Since the Launch of the King III Report on Corporate Governance by the Institute of Directors, the completion of board evaluations has featured on the board agenda with much hype. But is it too much about nothing? Are boards simply completing the evaluation process as a tick box exercise to demonstrate they have fulfilled their obligations?
King III recommends the annual evaluation of boards and directors. The JSE listing requirements have made the application of King III mandatory, and listed entities that do not apply the code are to provide sufficient disclosure to justify the deviation from the recommended principles and practices. Whilst the intentions of these requirements have sound merit, it does have the potential of forcing boards to complete the evaluation process as a tick box exercise.
At KPMG, we prefer to look at the completion of board and director evaluations beyond a simple tick box exercise. We believe that the completion of the evaluation process, if done properly, provides board members with the opportunity to self-reflect, analyse and formally review their performance as a collective, and as individuals, with the objective of improving their effectiveness and seeking further efficiency opportunities for the benefit of the organisation.