The Malaysian Code on Corporate Governance issued in April 2017 (MCCG) states that boards should undertake a formal and objective annual evaluation to determine the effectiveness of the board, its committees, and each individual director.
KPMG’s Governance & Sustainability team released a report titled “Board Evaluation – Mutual Admiration or Thoughtful Reflection”, which sheds insights on the thinking, approaches and practices associated with the board evaluation exercise based on the disclosures from 581 listed companies in Malaysia as well as anecdotes and first-hand insights gathered from the marketplace.
This seminal report include insights of how leading companies are optimising their board evaluation process by having a focus on key roles in the boardroom, formulating multifaceted evaluation instruments and developing report cards for individual directors.
The report also noted that 82% of independent directors in Large Companies have not exceeded the 9 years tenure yardstick and this is aligned with the notion that long tenures of independent directors and familiarity may erode the board’s objectivity.
Download the report here.
KPMG is also introducing a Board Effectiveness Evaluation Tool to aid the board evaluation process.
The tool aims to iron out some of the wrinkles prevalent in a conventional board evaluation exercise such as the need for an extended amount of time in completing the assessment instruments, provision of uniform rating for all questions in the instruments and limited analytics in drawing up the results.
The tool comprises certain value-add features:
The tool will be customized in consultation with each prospective client that will be used together in delivering our Governance & Sustainability Advisory services.
Read more about the Tool here.