Board Self-Evaluations: Practical And Legal Implications

The NYSE mandates that the boards of listed companies undertake an annual self-evaluation to determine whether they and each of their committees are functioning effectively. While Nasdaq does not impose similar requirements, companies listed on this exchange, as a matter of good governance, often undertake this performance review. The self-evaluation is intended to provide a systematic process by which the board and its committees can review their performance, make sure they are discharging their obligations, and institute steps for further improvement.

In implementing the self-evaluation, boards not only need to have an appreciation of the process, but also should make certain that it is suited to the company's particular situation and needs. That is, does the board have the commitment and resources to engage in a robust self-evaluation process? Factors that can influence how the board approaches this process can include whether the company has been going through an