As part of our providing advisory support to assist AIM Company compliance with QCA Corporate Governance Code we are providing support in the facilitation of internal Board Evaluations.

The QCA Code on Board Evaluations

The QCA Code explains the rationale of an effective Board and the benefits of a Board evaluation process as follows:

MAINTAIN A DYNAMIC MANAGEMENT FRAMEWORK

Principle Application
7. Evaluate board performance based on clear and relevant objectives, seeking continuous improvement The board should regularly review the effectiveness of its performance as a unit, as well as that of its committees and the individual directors. The board performance review may be carried out internally or, ideally, externally facilitated from time to time. The review should identify development or mentoring needs of individual directors or the wider senior management team. It is healthy for membership of the board to be periodically refreshed. Succession planning is a vital task for boards. No member of the board should become indispensable.

The QCA Guidance

The QCA Code provides the following guidance on the Board Evaluation process:

“Boards should continuously challenge themselves and regularly consider whether they are effective. An effective board develops and promotes the company’s purpose together with the values, culture and behaviours needed to conduct business and to achieve its strategic objectives. The key characteristics that boards should ensure they meet as a minimum are outlined below.” 

Criteria for an effective board:

1. A clear purpose and strong leadership by the chair.

2. The right balance of skills, experience and independence.

3. Directors who work as a team.

4. Excellent understanding of the business and support for the creation and delivery of the strategy of the company.

5. Members who regularly inform and engage with shareholders and other key stakeholders

6. Members who evaluate their performance and act upon the conclusions.

The MSP Board Evaluation Support Package

Ensuring our AIM clients remain in compliance with the QCA Code, the MSP Board Evaluation process supports Boards and Individual Directors alike as follows:

  • We obtain a detailed questionnaire completed by Board members with commentary on areas for discussion or needing improvement.
  • This questionnaire serves to evaluate the performance of the Board and its Committees as a whole, as well as the performance of individual directors.
  • We compile a Board Evaluation report to be discussed at a Board meeting that will determine any improvement recommendations that will then be implemented and monitored.

On-Going Compliance Obligations

Following a Board Evaluation exercise, the QCA Code will require the following disclosures in an AIM Company’s Annual Report & Accounts:

  • A high-level explanation of the board performance effectiveness process.
  • Where a board performance evaluation has taken place in the year, provide a brief overview of it, how it was conducted and its results and recommendations. Progress against previous recommendations should also be addressed.

The QCA Code will also require the following disclosures on an AIM Company’s website concerning Board Evaluation:

  • Include a more detailed description of the board performance evaluation process/cycle adopted by the company. This should include a summary of: the criteria against which board, committee, and individual effectiveness is considered; how evaluation procedures have evolved from previous years, the results of the evaluation process and action taken or planned as a result; and how often board evaluations take place.
  • Explain how the company approaches succession planning and the processes by which it determines board and other senior management appointments, including any links to the board evaluation process.

MSP can provide advisory support in these areas including the necessary drafting of the required disclosures and the facilitation of any follow up actions.

For further information and a free consultation on how a Board Evaluation can benefit the performance of your own Board and Individual Directors please contact Ian Farrelly, Director of Legal & Company Secretarial Services at ianf@mspsecretaries.co.uk