Determining best practices for board evaluation for a provincial commercial Crown corporation.

Abstract

Board performance evaluations have become an essential element of good corporate governance and are increasingly required for publically-traded companies around the globe. This paper seeks to identify board evaluation best practices which are appropriate to a Canadian provincial commercial Crown corporation. An historical review of the development of governance practices in several jurisdictions reveals two distinct approaches: a rules-based compliance approach in the US, and a principles-based approach in Canada, the UK, Australia and elsewhere. There is debate about the strict relationship between good governance and firm performance, but consensus is growing that good governance matters; and that board evaluations are critical to developing board performance. Despite differing regulatory contexts, the emerging best practices for board evaluation are similar. This paper looks at how performance is defined and measured and how board evaluations should be designed and conducted to bring best value. The focus is on identifying effective evaluation practices from the academic and normative literature and considering them in the context of a commercial Crown corporation. The conclusion drawn from the research is that basic principles and best practice processes apply whether they are applied to private sector, not-for-profit organizations, or Crown corporations. The specific performance attributes to be measured may differ between different sectors – and in any case should be tailored to individual firms – but the evaluation processes and principles are shared.