Board evaluation in Hong Kong: how to assess board performance and comply with the code

Board Evaluation Hong Kong: What the HKEX Corporate Governance Code Requires

For Hong Kong listed issuers, the annual board evaluation Hong Kong process is mandatory. The HKEX Corporate Governance Code (Appendix C1) requires a formal evaluation every year. No exceptions.

The company secretary owns the process. Design a review that meets the comply-or-explain standard, produces insights the board can act on, and satisfies disclosure requirements. Do it without building an administrative machine that outweighs the benefit.

Hong Kong Board Performance Review: The Code Provisions

The current Code, effective from 1 July 2025, states that the board should conduct a formal evaluation of its own performance and that of its committees and individual directors at least annually. This is a Code Provision. It operates on a comply-or-explain basis: comply, or explain in the corporate governance report why you have not.

The evaluation must cover three areas. First, the board as a whole , its effectiveness, composition and dynamics. Second, each board committee: audit, remuneration, nomination and any other standing committee. Third, individual directors, including the chairman and each independent non-executive director.

The annual review assesses whether the board has the right mix of skills, experience and diversity to execute the issuer's strategy. Disclose the results in the corporate governance report. Include a description of the evaluation process and the actions taken in response to the findings.

Board Effectiveness Assessment Hong Kong: Self-Assessment vs External Facilitation

The Code Provision does not prescribe a single method. Most Hong Kong listed issuers use an internal self-assessment questionnaire, often supplemented by interviews conducted by the company secretary or nomination committee. A self-assessment is the minimum standard. For issuers with stable boards, it is widely accepted as sufficient.

An external facilitator adds rigour and independence. The recommended best practice in Appendix C1 suggests that the board should consider using an independent external facilitator at least every three years to conduct the evaluation. An external facilitator brings objectivity, benchmarks against peer practice, and can surface issues directors are reluctant to raise among themselves.

The choice between internal and external turns on the board's maturity, the presence of unresolved governance issues, and cost. A newly listed issuer or one undergoing significant change should consider external facilitation from the start. An established board with a well-functioning evaluation cycle may use internal self-assessment for two years and bring in an external facilitator every third year.

Code Provision Board Evaluation Comply or Explain: How the Disclosure Works

The board evaluation is a Code Provision, not a Listing Rule. The disclosure requirement is therefore critical. The corporate governance report must state whether the issuer has conducted a formal evaluation in the reporting year. If it has not, it must explain why.

The explanation must be specific. A generic statement that the board considers self-assessment unnecessary will not satisfy the Exchange. Explain the circumstances that make compliance impracticable , a major restructuring or a recent change in board composition , and set out what alternative process was used to assess performance.

The disclosure should also describe the scope of the evaluation (board, committees, individual directors), the method used (self-assessment questionnaire, interviews, external facilitator), key findings, and actions taken or planned in response.

Document the evaluation process and results in board minutes or a separate file. The board must be able to verify the disclosure if questioned.

Hong Kong Corporate Governance Board Appraisal: The Role of the Board Skills Matrix

A board evaluation measures performance against criteria. Code Provision B.1.5, effective from 1 July 2025, requires the issuer to maintain and disclose a board skills matrix. The matrix sets out the mix of skills the board currently has, how that combination serves the issuer's strategy, and any gaps the board is seeking to fill.

The skills matrix feeds directly into the evaluation. The annual performance review should assess whether the board's composition still matches the strategy, whether gaps identified in the previous year have been addressed, and whether new risks or opportunities require additional expertise.

The nomination committee maintains the skills matrix and proposes board appointments that fill identified gaps. Report the evaluation results to the nomination committee. It then recommends any changes to board composition for the coming year.

The Evaluation Cycle: What the Company Secretary Should Plan

A standard evaluation cycle for a Hong Kong listed issuer runs as follows:

1. Quarter four of the financial year: Prepare a self-assessment questionnaire based on the board skills matrix, the previous year's findings, and any new regulatory requirements.
2. After the annual results but before the AGM: Directors complete the questionnaire. Collate responses and prepare a summary report.
3. At the nomination committee meeting: The committee reviews the findings, discusses any performance issues, and recommends changes to board composition.
4. At the board meeting: The board considers the evaluation report and approves any actions , additional training, changes to committee membership, or a search for new directors.
5. In the corporate governance report: Disclose the evaluation process, findings and actions taken.

Keep a record of the evaluation questionnaire, the response summary and the board's discussion of findings. This file supports the annual disclosure and provides the baseline for next year's evaluation.

Individual Director Appraisal and Training and Continuous Development

The board evaluation should include an individual appraisal for each director. The chairman leads the appraisal of non-executive directors. The board as a whole appraises the chairman. Appraise independent non-executive directors against the independence criteria and their contribution to board debates.

An individual appraisal may use a self-assessment form covering attendance, preparation, contribution, engagement with management, and willingness to challenge. The chairman should then discuss the results privately with each director.

Where an appraisal identifies a development need, arrange appropriate training and continuous development. The Corporate Governance Code expects every director to receive regular training to keep their skills current. The corporate governance report must disclose the training each director received during the year.

Board Composition and Diversity in the Evaluation

Assess board composition against the issuer's diversity policy and the Listing Rules. From 1 July 2025, Code Provision B.3.5 requires that at least one member of the nomination committee be of a different gender from the others. Confirm that this requirement is met.

Board diversity is not limited to gender. The skills matrix should reflect diversity of professional background, industry experience, age and tenure. Consider whether the board has sufficient depth in financial reporting, risk management, technology and sustainability.

Common Pitfalls in the Board Evaluation Process

Watch for these problems:

• Process fatigue: A questionnaire that is too long or too generic produces low-quality responses. Keep it focused on the current year's strategic priorities.
• Evaluation without action: The most common criticism from regulators is that boards conduct evaluations but do nothing with the findings. The disclosure must show follow-through.
• Ignoring committee performance: Committees often receive less attention than the full board. Each standing committee should have its own assessment.
• Failing to document: Maintain a clear record of the evaluation process, findings and board discussion. The Exchange may request this record during a regulatory review.

The Corporate Governance Report Disclosure

The Mandatory Disclosure Requirements in Appendix C1 specify that the corporate governance report must contain a description of the board's performance evaluation process. State that a formal evaluation was conducted, the scope of the evaluation, the method used, the key findings, and the actions taken or planned.

If the issuer used an external facilitator, name the facilitator and confirm that the facilitator has no other relationship with the issuer that would compromise independence.

Draft the disclosure in consultation with the chairman and the nomination committee. The board must approve the corporate governance report before it is published with the annual report.

Summary of Responsibilities

Party	Role in Board Evaluation
Board	Approves evaluation process and findings; considers actions
Chairman	Leads evaluation of individual directors; discusses results
Nomination committee	Reviews skills matrix; proposes board changes based on evaluation
Company secretary	Designs and administers process; drafts disclosure
External facilitator	Provides independent perspective; benchmarks against peers

For further detail on the evaluation process, refer to the HKEX Corporate Governance Code (Appendix C1), particularly Code Provision B.1 and the Mandatory Disclosure Requirements. The Exchange also publishes guidance notes on corporate governance disclosure containing practical examples of evaluation processes and disclosures.