NEW YORK, Dec. 2, 2016 /PRNewswire/ -- A new and comprehensive Board of Directors Evaluation and Effectiveness study conducted by the Rock Center for Corporate Governance at Stanford University and The Miles Group ("TMG") reveals that while boards generally rate themselves positively in terms of skills and expertise, significantly high negative assessments in other areas cause concern for many firms.
"Directors generally believe they have the right composition of knowledge and experience on their board to oversee their company and management," says Professor David F. Larcker of Stanford Graduate School of Business. "However, we find significant negative perceptions percolating under the surface."
The study surveyed 187 directors of public and private companies in North America to understand how they perceive effectiveness of their boards, including its composition, leadership, and evaluation process. Key findings include:
- Boards rate themselves positively on performance and negatively on open and honest feedback.
- Evaluations routinely fall short of providing usable information, and 20 percent of boards fail to evaluate performance.
- Female directors assess board effectiveness, board room dynamics, and the qualifications and engagement of their fellow directors more negatively than male directors.
"There is clearly sub-optimization happening in boards, and it has an impact on trust as well as overall board effectiveness," adds Stephen A. Miles, CEO of TMG. "It is important that board members understand that there are clear and objective measures for their performance, and there could be steps taken if the needs of the enterprise are not being met. Boards take real work to be effective, and this involves improving both individual as well as group processes."
Consistently negative ratings should raise red flags for any board. Leaders must call for objective diagnostics to identify underlying challenges, and remediating actions, to improve the entire board's effectiveness.
"The negative perception of female directors is disconcerting," notes Taylor Griffin, COO of TMG. "Regardless of whether this is due to being 'outnumbered' on the board or other factors, board leadership should take active steps to ensure that the contribution of all members is balanced and that conflicts and dissatisfactions are addressed."
Given the study's findings, the authors note that companies would benefit from an independent evaluation of how their boardroom functions and a roadmap for improving performance, as well as comprehensive and individualized feedback for directors around their effectiveness.
TMG develops talent strategies for organizations, teams, and individuals—focusing on highperformance, world-class leadership. We advise top global corporations through CEO and senior leader succession, board effectiveness and optimization, senior executive coaching and assessments, and top team development. TMG is part of G100 Companies, a private partnership of boutique businesses that deliver solutions, advice, and forums for CEOs of the world's leading companies.
THE ARTHUR AND TONI REMBE ROCK CENTER FOR CORPORATE GOVERNANCE is a joint initiative of Stanford Law School and Stanford Graduate School of Business. The Center was created to advance the understanding and practice of corporate governance in a cross-disciplinary environment where leading academics, business leaders, policy makers, practitioners and regulators can meet and work together. The Center is led by outstanding Faculty with active collaboration from its Advisory Board.
THE CORPORATE GOVERNANCE RESEARCH INITIATIVE at Stanford Graduate School of Business focuses on research to advance the intellectual understanding of corporate governance, both domestically and abroad. By collaborating with academics and practitioners from the public and private sectors, we seek to generate insights into critical issues and bridge the gap between theory and practice. Our research covers a broad range of topics that include executive compensation, board governance, CEO succession, and proxy voting.
Press Contact: Nika Makhmali
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SOURCE The Miles Group