What Should be Included in an Assessment?
A performance assessment should cover the major aspects of the company's corporate governance practice critical to shareholders, such as the board of directors, executive and director compensation, transparency and disclosure, and shareholder rights and communications. Depending on the industry sector, the company might also consider including environmental or social issues as part of the assessment.

Evaluations of board performance are included in the listing requirements of the NYSE as well as Corporate Governance Codes of several countries, including France, Belgium and Portugal. Such evaluations typically include evaluations of board functioning and performance, committee activities, as well as the contribution and work of individual board members. Depending on the code, results of evaluations may need to be revealed in reports to shareholders.

With respect to transparency and disclosure, the company should confirm that it is telling investors and other stakeholders what they need to know about company operations. While national corporate governance regulations and exchange listing requirements spell out the minimum level of disclosure, companies may want to consider going beyond these minimums to provide additional information. For example, a company might disclose performance toward specific environmental goals, such as reductions in greenhouse gas emissions, even if it is not legally obligated to do so. During the assessment, the company should also confirm that external documents related to corporate governance practices are up to date.

Shareholder communications are an important part of corporate governance. Many issuers have robust programs for outbound communications to shareholders, including press releases, webcasts, conference calls and websites. However, managing inbound communications from shareholders is just as important. Institutional investors are very interested in engaging with their portfolio companies, with 80% engaging either directly with companies and directors, or through a third party investment manager, based on data obtained from ISS' 2006 Global investor Study. Therefore, companies may want to look at responsiveness to shareholders as part of an overall assessment.

A review of executive and director compensation practices, especially how they align with those of peer companies, may also be a useful element of an overall corporate governance assessment. US companies in particular may want to ensure they are ready for the new SEC requirements for Executive Compensation Disclosure for 2007.

All of the items above need not be included in every assessment. Rather, it may make sense for companies to start by focusing on areas they deem critical to their corporate governance practice, and then expand to other areas.

Benefits of Corporate Governance Assessments
Corporate governance assessments can be used in variety of ways to provide ongoing benefits to the organization. An assessment provides a baseline analysis of the company's current corporate governance practices. Management can use this baseline to develop a strategic roadmap for future changes in governance practices, whether they want to attack easy to resolve items or more complex issues. Combining the assessment with an analysis of institutional voting trends can help management plan the corporate governance strategy to ensure alignment with shareholder desires.

Some companies may decide to leverage certain parts of their assessments publicly, just as they might highlight a positive product review or an award the company receives. For example, if the assessment shows achievement of certain environmental or social goals, the company has a positive story to tell shareholders and the general public. Some companies choose to reveal their new corporate governance initiatives they have adopted on their websites, as they feel the adoption of sound corporate governance practices reduces risk and improves shareholder value.

A corporate governance assessment can help companies measure where they are with respect to corporate governance objectives, and provide insight into changes they can make to accomplish those objectives. In today's business environment where boards are under increasing scrutiny to create shareholder value, good governance just makes good business sense. Clearly, the advantages of periodic governance assessments outweigh the challenges.