Companies should continue to improve their board evaluations and reporting

To be among those with top class boards of directors, companies should continue to improve how they evaluate their boards and how they report the findings.

During 2022, Leadership Advisor Group analyzed how well the Danish C25 companies met the recommendations for conducting and reporting board evaluations. These companies often serve as role models for all listed companies.

We used systematic desk research, reading the C25 companies’ management commentary and researching their websites, then commenting on each of the companies’ written descriptions. Our assessment was based purely on what the companies have described in writing available to the public.

Our aim with this research was to analyze to what extent the C 25 companies comply with the Committee on Corporate Governance’s recommendations 3 5 1 and 3 5 2 concerning board evaluations and with what quality the evaluations are carried out.

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It is our hope and intention that this research can shed light on the challenges and inspire boards that would like to comply with the recommendations, to better integrate good corporate governance and to do high quality board evaluations. All with the purpose of increasing board effectiveness for the benefit of the company, the stakeholders, and the community.

Our analysis included the extent to which the C25 companies comply with the recommendation, and the standard (quality) with which these evaluations have been carried out.

As the practice and compliance of board evaluations are still improving, there are significant differences among the C25 companies.

While 38% of the C25 companies were compliant describing the procedure and conclusions of that board evaluation in the management commentary and on the website (up from 33% last year), only 13% of them conducted a high-quality board evaluation. This means that compliance does not necessarily indicate a high quality board evaluation.

46% of the C25 companies were partially compliant. Of these, 33% conducted a board evaluation of moderate quality and 13% conducted a board evaluation that can be improved (meets at least one criteria for quality) or is of a low quality (meet none of the criteria for quality).

Lastly, 16% of the C25 companies were not compliant, as they did not describe the procedure or the conclusion of the board evaluation.

Compared to previous years, it appears that C25 boards are slightly improving in reporting on the procedure for the evaluation and the general conclusions of the evaluation. However, there is still room for improvement.

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