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Board Evaluations: making a fit between the purpose and the system

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Author

  • Alessandro Minichilli
  • Jonas Gabrielsson
  • Morten Huse

Summary, in English

Board evaluations can contribute to effective boards and improved corporate financial performance. The increasing interest in the practice of board evaluations, however, calls for a more systematic and careful approach than has been employed in the past. While most attention has primarily been focused on the content of board evaluations, this article outlines the features of various possible board evaluation systems. Based on state-of-the-art research on boards and governance, we contend that a comprehensive board evaluation system needs to include decisions about: (a) the agent who evaluates the board; (b) the content, or what the evaluation should deal with; (c) the addressee and other stakeholders for whom the board is evaluated; and (d) how the board is evaluated. These key decisions should not be seen as independent of each other as they have consequences for the kind of system that will be adopted. Following this argument, we present four different board evaluation systems: (i) board-to-board, (ii) board-to-market, (iii) market-to-board and (iv) market-to-market. The key message we communicate in this article is that there must be a fit between the purpose and the system of board evaluations. There is no universal or "one best way" to evaluate boards of directors. Board evaluations will not meet their purpose unless there is a fit between the agents, the addressees, the content and the modalities of the evaluation. It is important to know who is doing what for whom and how.

Department/s

Publishing year

2007

Language

English

Pages

609-622

Publication/Series

Corporate Governance: an international review

Volume

15

Issue

4

Document type

Journal article

Publisher

Wiley-Blackwell

Topic

  • Social Sciences Interdisciplinary

Keywords

  • evaluation of the board
  • corporate governance rating/index
  • Board of directors

Status

Published

ISBN/ISSN/Other

  • ISSN: 0964-8410