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BACKGROUNDER

A Guide toBoard Evaluation

The Companies Act, 2013 Series

APRIL 2015

PRICE : Rs. 200/- (Excluding Postage)

© THE INSTITUTE OF COMPANY SECRETARIES OF INDIA

All rights reserved. No part of this publication may be translated or copied in anyform or by any means without the prior written permission of The Institute ofCompany Secretaries of India.

ISBN : 9789382207-48-1

Published by :

THE INSTITUTE OF COMPANY SECRETARIES OF INDIAICSI House, 22, Institutional Area, Lodi Road, New Delhi - 110 003Phones : 41504444, 45341000 Fax : 24626727

Website : www.icsi.edu E-mail : [email protected]

Printed at :

Chandu Press/1000/April 2015

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PREFACE

“Everything that can be counted does not necessarily count;everything that counts cannot necessarily be counted”

Albert Einstein

The duties of the Board defined under the Companies Act, 2013clearly codifies that the director of a company shall act in good faithin order to promote the objects of the company for the benefit of itsmembers as a whole, and in the best interests of the company, itsemployees, the shareholders, the community and for the protectionof environment. This enhanced role of directors requires Boards tobe more engaged, more knowledgeable and more effective.

Board Evaluation is the most effective way to ensure Board membersunderstand their duties and to adopt effective good governancepractices. To be effective, boardroom appraisals need to havespecific, clearly defined steps and practices, and a specialcommitment from the Board.

Board Evaluation as a good governance practice has found its placein the Companies Act, 2013.This Handbook comprehensively capturesall the provisions relating to Board Evaluation in the Companies Act,2013, Steps involved in Board Evaluation, Parameters and Samplemodels for evaluation of Chairperson, Managing Director, ExecutiveDirector, Non- executive director, Independent Director, Board aswhole and the Committees and also provides guidance on how toconduct evaluation of Board.

I am confident that the publication will prove to be of immense benefitto companies and professionals.

I place on record my sincere thanks to CS S. K Agrawala, CentralCouncil member, CS Ahalada Rao, Central Council member, Mr. NHariharan Vice President (Secretarial) & Company Secretary, Larsen& Toubro Ltd for their valuable inputs in finalizing the hand book.

I commend the dedicated efforts put in by team ICSI led by CS AlkaKapoor, Joint Secretary and comprising CS Banu Dandona, DeputyDirector, Mr. Chittaranjan Pal, CS Disha Kant, Assistant Education

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Officers under the overall guidance of CS Sutanu Sinha, ChiefExecutive & Officiating Secretary and leadership of CS Mamta Binani,Vice President and CS Vineet Chaudhary, Central Council Memberand Chairman, Corporate Laws and Governance Committee.

In any publication, there is always scope for further improvement. Iwould personally be grateful to users and readers for offering theirsuggestions/comments for further refinement.

(CS Atul H Mehta)Place: New Delhi PresidentDate: 15-04-15 Institute of Company Secretaries of India

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INDEX

INTRODUCTION 1

NEED FOR BOARD EVALUATION 3

LEGAL FRAMEWORK IN INDIA 4

Requirements under schedule IV 5

Role of Nomination & RemunerationCommittee in Board Evaluation 6

Listing Agreement 6

BROAD EVALUATION METHODOLOGIES 7

EVALUATION OF THE BOARD 9

EVALUATION OF INDIVIDUAL DIRECTOR(s) 10

Evaluation of Managing Director /Whole time Director /Executive Director 10

Evaluation of Non-Executive Directors 11

Evaluation of Independent Directors 12

EVALUATION OF THE COMMITTEES 12

EVALUATION OF CHAIRPERSON OF THE BOARD 13

FREQUENCY OF BOARD EVALUATION 14

DISCLOSURE 14

STEPS FOR BOARD EVALUATION 15

Identification of objectives 15

What is to be evaluated? 15

Important Steps for Evaluation Process 17

REVIEW 17

POST DISCLOSURE 18

SNAP SHOT OF INDIAN LEGISLATIVE FRAMEWORK 19

INTERNATIONAL PERSPECTIVE 23

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SAMPLE POLICY FOR EVALUATION OF THEPERFORMANCE OF THE BOARD OF DIRECTORS 36

SAMPLE EVALUATION TOOLS

PART-I Board of Directors Evaluations 39

PART-II Managing Director / Whole Time Director /Executive Director Assessment Form 47

PART-III Director Self Assessment / Peer Review 56

PART-IV Non-Executive Director and IndependentDirector Evaluation Form 59

PART-V Evaluation of Board Committees 64

PART VI Chairperson Assessment 67

SAMPLE BOARD ASSESSMENT MODELS

Deloitte : Sample Board Performance Form 69

Genome Canada 77

KPMG : Audit Committee Institute, Ireland 90

BIBLIOGRAPHY 102

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“Why should boards exhibit less responsibility than they requireof the people who work for them? Why should the parts of anorganisation make more sense than the whole? Why must themost powerful organizational unit be less studied, least developed,and least rational? Why should board be excused from takingresponsibility for their own jobs?..... given the massiveaccountabilities and powers of boards, why should we not expectheroic performance? Do we have any right to accept less?”“virtually without question we countenance far less competencein boards than we demand in pilots, surgeons, cosmetologists”.

Dr. John Carver – Creator of Model Policy Governance

At the core of the corporate governance practices is the Boardof Directors which oversees how the management serves andprotects the long term interests of all the stakeholders of thecompany. The institution of Board or directors was based on thepremise that a group of trustworthy and respectable people shouldlook after the interests of the large number of shareholders who arenot directly involved in the management of the company. The positionof Board of Directors is that of trust as the Board is entrusted withthe responsibility to act in the best interests of the company. It isaccountable to the shareholders for creating, protecting andenhancing wealth, ensuring optimum utilisation of resources of thecompany, and reporting to them on the performance in a timely andtransparent manner. The Board is ultimately responsible for ensuringcompliance of various applicable laws in the best interests ofstakeholders.

The shareholders and investors repose confidence on the Boardof Directors as their representatives for conducting and monitoringthe affairs of the company. Board behavior and effectiveness arebecoming increasingly visible to investors and other stakeholders.

Introduction

1

A Guide to Board Evaluation2

Corporate boards are expected to be more engaged, moreknowledgeable and more effective than in the past. One tool that agrowing number of boards are using to examine and improve theireffectiveness is the Board evaluation.

According to Heidrick & Struggles Asia Pacific CorporateGovernance Report 2014 “Foundations and Building Blocks for High-performing Boards”, regular Board evaluations is the core drivernecessary to promote change and deliver best practice. The fourcapabilities of high-performing boards include as “top talentperformance and succession planning” (people), “clarity of vision/strategy that is both shared and understood” (vision), “leadershipon the Board that promotes team dynamics” (leadership) and“capacity to adapt to risk and innovation” (innovation).

The Companies Act 2013 for the first time codifies the duties ofdirectors, and specifies that the director of a company shall act inaccordance with the articles of the company. It is further provided:

• A director of a company shall act in good faith in order topromote the objects of the company for the benefit of itsmembers as a whole, and in the best interests of thecompany, its employees, the shareholders, the communityand for the protection of environment.

• A director of a company shall exercise his duties with dueand reasonable care, skill and diligence and shall exerciseindependent judgment.

• A director of a company shall not involve in a situation inwhich he may have a direct or indirect interest that conflicts,or possibly may conflict, with the interest of the company.

• A director of a company shall not achieve or attempt toachieve any undue gain or advantage either to himself or tohis relatives, partners, or associates and if such director isfound guilty of making any undue gain, he shall be liable topay an amount equal to that gain to the company.

• A director of a company shall not assign his office and anyassignment so made shall be void.

The stakeholders and investors are interested to know whetherthe members of Board are effectively functioning individually and

A Guide to Board Evaluation 3

collectively. The Board at many times requires new skills for promptlyresponding to the dynamic changing business environment.Performance measurement, against the set benchmarks, in the formof Board evaluation (also called “Board assessment”, “Boardreview”) has the potential to significantly enhance Boardeffectiveness, maximize strengths, tackle weaknesses and improvecorporate relationships. Annual assessment is a powerful tool toconvert good boards into great boards.

NEED FOR BOARD EVALUATION

The purposes of the Board evaluation can be enumerated asunder:

• Improving the performance of Board towards corporate goalsand objectives.

• Assessing the balance of skills, knowledge and experienceon the Board.

• Identifying the areas of concern and areas to be focussedfor improvement.

• Identifying and creating awareness about the role of Directorsindividually and collectively as Board.

• Building Team work among Board members.

• Effective Coordination between Board and Management.

• Overall growth of the organisation.

Appraisal of Board’s performance includes fixing up of individualand collective roles and responsibilities of its directors, creatingawareness among Directors about their expected level ofperformance and thereby improving the effectiveness of the Board.Board evaluation contributes significantly to improved performanceat three levels - organizational, Board and individual Board memberlevel. It also improves the leadership, teamwork, accountability,decision-making, communication and efficiency of the board. Acommitment to annual evaluation is powerful change agent.

The Board evaluation sets the standards of performance andimproves the culture of collective action by Board.

Evaluation also improves teamwork by creating better


understating of Board dynamics, board-management relations andthinking as a group within the board. It helps to maximize board/director contribution by encouraging participation in meetings andhighlighting the skill gaps on the Board and those of individualmembers. Directors demonstrate commitment to improvement, basedon the feedback provided on individual and collective skill gaps.

Even beyond the legal mandate many good governed companieshave been undertaking evaluation of its Board.

The “Review of the Role and Effective Functioning of Non-Executive Directors” carried out under the chairmanship of Sir DerekHiggs in 2003 (the Higgs Review) in U.K. for the first time noted theimportance of Board performance evaluation. It stated that it is ‘bestpractice that the performance of the Board as a whole, of itscommittees and of its members, is evaluated at least once a year’and that ‘Companies should disclose in their annual report whethersuch performance evaluation is taking place.’

LEGAL FRAMEWORK IN INDIA

Board evaluation, until recently, was recognised as a goodcorporate governance practice and largely undertaken voluntarily.The erstwhile Clause 49 of the Listing Agreement as a non-mandatoryrequirement, provided for performance evaluation of non-executivedirectors by a peer group. Further, the Corporate GovernanceVoluntary Guidelines 2009 recommended that the Board shouldundertake a formal and rigorous evaluation of its own performanceand that of its committee and individual directors.

The Companies Act, 2013 (the Act) now mandates formal annualevaluation of the Board, its committees and individual directors.

Section 134 of the Companies Act, 2013 inter- alia specifies thecontents that are required to be part of Board’s Report.

According to Section 134 sub-section 3(p) read with Sub-rule (4)of Rule 8 of the Companies (Accounts) Rules, 2014 every listedcompany and every other public company having paid- up sharecapital of twenty five crores or more calculated at the end of thepreceding financial year should include in the report by its Board ofDirectors, a statement indicating the manner in which formal annualevaluation has been made by the Board of its own performance andthat of its committees and individual directors.


‘Listed company’ as per section 2(52) of the Act means acompany which has any of its securities listed on any recognisedstock exchange.

