We use a structured approach, evaluating board effectiveness at five increasingly accountable levels.
Level One – Board Essentials: Infrastructure. This level addresses thirteen ‘essentials’, including board structure, processes, composition, information, and committee and board management. Are standard board processes enough to get the job done? Is the mix of experience and backgrounds appropriate? Are board roles and responsibilities clear?
Level Two – Effectiveness: Processes and Group Dynamics. This level evaluates board dynamics and the abilities of directors to work effectively together and with management in terms of quality and effectiveness. Effectiveness often has less to do with formal structure than with the quality of directors themselves and how they interact. Do board members work well with each other and with management?
A good understanding of levels one and two make the performance of Level Three much easier.
Level 3 – Alignment: Coalition and Strategy Development. This level is extremely important, because it focuses on the board’s ability to align with management to define strategy and contribute to successful execution. Is there clear understanding about the appropriate metrics of corporate performance? Is there ownership of performance improvement and evaluation?
Level 4 – Synchronization: Business Issues Management. This level considers the board’s use of clear and viable accountability metrics as it synchronizes to shape models for both its business and governance. This can be difficult, and requires the right corporate governance attributes for predicting performance. Does the board articulate clear key drivers? Does it communicate to stakeholders about corporate performance? Does it anticipate and help to shape future business models and strategy that are in sync with shareholder interests?
Level 5 – Convergence: Corporate Issue Management. This level considers the sustainability of the board’s approach to governance and what it contributes to corporate results, shareholders, stakeholders and society. The highest level considers a board’s broader role in society. This can be challenging, and requires boards to overcome the asymmetry of information that often occurs between committees and supervisory and executive boards. Do activities converge to create critical, forward-looking leadership and influence with government, community and the environmental? Do members share common goals?
Intrabond Capital believes compliance with all of these levels can be achieved with the right motivation and commitment. It assesses boards by combining these quantitative and qualitative measures – based on international and industry best practices – to deliver reliable information that a board can use to evaluate improvement opportunities.