By Roger M. Kenny
While most company boards of directors are doing annual board assessments, they do not appear to be effective at the individual director level. Many directors still seem to be hesitant to undertake individual, peer-to-peer reviews, thus limiting important personal feedback from their fellow directors.
A study conducted by the Stanford University Graduate School of Business and the Miles Group Survey revealed that only slightly more than half of the companies surveyed actually gave each director personal, peer-to-peer feedback about performance, even though over 90% of the directors in those same companies thought they possessed the necessary skills to accomplish this task. At the same time, 36% of the boards surveyed reported that Individual director reviews were ineffective, so they obviously had a negative opinion of peer-to-peer reviews and were reluctant to try.
Why is this so? Have so many directors decided that merely checking boxes satisfies the annual assessment requirement? Or, are directors squeamish about participating with their peers in the process of giving and receiving personal feedback?
Interestingly, less than half of the directors surveyed by the Stanford/Miles Group said they tolerated dissent and in many of the companies surveyed there were a few Directors who had an oversized impact on their boards as a whole. At the same time, most of the directors surveyed believed that at least one of their fellow directors actually should be removed from the board. It also appears that Board Leadership is part of the problem since only 60% of directors believe their board Leader “asks the right questions.” These are very daunting findings.
Over the years we have seen huge changes in Board behavior impacted by the revolutionary call for board director independence in the nineties which rocked the very foundation of boards and then, fifteen years ago, SOX (Sarbanes/ Oxley), which led to the institutionalizing of board assessments by the New York Stock Exchange. Still, the Stanford/Miles survey is discouraging since it reveals that only half the directors believe their fellow board members express their “honest opinions”, or even challenge management which is their most important responsibility.
So you can’t blame directors, themselves, for not wanting to receive personal feedback from peer-to-peer reviews if they are not confident those reviews are objective. Board leadership already has the burden of playing a key role in keeping discussions on topic and giving objective feedback in order to earn the respect of fellow directors.
Let’s face it, nobody likes to receive negative feedback, especially if it can become threatening. In most cases board directors enjoy their role as company leaders and want to keep it. To them it is very important personally and professionally and is usually financially rewarding, which is not an insignificant factor. Some directors are known to have balked at the idea of independent peer-to-peer reviews for that very reason, not wanting to “rock the boat.”
One way to assuage most of these concerns would be to have a trusted, independent professional who has no affiliation with the company execute the assessment. An assurance of strict confidentiality not only promotes more candor on the part of directors, but also removes a burden from the board leader. Since Boards have to refresh themselves periodically with new members, this is another reason for keeping the process independent.
The Stanford/Miles study was able to show that peer-to-peer feedback is still not fully accepted. “Only 26% of Directors believe they are very effective in giving direct personal and constructive feedback to fellow Directors.” Good board directors want honest feedback from their peers as to how they could add more value to the company. An assessment should never be perceived as a “witch hunt”. It must be a very positive, professional and rewarding process.
Enormous improvements follow when directors receive honest feedback about their contributions to Board dialogue and learn how they can add more value to the board and to the company. Just breaking this impasse in dialogue has an incredible impact on board performance once a director becomes aware of what his or her colleagues want. Helped by the Stanford/Miles Survey, we see there are many opportunities presented by more peer-to-peer reviews.
In fact, the most significant result of every board assessment in our findings was the personal feedback received from fellow directors. It is a powerful process and its use should never be compromised by perceived, untested suppositions.