“Securities” under section 2(81) of the Act securities means“the securities as defined in clause (h) of section 2 of the SecuritiesContracts (Regulation) Act, 1956”. The relevant section states thatsecurities include:-

(i) shares, scrips, stocks, bonds, debentures, debenture stockor other marketable securities of a like nature in or of anyincorporated company or other body corporate;

(ia) derivative;

(ib) units or any other instrument issued by any collectiveinvestment scheme to the investors in such schemes;

(ic) security receipt as defined in clause (zg) of section 2 of theSecuritisation and Reconstruction of Financial Assets andEnforcement of Security Interest Act, 2002;

(id) units or any other such instrument issued to the investorsunder any mutual fund scheme;

(ie) any certificate or instrument (by whatever name called),issued to an investor by any issuer being a special purposedistinct entity which possesses any debt or receivable,including mortgage debt, assigned to such entity, andacknowledging beneficial interest of such investor in suchdebt or receivable, including mortgage debt, as the case maybe;

(ii) Government securities;

(iia) such other instruments as may be declared by the CentralGovernment to be securities; and

(iii) Rights or interest in securities;

Requirements under schedule IV

The Schedule IV i.e. “Code for Independent Directors” providesthat independent directors shall bring an objective view in theevaluation of the performance of Board and management.


The independent directors of the company shall hold at leastone meeting in a year, without the attendance of non-independentdirectors and members of management. All the independentdirectors of the company shall strive to be present at such meeting.The meeting shall:

(a) review the performance of non-independent directors andthe Board as a whole;

(b) review the performance of the Chairperson of the company,taking into account the views of executive directors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow ofinformation between the company management and theBoard that is necessary for the Board to effectively andreasonably perform their duties.

Role of Nomination & Remuneration Committee in BoardEvaluation

Nomination & Remuneration committee constituted undersection 178 of the Act has been made responsible for carrying outevaluation of every director’s performance.

Section 178(2) states that the Nomination and RemunerationCommittee shall identify persons who are qualified to becomedirectors and who may be appointed in senior management inaccordance with the criteria laid down, recommend to the Boardtheir appointment and removal and shall carry out evaluation of everydirector’s performance.

It is pertinent to note that for the smooth and timely evaluation,the Nomination and Remuneration Committee plays a crucial rolestarting from developing the questionnaire to overseeing theevaluation and finally analyzing the feedback.

Listing Agreement

SEBI has revised the listing agreement, effective October 01,2014 whereby the Board of Directors have to fulfil certain keyfunctions, including monitoring and reviewing the Board evaluationframework.

The revised Listing Agreement mandates evaluation with respectto performance evaluation of Independent Directors.


Additionally, for listed companies, as mentioned above,Nomination & Remuneration Committee shall lay down theevaluation criteria for performance evaluation of IndependentDirectors.

The Listing Agreement further provides that the company shallfamiliarise the independent directors with the company, their roles,rights, responsibilities in the company, nature of the industry in whichthe company operates, business model of the company, etc., throughvarious programmes. The details of such familiarisation programmesshall also be disclosed on the company’s website and a web linkthereto shall also be given in the Annual Report.

Attention is drawn to the different words used in differentplaces, like “review”, “assess”, “evaluate”. Each of these wordscarries specific meanings, according to which the scope mayalso vary.

BROAD EVALUATION METHODOLOGIES

The Act is silent on how the Board evaluation is to be undertaken.It only provides that the Nomination & Remuneration Committeeshall carry out Board evaluation. Further Schedule IV of the Actprovides that the independent directors shall bring an objective viewin the evaluation of the performance of Board and management.

Listing Agreement is also silent on what process needs to beadopted for the purpose of evaluation.

Companies should ensure that the process for evaluation of theboard, committees and directors should be developmental ratherthan just a compliance exercise. Doing just bare minimum ofcompliance would mean squandering the opportunity of genuinelyimproving the work of the Board.

Typically, the Board evaluation process should comprise of bothassessment and review. This would include analysis of how the Boardand its committees are functioning, the time spent by the Boardconsidering matters and whether the terms of reference of the Boardcommittees have been met, besides compliance of the provisions ofthe Act.


Generally Board appraisals include following components:

1. Evaluation of the Board as a whole

a. Internally

b. Externally

2. Evaluation of Individual Directors (Independent, Executive,Non- executive, Whole Time Director)

a. Self evaluation

b. Peer to Peer evaluation

c. External

3. Evaluation of the Committees

a. Internal (by the Board)

b. External

4. Evaluation of the Chairperson

a. All Directors

b. External

These are elaborated below :

(a) Internal Evaluation : In case of internal evaluation, the Boardis responsible for managing both the process as well as thecontent. Evaluation methodology may be set by theNomination and Remuneration Committee. The Boards’performance may generally be evaluated by a standardquestionnaire and/or through one-on-one interviews.

This approach has certain drawbacks, which includes:

• Reluctance of directors to share issues within thecompany.

• The approach may not be entirely acceptable tostakeholders, as they may question the rigour of theprocess.

(b) External evaluation : External evaluation may be externallyfacilitated. Externally facilitated evaluations are undertakenwith the assistance of a external expert, this adds to thelevel of independence of the evaluation. This approach isalso recommended by the UK Code for Corporate Governancefor FTSE 350 companies and also in the revised ASX Corporate


Governance Council Principles & Recommendations. TheHiggs Review states: “The conduct of the evaluation by anexternal third party can bring objectivity to the process”.

These evaluations may be made by using a questionnaireand/or one-on-one interviews. External evaluators areexpected to bring their own judgment on the quality of theBoard’s performance during the evaluation.

(c) Peer Review : In this case the evaluation of each Director isdone by the Directors other than the one being evaluated.

It is of great importance that trust is established in the credibilityand confidentiality of the process of Board evaluations, regardlessof whether it is managed by the Board itself or by a third party.

1. EVALUATION OF THE BOARD

The performance of the Board as a whole may be evaluatedeither from the reviews/ feedback of the directors themselvesor by some external source. The broad parameters forreviewing the performance of the Board, inter alia, shallcontain the following:

• Development of suitable strategies and business plansat appropriate time and its effectiveness;

• Implementation of robust policies and procedures;

• Size, structure and expertise of the Board;

• Oversight of the Financial Reporting Process, includingInternal Controls;

• Willingness to spend time and effort to learn about theCompany and its business; and

• Awareness about the latest developments in the areassuch as corporate governance framework, financialreporting, industry and market conditions.

The Independent Directors at their separate meeting shallalso assess the quality, quantity and timeliness of flow ofinformation between the company management and theBoard that is necessary for the Board to effectively andreasonably perform their duties.


Quality of information includes its relevance, completeness,authenticity, how comprehensive and concise and clear suchinformation is. As regards quantity, the independent directorneed to assess that the information is neither too less nortoo much resulting in an information overload. Typically theinformation to the board members should carry an executivesummary which is supplemented by detailed notes and wherenecessary back-up papers as annexures. Timeliness ofinformation flow can be gauged from facts such as how soonare important events communicated between boardmeetings, timeliness of the agenda papers, etc.

The evaluation form placed later as Part I in SampleEvaluation Tools may be referred.

2. EVALUATION OF INDIVIDUAL DIRECTOR(s)

i. Evaluation of Managing Director / Whole time Director /Executive Director

The performance evaluation of Managing Director,Executive Director of the Company may be done by allthe directors. The external facilitation may also serve asthe efficient tool for evaluation. The Code for IndependentDirectors also provides that Independent Directors shallreview the performance of non-independent Directors,which include Managing Director / Whole time Director/Executive Director.

The broad parameters for reviewing the performance ofManaging Director/Executive Director are:

• Achievement of financial/business targets prescribedby the Board;

• Developing and managing / executing business plans,operational plans, risk management, and financialaffairs of the organization;

• Display of leadership qualities i.e. correctlyanticipating business trends, opportunities, andpriorities affecting the Company’s prosperity andoperations;

• Development of policies, and strategic plans aligned


with the vision and mission of Company and whichharmoniously balance the needs of shareholders,clients, employees, and other stakeholders;

• Establishment of an effective organization structureto ensure that there is management focus on keyfunctions necessary for the organization to align withits mission; and

• Managing relationships with the Board, managementteam, regulators, bankers, industry representativesand other stakeholders.

The evaluation form placed later as Part II SampleEvaluation Tools may be referred.

(ii) Evaluation of Non-Executive Directors

In terms of the Code for Independent Directors, theIndependent director(s) on the Board of the Company canevaluate the performance of Non-independent director(s)which include non-executive director(s). Peer Reviewmethod or external evaluation may also facilitate thepurpose of evaluating Non-executive directors.

The broad parameters for reviewing the performance ofNon-executive Directors are:

• Participation at the Board / Committee meetings;

• Commitment (including guidance provided to seniormanagement outside of Board/ Committee meetings);

• Effective deployment of knowledge and expertise;

• Effective management of relationship withstakeholders;

• Integrity and maintaining of confidentiality;

• Independence of behaviour and judgment; and

• Impact and influence.

The evaluation form placed later as Part III of SampleEvaluation Tools may be referred for self assessment.

The evaluation form placed later as Part IV of SampleEvaluation Tools may be referred for Peer review.


(iii) Evaluation of Independent Directors

The Schedule IV of the Act i.e. “Code for IndependentDirectors” also provides for the evaluation of IndependentDirectors. It requires that the performance evaluation ofindependent directors shall be done by the entire Boardof Directors, excluding the director being evaluated. Onthe basis of the report of performance evaluation, it shallbe determined whether to extend or continue the term ofappointment of the independent director. This also meansthat Independent Directors (other than the IndependentDirector being evaluated) also become a part to assessthe Independent Director being evaluated.

The revised Listing Agreement provides that theNomination Committee shall lay down the evaluationcriteria for performance evaluation of independentdirectors. The company shall disclose the criteria forperformance evaluation, as laid down by the NominationCommittee, in its Annual Report. The performanceevaluation of independent directors shall be done by theentire Board of Directors (excluding the director beingevaluated).

In addition to the parameters laid down for Directors,which shall be common for evaluation to bothIndependent and Non- executive directors, anIndependent director shall also be evaluated on thefollowing parameters:

• Exercise of objective independent judgment in thebest interest of Company;

• Ability to contribute to and monitor corporategovernance practice; and

• Adherence to the code of conduct for independentdirectors.

The evaluation form placed later as Part IV of SampleEvaluation Toolsmay be referred.

3. EVALUATION OF THE COMMITTEES

The performance of the committees may be evaluated by


the Directors, on the basis of the terms of reference of thecommittee being evaluated. The evaluation may be externallyfacilitated.

The broad parameters of reviewing the performance of theCommittees, inter alia, are :

• Discharge of its functions and duties as per its terms ofreference;

• Process and procedures followed for discharging itsfunctions;

• Effectiveness of suggestions and recommendationsreceived;

• Size, structure and expertise of the Committee; and

• Conduct of its meetings and procedures followed in thisregard.

The evaluation form placed later as Part V of SampleEvaluation Tools may be referred.

4. EVALUATION OF CHAIRPERSON OF THE BOARD

The performance of the Chairperson is linked to both thefunctioning of the Board as a whole as well as theperformance of each director.

In terms of Code for Independent Directors, the IndependentDirector shall review the performance of the Chairperson ofthe company taking into account the views of the executivedirectors and non-executive directors.

All the directors of the Board of the company thereofcontribute in evaluating the performance of the Chairpersonof the Board. External agencies may also be involved inevaluating the Chairperson.

The broad parameters for reviewing the performance ofChairperson of the Board are:

• Managing relationship with the members of the Boardand management;

• Demonstration of leadership qualities;


• Relationship and communication within the Board;

• Providing ease of raising of issues and concerns bythe Board members; and

• Promoting constructive debate and effective decisionmaking at the board;

• Relationship and effectiveness of communicationwith the shareholders and other stakeholders;

• Promoting shareholder confidence in the Board and

• Personal attributes i.e. Integrity, Honesty, Knowledgeetc.

