The role of Balanced Scorecard models in the assessment of Board of Directors performance

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Jelena Peković
Stefan Zdravković
Goran Pavlović

Abstract

There are a number of performance management systems that are used as mechanisms to control corporate operations, and one of the well-known is the Balanced Scorecard. Business control is a fundamental issue, and the Board of Directors is an important internal control mechanism for improving the performance and competitiveness of corporations. The Board of Directors represents the link between the owner and the manager and his task is to constantly monitor the manager and to make sure that they carry out their activities in a way that will maximize profits for the owners of the capital. For the board to perform its role, its members need to have the appropriate competencies. The specific knowledge, skills, abilities and experiences of board members represent human capital. The subject of the research is to examine the possibility of applying the Balanced Scorecard model in the performance evaluation of the members of the Board of Directors and to examine the impact of the compensations of the board members, which are viewed as a factor of motivation and investment in human capital (HCE), on the financial performance of the company, namely the rate of return on the total invested capital and the total invested assets (ROE and ROA). The results of the research showed that the Balanced Scorecard is an applicable model for evaluating the performance of the members of the Board of Directors, and that the level of compensation of the board members is positively correlated with the financial performance of the company.


Keywords: Balanced Scorecard, Board of Directors, human capital, compensation of board members, financial performance.

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