Council of Institutional Investors, Washington, is calling for more disclosure of the self-evaluation process carried out by corporate boards of directors.
“Robust disclosure of the board evaluation process is not a common practice in the United States,” said a discussion paper, “Best Disclosure: Board Evaluation,” CII released Thursday.
“While most major U.S. companies have a self-assessment process for the board in place, their proxy materials often merely state this fact without elaborating on what the process entails,” the paper said.
Such disclosure “is more common among non-U.S. companies,” the paper said, pointing to Canada, Australia and Europe, including the United Kingdom.
“Shareholders value detailed disclosure of the board evaluation process when making voting decisions about directors. Disclosures about how the board evaluates itself, identifies areas for improvement and addresses them provide a window into how robust the board’s process is for introducing change,” the paper said, noting, “shareholders generally do not expect the board to reveal the details of individual director evaluations; rather, they want to understand the process by which the board approaches the task of continually improving itself.”
The CII paper underscores what it considers exemplary examples of two approaches to such disclosure.
One “approach focuses on the mechanics of how the board evaluation process is conducted and analyzed,” the paper said, highlighting three companies as excellent examples — General Electric Co., Fairfield, Conn.; Agrium Inc., Calgary, Alberta; and Potash Corp. of Saskatchewan, Saskatoon.
The other approach “goes beyond a detailed discussion of the board evaluation methodology to also include discussion of big picture, board-wide findings and any steps for tackling areas identified for improvement,” the paper said, pointing to several excellent examples — BHP Billiton Ltd., Melbourne, Australia; Dunelm Group PLC, Syston, England, and Randstad Holding NV, Amsterdam.
The paper is available on CII’s website.