The evaluation form placed later as Part VI of SampleEvaluation Tools may be referred.

FREQUENCY OF BOARD EVALUATION

Reading section 134(3)(p) it can be inferred that there has to bea formal annual evaluation of Board of its own performance andthat of its committees and individual directors.

The Company may undertake annual evaluation either inaccordance with calendar year or financial year, as there is no clarityon this. Ideally, the same should be as per financial year.

DISCLOSURE

The Companies Act, 2013 requires the Board’s report to includea statement indicating the manner in which formal annual evaluationby the Board of its own performance and that of its committees andindividual directors. (Section 134(3)(p))

Additionally, the Listing Agreement provides that the companyshall disclose the evaluation criteria as laid down by the Nominationcommittee, in its Annual Report. (Clause 49(II)(B)(5)(b))

Therefore all the listed companies and public companies withpaid- up share capital of Rs. 25 crore or more shall have to includesuch a statement in Board’s Report indicating the manner andcriteria of formal Board evaluation. (Section 134 sub-section 3(p)read with Sub-rule (4) of Rule 8 of the Companies (Accounts) Rules,2014)


This type of disclosure does not however, discuss the findings ofspecific evaluation. Instead, it details the criteria of the assessmentprocess to show how the Board identifies gaps in the skills generally.

STEPS FOR BOARD EVALUATION

Identification of objectives

The first step for Board evaluation is to identify the objectiveof evaluation. It is important to determine what to assess, since itis critical in designing an appropriate evaluation framework. TheBoard has to undertake various important responsibilities includingstrategic development, risk management, etc. Before the evaluationeven begins it is important that the directors set the targets of thecompany against which the performances can be measured, afterthorough Board discussion.

What is to be evaluated?

The evaluation process should be used constructively as amechanism to improve Board effectiveness, maximise strengths andtackle weaknesses.

Board evaluation can be divided into two main factors; peoplefactors (knowledge, personal characteristics, Board size, structure,directors contribution, interpersonal skills, level of commitment,Board room behaviour, etc); and process factors (planning andmanaging Board meetings, information flow, oversight management,risk management, coordination, succession planning, etc.)

The Higgs Review suggests the following as some of the areasthat should be considered in a performance evaluation:

• How well has the Board performed against any performanceobjectives that have been set?

• What has been the board’s contribution to the testing anddevelopment of strategy?

• What has been the board’s contribution to ensuring robustand effective risk management?

• Is the composition of the Board and its committeesappropriate, with the right mix of knowledge and skills tomaximise performance in the light of future strategy? Are


inside and outside the Board relationships workingeffectively?

• How has the Board responded to any problems or crises thathave emerged and could or should these have been foreseen?

• Are the matters specifically reserved for the Board the rightones?

• How well does the Board communicate with the managementteam, company employees and others? How effectively doesit use mechanisms such as the AGM and the annual report?

• Is the Board as a whole up to date with latest developmentsin the regulatory environment and the market?

• How effective are the board’s committees? (Specific questionson the performance of each committee should be includedsuch as, for example, their role, their composition and theirinteraction with the board.)

The processes that help underpin the board’s effectiveness shouldalso be evaluated e.g.:

• Is appropriate, timely information of the right length andquality provided to the Board and is management responsiveto requests for clarification or amplification? Does the Boardprovide helpful feedback to management on itsrequirements?

• Are sufficient Board and committee meetings of appropriatelength held to enable proper consideration of issues? Do allthe Board members attend and actively contribute atmeetings? Is time used effectively?

• Are Board procedures conducive to effective performanceand flexible enough to deal with all eventualities?

The leadership skills of the Chairperson are central to an effectiveBoard process.

In addition, according to Higgs Review some specific issuesrelating to the Chairperson should be included as part of anevaluation of the board’s performance e.g.:

• Is the Chairperson demonstrating effective leadership of theboard?


• Does his leadership style promote effective decision makingand constructive feedback?

• Are relationships and communications with shareholders wellmanaged?

• Are relationships and communications within the Boardconstructive?

• Do the Chairperson and CEO work well together tocomplement their skills and experience?

• Are the processes for setting the agenda working? Do theyenable Board members to raise issues and concerns?

Important Steps for Evaluation Process

• To develop a methodology for evaluation. It may be differentfor different Companies.

• As a good practice, the Company may also develop a Policyon Board Evaluation.

• Ideally, evaluation process could commence each year(during last quarter) to evaluate the performance ofconcerned body or individual in the succeeding year.

• It is a good practice that each director is given a copy of theform for assessing the overall performance of Board/Committees/Directors/ Chairperson/ Managing Director/wholetime director / Executive Director, as the case may be,sufficiently in advance.

• The forms which include a set of questions, should have arating mechanism or subjective questions, which may beanalysed by the Nomination & Remuneration Committee.

• Ideally, the Nomination & Remuneration Committee shouldcompile the feedback and comments in the evaluation formsand appropriately review the same.

• Thereafter the consolidated feedback and comments alongwith its recommendation be placed before the Board.

REVIEW

This evaluation methodology may be reviewed once in a year bythe Nomination and Remuneration Committee based on therecommendation of the Board and/ or to ensure compliance withregulatory requirements.


POST DISCLOSURE

Apart from disclosures in the Boards’ Report, follow-up is criticalfor having the maximum impact. Once the evaluation is complete,directors should be encouraged to formally recognize the resultsand enable follow-up activities. Follow up should include developinga plan of action for addressing points that arise from the discussionand assigning follow-up responsibilities to the governance committee,if any or the Board Chair. This may include :

— Communication to individual director - the feedback orconcerns may be shared with directors preferably by theChairperson in a delicate and subtle manner in one to onemeeting. Such meetings should be interactive so that cordialfuture action can be derived.

— Systemic changes can be introduced which shall includedirector development programmes, director dashboard, betterinformation flow to directors, committees etc.

For the sake of convenience of the readers, the Snap Shot ofIndian Legislative Framework is given in tabular form here:

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uide to Board Evaluation19

Snap Shot of Indian Legislative Framework

Board of Directors and Evaluation

Source Particulars Board’s Role in evaluation Remarks

Companies Act-Section 134(3)(p) Evaluation to be done by the Has to do formal annual Board overall evaluationentire Board evaluation of its own performance

Has to do formal annual Evaluation of Committeesevaluation of its Committees

Has to do formal annual evaluation Evaluation of individual directorsof all the individual directors

Has to do performance evaluation The said evaluation will be the basisof Independent Director’s (excluding for continuation of the extension/the director being evaluated) the term of the Independent

Director.

Companies Act- Section 134(3)(p) Disclosure Board’s Report All the listed companies and publicread with Rule 8 of companies companies with paid-up share(Accounts) Rules 2014 capital of Rs. Twenty Five crore or

more shall have to include such astatement in Board Reportindicating the manner & criteria offormal Board evaluation.

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uide to Board Evaluation20Nomination Committee and Evaluation

Source Particulars Committee’s Role in evaluation Remarks

Listing Agreement Nomination & Remuneration Shall lay down the evaluation criteria The evaluation criteria for Indepen-Committee (NRC) for performance evaluation of Inde- dent Directors shall be prepared by

pendent Directors NRC.

(This criteria is also required to bedisclosed in the Annual Report ofthe Company)

Companies Act- Evaluate every director’s Evaluation of directors include:section 178(2) performance a. Independent directors

b. Non executive directors

c. Executive directors and wholetime directors

d. Managing Directors

e. Chairperson

A G


Role and functions of Independent Directors in relation to evaluation

Source Particulars Independent Directors’ RemarksRole in evaluation

Companies Act - Schedule IV- In the separate meeting of Inde- Review the performance Review of:Code for ID (Part VII) pendent Directors of Non-Independent Directors

a. Non executive directorsb. Managing Director, whole time

directors and Executivedirectors

Review the performance of the Review the performance of theBoard as a whole Board as a whole.

Review the performance of the Review the performance of theChairperson of the Company, Chairperson.taking into account the viewsof Executive Director’s andNon executive director’s

Assess the:

a. quality

b. quantity and

c. timeliness

of flow of informationbetween Quality of information includesthe Company management and its relevance, completeness,

A G

uide to Board Evaluation22the Board, that is necessary authenticity, how comprehensive,

for the Board to effectively and concise and clear such infor-reasonably perform their duties. mation is. As regards quantity, the

independent director need to assessthat the information is neither tooless nor too much resulting in aninformation overload. Typically theinformation to the board membersshould carry an executive summarywhich is supplemented by detailednotes and where necessary back-uppapers as annexure. Timeliness ofinformation flow can be gaugedfrom facts such as how soon areimportant events communicatedbetween board meetings, timelinessof the agenda papers, etc.

UK CORPORATE GOVERNANCE CODE 2014

For board effectiveness it is required that the board shouldundertake a formal and rigorous annual evaluation of its ownperformance and that of its committees and individual directors.

The board should undertake a formal and rigorous annualevaluation of its own performance and that of its committeesand individual directors.

Supporting Principles

Evaluation of the board should consider the balance of skills,experience, independence and knowledge of the company on theboard, its diversity, including gender, how the board works togetheras a unit, and other factors relevant to its effectiveness.

The chairman should act on the results of the performanceevaluation by recognising the strengths and addressing theweaknesses of the board and, where appropriate, proposing newmembers be appointed to the board or seeking the resignation ofdirectors.

Individual evaluation should aim to show whether each directorcontinues to contribute effectively and to demonstrate commitmentto the role (including commitment of time for board and committeemeetings and any other duties).

Code Provisions B.6.1.

The board should state in the annual report how performanceevaluation of the board, its committees and its individual directorshas been conducted.

B.6.2. Evaluation of the board of FTSE 350 companies should beexternally facilitated at least every three years. The external

International Perspective

23


facilitator should be identified in the annual report and a statementmade as to whether they have any other connection with thecompany.

B.6.3. The non-executive directors, led by the senior independentdirector, should be responsible for performance evaluation of thechairman, taking into account the views of executive directors.

Australia

The ASX Corporate Governance Council Principles andRecommendations 3rd Edition (2014)

Recommendation 1.6:

A listed entity should:

(a) have and disclose a process for periodically evaluatingthe performance of the board, its committees andindividual directors; and

(b) disclose, in relation to each reporting period, whether aperformance evaluation was undertaken in the reportingperiod in accordance with that process.

Commentary

The board performs a pivotal role in the governance frameworkof a listed entity. It is essential that the board has in place a formaland rigorous process for regularly reviewing the performance of theboard, its committees and individual directors and addressing anyissues that may emerge from that review. The board should considerperiodically using external facilitators to conduct its performancereviews.

A suitable non-executive director (such as the deputy chair orthe senior independent director, if the entity has one), should beresponsible for the performance evaluation of the chair, after havingcanvassed the views of the other directors.

When disclosing whether a performance evaluation has beenundertaken the entity should, where appropriate, also disclose anyinsights it has gained from the evaluation and any governancechanges it has made as a result.


Singapore

Code of Corporate Governance 2012

The Nomination Committee should make recommendations tothe Board on relevant matters relating to the development of aprocess for evaluation of the performance of the Board, its boardcommittees and directors.

Individual evaluation should aim to assess whether each directorcontinues to contribute effectively and demonstrate commitment tothe role (including commitment of time for meetings of the Boardand board committees, and any other duties). The Chairman shouldact on the results of the performance evaluation, and, in consultationwith the Nomination Committee, propose, where appropriate, newmembers to be appointed to the Board or seek the resignation ofdirectors.

