“Board performance reviews, also known as board evaluations, are a critical tool to ensure continuous improvement in governance and board-level decision making. Performed effectively, they foster accountability, increase investor and public confidence and help organisations align their strategic objectives.”

Chartered Governance Institute (UK&I)

Many regulatory bodies and industry associations require organisations to perform varied types of periodic Board Performance Reviews. Our multidisciplinary team of lawyers, regulatory experts and governance professionals have a depth of experience in supporting and advising organisations on their sector-specific requirements related to board performance reviews. We are the only Irish-domiciled Board Performance Reviewer accredited by the Chartered Governance Institute (UK&I). In this article, we share what great board performance looks like in practice.

What is meant by ‘Board Performance’? 

Under the Companies Act 2014 [1], the Board of Directors (“Board”) has collective responsibility for managing the organisation, including setting out and overseeing the successful implementation of the organisation’s strategy. In turn, each member of the Board has their own fiduciary duties including but not limited to, acting honestly, responsibly and in the interests of the organisation, as well as exercising the care, skill and diligence that would be expected of a person in their position. As part of a Board Performance Review, therefore, it should not be surprising that the assessment should at least cover the key aspects of each of the following:

• The governance and operations of Board as a collective.
• If relevant, the governance and operations of the established Committees of the Board; and
• The performance of individual Board Members, particularly the Board and Committee Chairs. 

What might be more surprising, however, is that an effective Board Performance Review is often more focused on the assessment of internal dynamics within the boardroom than on the quality of the formal governing documents and/or the board papers. The defining features of a high-performing and effective Board can include those listed below.

Graph 1: Defining Features of a High-Performing and Effective Board

Feature	Non-Exhaustive Examples of Good Practice
Trust & Dynamics	Strong bi-lateral relationships between all Board Members, not just between Board Members and the Chair. While Board Members trust that their fellow directors consistently apply due care, skill and diligence in their roles, Board Members demonstrate a healthy level of professional scepticism when assessing proposals and recommendations. Board Members work well together as a team and demonstrate an awareness of which member(s) may possess keen insights on a specific topic. All voices are heard equally; no one director dominates, and equally, no director is allowed to remain silent throughout meetings.
Skills and Competencies	Collectively, the Board possesses the right mix of professional skills and technical competencies to lead the organisation and to set the strategic goals and objectives. Skill and competency needs are frequently assessed and any gaps identified are remediated on a timely basis through either training or future vacancies, as appropriate.
Culture & Values	The Board takes responsibility for setting the ‘tone at the top’ and seeks to create a positive and collaborative culture allowing for respectful review and challenge of each other as well as of members of the Senior Management Team.
Experience & Networks	The Board benefits from the insights of a subset of members who have relevant experience working in the same industry and market sector as the organisation they have been appointed to. Members understand how the organisation operates in practice and the various challenges and risks which it may face.
Performance of Board Chair	The Board Chair works with the Company Secretary to set out and agree an agenda which allows sufficient time for the review and discussion of each item. The Board Chair recognises that time is a limited resource and thus ensures that strategic matters are prioritised and only material operational matters should be brought to the Board’s attention. Meetings are managed to the agreed agenda such that presenters can be appropriately coordinated, and no agenda item is unduly rushed. The Board Chair controls who is in the boardroom and seeks to limit standing attendees wherever possible.
Performance of Committee Chair(s)	Like the Board Chair, each Committee Chair is responsible for managing the agenda and leading the meeting. A high performing Committee Chair shall also provide clear and concise reporting to the Board on the activities of the Committee, avoiding undue repetition of committee-level discussions or the duplication of committee materials.
Relationship with Management	The Board fosters an appropriate working relationship with the Senior Management Team whilst maintaining clear and defined boundaries i.e. they strike the balance between supporting management and ensuring there is sufficient review and challenge of reporting provided.
Training & Support	As appropriate, the Board seeks out training and support to ensure they are equipped to support the organisation and to ensure compliance with legal and regulatory obligations. The formal induction programme for new Board Members ensures that the training covers the operations and structures of the organisation itself and not just the mechanics of the Board and its Committees.
Documentation	Strong and sufficiently detailed terms of reference at both Board and Committee level which are reviewed and approved at least annually. Clear and documented assignment of authority, where relevant, such that all Board Members and Members of the Senior Management Team are aware of and understand their roles and responsibilities. Management Reporting to Board is sufficiently detailed and timely to facilitate informed decision-making and Board Minutes appropriately reflect the ensuing discussion, challenge and decision-making of the Board.

Put simply, the performance of the Board and its Committees is predicated on the ability of the respective Chair to both manage the meeting agenda and lead the members as they collectively make informed decisions based on timely and sufficiently detailed reporting.

No well-crafted terms of reference, governance manual, or set of meeting minutes can ever make up for a lack of trust or cohesion amongst board members or meaningful engagement in the boardroom.

Nature and Frequency of Reviews

As highlighted in the table below, the importance of regular Board Performance Reviews has been recognised across numerous industries and sectors with many organisations expected to perform an informal internal review annually, while others must also ensure that a formally documented, if not an external review, is performed on at least tri-annual basis.

It is notable that the principle of proportionality features much more predominantly in the requirements that apply to organisations operating in the private sector, where the need to perform a Board Performance Review is often a function of the organisation’s market capitalisation or the risk they pose to the wider economy. In comparison, organisations operating in the public sector are subject to a blanket requirement to perform internal and external reviews, regardless of their scale or size.

Whether mandated for your organisation type or not, Board Performance Reviews are now viewed as a cornerstone of good governance, demonstrating a clear commitment by the Board to continuous improvement and adherence to best practices.

