Increasingly, companies and their boards see the value of using an independent governance consultant to conduct their board evaluation. Some investor policies call for the use of an independent review of board effectiveness from time to time. Corporate governance consultants, accounting firms, executive search firms, business consultants, management consulting firms, law firms, membership organizations, and other service providers offer board evaluations and other governance services.
To assist those charged with finding an independent governance consultant to work with the board on its board evaluation or to conduct a governance review, below are a series of questions and topics to consider. These questions and topics are based on our experience as independent corporate governance lawyers and consultants. For additional information or to discuss these questions or topics, our contact information is below.
Questions to consider
- What array of services does the firm or consultant provide in the governance area?
- Is corporate governance a primary area of expertise and focus, or one area among many others?
- How long has the firm or consultant been engaged in governance consulting?
- What is the firm’s or consultant’s approach to conducting governance reviews or board evaluations?
- Is the firm willing or able to tailor the approach to meet the company’s needs or expectations?
- Is the scope of the work a good fit with the experience and expertise of the consultant or firm?
- Will the personality of the consultant or the individuals providing the services be a good fit for the board and/or the CEO?
- What is the background and experience of the person or persons who will be doing the work, including with different types of boards?
- What is the boardroom experience of the firm or consultant?
- What experience has the firm or consultant had in implementing governance processes and practices?
- What is the firm’s or consultant’s reputation in the corporate governance arena?
- Is there an ongoing business relationship between the consultant or firm and the company or the board? If so, consider whether the consultant or firm is “independent” and be able to be candid with the board.
- What is the quality of references provided by the consultant or firm?
- How long is the project expected to take?
- Will the CEO and other top executives working with the board be part of the process?
- What will be expected of directors and how much of their time will be needed?
- What is the desired process for reporting results?
- Are the proposed fees reasonable given the scope of the project?
- Fees for governance services, including board evaluations, vary based on the scope and complexity of the project.
Attorney-Client Privilege
What steps will the consultant take to protect the confidentiality of individual director responses, and will the attorney-client privilege be available if appropriate?
- The applicability of the privilege to a board evaluation has not been determined. If the attorney-client privilege is an important consideration, the consultant conducting the board evaluation must be a lawyer.
- There may be a tendency to turn to outside counsel to conduct the board evaluation or tally the results of an evaluation in an effort to get the benefit of the attorney-client privilege and also because they are a known quantity. Consider whether outside counsel is “independent” given the existing relationship or the best choice to conduct a board evaluation. Considerations include:
- Will board members and management be candid with outside counsel?
- Is outside counsel experienced enough in board governance, board process, board culture to conduct the board’s evaluation, peer reviews, director self-assessments?
Frequency
Some boards use an independent governance consultant every year, others rely on an in-house process for two or three years before calling in an independent governance consultant to provide a different perspective. For public companies, investor policies recommend the use of an independent governance consultant from time to time.
Resources
Law firms, investment advisory firms, and strategic advisory firms will often recommend independent governance consulting firms to their clients for board evaluations. The Society for Corporate Governance has a service provider directory listing governance consultants and Society members often comment on and recommend firms their boards have used. Contact the Society for more information. TheCorporateCounsel.net under Board Evaluation Facilitators has a list of service providers, including corporate governance consultants who conduct board evaluations and other types of governance services.
Given the number of corporate governance services providers, and the importance of having the right people work with your board, having a process to screen firms and individuals will facilitate finding the right firm for the particular governance project.
An earlier version of this document first appeared as a Practice Tool for the legal portfolio by Kristina Veaco and Cheryl Sorokin, “The Role of the Corporate Secretary: Facilitating Corporate Governance and the Work of Corporate Boards, 96 Corporate Practice Series” (BNA)
Kristina Veaco and Cherie Sorokin contributed to this blog. Veaco and Sorokin are corporate governance consultants with Veaco Group, with board experience, former in-house corporate secretaries and in-house counsel who conduct independent board evaluations, skills assessments, governance reviews and consult with boards and senior management on practical corporate governance. For more information, call 415-731-3111 or email Kristina.
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