Board Performance Review and Related Services

Article

Board Performance Review and Related Services

To address the Hong Kong Stock Exchange's Consultation Paper on Corporate Governance Code and Related Listing Rules

Published date: 18 November 2024

Background

In June 2024, the Stock Exchange of Hong Kong Limited (the “Exchange”) published a consultation paper which outlines proposed enhancements to the Corporate Governance Code and related Listing Rules.

With the aim of improving the board effectiveness of Hong Kong issuers, one of the consultation paper's proposals is to upgrade the requirement for conducting the evaluation of board performance at least once every two years from voluntary to “a comply or explain basis” (proposed CP B.1.4) and to establish requirements for new disclosures in the Corporate Governance Report (“CG Report”), as follows:

  1. Confirmation as to whether a board performance review was conducted in the reporting period and, if not, when the next review will be conducted;
  2. Whether the review was conducted internally or by an external service provider;
  3. Scope of review and the responsible department(s)/committee(s)/external provider(s) involved in conducting the review;
  4. Connection (if any) between the external provider and the issuer or any of its directors; and
  5. Details on the findings of the review, including significant areas of improvement and measures, taken or planned, to address them.

A board effectiveness review allows key stakeholders to holistically evaluate your organisation’s board structure, board oversight responsibilities, board composition, focus areas, strengths and developmental opportunities, and overall board effectiveness. Whether your goal is to build an exemplary board, or to ensure that minimum requirements are complied with, Deloitte is dedicated to support you along on the journey to achieving corporate governance excellence with our leading practices, custom-built assessment tools and expertise in building long-term business success.

Deloitte’s Board Effectiveness Framework and Approach

Effectiveness is more than just structures and processes. It is also about the dynamics, culture and behaviours of the board and of individuals that form its composition. 

Deloitte’s Board Effectiveness Framework focuses on three key roles of the board and their enablers (as illustrated in the diagram below). This forms an agile foundation for our review methodology which allows customization based on your specific needs for application to your board, board committees or any particular individual director. 

Typical Approach:

Survey/Questionnaire

Distributing anonymous surveys to enable the collection of genuine and honest feedback. Directors can gain better understanding of their strengths as well as areas for improvement on predetermined evaluation topics.

 

Document inspection

This is to understand the existing practices of the board and to identify process bottlenecks within the organisation. The review may involve board agenda and minutes, terms of reference, governance manuals, board skills matrices, succession plans, etc..

 

Director and chairman interviews

This enables more in-depth and candid discussion on sensitive issues that may not be covered in the survey.

 

Reporting

Our deliverable for the review includes both quantitative and qualitative analysis, along with observations and corresponding recommendations that help the board to improve its effectiveness.

 

 

Establishment of Board Skills Matrix

The Exchange has also introduced a new Corporate Governance Code provision for the disclosure of a board skills matrix (“BSM”) in each issuer's CG Report (proposed CP B.1.5).

Deloitte has the relevant experience and methodologies (including tools) to:

  1. Assist both listed and non-listed companies with assessing the level of experience each director has in various skills areas and the diversity of the board. 
  2. Identify gaps in the existing capabilities for better succession planning.

The development of a BSM is a robust process for aligning director skillsets with your strategic priorities and which can bring in fresh thinking and perspectives as your business environment evolves.

Contacts

Melissa Fung <melfung@deloitte.com.hk>

Charles Ellis <chaellis@deloitte.com.hk>

Hugh Gozzard <huggozzard@deloitte.com.hk>

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