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By ZimCode Secretariat
Chapter 3 of the ZimCode addresses Board of directors. This chapter highlights that the Company’s business is managed under the direction of the Board of Directors. The Board’s role is to oversee the management and governance of the company and to monitor senior management’s performance. The key messages from this chapter include roles/responsibilities of the board; board composition, director appointments and remuneration as well as evaluation of performance of the board itself.

Principle 169 (a) of the ZimCode highlights that “The Board should regularly assess its performance and effectiveness as a whole and the performance and effectiveness of Board committees, individual directors and the chief executive officers”. This is because a successful board is not guaranteed by just bringing together successful people.

The purpose of a board evaluation is to enable boards to purposefully identify and conquer the barriers that impede their effectiveness.

It assists the Boards to know its weaknesses collectively and individually and to address strategies for improvement.

Board evaluations if properly done, enhance the effectiveness of a director; test and evaluate board for effectiveness; provides independent and impartial advice which the organisation can use to make changes that positively impact performance and shareholder value.

In conducting performance evaluations, it should be noted that one size does not fit all and the facilitator needs to get the scope of the evaluation right from the start.

There are four main reasons why organisations undertake board evaluations:

The need to address specific issues;

The need to benchmark performance against other companies;

The need to ensure that the board is doing the best it can and;

The need to be seen to be doing something (ticking the box). The scope will determine how the findings are used.

The ZimCode recognises the importance of evaluating the board as outlined in principle 169-181.

According to these principles the Board should undertake a formal and rigorous annual evaluation of its own performance, its committees and individual directors, which should be externally facilitated every three (3) years.

The evaluation should be against set objectives, roles and functions, performance indicators that would have been agreed to when the director/board takes office. The key areas that should be evaluated are strategic issues; governance and leadership; and board monitoring and oversight role.

External evaluation once every three years by an independent facilitator is important for the organisation because it helps the organisation to gain a view on how the board is doing compared to the findings of its other internal evaluations.

External evaluations can give directors assurance that the evaluation is purely for professional reasons hence they can be objective especially on sections they have to evaluate their peers and the Chair. Moreover, a good external facilitator can add much external perspective which a board would otherwise not be able to access.

An external view can be both challenging as well as reassuring, both aspects are important to boards and directors in equal measure so external facilitation has a valid place.

Principle 182 of the ZimCode highlights that if directors are found lacking director training and development programmes should be made available to them. It is the duty of the Chairperson to talk to the individual director privately where it is hoped the deficiencies are highlighted and the corrective measures intended to be taken fully explained. In the same manner, the chairperson should accept performance appraisal results from peers and address areas that need improvement. When the board is not afraid to look into the mirror, it is fairly easy to cascade the same culture to the rest of the departments which can improve the organisation’s overall performance.

While the benefits of evaluating the board seem obvious recent research has shown that evaluating directors and board for effectiveness is not a common practice in many organisations.

Directors are sensitive about board evaluations which they associate with “witch hunting” especially if the process is carried out internally, while others believe there is an element of voluntary service and that their contributions should be gratefully received and not questioned.

Some organisations do not prioritise board evaluations because they are often sceptical about “rocking the boat” and would prefer to maintain the status quo and forego the benefits that come with evaluating the one body with the most power to influence the organisation.

Since the ZimCode operates at an “apply or explain” basis, most organisations have mastered the art of “explaining away” things they do not want to prioritise.

Budget constraints, time factor and assumed satisfaction with board performance are often used as reasons for not carrying out board performance evaluations. These factors could be valid but for the organisation to have an effective board, board evaluations pay a key role.

For more information on the ZimCode contact: [email protected]