Board Evaluation And What Shareholders Want


Fidelio regularly conducts Board Evaluations for public companies, not-for-profit organisations and regulators in our work building effective Boards and leadership teams.

Board Evaluation is now a standard feature of the Board calendar and Fidelio sees Chairmen putting the Evaluation to good use – probing questions, practical recommendations. But what of the shareholders? What value do they derive from Board Evaluations?

To answer this question Fidelio was delighted to host a Board Breakfast on Tuesday 19th June 2018 entitled: “Board Evaluation and What Shareholders Want”. Our key speaker was Dr Hans-Christoph Hirt, Head of Hermes EOS, an active and vocal leader on governance issues globally including the critical role of Board Evaluation.

Hans provided clear insight on the shareholder’s perspective of Board Evaluation and covered three critical themes:

  • What is the purpose of Board Evaluation?
  • How much visibility should shareholders have/ do shareholders need?
  • What are the benefits of an independent viewpoint?

Fidelio’s Board Breakfast was attended by Chairmen, Senior Independent Directors, Non-Executive Directors and Company Secretaries whose lively debate shed light on the Board’s perspective regarding Board Evaluation. A number of sectors were represented including retail, banking, insurance, oil and gas, charity and pharmaceutical.


With recent corporate crises and governance failures in the US, Europe and the UK, the question being asked by the public and shareholders is: “where was the Board?”

As public scrutiny of the Board intensifies, shareholders, stakeholders and the public are increasingly challenging the value that Boards add. The Board Evaluation is a key method of improving Board effectiveness and ensuring the Board has the right people and skills around the Top Table.

Drawing upon his extensive expertise as an investor and active leader on governance issues globally, Hans shared his view on the use of the Board Evaluation for Boards and the benefit that shareholders derive. In the UK and increasingly in other jurisdictions, shareholders have a high level visibility of:

  • When a Board Evaluation takes place;
  • Whether it has been internally or externally conducted;
  • If externally conducted, by whom;
  • What the key recommendations are.

Investors have an increasing body of Board Evaluation case studies that they draw upon as they engage with Boards. Hans opened the discussion by referring to one such case study based in Germany which is in the public domain and is relevant for investors:

In 2014 Siemens conducted its first external Supervisory Board Evaluation following a decisive AGM at which shareholders expressed frustration on a number of governance issues. Among the findings from the Evaluation was a recommendation that the Supervisory Board diversify its skillset, in particular with regard to expertise in technology and innovation. The Board Evaluation contributed to a robust internal and external discussion of technology cycles and the link to Board composition and critically succession planning – a clear instance of shareholders, the Board and the company benefiting.



Board Evaluation – The Purpose

“Doing a Board Evaluation signals a willingness to question yourself, a willingness for feedback and a willingness to set the right culture. Board Evaluation is an important signalling function to investors.” Hans-Christoph Hirt

As the case study illustrates, investors view an external Board Evaluation as a positive tool that can be used to enhance Board effectiveness – identifying both strengths and areas for development. It is an opportunity to review the Board collectively and also individually.

Board Evaluation – Reporting

“Not doing a Board Evaluation should be a warning sign for investors.” Hans-Christoph Hirt

The design and emphasis of the Board Evaluation lies with the corporate and investors respect this. A number of major institutional investors, such as LGIM and Hermes, provide guidelines on their key criteria and expectations.

Moreover, investors recognise the sensitivity of the internal discussions which form part of the Evaluation. Hans explained that investors do not want to impede this process. It is important that the Evaluation creates an opportunity for Board Members to speak openly and in confidence. However investors do need a clear summary of the high-level findings of the Evaluation as it enables the investor to engage and hold the Board to account.

While major investors have the opportunity to discuss the Evaluation with the Chairman, Hans was clear that the public disclosure of recommendations is important for the broader shareholder base.

The absence of a Board Evaluation is increasingly a warning sign for investors, although there is tolerance around the best time to conduct this if major Board/Executive changes, for example, coincide with the cycle of three-year external reviews.

Board Evaluation – Independence

Hans emphasised that from a shareholder’s perspective, independence, and in particular independence of thinking, is an important criteria for an external Evaluator. The UK boasts a lively market of external Board Evaluation providers, ranging from Audit firms to Executive Search firms – in other countries there is not such a wide range of choice.

Hans stated no specific recommendation for the type of firm preferable to shareholders. For investors the following are important:

  • Requisite understanding of governance;
  • Substantial Board experience;
  • An independent perspective.


Our Board breakfast in turn drew upon the experience of our guests – Chairs, Non-Executive Directors and Company Secretaries – and their experience and perspective on Board Evaluation, as well as their engagement with shareholders on this topic.


