The Challenge of Individual Director Evaluation: 2010 Special Report

Over the past ten years, there has been a significant increase in the percentage of companies that undertake some form of individual director evaluation. In 2010, 88% of the surveyed directors’ boards conducted individual director evaluations compared with 45% nine years ago.1 Furthermore, 93% of the directors who undertake individual director evaluation believe that it is a useful and constructive board process.

This high level of support doesn’t mean that directors don’t believe there could be improvements, but they do believe in the concept of individual director evaluation. The focus of this special survey is on the “individual director” evaluation process, not full board and committee evaluations. Processes tend to be either self-evaluation or peer evaluation and often some combination of both. Individual director self-evaluation is the process whereby an individual director assesses his/her own performance. Individual director peer evaluation is the process whereby each director’s performance is assessed by each of the director’s peers. An informal process is one in which the board chair, lead director, governance committee chair or an individual director makes observations regarding each individual director’s performance from time to time. A formal process is a periodic process that involves an organized questionnaire or verbal interview conducted by a board member, the corporate secretary or an outside consultant.

Korn/Ferry International and Patrick O’Callaghan and Associates interviewed or received written response from 175 directors for this special survey. The following table provides an overview of processes used by these directors. We were interested in examining what changes might have taken place since we last looked at individual director evaluation in detail roughly eight years ago.