South Africa

King III Report 2009

On Performance assessment it has been provided that theevaluation of the board, its committees and the individual directorsshould be performed every year.

Yearly evaluations should be performed by the chairman or anindependent provider.

The results of performance evaluations should identify trainingneeds for directors.

An overview of the appraisal process, results and action plansshould be disclosed in the integrated report.

The nomination for the re-appointment of a director should onlyoccur after the evaluation of the performance and attendance of thedirector.

It is provided that the chairman’s ability to add value, and hisperformance against what is expected of his role and function, shouldbe assessed every year.

NYSE LISTING RULES

The NYSE mandates that the boards of listed companies undertake


an annual self-evaluation to determine whether they and each oftheir committees are functioning effectively.

303A.04 Nominating/Corporate Governance Committee

The nominating/corporate governance committee must have awritten charter that includes that the committee’s purpose andresponsibilities – which, at minimum, must be to: identify individualsqualified to become board members, consistent with criteriaapproved by the board, and to select, or to recommend that theboard select, the director nominees for the next annual meeting ofshareholders; develop and recommend to the board a set of corporategovernance guidelines applicable to the corporation; and overseethe evaluation of the board and management.

303A.09 Corporate Governance Guidelines further provide forAnnual performance evaluation of the board. The board shouldconduct a self-evaluation at least annually to determine whether itand its committees are functioning effectively.

CALIFORNIA PUBLIC EMPLOYEES’ RETIREMENT SYSTEM

CALPERS administer health and retirement benefits on behalf ofmore than 3,000 public school, local agency and State employers.They ensure that the boards adopted the best governance practices,accordingly board evaluation.

Global Principles of Accountable Corporate Governance, 2014recommend the following on Board, Director, and CEO Evaluation.

No board can truly perform its function of overseeing a company’sstrategic direction and monitoring management’s success withouta system of evaluating itself. Each director should fit within the skillsets identified by the board as necessary to focus board attentionon optimizing company operating performance and returns toshareowners. No director can ulfil his or her potential as an effectiveboard member without a personal dedication of time and energy.Corporate boards should therefore have an effective means ofevaluating itself and individual director performance.

With this in mind, it has been recommended that:

2.1 Corporate Governance Principles : The board adopts anddiscloses a written statement of its own governance


principles, and re-evaluates them on at least an annualbasis.

2.2 Board Talent Assessment and Diversity : The board shouldfacilitate a process that ensures a thoroughunderstanding of the diverse characteristics necessaryto effectively oversee management’s execution of a long-term business strategy. Board diversity should be thoughtof in terms of skill sets, gender, age, nationality, race,and historically under-represented groups. Considerationshould go beyond the traditional notion of diversity toinclude a more broad range of experience, thoughts,perspectives, and competencies to help enable effectiveboard leadership. A robust process for how diversity isconsidered when assessing board talent and diversityshould be adequately disclosed, and entail:

a. Director Talent Evaluation : To focus on the evolvingglobal capital markets, a board should disclose itsprocess for evaluating the diverse talent and skillsneeded on the board and its key committees.

b. Director Attributes : Board attributes should includea range of skills and experience which provide adiverse and dynamic team to oversee businessstrategy, risk mitigation and senior managementperformance. The board should establish and disclosea diverse mix of director attributes, experiences,perspectives and skill sets that are most appropriatefor the company. At a minimum, director attributesshould include expertise in accounting or finance,international markets, business or management,industry knowledge, governance, customer-baseexperience or perspective, crisis response, riskassessment, leadership and strategic planning.Additionally, existing directors should receivecontinuing education surrounding a company’sactivities and operations to ensure they maintain thenecessary skill sets and knowledge to meet theirfiduciary responsibilities.

c. Director Nominations : With each director nomination


recommendation, the board should consider the issueof continuing director tenure, as well as boarddiversity, and take steps as necessary to ensure thatthe board maintains openness to new ideas and awillingness to re-examine the status quo.

2.3 Board, Committee, and Director Expectations : The boardestablishes preparation, participation and performanceexpectations for itself (acting as a collective body), forthe key committees and each of the individual directors.A process by which these established board, keycommittee and individual director expectations areevaluated on an annual basis should be disclosed toshareowners. Directors must satisfactorily perform basedon the established expectations with re-nomination basedon any other basis being neither expected norguaranteed.

2.4 Director Time Commitment : The board adopts anddiscloses guidelines in the company’s proxy statementto address competing time commitments that are facedwhen directors, especially acting CEOs, serve on multipleboards.

2.5 Director Attendance : Directors should be expected toattend at least 75% of the board and key committeemeetings on which they sit.

2.6 Board Size : The board periodically reviews its own size,and determines the size that is most effective towardfuture operations.

2.7 CEO Performance : Independent directors establish CEOperformance criteria focused on optimizing operatingperformance, profitability and shareowner value creation;and regularly review the CEO’s performance against thosecriteria.

2.8 CEO Succession Plan : The board should proactively leadand be accountable for the development, implementation,and continual review of a CEO succession plan. Boardmembers should be required to have a thoroughunderstanding of the characteristics necessary for a CEO


to execute on a long-term strategy that optimizesoperating performance, profitability and shareownervalue creation. At a minimum, the CEO successionplanning process should:

(a) Become a routine topic of discussion by the board.

(b) Extend down throughout the company emphasizingthe development of internal CEO candidates andsenior managers while remaining open to externalrecruitment.

(c) Require all board members be given exposure tointernal candidates.

(d) Encompass both a long-term perspective to addressexpected CEO transition periods and a short-termperspective to address crisis management in theevent of death, disability or untimely departure ofthe CEO.

(e) Provide for open and ongoing dialogue between theCEO and board while incorporating an opportunityfor the board to discuss CEO succession planningwithout the CEO present.

(f) Be disclosed to shareowners on an annual basis andin a manner that would not jeopardize theimplementation of an effective and timely CEOsuccession plan.

2.9 Director Succession Plan : The board should proactivelylead and be accountable for the development,implementation, and continual review of a directorsuccession plan. Board members should be required tohave a thorough understanding of the characteristicsnecessary to effectively oversee management’sexecution of a long-term strategy that optimizes operatingperformance, profitability, and shareowner valuecreation. At a minimum, the director succession planningprocess should:

(a) Become a routine topic of discussion by the board.

(b) Encompass how expected future board retirements


or the occurrence of unexpected director turnover asa result of death, disability or untimely departure isaddressed in a timely manner.

(c) Encompass how director turnover either throughtransitioning off the board or as a result of rotatingcommittee assignments and leadership is addressedin a timely manner.

(d) Provide for a mechanism to solicit shareowner input.

(e) Be disclosed to shareowners on an annual basis andin a manner that would not jeopardize theimplementation of an effective and timely directorsuccession plan.

INTERNATIONAL CORPORATE GOVERNANCE NETWORK

GLOBAL GOVERNANCE PRINCIPLES, 2014

Responsibilities of the Board include ensuring a formal, fair andtransparent process for nomination, election & evaluation of directorsand conducting an objective board evaluation on a regular basis,consistently seeking to enhance board effectiveness.

The nomination committee should evaluate the process for arigorous review of the performance of the board, the companysecretary (where such a position exists), the board’s committeesand individual directors prior to being proposed for re-election. Theboard should also periodically (preferably every three years) engagean independent outside consultant to undertake the evaluation.

The non-executive directors, led by the lead independent director,should be responsible for performance evaluation of the chair, takinginto account the views of executive officers. The board shoulddisclose the process for evaluation and, as far as reasonably possible,any material issues of relevance arising from the conclusions andany action taken as a consequence.

For the sake of convenience of the readers, the comparative tableof Board Evaluation in various countries is given here:

A G


COMPARATIVE TABLE OF BOARD EVALUATION IN VARIOUS COUNTRIES

MODE

EVALUATION OFINDIVIDUALDIRECTOR

UK

Internal andExternal facilitatedevaluation

The board shouldundertake a formaland rigorous annualevaluation of itsindividual directors.

USA(NYSE Corporate

GovernanceGuidelines)

Annual self-evaluation

An annual self-evaluation of theperformance of theboard of directorsand its committees.

SOUTH AFRICA

Internal andExternal evaluation(chairman or ani n d e p e n d e n tprovider.)

The evaluation ofthe individualdirectors should beperformed everyyear.

The nomination forthe re-appointment of adirector should onlyoccur after theevaluation of the

AUSTRALIA

External facilitatorsis recommended

The board has in placea formal and rigorousprocess for regularlyreviewing theperformance of theboard, its committeesand individualdirectors andaddressing any issuesthat may emerge fromthat review.

SINGAPORE

Internal andExternalevaluation

There should bea formal annualassessment ofthe effective-ness of thecontribution byeach director tothe effective-ness of theBoard.

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uide to Board Evaluation32Individual evalua-

tion should aim toshow whether eachdirector continuesto contri-buteeffectively and tod e m o n s t r a t ecommitment to therole.

The board shouldundertake a formaland rigorous annualevaluation of its

-do-

performance andattendance of thedirector.

The evaluation ofthe board shouldbe performed everyyear.

-do-

Individual eva-luation shouldaim to assesswhether eachd i r e c t o rcontinues toc o n t r i b u t eeffectively andd e m o n s t r a t ecommitment tothe role( i n c l u d i n gcommitment oftime formeetings of theBoard andb o a r dc o m m i t t e e s ,and any otherduties)

There should bea formal annualassessment of theeffect iveness

EVALUATION OFBOARD

A G


own perfor-mance.

Evaluation of theboard of FTSE 350companies shouldbe externallyfacilitated at leastevery three years.

The board shouldundertake a formaland rigorous annualevaluation of itscommittees.

The results ofperformance eva-luations shouldidentify trainingneeds for directors.

The evaluation ofthe boardcommittees shouldbe performed everyyear.

-do--do-EVALUATION OFBOARD

COMMITTEES

of the Board asa whole.

If an externalfacilitator hasbeen used, theBoard shoulddisclose in thec o m p a n y ’ sAnnual Reportwhether theexternal facili-tator has anyother connec-tion with thecompany or anyof its directors.

There should bea formal annualassessment ofthe effective-ness of the boardcommittees.

A G


The non-executivedirectors, led by thesenior independentdirector, should beresponsible forp e r f o r m a n c eevaluation of thechairman, takinginto account theviews of executivedirectors.

The board shouldstate in the annualreport howperformance eva-luation of the boardhas been conducted.

EVALUATION OFCHAIRMAN

DISCLOSURES

Nothing Specific

The results of theself evaluation arenot disclosedpublicly.

Chairman’s ability toadd value, and hisp e r f o r m a n c eagainst what isexpected of his roleand function,should be assessedevery year.

An overview of theappraisal process,results and actionplans should bedisclosed in theintegrated report.

A suitable non-executive director(such as the deputychair or the seniori n d e p e n d e n tdirector, if theentity has one),should beresponsible for thep e r f o r m a n c eevaluation of thechair, after havingcanvassed theviews of the otherdirectors.

A listed entityshould:(a) have and

disclose aprocess forp e r i o d i c a l l yevaluating the

Nothingspecific

T h eN o m i n a t i o nC o m m i t t e eshould decidehow the Board’sp e r f o r m a n c emay be

A G


the perfor-mance of theboard, itscommittees andindividual direc-tors; and

(b) disclose, inrelation to eachr e p o r t i n gperiod, whethera performanceevaluation wasundertaken inthe reportingperiod in accor-dance with thatprocess.

evaluated andpropose objec-tive perfor-mance criteria.

