A board should, in principle, have sufficient diversity of skills and experience to be able to assess the robustness of operational decisions and recommendations made by the CEO and the executive management team. When such experience and skills are lacking (e.g. one-off or unusual situations and challenges), then it is reasonable to draw on the skills and experience of external parties and advisors.


The challenge of course is for a board to self-assess and judge whether "they are skilled and experienced enough and when their own judgement is inadequate." The best way to judge the capability of the board, apart from a range of diagnostic tools related to board effectiveness, is to have a fairly robust review process that assesses the impacts and outcomes of previously undertaken decisions, coupled with a process that "implements the learnings from such assessments" ...and each board is different.

In my humble opinion, the only way for a board to assess the effectiveness of CEO (and executive managment team) performance is against their ability to deliver shareholder objectives (as interpreted by the board). If a corporation is unaware of those shareholder objectives, then it is impossible to make that assessment in any meaningful manner. One therefore resorts to assessment against peers and that is fraught with danger as different organisations chase different outcomes - thus making comparison difficult (invalid?)

To add another nuance to this challenge, I have recently come across a corporation where, regardless of the CEO's skills and capabilities, he has a very powerful Chairman who, for all intents and purposes, "runs" the business. How does one in that context meaningfully assess that CEO's performance?