EY Reviews Trends in Corporate Board Self-Evaluations

The EY Center for Board Matters (CBM) recently released its fourth annual report on trends in public company board evaluation practices based on reviews of proxy statements filed by Fortune 100 companies According to EY, 94% of 2021 Fortune 100 proxy filers provided at least some disclosure about their evaluation process, in line with prior years, with the scope and details of the disclosures continuing to vary. EY found that since 2018, more boards are expanding their evaluation process to include individual director evaluations. A majority (53%) of 2021 Fortune 100 proxy filers disclosed that they performed individual director evaluations along with board and committee evaluations, up from 24% in 2018. Among the companies that disclosed performing individual director evaluations, it was not always clear whether that assessment involved peer evaluation, director self‑evaluation or both. Thirty-one percent made clear that the individual director evaluation component includes director peer evaluations, up from 10% in 2018, and 8% made clear that it involves self-evaluation, up from 5% in 2018. The data is a stark comparison to fund boards, which continue to lag in conducting peer evaluations. EY’s report also included investors’ views on board effectiveness and evaluations. EY talked with governance specialists from more than 60 institutional investors representing more than US$38 trillion in assets under management and asked those investors what steps they want corporate boards to take to strengthen their effectiveness in the current environment. The topics those investors focused on were:

Board refreshment — Around 40% of investors expressed a desire for boards to have stronger discipline around turnover in the boardroom to better align board expertise with strategy and meet investor expectations for board diversity.

Board diversity — Around a third of investors focused on the opportunity for boards to enhance their effectiveness by diversifying across numerous dimensions, specifically including race, ethnicity, gender, skills, and experiences.

Board information practices and education — Investors were interested in how boards are staying informed and receiving ongoing education to meet evolving oversight demands and navigate a rapidly shifting risk landscape.