Board analysis is a study of the organization, structure and composition of a board. Its purpose is to find out if a board has the right balance of outside and inside knowledge, experience and objectivity to monitor and advise management and formulate strategy. It also aims at understanding the way a board works as a collective and if the board is effectively supporting the CEO and contributing to the company’s success.
The best boards are defined by a culture of trust, openness, and collaboration. They have a clear understanding of the company’s ecosystem, and they ask management critical questions. They are focused on the long-term health of the business and able to identify risk and opportunities. They work with the stakeholders to ensure that the board understands their vested interest, and are able to pursue changes in corporate behavior and make an impact.
According to McKinsey’s 2021 global study of more than 800 directors, the top boards are a mix of non-executive directors (NEDs) with expertise and senior executives who have a deep understanding of the business. They have clear structures and a set of guidelines to guide their decision-making, and they are committed to improving the effectiveness of the board and its committees.
A board review can be an excellent tool for boards to assess its performance and give feedback to the Chairperson or CEO. It is not the case that all boards make this a priority. Through conducting an objective third-party evaluation Board members can become more aware of any potential pitfalls.