Australia: The role of board evaluations in strategic growth of an organisation

Last Updated: 25 July 2017
Article by Lis Boyce
Services: Corporate & Commercial
Industry Focus: Financial Services, Insurance, Life Sciences & Healthcare, Real Estate & Construction

What you need to know

  • The members of an organisation's board have individual and collective responsibility for the overall governance and guidance of that organisation.
  • While it's easy to get caught up in the day to day, it's important for boards to periodically step back and evaluate how well (or not so well) they are meeting their responsibilities, supporting the organisation's strategy and achieving both short-term and long-term goals.
  • A well-designed board evaluation based around key strategic questions, and possible involvement of an external evaluator, can play a critical role in ensuring continued growth and success for any organisation.

The concept of 'board evaluation' covers everything from a director having a quiet chat with the Chairman to detailed questionnaires and interviews with an external facilitator. Some boards and directors shy away from it, or only undertake it at a surface level. But when handled in the right way, board evaluation is an important piece of 'kit' in an organisation's strategic tool bag.

Why conduct a board evaluation?

Support the organisation's strategy

Any organisation can accept its current operations and strategy as 'what we've always done' without questioning whether that will lead to success and growth. As an organisation evolves, its governing body needs to revisit the question of whether its structure and governance are supporting the organisation's development. For example:

  • A growing company engaging with external investors for the first time will need to grapple with the difference between executive and non-executive directors, and accept more formal governance structures, such as board committees, required by a venture capital or private equity investor.
  • Boards of recently listed companies need to adjust to a much broader range of stakeholders, additional requirements for shareholder approval and the need to engage regularly with the market through continuous disclosure.
  • Recently listed companies may also need to work through legacy issues where the founder maintains a board position and significant shareholding. This may be a strength (there is a committed substantial shareholder with 'skin in the game' who is highly motivated to ensure the company succeeds in the long term) or a weakness (the founder cannot adjust to being outside the core of the executive team, and undermines the new CEO).
  • Boards of companies in international groups may find that their area of responsibility is not clearly mapped out because the international group operates on business unit or functional lines rather than by entity, and those lines of authority may change over time. The local board may have an advisory rather than strategy-setting role but they are also on the front line when something goes wrong in the local business.
  • Not-for-profit boards may grapple with strong personalities championing the interests of their constituents rather than those of the organisation as a whole, particularly when merging with a similar organisation, or trying to raise its profile and funding base.

In any transition, a wise board will consider:

  • have we got the right board for this point in our journey?
  • how are we building up the capability we will need for the next stages in our organisation's evolution?

Promote good governance

Regular board evaluation is part of the framework of good governance. Reduced to its essentials, good governance means good stewardship and good decision-making.

Boards are stewards of the resources of the company, whether it is a business enterprise that needs to deliver capital growth and revenue to its investors, or a 'profit for purpose' organisation that needs to satisfy its community, charity or other objectives. Board evaluation can include these key questions:

  • how well do we understand and communicate our strategy?
  • who are our stakeholders and how are we engaging with them?

Boards exercise their stewardship through the decisions they make. In evaluating the way they do this, board members need to ask:

  • do our decision-making processes get the best from each director? Is each director giving their best to those processes?
  • do our processes have the right balance of strategy versus operations, short versus long-term focus and detail versus overview?

Deliver on legal obligations

The Corporations Act 2001 (Cth) does not impose any duty on boards as a whole – the duties fall on the individual directors who make up those boards. Those duties include the duty to act with appropriate care and skill (s 180) and the duty to act in good faith in the interests of the company (s 181).

