UK Boards: How Good Are We?

The following entry appeared as part of GovernanceMetrics International’s GMI Blog. GMI is the leading independent provider of global corporate governance and ESG ratings and research. Corporate stakeholders – including leading investors, insurers, auditors, regulators and others – use GovernanceMetrics services to identify and monitor risks related to non-financial measures covering key environmental, social, governance and accounting risk factors.

By Paul Hodgson – CCO and Senior Research Associate

Law Debenture has just published a review of the first year of “compulsory” board evaluations.

The 2010 UK Corporate Governance Code requires companies in the FTSE 350 to comply with, or explain why are they are not complying, a regulation that calls for a triennial board evaluation. While there is still time for boards to comply, the report found an immediate increase in the proportion of companies conducting external board evaluations. For the FTSE 100, for example, 42 companies conducted external evaluations, as against 35 in 2010.

Not only are evaluations being conducted at a higher rate, but more companies are disclosing action plans that discuss issues arising from the evaluation. These include:

Impact on board strategy

Improve effectiveness and clarify board and committee effectiveness

Improve succession planning

Where companies have not conducted any evaluations, the reasons given in explanation range from new board membership, recently listed companies without a full public fiscal year, or other board preoccupations. Prior evaluations were also referred to.

The Board Director Training Institute (BDTI) is a "public interest" nonprofit in Japan dedicated to training about directorship, corporate governance, and related management techniques. It is certified by the Japanese government to conduct these activities as a regulated nonprofit. Read a summary about BDTI here, and see a menu of its services for both corporations and investors here.

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