The latest published index from the Institute of Internal Auditors shows two of the weakest areas across the companies studied (public listed), are the board’s willingness to challenge management and questioning whether information it receives is accurate and complete. Due to the increased pace of change and complexity in our world today, now more than ever, candour is required in our boardrooms. The stakes are high and decisions being made can affect our organisations for years into the future. Governors must stay informed and be willing to ask probing questions, challenge management assumptions, speak honestly and be prepared rock the boat if necessary. Governors have an obligation to bring professional scepticism to their role.
Board evaluations were noted as the most ineffective of all principles for the second consecutive year. While it saw some improvement—boards are discussing the issue more and seeking feedback on corporate governance efficacy—routine formal evaluations of overall corporate governance remain weak. “Without effective evaluations, organisations risk missing warning signs of weaknesses or vulnerabilities that can lead to governance breakdowns,” according to the report. The latest governance research report from The Good Governance Institute, highlights as one of its top three characteristics of an effective board, as the ability to embrace board effectiveness evaluations and succession planning. The best governed companies are 3 x more likely to demonstrate they have taken action as a result of a board evaluation and 4 x more likely to demonstrate they have a clear succession plan for the board and senior leaders.
For support on asking important questions, visit the Support & Challenge area in our Knowledge Bank. For further guidance on Board Evaluations, visit the Governance Performance area in our Knowledge Bank, and the Evaluation Tools page.