Board Management Decision Making

The decision-making process for board management is among the most crucial, complex processes of governance. Boards need to make decisions 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 of communication and make decisions.

Effective boards avoid binary decision making and invest an enormous amount of time in the multiplicity of choices, as well as challenging assumptions. They also ensure that their decisions are recorded in a way that permits them to evaluate and review the effectiveness.

Leigh Weiss says that for high-consequence decisions or what I call black elephants, it’s essential to involve a diverse group in framing the ultimate binary question, and in the discussions surrounding it. Weiss is referring to bringing in experts to help the board better understand the implications and complexity of the decisions. It involves the board being involved in the debate instead of just letting management make an informed decision, and then voting on it.

It is beneficial to have a chart that indicates which committees executives and/or the board should take certain kinds of decisions. This can be especially helpful when the board is weighing an important and crucial decision that could affect the future of the company. Boards must also decide on the voting procedure to use (supermajority, simple majority or unanimous) for specific decisions.

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