Directors' powers are exercised collectively. A board evaluation allows individual directors to consider whether they and their colleagues are personally applying appropriate skill and care to their decision-making for the benefit of the company. An evaluation also allows the board to consider whether its processes provide enough support to the individual directors to satisfy those duties of care, skill and good faith. For example:

  • how does information flow to the board? (e.g. what is the quality of board papers and what is the timeliness of their delivery? How is information presented so that directors can easily monitor performance against key metrics?)
  • how is communication managed at and between board meetings?
  • how well do the board and senior management interact, and does everyone have a clear role?
  • given that the Chairman's role is to facilitate discussion, does his or her facilitation style ensure that all relevant views are properly aired? Does he or she draw discussion to a clear conclusion, and ensure that time is not being wasted?
  • what are the particular skills and perspectives that individual directors bring to the board, and are they actually delivering value in contributing those skills and perspectives and in their interactions with each other?

What's involved in the board evaluation process?

The starting point is looking at the board's own charter (if it has one) and assessing whether the board has actually lived up to its stated responsibilities. From there, two steps should follow.

Ask key questions

As well as the questions outlined elsewhere in this summary, boards should consider:

  • does the board give sufficient attention to long-term strategy?
  • how effectively has the board monitored the executive team, the performance of the company's business and the operation of the company's risk management systems?
  • what steps is the board taking to support diversity in the company's leadership team and employees and are the diversity objectives being met?
  • how effective were board meetings? (e.g. time allocated for particular topics, Chairman's leadership, quality of board papers, participation of management, location and timing of meetings)
  • are board committees fulfilling the objectives set out in the relevant charter, and what, if any, action items arise from the reviews undertaken by those committees?

Often the Chairman will take the lead on board evaluations. If he or she meets with individual directors to discuss their individual performance and contribution to the board, topics for discussion would include:

  • changes in degree of independence including any potential conflicts of interest
  • areas in which the director currently adds value, or could add further value, to the board's deliberations
  • interactions with colleagues, senior management and shareholders.

Consider involving external expertise

When directors are evaluating each other, they may be tempted to be 'soft' given that our natural inclination is not to criticise people to their face, and personal relationships may be at stake.

A hand-picked external adviser brings the benefit of a fresh pair of eyes who may probe more deeply than a long-standing colleague. An external party may also provide value in conducting one-on-one conversations with board members and key managers and then collating the information on a non-attributable basis, in order to describe to the board as a whole, and to individual directors, the key issues that have emerged from those conversations.

It is not necessary to always involve an external party, but boards may choose to alternate 'internal' review processes with externally-facilitated processes on a year-to-year basis.

Key takeaways

The board of any organisation has an essential role in 'setting the tone' from the top. Undertaking a board review demonstrates a commitment to continuous improvement, which the board would want to see reflected in the rest of the organisation.

If well designed, and positioned within an ongoing conversation about the organisation's strategy and performance, the review process ensures that the board regularly takes a fresh look at:

  • how the board is performing
  • how the individuals are working together
  • whether legal obligations are being complied with, and
  • whether the directors (individually and as a whole) are serving the current and future needs of the organisation.

This article is intended to provide commentary and general information. It should not be relied upon as legal advice. Formal legal advice should be sought in particular transactions or on matters of interest arising from this article. Authors listed may not be admitted in all states and territories

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:
  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.
  • Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.
    If you do not want us to provide your name and email address you may opt out by clicking here
    If you do not wish to receive any future announcements of products and services offered by Mondaq you may opt out by clicking here

    Terms & Conditions and Privacy Statement (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

    Use of

    You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


    Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

    The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


    Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

    • To allow you to personalize the Mondaq websites you are visiting.
    • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
    • To produce demographic feedback for our information providers who provide information free for your use.

    Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

    Information Collection and Use

    We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

    We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to with “no disclosure” in the subject heading

    Mondaq News Alerts

    In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


    A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

    Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

    Log Files

    We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


    This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

    Surveys & Contests

    From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


    If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


    From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

    *** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .


    This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to

    Correcting/Updating Personal Information

    If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to

    Notification of Changes

    If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

    How to contact Mondaq

    You can contact us with comments or queries at

    If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at and we will use commercially reasonable efforts to determine and correct the problem promptly.

    By clicking Register you state you have read and agree to our Terms and Conditions