Board Management Decision Making

The process of decision-making for board management is among governance’s most intricate and critical processes. Boards must determine what kind of risk they’ll accept and how much knowledge is required to manage that risk. They must also decide on the best method for communicating and make decisions.

Effective boards steer clear of binary decisions and focus their attention on the myriad of options and challenging assumptions. They also make sure that their decisions are documented in a manner that enables them to review their decisions and assess the effectiveness of implementation.

Leigh Weiss: For high-consequence or what I refer to as black elephant decisions, the most important factor is to involve an array of stakeholders in the framing of the ultimate binary question and in the discussion surrounding it. Weiss says this includes bringing in outside experts to help the board understand the complexity and ramifications of the decisions. The board is required to participate in the discussion rather than simply letting management take the decision and then approve it.

It is helpful to have a system that indicates which committees executives, and/or the entire board should make certain types of decisions. This is particularly helpful when the board is contemplating an important and significant decision that could affect the future of the business. Boards must also decide on the voting procedure to use (supermajority or simple majority unanimous) for specific decisions.

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