Decision Framework

Every board is different, but each is driven by its own culture or savoir-faire. I have noticed two “tensions” at play: (1) management – board and (2) board – individual director.These two tensions affect where the board is in the governance spectrum: a micro-managing working board? Or at the other end of the spectrum, a ratifying board. Or does the board veer from one end, to the other depending on circumstances?

In the first type of tension, the management’s views of the role of the board will set the stage. If management expects value-added contribution and support from the board, the shareholders will inevitably reap this benefit from the mutual respect engendered. The best of directors will be nominated, and the best stewardship will materialize. On the other hand, when owners of the company (such as a company that was founded by a group of entrepreneurs/managers or is family-controlled/run or is state-owned) view directors and governance as a necessary cost to accessing public capital and debt markets, then I would know that the company has not taken advantage of one of its best institutional assets.

The second type of tension manifests at the board meetings, all of which I have experienced:

1. Prepared, engaged directors smoothly following a well-planned agenda with clear action requirements of the board (such as for notation/ for approval/ for ratification/ for endorsement) – mechanical, but is efficient.

2. Discussions led by a democratic, thoughtful Chair providing sufficient voice to each director and final decision arrived at unanimously after constructive debate with management.

3. Directors fully trust an entrepreneur – founder-CEO and “follows” his/her lead thus abdicating their role.

4. A dominant director always makes the decision, everyone slightly intimidated and falls behind with no dissent.

5. No one has any idea but by consensus, everyone can live with the decision.

6. A “noisy” director (often a diva/o or an old wizard) creates a fracas, everyone just gives in to avoid the pain, and the Chair helpless to control this director.

7. A Chair, in his or her bid to be efficient, comes with preconceived ideas and steamrolls the board, leaving directors demotivated.

8. A checked-out, exhausted board where no one says a word. Minutes record that the board has approved each resolution.

I find that having a decision framework based on full facts and data, with management analysis and insights help in all these scenarios. A well thought out set of board papers goes a long way, and this is where management can derive the best from a director. After all this, considering the important drivers to the financial and commercial position, oftentimes collective wisdom results in the best outcome.

photo of Museum entrance to the Lake Gardens, at dawn

Location: Kuala Lumpur, Federal Territory of Kuala Lumpur, Malaysia

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