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Board Evaluations Survey: Less than half of all FTSE 100 companies use external facilitators.

Mazars, the international accountancy firm, today publishes the findings of extensive research into how board evaluations are undertaken by today’s FTSE100 companies as reported in their annual report for the last three years.

Based on their annual report disclosures, the key findings include:

• Less than half (41) of the current FTSE100 companies have had an externally facilitated evaluation in any of the last three years.

• Only nine of the current FTSE100 companies have had an externally facilitated evaluation in each of the last three years. * A further seven had an external evaluation in two of the last three years.

• In the last financial year 25 FTSE100 companies had external involvement in their board evaluations, including ten companies using external facilitation for the first time since the publication of the revised Combined Code in 2003.

• There is no single dominant method used for undertaking evaluations. There are a variety of approaches mainly involving questionnaires, interviews or a mixture of both methods.**

• The quality of disclosure is variable. At the leading-edge, companies clearly set out their evaluation processes and report on improvements to be made as a result of the evaluation and progress on implementing changes agreed the previous year.

• 96% of FTSE100 of companies undertook a board evaluation in their last financial year. The comparable figures for FTSE 250 companies was 93%.

• Only 13% of FTSE250 companies undertook an external evaluation in their last financial year, half the proportion of their FTSE100 counterparts.

Anthony Carey, the partner at Mazars leading on board effectiveness in the UK commented:

"Board evaluations were one of the key innovations in the new Combined Code in 2003. Our survey highlights good progress made by FTSE100 companies in embedding them in boardroom practice but opportunities remain for further development especially in the area of the use of external facilitators.

Externally facilitated evaluations can provide a fresh perspective to a board on measuring effectiveness. They can also help avoid the ‘elephant in the sitting room’ syndrome where everyone knows there is a problem but it is not being addressed. Investors would also gain from taking a keen interest in the thoroughness of evaluations especially when they have concerns over corporate performance."

Notes on the research:

*The nine companies that had an external evaluation in each of the three years were 3i Group; BAE Systems; Barclays; Cadbury Schweppes; Centrica; Imperial Tobacco; Prudential, Severn Trent and Kingfisher.

** Of the 96 companies that carried out an evaluation in 2006/7, 28 used questionnaire only, 21 interview/discussion only, 29 included a combination of questionnaire and discussion, 4 used alternative methods and in 14 cases, a surprisingly high number given the Code provision, the method was not specified or expressed only in very vague terms.

The Combined Code on Corporate Governance calls on the boards of listed companies to undertake a ‘formal and rigorous’ board evaluation of their own performance (and that of their committees and individual directors) and to state in the annual report how performance evaluation has been carried out.

The research was undertaken by Mazars’ Public Interest Markets Group in August/September 2007.

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