In the current landscape of uncertain macroeconomic conditions characterized by inflation, geopolitical instability and sweeping regulatory changes, organizations are increasingly recognizing the importance of having a sound and resilient board.

A comprehensive board evaluation process is imperative for the sustainable success of any organization. The key benefits of conducting board evaluations include:

  • Enabling stakeholders to hold individual board members accountable for their actions and decisions, building more trust within the organization
  • Identifying improvement opportunities in board operations leading to more effective decisionmaking, improved strategic planning and organizational performance
  • Addressing gaps in diversity on the board (skill sets, gender, nationality, age, etc.) to support decision-making and improve stakeholder engagement
  • Enhancing transparency amongst board members and management and exchanging constructive feedback to establish a favorable board culture and dynamics

The Capital Market Authority (CMA) in Oman has issued corporate governance regulations and guidelines that require listed entities, financial institutions, insurance companies, and government entities to perform board evaluations every three years.

These requirements are in line with leading global practices and support the long-term sustainability of organizations.

The importance of board evaluations in enhancing overall corporate governance

A comprehensive board evaluation framework goes beyond ensuring compliance with regulations as it can uncover critical improvement areas and action items to be executed by the board and board committees.Identifying and addressing these capacities is imperative for the organization’s long-term growth. Below are some of the key benefits that can be derived from conducting board evaluations:

Streamlining the flow of information and minimizing the duplication of work enables conducive and robust working relationship between the board, its committees and individual members.

Board evaluations offer a holistic assessment of the structure and composition of the board and its committees, allowing organization to identify whether this arrangement can effectively support its working procedures and is in line with the business’s size and complexity.

Asking the following questions during board evaluations can provide valuable insight and identify opportunities for a more positive and productive board culture:

  • Is the board promoting open and honest discussions?
  • Is there enough trust between the board and the management?
  • Are dissenting opinions encouraged?
  • Are the board and board committee communicating openly?

Board evaluations help assess the extent to which the board and its committees are meeting their mandated requirements and whether any key areas have been overlooked during the review period.

By promoting a culture of learning and identifying the training needs of board members, board evaluations can ensure the organization has the technical capabilities to adapt with the rapidly changing environment.

This approach creates an opportunity for board members and senior management to self-reflect and critically evaluate improvement areas within the board and their individual conduct. This can also help them incorporate any detected improvement opportunities.

Conducting regular board evaluations enhances the overall governance culture by ensuring the board can be held accountable for the organization’s performance throughout the year.

Periodic board evaluations can demonstrate the board‘s dedication to continuous improvement and good governance, which in turn establishes confidence among key stakeholders including shareholders, potential investors, customers, and regulators.

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