Evaluation; Board Committee Self Evaluation; Non-Board Committee Evaluation; Outside Consultant Evaluation.

Full Board Self Evaluation PROS: Involves entire Board No one knows more about the Board than the Board itself CONS: Can be a lengthy process

Board Committee Self Evaluation PROS: Again, no one knows the Board better than the Board itself; Will proceed more quickly since there are fewer people involved. CONS: Possibility of bias since the whole Board may not involved.

Non Board Committee Evaluation PROS: Provides an unbiased opinion Outside evaluation may provide the board with information they have never considered before CONS: Committee will be looking from the inside in.

External Consultant Evaluation PROS: Familiar with industry as a whole Provides: Objective criteria Outside perspective Precedent - future Evaluations Unbiased view Expert Independent Ability to Benchmark CONS: The Consultant will be looking from the outside in. Can be expensive Threatening to vested interests Administration/Confidentiality Time consuming Can identify problems the BOD does not want to deal with When to use external consultant: First time evaluations During an emotionally charged Year For a Board which has difficulty building consensus Internal process has not worked well in the Past.

Board Evaluation Instruments: Questionnaires Structured Interviews; Peer Review Matrix; 360 degree analysis; Annual discussions between the Chairman & individual directors; Self evaluation; Board Evaluation Report/Results/ Recommendations; The questionnaire for the Directors usually contains 4 sections, namely, evaluation of the Board of Directors as a whole; evaluation of the Chairman by the Directors; evaluation of the Chief Executive by other Directors; evaluation of the Company Secretary by the Board

Chairman’s Evaluation: Areas of a Chairman’s performance that should be assessed are as follows:- Chairing board meetings; Providing input to board agendas; Working with the CEO; Communicating with fellow directors; and Communicating with shareholders and other stakeholders. Areas of a Chairman’s performance that should be assessed are as follows:- Chairing board meetings; Providing input to board agendas; Working with the CEO; Communicating with fellow directors; and Communicating with shareholders and other stakeholders.

Basic contents of the evaluation instrument General operations of the Board Board structure Selection, Appointment, induction, Development, Rotation and succession of directors Board effectiveness Strategic direction Accountability The Chairman- Leadership, Stakeholder relationships The CEO-Leadership, Stakeholder relationships Individual directors-Training, Experience, Competence and skills, Commitment to Board functions and the Company, Knowledge of legal duties and liabilities, Conflicts of interest, Preparation for meetings, Conduct and integrity, Teamwork

Evaluation Instrument The Evaluation instrument developed is required to measure whether the Board:- Provides leadership and looks at the right issues; Has met its key performance indicators; Provides an effective mix of knowledge, experience and diversity; Works in terms of board dynamics and behavior; Has effective processes.