The Boardshould state inthe company’sAnnual Reporthow its assess-ment has beenconducted.

There should be aformal annualassessment of theeffectiveness ofthe contri-butionby each director tothe Board. TheBoard should statein the company’sAnnual Reporthow its assess-ment has beenconducted.


EFFECTIVE DATE

1. INTRODUCTION

As one of the most important functions of the Board of Directorsis to oversee the functioning of company’s top management, thispolicy aims at establishing a procedure for conducting periodicalevaluation of directors’ performance and formulating the criteria fordetermining qualification, positive attribute and independence ofeach and every director of the company in order to effectivelydetermine issues relating to remuneration of every director, keymanagerial personnel and other employees of the company. Thispolicy further aims at ensuring that the committees to which theBoard of Directors has delegated specific responsibilities areperforming efficiently in conformity with the prescribed functionsand duties. In addition, the Nomination and Remuneration Committeeshall carry out the evaluation of performance of every director, keymanagerial personnel in accordance with the criteria laid down.

2. OBJECTIVE

The object of this policy is to formulate the procedures and alsoto prescribe and lay down the criteria to evaluate the performanceof the entire Board of the Company.

3. RESPONSIBILITY

— Responsibility of the Board

It shall be the duty of the chairperson of the board, who shallbe supported by a Company Secretary to organise theevaluation process and accordingly conclude the stepsrequired to be taken. The evaluation process will be usedconstructively as a system to improve the directors’ and

Sample Policy for Evaluation of thePerformance of the Board of Directors

36


committees’ effectiveness, to maximise their strength andto tackle their shortcomings.

The Board of Directors shall undertake the following activitieson an annual basis

— The board as a whole shall discuss and analyze its ownperformance during the year together with suggestionsfor improvement thereon, pursuant to the performanceobjectives.

— Review performance evaluation reports of variouscommittees along with their suggestions on improvingthe effectiveness of the committee. Also, the requirementof establishing any new committees shall be reviewedby the Board on an annual basis.

— Review the various strategies of the company andaccordingly set the performance objectives for directors.

— Ensure that adequate disclosure is made with regard toperformance evaluation in the Board’s Report.

— Responsibility of the Nomination & Remuneration Committee

It shall evaluate the performance of individual Directors ofthe Company as per its terms of and the Nomination andRemuneration Policy of the Company framed in accordancewith the provisions of section 178 of the Companies Act,2013

— Responsibility of Independent Directors

Independent Directors are duty bound to evaluate theperformance of non-independent directors and Board as awhole. The independent directors of the Company shall holdat least one meeting in a year to review the performance ofnon-independent directors, performance of the chairpersonof the Company and Board as a whole, taking into accountthe views of executive directors and non-executive directors.

The independent directors at their separate meetings shall :

(a) review the performance of non-independent directors andthe Board as a whole;

(b) review the performance of the Chairperson of thecompany, taking into account the views of executivedirectors and non-executive directors;

(c) assess the quality, quantity and timeliness of flow ofinformation between the company management and theBoard that is necessary for the Board to effectively andreasonably perform their duties.

— Evaluation of Independent Director shall be carried on bythe entire Board of Directors of the Company except theDirector getting evaluated.

4. POLICY REVIEW

Subject to the approval of Board of Directors, the “Nominationand Remuneration Committee” reserves its right to review and amendthis policy, if required, to ascertain its appropriateness as per theneeds of the company. The Policy may be amended by passing aresolution at a meeting of the Nomination and RemunerationCommittee.

5. DISCLOSURE

In accordance with the requirement under the Act, disclosureregarding the manner in which the performance evaluation has beendone by the Board of Directors of its own performance, performanceof various committees of directors and individual directors’performance will be made by the Board of Directors in the Board’sReport. Further, the Board’s Report containing such statement willbe made available for the review of shareholders at the generalmeeting of the Company.

The Policy has been made available on Company’s officialwebsite and the key features of this Policy have also been includedin the corporate governance statement contained in the annualreport of the Company.

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SAMPLE EVALUATION TOOLS

Rating Scale:

1. Outstanding,

2. Exceeds Expectation,

3. Meets Expectation,

4. Needs Improvement,

5. Poor

PART IBoard of Directors Evaluation

(By all the directors or externally facilitated)

Criteria 1 2 3 4 5 How can the boarddo it better ordifferently

Board Composition & Quality

1 The Board has appropriate expertise and experience to meet the bestinterests of the company.

2 The board has appropriate combination of industry knowledge and diversity(gender, experience, background).

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3 All the independent directors are independent in true letter and spirit i.e.whether the independent Director has given declaration of independenceand they exercise their own judgement, voice their concerns and act freelyfrom any conflicts of interests.

4 Board members demonstrate highest level of integrity (includingmaintaining confidentiality and identifying, disclosing and managingconflicts of interests).

5 The Board members spend sufficient time in understanding the vision,mission of the company and strategic and business plans, financial reportingrisks and related internal controls and provides critical oversight on thesame.

6 The Board understands the legal requirements and obligations under whichthey act as a Board; i.e. bylaws, corporate governance manual etc. anddischarge their functions accordingly.

7 The Board has set its goals and measures its performance against them onannual basis.

8 The Board has defined its stakeholders and has appropriate level ofcommunication with them.

9 The Board understands the line between oversight and management.

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10 The board monitors compliances with corporate governance regulationsand guidelines.

11 An effective succession plan of board in place.

12 The Board has the proper number of committees as required by legislationand guidelines, with well-defined terms of reference and reportingrequirements.

Board Meetings and Procedures

1 The Annual Calendar of Board meetings is communicated well in advanceand reviewed from time to time.

2 The Board meeting agenda and related background papers are concise andprovide information of appropriate quality and detail.

3 The information is received by board members sufficiently in advance forproper consideration.

4 Adequacy of attendance and participation by the board members at theboard meetings.

5 Frequency of Board Meetings is adequate.

6 The facility for video conferencing for conducting meetings is robust.

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7 Location of Board Meeting( As a good governance practice the Boardmeeting should be held at different places).

8 The Board meetings encourage a high quality of discussions and decisionmaking.

9 Openness to ideas and ability to challenge the practices and throwing upnew ideas.

10 The amount of time spent on discussions on strategic and general issues issufficient.

11 How effectively does the Board works collectively as a team in the bestinterest of the company?

12 The minutes of Board meetings are clear, accurate, consistent, completeand timely.

13 The actions arising from board meetings are properly followed up andreviewed in subsequent board meetings.

14 The processes are in place for ensuring that the board is kept fully informedon all material matters between meetings (including appropriate externalinformation eg. emerging risks and material regulatory changes).

15 Adequacy of the separate meetings of independent directors.

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16 Appropriateness of secretarial support made available to the Board.

17 The Board members understand the terms and conditions of D & Oinsurance.

18 All proceedings and resolutions of the Board are recorded accurately,adequately and on a timely basis.

Board Development

1 Appropriateness of the induction programme given to the new boardmembers.

2 Timeliness and appropriateness of ongoing development programmes toenhance skills of its members

3 Appropriate development opportunities are encouraged andcommunicated well in time

Board Strategy and Risk Management

1 The time spent on issues relating to the strategic direction and not day-to-day management responsibilities

2 Engaging with management in the strategic planning process, includingcorporate goals, objectives and overall operating and financial plans toachieve them.

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3 The Board has developed a strategic plan / policies and the same wouldmeet the future requirement of the Company.

4 The Board has sufficient understanding of the risk attached with the businessstructure and the Board uses appropriate risk management framework andwhether board reviewed and understood the risks provided in the internalaudit report and the management is taken sufficient steps to mitigate therisk.

5 The Board evaluates the strategic plan/ policies periodically to assess theCompany’s performance, considers new opportunities and responds tounanticipated external developments.

6 The Risk management framework is subject to review.

7 Monitoring the implementation of the long term strategic goals.

8 Monitoring the company’s internal controls and compliance with applicablelaws and regulations.

9 The adequacy of Board contingency plans for addressing and dealing withcrisis situations.

10 Appropriateness of effective vigil mechanism.

11 The Board focuses its attention on long-term policy issues rather than short-term administrative matters.

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12 The Board discusses thoroughly the annual budget of the Company and itsimplications before approving it.

13 The Board periodically reviews the actual result of the Company vis-à-visthe plan/ policies devised earlier and suggests corrective measures, ifrequired.

Board and Management Relations

1. The Board sets the overall tone and direction of the Company.

2. The Board has approved comprehensive policies and procedures for smoothconduct of all material activities by Company.

3. The Board has a range of appropriate performance indicators that are usedto monitor the performance of management.

4. The Board is well informed on all issues (short and long-term) being facedby the Company.

5. The Board adequately reviews proposed departures from the long-andshort- term business plans of the Company before they take place.

Succession Planning

1. The Board has a succession plan for the Chairperson and the Chief ExecutiveOfficer / Managing Director.

2. The Board reviews the existing succession plan and if appropriate, makenecessary changes by taking into account the current conditions.

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Outstanding Exceeds Expectation Meets Expectation Needs Improvement Poor

Overall rating ofBoard performance

Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

................………………………………………................................................…………………

Please suggest three things that could improve Board’s performance. Name of Director:

a) ……………………………………………………………………… …………………………………………

b) ……………………………………………………………………… Signature:

c) ……………………………………………………………………… …………………………………………

Date :

…………………………………………

If Externally facilitated,

Comments of evaluator:

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PART II

MANAGING DIRECTOR / EXECUTIVE DIRECTOR ASSESSMENT FORM(By all the Board members)

RATINGS COMMENTS

EVALUATION FACTOR 1 2 3 4 5

Leadership

1. The MD / ED has shown clear vision in correctlyanticipating business trends, opportunities, andpriorities affecting the Company’s prosperity andoperations.

2. The MD / ED has clearly translated his/her vision andstrategy into feasible business or operational plans toachieve strategic success for the Company.

3. The MD/ ED has accurately communicated his/herconcept, vision, mission, strategies, goals, anddirections for the Company to stakeholders.

4. The MD / ED has motivated and encouraged high

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facilitated team-building and cohesiveness among theCompany’s employees to achieve the Company’s vision.

5. The MD / ED is open to constructive suggestions, andexercised effective leadership for the organization.

6. The MD / ED has been an initiator, setting high workingstandards and pursuing goals with a high level ofpersonal drive and energy.

Strategy Formulation

7. The MD / ED has developed clear mission statements,policies, and strategic plans that harmoniously balancethe needs of shareholders, clients, employees, andother stakeholders.

8. The MD/ED has accurately identified and analyzedproblems and issues confronting the Company.

9. The MD/ED has accurately determined and assessed keysuccess factors for formulating the Company’s strategy.

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10. The MD/ED has ensured that board members, seniormanagement and other employees had participated inthe formulation of strategic plans so that they had theownership of the plans.

11. The MD/ED has assured that company’s resources andbudgets are aligned to the implementation of theorganization’s strategic plan.

12. The MD/ED has established processes that did themonitoring and controlling works, thus ensuring thatthe effectiveness of organizational performance,including risk management, was achieved.

Strategy execution

13. The MD/ED has established an effective organizationstructure, ensuring that there is management focus onkey functions necessary for the organization to alignwith its mission.

14. The MD/ED has organized and delegated workaccurately, and has performed his or her functionswithin his/her scope of responsibility.

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15. The MD/ED has consistently made sound decisions andmade timely adjustments in strategies, if required.