It was clear that one element of Evaluation is providing comfort on good governance. For regulated entities in the financial services this becomes critically important. A Chair of the Risk or Audit Committee is defined as a “Senior Management Function” governed by specific Prescribed Responsibilities under the Senior Manager’s Regime and, of course, will be seeking comfort about Board-level processes and effectiveness and indeed compliance.

However, this can also encourage a tick box approach that is narrowly compliance focussed. Our guests pushed back strongly that this approach can be a hindrance in increasing effectiveness.

A Board Evaluation should be an opportunity to consider more deeply the purpose of the Board, its objectives and, of course, to allow the insights and indeed frustrations or concerns of individual Board Member to be heard.

Fit for Purpose

“If nothing is changing after a Board Evaluation – that’s a red flag.” Hans-Christoph Hirt

Building Boards fit for purpose and fit for the future was a key theme of the discussion. One Non-Executive Director argued firmly in favour of a Board Evaluation that ensures the Board is fit for purpose over the long-term, with the rights skills and behaviours to support strategy and develop culture for the next 5-10 years.

Two primary areas need to be addressed to ensure this:

  1. Board Composition and Skills – is the current Board aligned to the strategic objectives of the organisation? Does it have the skills and experience to guide the organisation through what may be a period of profound change?
  2. Benefiting from the Board Evaluation – How is the Board responding to the findings? What are the mechanisms for the follow up? What is the reporting and what is the accountability to shareholders and indeed the company?

A Senior Independent Director flagged the importance of the outcomes from a Board performance review. She had welcomed revisiting the findings with the external evaluator two years after the Evaluation to assess how changes had been implemented. Hans agreed that for investors the recommendations and subsequent outcomes are more important to investors than a clean Board Evaluation.

Diversity and Board Composition

Fidelio asked Hans on Hermes’ position towards diversity at the Top Table and the importance of the Board Evaluation in promoting diversity. As an investment management company, Hermes actively encourages and promotes diversity at the Boardroom table. Hans cited the active stance it had taken for example in the case of Glencore, the last FTSE100 company with an all-male Board.

While most investors recognise the risks of group think, relatively few use their votes on diversity issues. Passive investors have a particularly important role to play here, governance is a critical lever for them. They cannot sell and have a long-term commitment; investors like LGIM has very strong record on diversity.

There is clearly an opportunity for institutional investors to be flagging diversity, composition and Board effectiveness as areas of focus. The Evaluation is a tool for the Board to review its strengths and weaknesses in these key areas and then to share high-level recommendations with investors.


“You should have the gravitas and knowledge to challenge around the Boardroom table.”

The ability to deliver challenge and to hold one’s own at the Boardroom table is a key attribute looked for in a Board Member. Individual Board Members’ contribution at the Board table will undoubtedly form part of the Board Evaluation.

An experienced Chair commented that it is also critically important for the individual evaluating the Board to have the gravitas, integrity and independence of thinking to deliver difficult messages in the Boardroom.

Once again shareholders should care who conducts Evaluations as should Chairmen. Challenge is not confined to Board Members; it is also incumbent upon the Evaluator.


It is clear that Board Evaluation is an important tool for Chairman both in the UK and abroad. Board Evaluation should be used to assess where the company is going and ensuring that the Board is fit to weather the challenges of tomorrow.

Practical takeaways included:

Board Evaluation is an important tool for investors. The Board Evaluation tool signals a willingness for the Board to question its own effectiveness, as well openness on the part of the Chair. No Board Evaluation signals a red light in the eyes of an investor. Investors don’t need to see the details, but the headlines. Investors understand the sensitivity of the Evaluation. They don’t expect to see the Report in full, but value a summary of the key findings. This provides a useful accountability framework for investors.

Board Evaluations support Boards fit for the future. There is a clear opportunity for a Board Evaluation to address key questions:

  1. Does the Board have the skills and experience to enable the company to achieve its objectives
  2. Is there a clear understanding of Board purpose?
  3. How is the Board adding value?

The link between Board Evaluation and succession planning. An effective Board Evaluation should provide a useful tool for succession planning. The answer to the question “how fit is the Board for the future” is invaluable. It shines a clear light on the skill matrix and identifies critical gaps. A Board Evaluator needs experience and gravitas. Investors need to know that the person conducting the Evaluation:

  1. Has a deep understanding of Boards and
  2. Has the independence of thinking and gravitas to deliver the tough messages as well as good.

We trust this summary has provided practical pointers as to what shareholders are looking for from Board Evaluation. We have also flagged what Directors and Chairmen increasingly expect from Board Evaluation and in particular how it can support Boards in becoming fit for the future. Fidelio would like to thank Hans-Christoph Hirt for his concise, thoughtful and international humoured contribution to our Board breakfast.

For further information on how we can support your company through Search, Development or Evaluation, or of Fidelio’s “A Seat at the Table” programme for senior female Executives and Directors please please get in touch.

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