The Rise and Rise of Board Effectiveness Reviews

Since the 1990s, board effectiveness reviews have evolved from rarely used, informal exercises into structured and often mandated practices across a multitude of sectors and jurisdictions. Notwithstanding early initial scepticism, the catalyst for this transformation has been a growing and increasingly widespread acceptance that well-governed boards have a role to play in sustainable organisational success and resilience and that board reviews can support this.

The board review concept began to gain traction in the wake of corporate scandals and financial crises in the late 20th century. The 1992 Cadbury Report in the UK was as a watershed moment: advocating, among other things, the need to undertake regular board performance evaluations.

In the US, the 2002 Sarbanes-Oxley Act further underscored the need for robust governance and accountability, reinforcing the value of board reviews. Meanwhile, in Australia and across Europe, codes of practice began to integrate guidance on board evaluation.

Some 30 years on, board effectiveness reviews have become a staple of governance best practice in the UK, not just in listed companies but also large private corporates as a result of the Wates Principles. Expectations as to what constitutes best practice have also matured with investors and regulators now wanting evidence that reviews have taken place, explaining the process and providing evidence of demonstrable outcomes. Since the 2010s, external facilitation of board reviews has become increasingly common among large corporations in many countries. 

In the public sector, the emphasis on board effectiveness reviews has often come from a drive for greater transparency, stewardship of public funds, and delivery of public value. In the UK, the 1994 Nolan Committee on Standards in Public Life articulated the principle of regular board reviews for public bodies—a concept echoed through legislation in Australia and New Zealand. Independent reviews, annual assessments, and capability frameworks are now also typical features in public sector governance.

Board reviews in the non-profit sector have historically lagged behind those in the corporate and public spheres, due in part to resource constraints and a culture of informality. However, as non-profits have grown in size, complexity, and visibility, stakeholders are seeking higher governance standards and trustee board reviews are seen as a tool to achieve this.

The evolution of board effectiveness reviews has not followed a uniform global path. Different countries have taken distinct approaches, shaped by their legal traditions and expectations, capital markets, and cultural attitudes toward governance. Nevertheless, there is a consistent direction of travel towards embedding board reviews as a significant practice across all sectors and jurisdictions.

Board effectiveness reviews are not without criticism. Some boards regard them as compliance-driven and superficial, undermining their potential for honest reflection. There is also variability in quality, especially where reviews are internally managed or lack follow-up.

A culture of confidentiality and trust are essential—directors being able to voice concerns without repercussions. The impact of reviews also depends heavily on the commitment of the Chair and the willingness of boards to act on findings. Well-considered preparation in scoping and executing board reviews is therefore clearly important in ensuring that board reviews deliver real benefits and meaningful suggestions for improvement.

From their roots in crisis and reform, board effectiveness reviews have matured into essential instruments of governance. Although the landscape continues to shift, it is clear that board effectiveness reviews have become a bedrock for good governance practice and are here to special ay —whatever the sector, wherever the country. 

Further information about how Ceradas supports board effectiveness reviews can be found here.