16. The MD/ED has timely and effectively executedstrategies on priorities and with measures set by theBoard.

17. The MD/ED has accurately supervised performancemonitoring and performance control to ensureaccountability at all levels of the organization.

18. The MD/ED has ensured that the company’s operationscomplied with requirements from all pertinent laws andregulations .

Financial planning / performance

19. The MD/ED has possessed a good understanding of thecompany’s financial measures relevant to its businessand financial situation.

20. The MD/ED has exercised good judgment in managingthe financial affairs and budgets of the organization.

21. The MD/ED has effectively monitored and evaluatedfinancial planning, budget and administrativeoperations.

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Relationships with the Board

22. The MD/ED has built strong working relationships withBoard members and has worked closely andcooperatively with the board in developing the mission,and short, medium and long-term strategic plans.

23. The MD/ED has demonstrated a sound knowledge ofBoard governance procedures and has consistentlyfollowed them.

24. The MD/ED has presented information to the board onitems requiring Board opinions and decisions in aprofessional manner, with recommendations based onthorough study and sound principles.

25. The MD/ED has been available to individual Boardmembers whenever necessary, as well as supported theboard in its governance duties by providing necessaryresources and other facilities.

External Relations

26. The MD/ED has served as an effective Company’srepresentative in communicating with all stakeholders.

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27. The MD/ED has encouraged corporate socialresponsibility and community involvement inpromoting a positive image of Company.

28. The MD/ED has assured that the Company maintainspositive relationships in the community and cultivatesgood working relationships with community groups andorganizations.

Human Resources Management/Relations

29. The MD/ED has created and maintained anorganizational culture and climate which attracts, keepsand motivates staff to carry out the Company’s mission,strategic directions and organizational goals.

30. The MD/ED effectively monitors procedures andpractices pertaining to human resources, includingappraisal process and rewarding systems formanagement and employees.

31. The MD/ED has ensured that the company has goodinternal communication and treated all personnel fairly,without favoritism or discrimination.

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Succession

32. The MD/ED has effectively reviewed the Company’ssuccession plan, and, if appropriate, made necessarychanges by taking into account conditions that areexternal or internal to the Company.

33. The MD/ED has put in place the processes and programsrequired to create a pipeline of future leadership.

Product/Service Knowledge

34. The MD/ED has demonstrated a thorough knowledgeand understanding about key aspects of the Company’sproducts and services.

35. The MD/ED has demonstrated a thorough knowledge andunderstanding of Company management and operations.

36. The MD/ED has a good understanding of the company’sbusiness model and allocation of its resources, as wellas business and industry environment.

37. The MD/ED has regularly demonstrated creativity andinitiative in creating new products and services.

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Personal Qualities

38. The MD/ED has attained an image that reflectspositively on the company, as well as demonstrated apersonality, outlook, and attitude that wins trust andsupport from all stakeholders.

39. The MD/ED has exercised good judgment in dealing withsensitive issues between people and between groups.

40. The MD/ED has shown skills at analyzing and addressingproblems, challenges and conflicts, and has beencomfortable with ambiguity and complexity.

41. The MD/ED has maintained a high standard of ethicsand integrity, as well as a healthy balance of timemanagement and priorities in both work-related andpersonal matters.


Overall rating ofOverall rating ofManaging Director /Executive Director’sperformance

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Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

................………………………………………................................................…………………


a) ……………………………………………………………………… …………………………………………

b) ……………………………………………………………………… Signature:

c) ……………………………………………………………………… …………………………………………

Date :

…………………………………………

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56PART III

DIRECTOR SELF ASSESSMENT/ PEER REVIEW

Criteria 1 2 3 4 5

KNOWLEDGEABLE

1 Understands duties, responsibilities, qualifications, disqualifications and liabilitiesas a director.

2 Brings relevant experience to the board and uses it effectively.

3 Understands the vision and mission of the company, strategic plan and key issues.

4 Staying abreast of issues, trends and risks (including opportunities and competitivefactors) affecting the company, and using this information to assess and guide thecompany’s performance.

5 Takes advantage of opportunity to upgrade skills by regularly attending professionaldevelopment programmes.

6 The management communications are sufficient to enhance company specificupdates.

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DILIGENCE & PARTICIPATION

1 Regularly and constructively attend board, committee and general meetings.

2 Prepares in advance for board and committee meetings.

3 Communicates opinions and concerns in a persuasive yet clear and concisemanner.

4 Uses Independent judgement in relation to decision making.

5 Facilitates and encourages change when it would improve board processes.

6 Encourages other members to contribute their opinions.

7 Raises appropriate issues at meetings and asking the appropriate questions forclarity.

8 Contributions add value to the decision making.

9 Gets dissent recorded in minutes.

10 Maintains confidentiality.

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11 Abides by the legal obligations and code of conduct.

12 Reports concerns about unethical behaviour, actual and suspected fraud.

LEADERSHIP TEAM

1 Listens attentively to the contributions of others.

2 Initiates discussions on issues in company’s interest.

3 Shares good interpersonal relationship with other directors.

4 Supportive and cooperative.

5 Respected by board members.

6 Insists on receiving information necessary for decision making to all the directors.

7 Manages conflicts of interest in best interest of the company.

8 Safeguard the interest of all stakeholders in the decision making.

9 Personal values are in congruence with that of the company.

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PART IV

NON-EXECUTIVE DIRECTOR AND INDEPENDENT DIRECTOR EVALUATION FORM

(PEER REVIEW- by Directors other than director being evaluated)

Name of the Director: ______________________________;

Category: Independent / Non-executive

PART A

RATINGS COMMENTS


Participation at Board/ Committee Meetings

1. Director comes well prepared and informed for theBoard / committee meeting(s).

2. Director demonstrates a willingness to devote time andeffort to understand the Company and its business anda readiness to participate in events outside the meetingroom, such as site visits?

3. Director has ability to remain focused at a governancelevel in Board/ Committee meetings.

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4. Director’s contributions at Board / Committee meetingsare of high quality and innovative.

5. Director’s proactively contributes in to development ofstrategy and to risk management of the Company.

Managing Relationship

6. Director’s performance and behaviour promotes mutualtrust and respect within the Board / Committee.

7. Director is effective and successful in managingrelationships with fellow Board members and seniormanagement ?

Knowledge and Skill

8. Director understands governance, regulatory, financial,fiduciary and ethical requirements of the Board /Committee.

9. Director actively and successfully refreshes his/ herknowledge and skills and up to date with the latestdevelopments in areas such as corporate governanceframework, financial reporting and the industry andmarket conditions.

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10. Director is able to present his/ her views convincinglyyet diplomatically.

11. Director listens and takes on Board the views of othermembers of Board.

Personal Attributes

12. Director has maintained high standard of ethics andintegrity.


Overall rating ofCommittee performance

Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

Please suggest three things that could improve Board’s performance. Name of Director:a) ……………………………………………………………………… …………………………………………b) ……………………………………………………………………… Signature:c) ……………………………………………………………………… …………………………………………

Date :…………………………………………

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If concerned director is “Independent Director” then in addition to Part-A of this sample toolthis may also be used.

Name of the Director: ______________________________;

Category: Independent

RATINGS COMMENTS


1. Director upholds ethical standards of integrity and probity.

2. Director exercises objective independent judgment in the bestinterest of Company.

3. Director has effectively assisted the Company is implementingbest corporate governance practice and then monitors thesame.

4. Director helps in bringing independent judgment during boarddeliberations on strategy, performance, risk management etc.

5. Director keeps himself/ herself well informed about theCompany and external environment in which it operates.

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6. Director acts within his authority and assists in protecting thelegitimate interest of the Company, Shareholder andemployees.

7. Director maintains high level of confidentiality.

8. Director adheres to the applicable code of conduct forindependent directors


Overall rating ofDirector performance

Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

................………………………………………................................................…………………

Please suggest three things that could improve Board’s performance. Name of Director:a) ……………………………………………………………………… …………………………………………b) ……………………………………………………………………… Signature:c) ……………………………………………………………………… …………………………………………

Date :…………………………………………

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64PART V

EVALUATION OF BOARD COMMITTEES(By Board of Directors)

Criteria 1 2 3 4 5 How can the boarddo it better ordifferently

Function and Duties

1 The Committee of the Board are appropriately constituted.

2 The terms of reference for the committee are appropriate with clear definedroles and responsibilities.

3 Observing Committees terms of reference.

4 The composition of the committee is in compliance with the legalrequirement.

5 The amount of responsibility delegated by the Board to each of thecommittees is appropriate.

6 The reporting by each of the Committees to the Board is sufficient.

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7 The performance of each of the Committees is assessed annually againstthe set goals of the committee.

8 Whether the terms of reference are adequate to serve committee’spurpose?

9 The committee regularly reviews its mandate and performance.

10 Committee takes effective and proactive measures to perform its functions.

Management Relations

12 Committee gives effective suggestion and recommendation.

13 Committee meetings are conducted in a manner that encourages opencommunication and meaningful participation of its members.

Committee Meetings and Procedures

14 Committee meetings have been organized properly and appropriateprocedures were followed in this regard?

15 The frequency of the Committee meetings is adequate.

16 Committee makes periodically reporting to the Board along with itssuggestions and recommendations.

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Overall rating ofBoard performance

Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

................………………………………………................................................…………………


a) ……………………………………………………………………… …………………………………………

b) ……………………………………………………………………… Signature:

c) ……………………………………………………………………… …………………………………………

Date :

…………………………………………

The participation and effective functioning of the committee meetings the questions may remain the same asfor Board meetings.

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PART VI

CHAIRPERSON ASSESSMENT(By each Board member)

RATINGS COMMENTS


Managing Relationships

1. The Chairperson actively manages shareholder, board,management and employee relationships and interests.

2. The Chairperson meets with potential providers ofequity and debt capital, if required.

3. The Chairperson manages meetings effectively andpromotes a sense of participation in all the Boardmeetings.

Leadership

4. The Chairperson is an effective leader.

5. The Chairperson promotes effective participation of allBoard members in the decision making process.

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6. The Chairperson promotes the positive image of theCompany.

7. The Chairperson promotes continuing training anddevelopment of directors.


Overall rating ofChairperson’s performance

Comment .................………………………………………................................................…………………

................………………………………………................................................…………………

................………………………………………................................................…………………


a) ……………………………………………………………………… …………………………………………

b) ……………………………………………………………………… Signature:

c) ……………………………………………………………………… …………………………………………

Date :

…………………………………………

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SAMPLE BOARD ASSESMENT MODELS

Deloitte*

Sample Board Performance Form

Select the appropriate rating for each statement

0 Insufficient knowledge/ Not applicable

1 Strongly disagree

5 Strongly agree

0 1 2 3 4 5

Composition and Quality

1. Qualified board members are identified by sources independent of management (e.g.,independent board members assisted by an independent firm in the search for candidates).

2. Board members have the appropriate qualifications to meet the objectives of the board’scharter, including appropriate financial literacy.

* The document is a copyright of Deloitte LLP, an Ontario Limited Liability Partnership, the Canadian member firm of Deloitte Touche TohmatsuLimited. It is available at http://www.corpgov.deloitte.ca/en-ca/Pages/RolesAndResponsibilities/Performance.aspx

The right to produce the document is received from the organisation.

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3. The board demonstrates integrity, credibility, trustworthiness, active participation, an abilityto handle conflict constructively, strong interpersonal skills, and the willingness to addressissues proactively.

