The decision-making process for board management is one of governance’s most complicated and crucial processes. 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 way to communicate and make decisions.
Effective boards avoid binary decision making and put in an enormous amount of time in the multiplicity of options, and in challenging assumptions. They also ensure that their decisions are recorded in a way that enables them to examine and assess the effectiveness.
Leigh Weiss says that for high-risk decisions, also known as what I call black elephants, it is important to involve a diverse group in framing the ultimate binary question, and in the discussion surrounding it. Weiss is referring to bringing in outside experts to assist the board in understanding the complexities and implications of the decisions. And board management decision making it involves the board actually engaging in the debate instead of let management make a pre-made decision, and then allowing the board to vote on it.
It is useful to have a chart that lists which committees, executives, or the entire board should take certain kinds of decisions. This can be especially helpful when the board is contemplating an important and significant decision that could affect the future of the company. Boards should also think about determining the kind of voting process (simple majority, supermajority or unanimous) to use in particular decisions.
