Shake off that boardom

Economic Times

2 days ago

Agencies Representational Sebi has mandated annual board performance reviews for listed companies with the intent of improving governance standards and ensuring agile and effective boards. But much like routine health checks, board evaluations are usually pushed back to another day, rushed through like a Monday morning breakfast, or treated as yet another compliance hassle. Very few boards treat it as meaningful exercise.Traditional methods of evaluation involving paper-based surveys, interviews and internal reviews have mostly fallen short. They are time-consuming, heavily reliant on subjective judgement, and reports tend to gather dust after board meetings. Thankfully, digital transformation is slowly but steadily bringing rigour, relevance and repeatability to board evaluations.
Technology is not just simplifying the process but enhancing its quality as well. From board portals to AI-enhanced analytics, tech is shaking up the performance evaluations process of boards. Here are four shifts India Inc should know while preparing for the future: Periodic rituals to continuous insight Traditional board evaluations follow a rigid cycle of once in every three years for in-depth reviews, with lighter (symbolic?) annual quickies. With digital tools, evaluations can become more frequent, flexible and embedded into the rhythm of board functioning.In Europe, a clear trend is emerging where more boards are moving to annual evaluations, sometimes with focused interim reviews in between. These 'in-betweeners' can be tailored to specific committees or themes such as audit oversight, strategy alignment or digital readiness.For Indian enterprises, especially those facing major market shifts, or family-to-professional transitions, such agility can be a game-changer. Digital platforms reduce the cost and administrative burden of evaluations, and allow directors to evaluate performance in a way that feels relevant, not regulatory compliance. Subjective judgement to data-driven oversight One of the biggest criticisms of today's board evaluations is their subjectivity. When directors assess each other, implicit biases, interpersonal politics and unwritten hierarchies can creep in. Results can feel vague, cautious or sanitised, which defeats the very purpose of the exercise. Technology helps move the needle from opinion to evidence.
Digital platforms capture structured data aligned with clearly defined board KPIs, including strategic execution, financial oversight, risk management, succession planning and stakeholder engagement. More importantly, they enable year-on-year tracking, which is invaluable. With consistent digital tools, companies can build longitudinal data, making it possible to spot performance trends over time. In the past, each evaluation might have involved a new consultant with a different lens, making comparisons difficult. In India, where regulators, proxy advisory firms and institutional investors are increasingly scrutinising board behaviour, data-driven evaluations offer both credibility and clarity. They also align well with Sebi's push for transparency and long-term value creation. Generic templates to tailored evaluations All boards are not created equal. A large, listed conglomerate, a promoter-led tech unicorn, and a PSU each has vastly different governance challenges. And, yet, until recently, many digital evaluation platforms used 'one-size-fits-all' questionnaires that failed to capture the finer details. This is changing.Today's tools allow deep customisation. Evaluations can now be structured around company lifecycle stage, industry dynamics, board composition, strategic priorities and even anticipated disruptions. A logistics company undergoing digital transformation may want questions on tech-savviness and cybersecurity oversight. A manufacturing board preparing for succession may focus on talent pipeline and leadership assessment.In India, where board diversity, independent director effectiveness and ESG oversight will all be in sharp focus soon, tailored evaluations are especially useful. They allow boards to gather input beyond the boardroom. Confidential feedback from CFOs, compliance officers and external auditors can highlight blind spots in committee functioning. A board chair may believe the audit committee is effective, but what does the internal audit team think? Tech tools enable this 360° feedback in a secure, anonymised manner. Embrace emerging AI Theoretically, AI holds immense promise in enhancing board evaluations. Algorithms can analyse meeting minutes to flag overlooked agenda items, assess time spent on key issues, detect redundancy across committees, and even predict future director skill needs based on corporate strategy. If a company is entering new markets or industries, AI could help assess whether the board has the requisite global experience or regulatory expertise.AI could also objectively benchmark director contributions by analysing attendance, speaking time, committee involvement and follow-through on action points.But adoption remains limited. Company secretaries cite internal policies that restrict the use of external AI tools. Concerns around data security, confidentiality and compliance with DPDP Act make boards wary. As AI tools mature and governance around data-sharing strengthens, selective use of AI in internal evaluations may become more acceptable. Striking a balance between AI analytics and human judgements will be key.India Inc boards are under increasing pressure to perform, not just from Sebi but from shareholders, rating agencies and civil society as well. As businesses grow more complex and stakeholder expectations rise, the traditional approach to board evaluation simply won't suffice. Board evaluations done right are corporate cardiograms.In a world where opacity is liability, data is destiny. As a veteran puts it, 'Great boards aren't born. They're beta-tested.' (Disclaimer: The opinions expressed in this column are that of the writer. The facts and opinions expressed here do not reflect the views of www.economictimes.com.) Elevate your knowledge and leadership skills at a cost cheaper than your daily tea. Can Chyawanprash save Dabur in the age of Shark-Tank startups?
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