4. The board demonstrates appropriate industry knowledge and includes a diversity ofexperiences and backgrounds.

5. Members of the board meet all applicable independence requirements.

6. The board participates in a continuing education program to enhance its members’understanding of relevant risk, reporting, regulatory, and industry issues.

7. The board monitors compliance with corporate governance regulations and guidelines.

8. The board reviews its charter annually to determine whether its responsibilities are describedadequately.

9. New board members participate in an orientation program to educate them on the organization,their responsibilities, and the organization’s activities.

10. The board chairman is an effective leader.

11. The board, in conjunction with the nominating committee (or its equivalent), creates asuccession and rotation plan for board members, including the board chairman.

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Select the appropriate rating for each statement 0 1 2 3 4 5

Understanding the Business, including Risks

1. The board takes into account significant risks that may directly or indirectly affecttheorganization. Examples include:

• Regulatory and legal requirements

• Concentrations (e.g., suppliers and customers)

• Market and competitive trends

• Financing and liquidity needs

• Financial exposures

• Business continuity

• Organization reputation

• Strategy execution

• Management’s capabilities

• Management override

• Fraud control

• Organization pressures, including “tone at the top”

2. The board considers, understands, and approves the process implemented bymanagement to effectively identify, assess, and respond to the organization’s key risks.

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3. The board understands and approves management’s fraud risk assessment and has anunderstanding of identified fraud risks.

4. The board considers the organization’s performance versus that of its peers in a mannerthat enhances comprehensive risk oversight by using reports provided directly bymanagement to the board or at the full board meeting. These may include benchmarkinginformation comparing the organization’s performance and ratios with industry andpeers, industry trends, and budget analysis with explanations for areas where significantdifferences are apparent.

Select the appropriate rating for each statement 0 1 2 3 4 5

Process and Procedures

1. The board develops a calendar that dedicates the appropriate time and resourcesneeded to execute its responsibilities.

2. Board meetings are conducted effectively, with sufficient time spent on significant oremerging.

3. The level of communication between the board and relevant parties is appropriate;the board chairman encourages input on meeting agendas from committee and boardmembers, management, the internal auditors, and the independent auditor.

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4. The agenda and related information are circulated in advance of meetings to allowboard members sufficient time to study and understand the information.

5. Written materials provided to board members are relevant and concise.

6. Meetings are held with enough frequency to fulfill the board’s duties and at leastquarterly, which should include periodic visits to organization locations with keymembers of management.

7. The board maintains adequate minutes of each meeting.

8. The board and the compensation committee regularly review management incentiveplans to consider whether the incentive process is appropriate.

9. The board meets periodically with the committee responsible for reviewing theorganization’s disclosure procedures.

10. The board respects the line between oversight and management.

11. Board members come to meetings well prepared.

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4Select the appropriate rating for each statement 0 1 2 3 4 5

Oversight of the Financial Reporting Process, including Internal Controls

1. The board considers the quality and appropriateness of financial accounting andreporting, including the transparency of disclosures.

2. The board reviews the organization’s significant accounting policies.

3. The board makes inquiries of the independent auditor, internal auditors, andmanagement on the depth of experience and sufficiency of the organization’s accountingand finance staff.

4. The board reviews the management recommendation letters written by theindependent and internal auditors and monitors the process to determine that allsignificant matters are addressed.

5. The board ensures that management takes action to achieve resolution when there arerepeat comments from auditors, particularly those related to internal controls.

6. Adjustments to the financial statements that resulted from the audit are reviewed bythe audit committee, regardless of whether they were recorded by management.

7. The board is consulted when management is seeking a second opinion on an accountingor auditing matter.

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Oversight of Audit Functions

8. The board understands the coordination of work between the independent and internalauditors and clearly articulates its expectations of each.

9. The board appropriately considers internal audit reports, management’s responses,and steps toward improvement.

10. The board oversees the role of the independent auditor from selection to terminationand has an effective process to evaluate the independent auditor’s qualifications andperformance.

11. The board considers the independent audit plan and provides recommendations.

12. The board reviews the audit fees paid to the independent auditor.

13. The board comprehensively reviews management’s representation letters to theindependent auditor, including making inquiries about any difficulties in obtaining therepresentations.

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6Select the appropriate rating for each statement 0 1 2 3 4 5

Ethics and Compliance

1. Board members oversee the process and are notified of communications receivedfrom governmental or regulatory agencies related to alleged violations or areas ofnon-compliance.

2. The board oversees management’s procedures for enforcing the organization’s code ofconduct.

3. The board determines that there is a senior-level person designated to understandrelevant legal and regulatory requirements.

4. The board oversees the organization’s hotline or whistleblower process, reviews thelog of incoming calls that relate to possible fraudulent activity, and understands theprocedures to prohibit retaliation against whistleblowers.

Monitoring Activities

5. An annual performance evaluation of the board is conducted and any matters thatrequire follow-up are resolved and presented to the full board.

Overall evaluation

Use the space below to conclude on the overall results taking into account thequantitative results of this self-assessment and qualitative factors not consideredabove.

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SAMPLE II

GENOME CANADA**

Introduction

The purpose of this evaluation tool is to assist the Board of Directors to:

• understand and recognize what is working well;

• identify areas for improvement;

• discuss and agree on priorities for change which can be addressed in the short-and-long-term;

• agree on an action plan.

It is intended that this evaluation tool will be completed annually by each director of Genome Canada’s Board ofDirectors. The Corporate Governance Committee will have responsibility to oversee the implementation of this evaluationtool, including discussing a summary of the results, and preparation of a final report with recommendations to the Boardof Directors.

In order to encourage open and frank evaluations, as well as offer anonymity to respondents, the evaluation processshall be directed by the Corporate Secretary, who will mail the questionnaire to each director as well as collate theresults into a report which will be submitted to the Corporate Governance Committee.

The questionnaire is structured in two parts:

PART 1 – Director Self Assessment

PART 2 – Board of Directors Evaluation

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8Both parts of the questionnaire are to be completed and sealed in the attached envelope and returned to the CorporateSecretary.

PART 1 - DIRECTOR SELF ASSESSMENT

Background

Genome Canada does not undertake a formal evaluation process for each director. Rather, it promotes a selfassessment by directors of their own performance.

Assessment Criteria for Individual Directors

The following criteria are useful in determining how effective a Director’s performance results in:

• contributing to corporate leadership and stewardship

• contributing to achievement of corporate objectives

• understanding Genome Canada’s mandate, strategic plan, and key issues

• constructive contribution to resolution of issues at meetings

• communicating expectations & concerns clearly

• obtaining adequate, relevant & timely information

• promotion of corporation’s interests externally

• interpersonal relationships with other directors and management

• attendance, confidentiality and preparation for meetings

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PART 1 - DIRECTOR SELF-ASSESSMENT

Rating Scale :

On a scale from 1 to 5 with 1 being “ Strongly Disagree’’ and 5 being ‘’ Very Strongly Agree” please rate your performanceas a director based on the following :

Assessment Criteria Strongly Disagree Agree Strongly VeryDisagree Agree Strongly

Agree

1 2 3 4 5

1 I have a good understanding of Genome Canada’smandate, strategic plan and key issues.

2 I understand the difference between governing andmanaging a corporate enterprise and avoid intrudingon management’s responsibilities.

3 My special skills/ expertise provide a uniquecontribution to the board’s overall effectiveness.

4 I have good interpersonal relationships with the otherdirectors.

5 I think, speak and act independently in relation todecisions the board must make.

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6 I facilitate and encourage change when it wouldimprove board processes.

7 I make a measured and appropriate contribution toboard discussions and deliberations.

8 I am sensitive to the complex relationships whichnaturally exist among the board chair , the independentdirectors and the president and CEO.

9 I come to meetings well prepared- having done thenecessary prior reading and having consulted otherdirectors and/or management if required.

10 I have a good knowledge of the responsibilities ofGenome Canada’s management team and am able toconsult with members of the management team , asrequired.

11 I promote Genome Canada’s corporate interestsexternally.

12 I respect the confidentiality of business information andour board’s deliberations.

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13 I understand the legal and fiduciary obligations ofindividual directors and of the board as a whole.

14 I have a sufficient knowledge of Genome Canada’s as alegal entity and not-for-profit corporation, as well asan understanding of its relationship with industryCanada and other federal departments.

15 When it is appropriate I communicate privately andconstructively with the chair and/or President and CEObetween meetings.

16 I expect high levels of performance from myself, myfellow directors and management.

17 I ask probing questions focused on policy and strategyrather than tactics and details.

18 I insist that I and the other directors receive informationnecessary for decision making.

19 I make a meaningful contribution when I serve on aboard committee.

20 My attendance rate at meetings is satisfactory.

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21 I serve as a resource to the board and to management.

22 I introduce new thinking and a fresh perspective toproblem solving.

23 My attitude is positive, supportive and enthusiastic.

24 My personal value and ethical system is congruent withthat of the board and the corporation.

Additional Comments:

PART 2 - BOARD OF DIRECTORS EVALUATION

Background

The Board of Directors should undergo on an annual basis, a review of its performance against established criteria,for purposes of assessing its effectiveness.

Assessment Criteria

The following criteria assist in determining how effective the Board’s performance is in:

• leadership

• stewardship

• contributing to achievement of corporate objectives

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• timely resolution of issues at meetings

• communications of expectations & concerns clearly

• obtain adequate, relevant & timely information

• review & approval of strategic and operational plans, objectives, budgets

• regular monitoring of corporate results against projections

• identify, monitor & mitigate significant corporate risks

• assess policies, structures & procedures

• direct, monitor & evaluate President and CEO

• review management’s succession plan

• effective meetings

• formal communications policy for corporation

• corporation’s approach to governance

• accountability

• assuring appropriate board size, composition, independence, structure

• clearly defining roles & monitoring activities of committees

• review of corporation’s ethical conduct

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4PART 2 BOARD OF DIRECTORS EVALUATION

Rating Scale

On a scale from 1 to 5 with 1 being “Strongly Disagree’’ and 5 being ‘’Very Strongly Agree’’ please rate theBoard’s performance against the following criteria.

Note: Additional comments are welcome.

Assessment Criteria Strongly Disagree Agree Strongly VeryDisagree Agree Strongly

Agree

1 2 3 4 5

Strategic Plan and Performance

1 The Board understands the vision, mission andobjectives of Genome Canada.

2 The Board is involved in the strategic planning process,including corporate goals, objectives and overalloperating and financial plans to achieve them.

3 The Board focuses on strategic issues and regularlyassesses performance against its strategic plans andgoals.

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4 The Board monitors financial and other indicatorsthroughout the year, and takes appropriate action asrequired.

5 The Board regularly assesses strategic and operatingrisks and takes appropriate action as required.

6 The Board understands the legal requirements andobligations under which they act as a Board; i.e., bylaws,funding agreement, corporate governance manual.

7 The Board has adopted and maintains a seniormanagement succession planning process and issatisfied with succession planning for the CEO.

8 The Board appropriately relates the compensation ofthe president and CEO to performance.

9 The Board is diligent in verifying the integrity of itsfinancial and management controls and systems.

10. The Board is made aware of Genome Canada’scommunications with key stakeholders; i.e. media,government, general public.


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Management Interaction

11 The Board has sufficient formal and informal contactwith the President and CEO.

12 The Board has sufficient formal and informal contactwith other management personnel.

13 The Board is able function independently ofManagement and has the mechanisms in place tomaintain that distinction.

14 The Board understands the difference between its roleand that of management.

15 The Board receives appropriate advice and counsel frommanagement.

Additional Comments

Board of Director Operations

16 The Board has an effective process for maintaining its sizeand compositions to provide appropriate expertise andexperience to meet the best interests of Genome Canada.