Code of Practice	Date of Publication	Annual Review (Internal)	Tri-Annual Review (External)	Comment
Irish Corporate Governance Code (Euronext)	Sep 2024	Required	Required	External review required every 3 years for firms with market cap > €750m.
UK Corporate Governance Code (FRC)	Jan 2024	Required	Required	External review required every 3 years for FTSE 350 companies.
Corporate Governance Requirements for Insurance Undertakings (CBI)	2015	Required	Required
Corporate Governance Requirements for Credit Institutions (CBI)	2015	Required	Required
Corporate Governance Requirements for Investment Firms and Market Operators (CBI)[2]	2018	Not Required	Not Required
Corporate Governance Code for Collective Investment Schemes and Management Companies (IFIA)[2]	2012	Required	Not Required	Annual review to be followed by a formal, documented review every 3 years. Formal review may be performed internally.
Corporate Governance Code for Fund Service Providers (IFIA) [2]	2014	Required	Not Required	Chair to be reviewed every 3 years.
Code of Practice for the Governance of State Bodies	Aug 2016	Required	Required
Charities Governance Code (CRA)	2021	Principle 5: Working Effectively sets out the expectation that charitable bodies will ‘from time to time, review how your board operates’, conduct a ‘regular review [of] the effectiveness of your board as a whole’ and ‘do regular skills audits.’

In addition to the core review, the collation and analysis of information and materials during a Board Performance Review can facilitate a wider review covering areas including:

• Board Committee and Executive Committee performance.
• The organisation’s broader governance arrangements and structures as compared to the relevant corporate governance codes of practice, good governance principles and best practices.
• The skills and competencies of the current Board versus requirements; and
• The design and documentation of Board and Executive Succession Plans.

Board Performance Review Types

Board Performance Reviews essentially assess how well the Board Members work together to effectively govern and oversee the operations of the organisation they have been appointed to.

Internal Board Performance Reviews generally involve a concise questionnaire designed to capture views on, amongst other matters, the Board’s processes and functions, composition and competencies, and governance arrangements. The results of the questionnaire are then typically reviewed by the Board Chair who will meet with each Board Member to discuss their responses before reporting back to the wider Board.

Internal reviews are frequently facilitated by a third party and, when done well, can be a very useful means of surfacing areas of improvement for the collective Board as well as areas for personal and professional development of individual Directors. They provide a key opportunity for the Board to discuss and reflect on the areas where they performed well or not so well, but most importantly they allow the Board to set out and agree how they can improve their performance going forward.

It is worth noting that the quality of the internal review output is significantly improved through the engagement of an external facilitator who can play a key role in the management and administration of the Board Performance Review process. The external facilitator can assist the Board Chair in reviewing and assessing internal dynamics through a more objective lens, considering factors such as Board composition and diversity of views. An external facilitator can also mitigate the potential conflict of interest arising where the Board Chair is asked to review and report on the performance of the collective Board they form a part of, and which they were responsible for managing and leading throughout the period covered by the review.

An external review generally comprises a non-invasive but thorough assessment of the Board’s performance by a third-party governance expert which is highly tailored to the needs of the organisation. Depending on the sector-specific requirements which apply and the areas which the organisation wishes to focus on, the format and scope of an external review can vary significantly but will typically include a combination of questionnaires, interviews, documentation reviews and meeting observation.

Responses received during an external review are anonymised in the final report and hence can lead to greater candour and openness. In this way, an external board reviewer can often play the role of intermediary, lending their voice and expertise to help highlight an issue which may otherwise have gone unspoken previously to protect interpersonal working relationships. In addition, through their enhanced level of objectivity, the external reviewers can often see through the Board’s well-worn habits and norms to identify areas of potential improvement which may not have been previously surfaced.

Implementing the Output of a Board Performance Review 

Regardless of whether the review is performed by an internal or external reviewer, the output of the assessment should be a set of practical recommendations and observations designed to improve or enhance one or more elements of the board’s performance and effectiveness. Each recommendation and observation should be discussed by the Board to determine the most appropriate corrective actions to be taken, the action owner and the timeline for implementation. To complete the process, the Board should ensure that there are appropriate mechanisms in place to track the progress of corrective actions through to completion.

Note: We would encourage readers to carefully note the use of the terminology ‘recommendations and observations’ as opposed to ‘findings’. Where internal or external reviewers identify compliance issues with a relevant Code of Practice or other applicable regulatory requirements, these findings may be quite prescriptive in nature and outline the required corrective actions to be taken.

Oftentimes, however, the outputs of a Board Performance Reviews are instead grounded in good governance principles, best practices and industry norms. As such, even when performed by an external reviewer, the Board is under no obligation to address these types of recommendations or observations identified, and all actions taken as a result of the matters raised are at the discretion of the Board.

How can we help?

Arthur Cox has a wealth of experience in the practical, legal, and regulatory aspects of Corporate Governance and Board Performance matters across all industries and sectors. Arthur Cox remains the only Irish-domiciled Board Performance Reviewer accredited by the Chartered Governance Institute (UK&I).

Whether you require support in conducting your own internal Board Performance Review or would like to talk to us about our external Board Performance Review services, our multi-disciplinary team of experienced consultants, corporate secretaries, and lawyers is here to help.

For Board Performance Reviews of organisations in the Asset Management and Investment Funds Sector, please contact your usual Arthur Cox contact or any member of the Asset Management and Investment Funds Group.

For all other entities, please contact the Governance and Consulting Services group with further information available in our Board Performance Review Services brochure.