Board Management Decision Making

The process of making decisions for board management is among governance’s most intricate and critical processes. Boards must make a decision about the type of risk they’ll accept, and the level of expertise needed to manage it. They also need to decide on the best method to communicate and make decisions.

Effective boards avoid making binary decisions and spend significant time on the multiplicity of options and challenging assumptions. They also ensure that their decisions are recorded in a manner that allows them to examine and assess the effectiveness of their decisions.

Leigh Weiss: For high-consequence decisions, also known as black elephant decisions, the most important aspect is to involve diverse groups of people in the formulation of the ultimate binary question and in the debate that surrounds it. Weiss says this includes the involvement of outside experts to help board chair responsibilities the board understand the complexity and ramifications of the decisions. It also involves the board taking part in the debate rather than simply letting management take an informed decision, and then voting on it.

It is useful to have a system that lists which committees, executives and/or the whole board should make certain types of decisions. This is particularly helpful when the board is considering a decision that could have significant implications for the future of the company. Boards must also decide on the voting method to use (supermajority or simple majority unanimous) for specific decisions.