Closing the Gap Between the Boardroom and Investors Through Board Evaluations

Closing the Gap Between the Boardroom and Investors Through Board Evaluations

Board evaluations are increasingly recognized as a critical component of effective corporate governance, helping boards enhance performance, strengthen accountability, and build investor confidence. These themes were explored during our recent webinar with the Hong Kong Investor Relations Association (HKIRA), “Board Evaluation: Closing the Gap between the Boardroom and the Investors.”

The discussion highlighted how board evaluations have evolved from a governance exercise into an important mechanism for improving board effectiveness and aligning board practices with investor expectations.

Why Board Evaluations Matter

Board evaluations play an essential role in maintaining and enhancing the effective functioning of company boards. They provide boards with an opportunity to reflect on performance, identify areas for improvement, and ensure alignment with the company’s long-term strategic objectives.

Board evaluations can take different forms, including:

• Internal evaluations conducted through board self-assessment, often with advisors’ support
• External evaluations performed by independent advisors

While internal evaluations support ongoing reflection and improvement, external evaluations are increasingly viewed as best practice for the objectivity and independent perspective they provide.

The Investor Perspective

From an investor standpoint, board evaluations are increasingly seen as an important indicator of governance quality and board accountability. Investors rely on effective board oversight to ensure the appropriate stewardship of capital and long-term value creation.

There is also growing investor focus on the use of independent and credible external evaluation providers willing to raise difficult issues and pave the way for honest conversations within the boardroom.

Global Governance Trends Driving Change

Globally, there is growing acceptance of a three-year evaluation cycle as best practice:

• Two annual internal evaluations
• Followed by one external evaluation in the third year

This approach has already seen strong adoption across major markets:

• High adherence among listed companies in the UK
• Increasing adoption across EU countries
• Nearly all S&P 500 companies in the US conduct board evaluations in some form
• Close to 40% of S&P 500 companies now engage external advisors, with this number continuing to rise

These evolving international practices are also influencing governance expectations in Hong Kong.

Impact on Hong Kong’s Governance Landscape

Since 2025, the Hong Kong Corporate Governance Code has recommended that issuers conduct board evaluations at least once every two years under Provision B.1.4 and disclose both the evaluation approach and principal findings.

Additionally, the HKEX Corporate Governance Guide for Boards and Directors provides further guidance on:

• Evaluation scope
• Reporting expectations
• International governance best practices

These developments reflect Hong Kong’s continued alignment with global governance standards and increasing investor expectations around transparency and board effectiveness.

Key Success Factors for Effective Board Evaluations

The webinar also explored the factors that contribute to successful and meaningful board evaluations. Key considerations include:

• Active involvement of the Chair or Senior Independent Director (SID)
• Confidentiality of responses to encourage candid feedback
• Inclusion of multiple perspectives, including senior management views
• Alignment of evaluation scope with board priorities and agenda
• Meaningful board reflection on evaluation outcomes
• Proper follow-up and continuity of action items
• Integration with:
• Board skills matrix reviews
• Succession planning
• Director development plans

Importantly, effective evaluations should not be treated as standalone exercises, but rather integrated into broader governance and board development processes.

Looking Ahead

As governance expectations continue to evolve globally, board evaluations are expected to play an even greater role in strengthening board effectiveness, enhancing transparency, and fostering investor trust.

For boards, the priority is not simply to complete an evaluation, but to ensure the process leads to meaningful discussion, clear actions and measurable progress. Effective evaluations should connect board composition, skills, succession planning, director development and investor expectations into one continuous governance improvement process.

To learn more about how Sodali & Co supports boards and issuers with board evaluations, governance advisory, and shareholder engagement strategies, please contact our team.