Guidance

Arm's length body boards: guidance on reviews and appraisals

Principles and resources to support regular arm's length body board effectiveness reviews and board member appraisals.

From:
Cabinet Office and UK Government Investments
Published
11 April 2022

Documents

Board effectiveness reviews: principles and resources for arm's-length bodies and sponsoring departments

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Non-executive director appraisals: principles and resources for arm's-length bodies and sponsoring departments

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Chair appraisals: principles and resources for arm's-length bodies and sponsoring departments

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Details

An effective board is crucial to the effectiveness of an arm’s length body (ALB), and an effective ALB delivers better outcomes for the public. Through regular review and appraisal of their boards and non-executive board members, ALBs can realise a number of benefits:

  • building and maintaining board quality and effectiveness, which is at the centre of an effective ALB
  • identification of strengths and weaknesses
  • promoting a culture of continuous improvement and learning throughout the organisation

The UK’s Corporate Governance Code (pdf, 269 KB) sets best practice in the private sector for review and appraisal. The Government believes that private sector best practice should be public sector best practice and therefore requires public corporations and government-owned companies to apply the Code to the extent it is appropriate. Best practice for other types of ALBs is set out in the Corporate Governance code for Central Government Departments (pdf, 514 KB). The Cabinet Office and UK Government Investments (UKGI) have co-developed this guidance to support ALBs and their sponsor departments in meeting their requirements within those Codes on reviews and appraisals.

This guidance is in three parts and covers:

  • Board Effectiveness Reviews. These provide an annual (and three-yearly) opportunity to evaluate the whole board and improve both its individual components, and as a unit. It should help inform appraisals of board members;
  • Non-executive director (“NEDs”) appraisal. An effective board requires effective NEDs. To understand their effectiveness, they must receive annual feedback, appraisal and development.
  • Chair appraisal. Appraisals of the chair provide an annual opportunity to review whether the ALB is delivering its objectives and supporting Ministers’ strategic aims, and the effectiveness of the chair and the board under their leadership.

Applying this guidance

Departments and ALBs should see appraisal and review as part of an annual rhythm. This starts with setting the ALB’s objectives and priorities in the first quarter of the financial year, a board effectiveness review should be undertaken in the third quarter, while appraisals should take place early in the last quarter. While ALBs vastly differ in their role, structure and size - good governance is good governance. Therefore, the principle of ‘comply or explain’ applies.

While this guidance is primarily intended for the use of ALB boards, other public bodies are encouraged to follow it where applicable. The following conventions are used to show the intention:

  • ‘must’ indicates a requirement: a mandatory element;
  • ‘should’ indicates a recommendation: an advisory element, which is established best practice; and
  • ‘may’ indicates an action/approach that is permitted.

This guidance should also be read alongside:

Contact

Any questions on this guidance should be addressed to: publicbodiesreform@cabinetoffice.gov.uk

Published 11 April 2022