The wayang of board evaluations

WELCOME to the new year. As we enter another corporate reporting season, the ritualistic dance of board evaluations takes centre stage.

Ideally, board evaluations are meant to assess the effectiveness of a company’s board of directors. The process should involve examining the board’s performance, decision-making and overall contribution to the company’s success – and then providing insights into how it can improve going forward.

In practice, the process can devolve into a superficial exercise that satisfies compliance requirements but fails to deliver meaningful outcomes. If unchecked, some board evaluations can be more of a choreographed performance – as in the spectacle of a wayang, or local street opera.

Board evaluations are meant to be an exercise in self-reflection and strategic planning, providing accountability and transparency to stakeholders. However, following the analogy of the wayang, a disconcerting reality may lurk behind the colourful costumes and lively music.

The players and their scripts

When boards approach the process as a performance designed to appease shareholders, regulators and their fellow directors, the script is predictable. Directors extol their own virtues, politely applaud the stage master (chairperson), highlight successes (real or imagined), and gloss over failures with vague platitudes about “lessons learned”.

When the metrics used in such evaluations only focus on easily quantifiable data (such as attendance records and committee participation), they ignore more important aspects of board effectiveness (such as the quality of decision-making, the diversity of perspectives, and the ability to challenge management).

Moreover, in a peer evaluation, the evaluators themselves are often part of the very system they are meant to scrutinise. It’s a bit like asking the lead actors to critique their own acting. Independent consultants are sometimes brought in, but they may be beholden to the board for future business, creating a conflict of interest that undermines the objectivity of their assessments.

Even when evaluations do identify shortcomings, the consequences are rarely significant. Directors are rarely removed from their positions as a result of these evaluations, and when they are, it is often for reasons unrelated to their performance on the board. The system can somehow come across as is perhaps designed to protect its own, rather than to hold individuals accountable for their actions.

Genuine evaluations

Of course, not all board evaluations are farcical. Some boards take the process seriously and use it as an opportunity for genuine introspection and improvement. These boards view evaluations as a strategic imperative rather than a compliance exercise, treating them as tools to enhance governance and drive long-term value creation.

For these evaluations to be effective, however, they must transcend superficial measures and address deeper issues. This requires a cultural shift within boards to prioritise transparency, accountability and continuous improvement over the comfort of self-congratulation.

Reimagining board evaluations

To ensure that board evaluations become a catalyst for real change rather than a ritualistic performance, companies must adopt a more thoughtful and rigorous approach. Here are several strategies to achieve this transformation:

1. Focus on qualitative metrics. Move beyond attendance records and committee participation to assess the quality of board discussions, the diversity of perspectives, and the willingness to challenge management. Boards must delve into questions such as: Are dissenting voices heard? Is groupthink avoided? Are decisions made with sufficient debate and foresight?

2. Involve external stakeholders. Seek input from major shareholders, management, employees, customers and other stakeholders who have both a vested interest and insights into the board’s effectiveness. By incorporating their perspectives, evaluations can provide a more holistic understanding of the board’s impact on the organisation. For instance, engaging shareholders can reveal whether board decisions align with long-term value creation, while feedback from employees can shed light on whether the board supports a healthy organisational culture.

3. Ensure independence of evaluators. Truly independent evaluators are essential to the integrity of the process. Companies should avoid hiring consultants with existing or potential business relationships with the board. To further ensure independence, it may be beneficial to rotate evaluators periodically, reducing the risk of complacency or undue influence.

4. Link evaluations to consequences. A robust evaluation process must have teeth. Poor performance should lead to tangible consequences, including the possibility of removal from the board or from board committees. Both the chair of the board and the nominating committee play critical roles, setting clear expectations for accountability, and making it known that underperformance will be noted.

5. Make evaluations a continuous process. Boards should encourage ongoing self-reflection and peer feedback throughout the year. For example, implementing mid-year check-ins or post-meeting reviews can foster a culture of continuous improvement. Such practices ensure that evaluations are not a once-a-year event but an integral part of board governance.

While these are not new ideas, they could be useful if implemented with the right intentions. There are always opportunities to improve every board evaluation and create a system that promotes accountability, transparency and effective governance.

Ultimately, board evaluations should be more than just a ritual or spectacle. They should be a catalyst for real change, a tool for ensuring that boards are equipped to deliver their responsibilities and drive long-term value creation for all stakeholders.

Shareholders demand nothing less.

The writer is a member of the Governing Council of the Singapore Institute of Directors.