Salz Review - Wall Street Journal

Salz Review
An Independent Review of Barclays’ Business Practices
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which was included in the UK Corporate Governance Code from 2010 onwards.
The Code also requires that the annual report discloses “how performance evaluation
of the board, its committees and its individual directors has been conducted”. 189
9.72 The purpose of any board evaluation should be to assist the board and individual
directors in their process of continuing improvement and change though an open
discussion. Recent Barclays’ Board evaluations were criticised by Sir David Walker
before the Parliamentary Commission on Banking Standards as “not good enough”
and lacking “tough external facilitation”. 190 We consider that the impact of a board
evaluation will be determined by the quality of internal engagement in the process,
the quality of dialogue about the findings and the commitment to follow-up actions.
This should be led by the Chairman and, given Sir David Walker’s comments, no
doubt the rigour of the evaluations will change considerably. High-quality external
facilitation is an important aid to Board engagement, but it is not a substitute for
that engagement.
9.73 The Board evaluations at Barclays since 2004 highlighted many issues for change,
suggesting a good level of engagement. We found that they were focused on the
quantitative outputs of surveys of members of the Board, examining changes in
scores year-on-year, as well as individual interviews. The evaluations did not include
observation of actual meetings, and did not separately evaluate information available
to the Board or Board committees. The follow-on work tended to be delegated to
the Corporate Secretariat without active ownership by the Board. Action plans
recently appeared to have limited impact. For example, one of the lowest rated scores
was given to the Group’s compensation strategy in nearly every evaluation but,
difficult as the issue may have been, it did not lead to steps which materially
improved the score. However, it should not be forgotten that the financial crisis
imposed exceptional burdens on the Board and would have taken much of
its attention.
9.74 The ABI has commended Barclays’ reporting of its evaluation process. Recently, it
has recommended that companies go further in their disclosure of board evaluations:
“Companies should explain the performance evaluation process and disclose any
significant recommendations and the changes or improvements that the board has
committed to following the review. We expect the outcomes of these evaluations to
be different year-on-year.” 191 Barclays has followed the ABI’s recommendations
detailing actions taken in respect of the prior year’s evaluation and describing themes
for the coming year. We would encourage as much specificity as reasonably possible
on the action plan so as to provide clarity when reporting on progress. Care will need
to be taken to avoid non-executives feeling that they cannot be open and candid in
the evaluation processes.
9.75 We consider board evaluations to be one element in a process where the board takes
time to consider explicitly its own workings and effectiveness, and the changes
required to improve them. Some companies, building on their board evaluation
189 Financial Reporting Council, UK Corporate Governance Code, 2012, p. 15.
190 Parliamentary Commission on Banking Standards, Corrected Transcript of Oral Evidence, HC606-xxxii, 5
February 2013.
191 Association of British Insurers, Report on Board Effectiveness, December 2012.