Questionnaires for Evaluation of the Board of Directors

This article throws light upon the five main types of questionnaires for evaluation of the Board of Directors. The types are: 1. General 2. Board’s Powers 3. Directors-Shareholders Inter-Relationship 4. Tasks before the Board 5. Test of Effectiveness.

Board of Directors Evaluation: Questionnaire Type # 1. General:

1. Who do the members constitute the present Board of Directors?

2. What are their qualifications (academic and/or professional), experiences (specific for the industry—general and/or specialisation, etc.), past attainments within and outside the entity under study, etc.?

3. What other provisions in the Statutes other than the Companies Act, 1956 have a bearing to the appointment and retirement of directors with a view to retaining the democratic character of the corporate entity?

4. Whether, under the Company Law:

(i) A person, as a director of a company, holds office of directorship in more than twenty companies. If not, how many and their details? If so, what action so far taken by the Company’s Board?

(ii) A person as a director of a company was at any time disqualified on account of the following :

a. In terms of the Articles of the Company?

b. Failure to pay any call in respect of shares?

c. Failure to attend three consecutive meetings of the Board or all meetings of the Board for a continuous period of three months, whichever is longer, without obtaining leave of absence from the Board?

Board of Directors Evaluation: Questionnaire Type # 2. Board’s Powers:

5. Are the overall powers of the Board grouped under the following:

i. Powers exercisable only with the consent of the shareholders in the General Meeting,

ii. Powers exercisable only at the Meeting of the Board,

iii. Powers exercisable at the meetings of the Board or by circular resolutions or by delegating the same to committees or others concerned with the management of the company, reasonably understood and applied consistently?

Board of Directors Evaluation: Questionnaire Type # 3. Directors-Shareholders Inter-Relationship:

6. (a) Is it recognised that both the Directors and the Members in general meeting are primary organs of the company between whom the company’s powers are divided?

(b) How is the relationship?

Board of Directors Evaluation: Questionnaire Type # 4. Tasks before the Board:

7. (a) How is the ‘trusteeship’ role (i.e. safeguarding and husbanding of company’s assets in the long-term interests of the Shareholders and to the Public) taken by the Board?

(b) Does the performance of the Board reflect such role in the context of the following functions at their meetings (say):

i. Formulation of long-range planning and perspective for the company?

ii. Laying down the policies in various functional areas of management, e.g., production, inventory, sales, purchases, finance, personnel, etc.?

iii. Review of corporate objectives, plans and strategies?

iv. Review and consideration of annual capital and revenue budgets?

v. Review of progress and performance both in physical and financial terms of the company?

vi. Review of variance analysis in relation to the targets set and achievements made during the period?

vii. Review of proposals of new investments?

viii. Declaration of dividends?

ix. Compliance with statutory requirements?

8. (a) Are the roles of Nominee Directors recognised?

(b) Do they assist in evolving healthy practices without interfering into day-to-day affairs but with due regard to the cannons of public policy?

(c) Do they closely monitor the ‘net worth’ position? Are they aware of the Government’s policy guidelines in this respect?

(d) Do they assist the Board specifically with respect to the following (say):

i. Providing expert/professional advice to the Chief Executive on specific matters?

ii. Acting as ‘watch-dog’ against managerial abuse?

iii. Acting as ‘friend-philosopher-guide’ to the Chief Executive?

iv. Generating pressure to drive the executive management to greater effort?

v. Ensuring ‘social responsibility’?

Board of Directors Evaluation: Questionnaire Type # 5. Test of Effectiveness:

Perhaps the most rigorous tests of an effective Board are:

i. Whether it can make a change in leadership, when corporate results are unsatisfactory.

ii. Whether it can make a critical appraisal of the Chief Executive/Managing Director’s Performance.

iii. Whether it can evaluate the management vigorously and take decisions involving changes in executive management, at the top level, unhesitatingly in the spirit of management divorced from ownership, wherever it is absolutely necessary.