Corporate Governance

Assignment No: 1


3/10/2014
Submitted to: Sir Haroon Rashid
Submitted by: Suleman Zaffar
Topic: Board of Directors Self Evaluation

The shareholders own the company but dont run it. Management runs the company but doesnt own it.
In between these two groups lies a bridge called board of directors.

Board of directors is appointed by share holder who jointly oversee and supervise activities of the
management, and thus is the focus of good corporate governance. Every board's actions are determined by
the powers, duties, and responsibilities conferred on it by an influence party outside itself (By
Law) and its responsibilities vary with the nature of the organization, and with the authority
within which it functions. For public corporations, these tasks are typically much more
precise and intricate than for those of other.

The Boards Role:-

Act as a bridge between shareholders, debt holders and management.
Present entrepreneurial guidance and direction.
Set strategic objectives of the company and arrange the required resources.
Review and evaluate management performance.
Set the companys standards and ethical code of conduct.

Its through this forum that the minority share holders lenders and society at large can exert
influence on those who run the company and who can easily expropriate their interests (senior
management and controlling share holders). As its obvious that this former group do not have
the opportunity to protect their rights and interests. It is often believed that the key to good
corporate governance rests in the hands of a corporations Board, but the real question is how
does a Board become good? And is a good Board born or made? Companies require board in order
to be cautious and preserve overall organization interests over individual interests. Board self-evaluation
allows all its members to critically assess their duties against the standards. Board of directors acts as a
guardian of vision and objectives of the organization and thus should be frequently evaluated.
The purpose of this evaluation tool is to assist the Board of Directors to:
Understand and make out what is functioning well.
Spot areas with Conflicts of Interest and strive for its removal.
Discuss and concur on priorities for modification which can be addressed in the short-
and-long-term and agree on an action plan.
Construct policies for organizations whistle blowing and address code of ethics issues.
Directors Evaluation:-
An evaluation is an orderly and purposeful assessment of an organization The aim is to
determine the relevance and accomplishment of objectives, and expansion of efficiency The
process for Self-evaluation can be carried out on two broad dimensions:
The evaluation of individual directors serving on the board.
The evaluation of the board as a whole.

Approach:-
In addition to the regular meetings and informal discussions between the chairman of the
board & the directors which would wrap a large range of strategic & operational issues
such as how well do the board dynamic work, & how well do the board sub committees
work, a proper evaluation criteria and framework should be set in order to fully assess
accomplishment of the organizations objectives and monitor boards performance.)



Individual self-evaluation form:-

Statement:



Good



reasonable



objectionable

1. Develop opportunities for mounting a sense of
minority shareholder active participation in key
decisions.



2. Act in the interest of the company.

3. Contributing to corporate leadership and stewardship


4. Enthusiastically manages all stakeholders interests
and relationships.



5. Performance is reliable and adheres to organization
standards.

Identify the purpose of evaluation.
Gather all the necessary information.
A structured form must be set to evaluate how the board is performing in key areas such as achieving
key goals, achieving key goals etc.
setting of clear board objectives, the dissemination of documents
Dimension:
indivisuals or board as a whole to be evaluated ?
Establish the criteria of assesment.
implementation of plan.



6. Avoid conflict between interest and duties.



7. Always ready and Organized for meetings.

8. Keeps well-informed with sector latest developments.

9. Practices confidentiality and over ethical practices.


10. Has personal characteristics of integrity, intellect,
independence, and character.



11. Communicating expectations & concerns clearly.



Board of Directors Evaluation form:-

Statement:



Good



reasonable



objectionable

1. Contributing to achievement of corporate objectives.


2. Constructive contribution to resolution of issues at
meetings.


3. Attendance, confidentiality and preparation for
meetings.



4. Timely review & approval of strategic and
operational plans, objectives, budgets.



5. Frequent monitoring of corporate outcome against
projections.



6. Ensures the flow of information from management to
board and vice versa on consistent basis.


7. Complete and focused procedure for every material
activities and risk management in the organization.


8. Assuring appropriate board size, composition,
independence, structure clearly defining roles &
monitoring activities of committees.


9. Members have complete understanding of the roles
and responsibilities as per rules and regulations.



10. Has mechanism for evaluating the impact of mission
on organization's offering and vigilant for un-
anticipated external environment.



11. Takes remedial measures over discrepancies and
deficiencies.



12. More focused on long-term policies rather than short
term. Assuring appropriate board size, composition, independence, structure clearly defining roles & monitoring activities of committees.



13. Has expertise and skill set for effective governing
decisions Members have complete understanding of the roles and responsibilities as per rules and regulations.



14. All proceedings of the board meeting are recorded Has mechanism for evaluating the impact of mission on organization's offering and vigilant for un-anticipated external environment.

15. Takes remedial actions and vocal over discrepancies
and deficiencies Has mechanism for evaluating the impact of mission on organization's offering and vigilant for un-anticipated external environment.


References:-
Stybel, L, and Peabody, M., 2005, 'How Should Board Directors
Evaluate Themselves?', MIT Sloan Management Review, 47, 1,
pp. 67-72
Julian A., 2013,board Evaluation, Seattle public school
Rubenstein, A and Murray, D., N.A, Board Self-Evaluations:
Striking the Right Balance, MLR Holdings LLC
Torres, Rosalie T., 2005,directors Evaluation, manual on
evaluation