Board Performance Evaluation Process

1.0 Introduction:

In October 2010, the CBB has issued the revised High Level Controls Module (HC) of the Rule Book incorporating the Ministry of Industry and Commerce (MOIC’s) Corporate Governance Code requirements. Adopting and conducting a Formal Performance Evaluation of the Director, Board Committees and the Board on an annual basis is one of the requirements. The process is to be adopted by the end of 2011.
This “Performance Evaluation Process” sets out the Procedure for adopting and implementing a formal process of annual performance review of the Director, Board Committees and the Board in relation to their effectiveness, their governance duties and responsibilities and in conducting the affairs of the Bank.

2.0 Purpose:

The objective of this performance evaluation process is to have a consistent and systematic formal method for assessing performance of the Directors, Board Committees and the Board and take steps to enhance the functioning and annually report the results to the Shareholders. This process would also be used for submitting Board’s recommendations to Shareholders for the re-election of Directors.

3.0 Regulatory Requirement:

As mentioned above, according to CBB Rulebook 1 (HC-1.9) and MOIC’s Corporate Governance Code (Principle 1.8), the Board is required to conduct an evaluation of its performance and the performance of each Committee and each individual Director, annually.

The requirements of such process as per section HC-1.9 are quoted below:

The evaluation process must include:

(a) Assessing how the Board operates, especially in light of Chapter HC-1;
(b) Evaluating the performance of each committee in light of its specific purposes and responsibilities, which shall include review of the self-evaluations undertaken by each committee;
(c) Reviewing each director’s work, his attendance at board and committee meetings, and his constructive involvement in discussions and decision making;
(d) Reviewing the board’s current composition against its desired composition with a view toward maintaining an appropriate balance of skills and experience and a view toward planned and progressive refreshing of the Board; and
(e) Recommendations for new directors to replace long-standing members or those members whose contribution to the bank and its committees (such as the audit committee) is not adequate.

4.0 Different Approaches:

There are multiple methodologies used by different institutions with customized variations. The process, however, is primarily questionnaire based.

Broadly, the evaluation mechanisms could be classified under three categories:

(a) Internal process based on self-evaluations and review/assessment by the Chairman or a Committee or the Group Corporate Secretary.
(b) Self evaluations by all the Directors for each Committee and the Board. The review and assessment to be conducted by an external consultant who would submit the report to the Board. The evaluation templates are normally devised and provided by the consultant.

5.0 Process:

This process will consist of questionnaires covering broad requirements/expectations under Corporate Governance module (HC-1) of Rulebook. Additionally they include assessment related to expectations under Board Charter, Code of Conduct, Conflict of Interest etc. and international best practice. The process has the following 3 self explanatory questionnaires to be completed by the Directors:

a) Self assessment Questionnaire (A)
b) Committee assessment Questionnaire (B)
c) Board assessment Questionnaire (C)
Each statement has to be rated on a scale of 1 to 5 as: 1. Very Poorly Agree, 2. Poorly Agree, 3. Moderately Agree, 4. Strongly Agree, 5. Very Strongly Agree or a similar approach.

The Group Corporate Secretary would review the assessments whether done internally or wit the assistance of a consultant and submit a summary report to the Board with recommendations.

Later on, based on experience, the process could be enhanced to include, if the Board so desires:

1. Peer-level assessment of all Directors by each Director
2. Evaluation of Chairman

6.0 Roles and Responsibilities:

6.1 Individual Director:

All the questionnaires should be completed and submitted to the Group Corporate Secretary or consultant if a consultant is involved.
Any other comments/ suggestions could be made in the designated field of the questionnaire.
If interviews are requested to attend interviews and present his/her open and fair views of issues under evaluation.

6.2 Chairman of each Committee (Audit/NRG/Ex. Com./Board):

To record comments on the Director’s/Member’s assessment if any in the space provided before submission to the Group Corporate Secretary.

6.3 Chairman of the Board:

The Chairman of the Board will oversee the performance evaluation process.
To review the Board’s assessment done by each Director
Submitting a summary of the evaluation to the Board/Shareholders.

6.4 Group Corporate Secretary:

The Group Corporate Secretary will circulate the questionnaires to all the Directors and submit them for further actions to the respective committees or coordinate with the consultant for the same as the case may be.
Summarize the assessment results and submit them along with the questionnaires to the Board for its consideration.
Maintain the records and future references.

7.0 Evaluation Period:

The Evaluation period will be each financial year.
The Group Corporate Secretary to review and recommend to the Board in its March or any other meeting as decided by the Board.
The process is disclosed to the AGM (generally in March)
A consultant is appointed Every three years to do an external evaluation process.

8.0 Reporting to Shareholders:

The Board shall report to the shareholders, at each annual shareholder meeting, that the Director’s, Committee’s and Board’s evaluation has been done.

9.0 Subsidiaries:

The fully owned subsidiaries may adopt a similar process with applicable changes and report annually to BBK Board.