Board Evaluations: Making a Fit between the Purpose and the System

14 Pages Posted: 8 Jul 2007

See all articles by Alessandro Minichilli

Alessandro Minichilli

Bocconi University - Department of Management and Technology

Jonas Gabrielsson

Lund University - School of Economics and Management

Morten Huse

Norwegian School of Management (BI) - Department of Innovation and Economics; MH Management Consultants; University of Witten/Herdecke; BI Norwegian Business School

Abstract

Board evaluations can contribute to effective boards and improved corporate financial performance. The increasing interest in the practice of board evaluations, however, calls for a more systematic and careful approach than has been employed in the past. While most attention has primarily been focused on the content of board evaluations, this article outlines the features of various possible board evaluation systems. Based on state-of-the-art research on boards and governance, we contend that a comprehensive board evaluation system needs to include decisions about: (a) the agent who evaluates the board; (b) the content, or what the evaluation should deal with; (c) the addressee and other stakeholders for whom the board is evaluated; and (d) how the board is evaluated. These key decisions should not be seen as independent of each other as they have consequences for the kind of system that will be adopted. Following this argument, we present four different board evaluation systems: (i) board-to-board, (ii) board-to-market, (iii) market-to-board and (iv) market-to-market. The key message we communicate in this article is that there must be a fit between the purpose and the system of board evaluations. There is no universal or "one best way" to evaluate boards of directors. Board evaluations will not meet their purpose unless there is a fit between the agents, the addressees, the content and the modalities of the evaluation. It is important to know who is doing what for whom and how.

Suggested Citation

Minichilli, Alessandro and Gabrielsson, Jonas and Huse, Morten, Board Evaluations: Making a Fit between the Purpose and the System. Corporate Governance: An International Review, Vol. 15, No. 4, pp. 609-622, July 2007, Available at SSRN: https://ssrn.com/abstract=998139 or http://dx.doi.org/10.1111/j.1467-8683.2007.00591.x

Alessandro Minichilli (Contact Author)

Bocconi University - Department of Management and Technology ( email )

Via Roentgen 1
Milan, MI 20136
Italy

Jonas Gabrielsson

Lund University - School of Economics and Management ( email )

Tycho Brahes väg 1,
S-220 07 Lund, 223 63
Sweden

HOME PAGE: http://www.circle.lu.se/html/person.aspx?ID=81

Morten Huse

Norwegian School of Management (BI) - Department of Innovation and Economics ( email )

P.O. Box 580
N-1302 Sandvika
Norway

MH Management Consultants ( email )

Butterudveien 32
N 1339 Vøyenenga
Vøyenenga
Norway

HOME PAGE: http://www.boardsandwine.net

University of Witten/Herdecke ( email )

Alfred-Herrhausen-Straße 50
Witten, 58448
Germany

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

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