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17 The Board has an adequate process for orientating andeducating new Directors.

18 The number and length of Board meetings isappropriate.

19 The amount of time spent on discussions on strategicand general issues is sufficient.

20 The chair conducts the meetings in a respectful mannerthat ensure open communication and meaningfulparticipation.

21 The chair communicates with directors betweenmeetings as necessary and appropriate.

22 The amount of information received in board packagesis appropriate for discussion and decision makingpurposes.

23. The Board materials are received sufficiently in advanceto adequately prepare for meetings.


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Committee Structure ° Executive ° Audit ° Investment ° Election ° Corporate Governance ° Compensation

24 The Committee structure is appropriate.

25 The delegation of responsibilities by the Board to itscommittee is appropriate.

26 The composition of the committee is appropriate.

27 The number and length of committee meetings isappropriate.

28 The meetings are conducted in a manner that ensuresopen communication and meaningful participation.

29 The amount of information received is appropriate fordiscussion and decision making purposes

30 The materials are received sufficiently in advance toadequately prepare for meetings.

31 The committee regularly reviews its mandate andperformance.


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List the top three priorities requiring attention in order for the Board of Directors to function more effectively.

1

2

3

** The document is a copyright of Genome Canada. The document is available at http://www.genomecanada.ca/medias/PDF/EN/GenomeCanadaBoardDirectorsAnnualQuestionnaire.pdf

The right to produce the document is received from the organisation.

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0SAMPLE III

KPMG

AUDIT COMMITTEE INSTITUTE, IRELAND***

More Satisfied 1 2 3 (Tick any one)

Less satisfied 4 5 (Tick any one)

A. Creating an effective board 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board has clearly documented its roleand responsibilities ( e.g. schedule of matters reserved for theboard , split of the chairman’s role and that of the CEO)?

2. Are you satisfied that board members, both individually andcollectively, understand what is expected of them (e.g. determiningthe company’s strategic aims)?

3. Are you satisfied that all non executive directors are independentof the organisation’s management and exercise their ownjudgement; voice their own opinions; and act freely from anyconflicts of interest?

4. Are you satisfied with the process by which board members areappointed?

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5. Are you satisfied with the appropriateness of the succession plansin place?

6. Are you satisfied that board members, as a whole, have sufficientskills, experience, time and resources to undertake their duties?

7. Are you satisfied that there is sufficient diversity in the boardroom(e.g. diversity of experience, balance between non executive andexecutive director is appropriate)?

8. Are you satisfied that board members have a sufficientunderstanding of the organisation and the sector in which itoperates?

9. Are you satisfied that all board member demonstrate the highestlevel of integrity (including maintaining utmost confidentiality andidentifying disclosing and managing conflicts of interest).

10. Are you satisfied with the level of ‘secretarial support’ placed atthe board’s disposal?

11. Are you satisfied with the process in place to make funds availableto the board to take independent legal, accounting or other advicewhen it reasonably believes it necessary to do so?

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2B. Running an effective board 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board has in place a set of objectives thatseek to enhance its effectiveness?

2. Are you satisfied with the chairman’s leadership style (e.g., arethey decisive, open minded and courteous; do they set a goodexample, allow members to contribute and hold members to highstandards; do they relate well to other members/attendees, dealeffectively with dissent and work constructively towardsconsensus)?

3. Are you satisfied that the board’s workload is dealt with effectively?

4. Are you satisfied that board members work together constructivelyas a team?

5. Are you satisfied that board meetings are conducted in a mannerwhich encourages open discussion, healthy debate and allows eachboard member to clearly add value to discussion and decisions?

6. Are board meetings conducted in an atmosphere of creativetension?

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7. Are you satisfied that the relationship between a) the board and b)the CEO, CFO and members of the senior management team strikesthe right balance between challenge and mutuality?

8. Are you satisfied that the board’s discussions enhance the qualityof management’s decision making (e.g.: does the board engagethose reporting to the board in dialogue that stimulates andenhance their thinking and performance)?

9. Are you satisfied that the board’s schedule of matters is up to dateand regularly reviewed?

10. Are you satisfied that the board’s meeting arrangements (e.g.,frequency, timing, duration, venue and format) enhance itseffectiveness?

11. Are you satisfied that the board’s meeting agenda has sufficientinput from all board members?

12. Are you satisfied that board meetings allow sufficient time for thediscussion of substantive matters?

13. Are you satisfied that board meeting agendas and relatedbackground information are circulated in a timely manner to enablefull and proper consideration to be given to the important issues?

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14. Are you satisfied with the quality of the board papers (e.g., notoverly lengthy and clearly explain the key issues and priorities)?

15. Are you satisfied that the board has the appropriate committeeswith necessary chargers?

16. Are you satisfied that the board is adequately informed of eachcommittee’s activities?

17. Are you satisfied that private meetings without the executivedirectors present are useful?

18. Are you satisfied that the board’s meeting minutes are clear,accurate, consistent, complete and timely?

19. Are you satisfied that outstanding actions arising from boardmeetings are properly followed up?

20. Are you satisfied that the processes in place for ensuring the boardis kept fully informed on all material matters between meetings(including appropriate external information e.g. emerging risks andmaterial regulatory changes) is working effectively?

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C. Professional development 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that new board members are given an appropriateinduction programme covering issues like: the role of the director;its terms of references; members’ expected time commitment; anoverview of the organisation and its strategic objectives?

2. Are you satisfied with timeliness and appropriateness of ongoingprofessional development received by the board (e.g. regulatorymatters director’s liability)?

3. Are you satisfied that board members are afforded appropriateopportunities to attend formal courses and conferences, internaltalks and seminars, and briefings by external advisers such as theorganisation’s auditors and lawyers?

4. Are you satisfied that any induction and professional developmentprogrammes adequately equip board members to understand thebusiness environment in which organisation operates?

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6D. Strategic foresight 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board devotes significant time todetermining (via management and other sources) the emergingissues that could affect the organisation in the future?

2. Are you satisfied that the board has a good understanding of thecompany’s key drivers of performance?

3. Are you satisfied that the board appropriately uses scenarioplanning as a fundamental process in the evaluation of strategicrisks?

4. Are you satisfied that the majority of the board’s time is spent onissues relating to the strategic direction and not day-to-daymanagement responsibilities?

5. Are you satisfied that the organisation’s purpose (mission) andvision been defined and clearly communicated to all levels withinthe organisation?

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E. Stewardship 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board understands and fulfils itsstewardship role?

2. Are you satisfied that the company’s risk management processesprovide to the board a full understanding of the high risk issuesthat could impact the organisation?

3. Are you satisfied that the board understands the details of thecontrol assurance framework including reporting scope andtimeliness?

4. Are you satisfied that board members are fully informed in relationto the issues not covered by the existing Directors and OfficersInsurance?

5. Are you satisfied that there is an adequate policy in place for dealingwith potential conflicts of interest and confidential information?

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8F. Performance evaluation 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that your existing range of financial and non-financial performance measures are board enough to monitormanagement’s performance?

2. Are you satisfied that your existing performance measures arelinked to the organisation’s strategy?

3. Are you satisfied that the organisation’s performance is adequatelybenchmarked against its peers?

4. Are you satisfied that management’s remuneration is appropriatelylinked to the organisation’s performance and an appropriate peergroup?

5. Are you satisfied that the board has in place an appropriate processfor regular board, committee and individual board memberevaluation?

6. Are you satisfied that all actions arising from performanceevaluation are followed up?

7. Are you satisfied that the board performance assessment processenhances board effectiveness?

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G. Managing management 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board has an agreed process to adequatelysupport the CEO?

2. Are you satisfied that the board has in place a rigorous process toevaluate the performance of the CEO, with input from all nonexecutive board members?

3. Are you satisfied that the board is appropriately engaged in CEO/senior management succession planning?

4. Are you satisfied that there are appropriate delegation authoritiesin place for management and that they are regularly reviewed?

5. Are you satisfied that the organisation’s culture encourages boardmembers to discuss agenda and other issues with seniormanagement?

6. Are you satisfied that bad news is communicated to the board as itarises?

7. Are you satisfied that the CEO and senior management receiveconstructive support from the board?

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00H. Value creation 1 2 3 4 5 What could the board do

better or differently?

1. Are you satisfied that the board has clearly identified theorganisation’s major stakeholders and the ‘value’ each requires?

2. Are you satisfied that there are systems in place to allow the boardto measure whether the organisation is creating or destroying majorstakeholder value?

3. Are financial and non financial value drivers in place to focus on theenhancement of value ?

4. Is your existing decision making process (including the presentstructure of management proposals) adequate to properly assesswhether proposals create major stakeholder value?

5. Is your organisation creating major stakeholder value?

6. Does the board/ management have adequate mechanisms forcommunicating with major stakeholders?

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I. Corporate culture 1 2 3 4 5 What could the board dobetter or differently?

1. Are you satisfied that the board’s comprehension of theorganisation’s purpose, vision and strategic plan is reflected inactions taken in the boardroom?

2. Are you satisfied that the board plays an appropriate pro- activerole in change?

*** The document is the copyright of KPMG Audit Committee Institute, Ireland. The document is available at http://www.auditcommitteeinstitute.ie/documents/101878_ Board_ Effectiveness_ Quest_ Flyer_ Feb12% 20% 282%29.pdf

The right to produce the document has been received from the organisation.


1. Board Assessment: Designing the Process by Beverly Behan(The Corporate Board–November/December 2004) https://www.corporateboard.com/Pdfs/0411-Behan.pdf)

2. Corporate Governance : Beyond Letters – ICSI Publication

3. Evaluation Questionnaires provided by Balrampur Chini MillsLimited

4. Beyond the Basics Getting the Most From Board Evaluations:Spencer Stuart (https://www.spencerstuart.com/~/media/PDF%20Files/Research%20and%20Insight%20PDFs/Cornerstone-of-the-Board_01Apr2004.pdf)

5. Enhancing Board effectiveness : A round Table Discussion:Spencer Stuart (https://www.spencerstuart.com/~/media/PDF%20Files/Research%20and%20Insight%20PDFs/E n h a n c i n g - b o a r d - e f f e c t i v e n e s s - A - r o u n d t a b l e -discussion_29Nov2007.pdf)

6. Board Performance Evaluation, Private (Private SectorOpinion): Issue 9, A Global Corporate Governance ForumPublication

8. Review of the Role and Effective Functioning of Non-ExecutiveDirectors, Derek Higgs, January 2003

9. ICGN Global Governance Principles 2014

10. Code of Corporate Governance, May 2012

11. The UK Corporate Governance Code, 2014

12. Global Principles of Accountable Corporate Governance, 2014

13. ASX Corporate Governance Council-Corporate GovernancePrinciples and Recommendations, 2014

Bibliography

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14. NYSE Listed Company Manual

15. Board Performance Evaluation Tool- Health InformationManagement Association of Australia Limited (http://www.himaa2.org.au/?q=node/47)

16. Corporate Governance Handbook 2007: Legal Standards andBoard Practices- The Conference Board (http://www. corpgov.deloitte. com/binary/com. epicentric. content management.servlet.ContentDeliveryServlet/USEng/Documents/Board%20Governance/Board%20 Evaluations, % 20Education%20and%20Development/Appendix6_SelfAssessment Questionnaire_Corporate Governance Handbook2007_TheConfBrd_July2007.pdf)