Page Description - this page includes information related to Board
decision making.
- How well-Run Boards Make Decisions - Boardroom
decision-making processes have largely been shielded from view. Pulling back
the curtain reveals several principles that can make your board better.
email Boards@EnergyCollection.us
for access.
Decision Levels:
Reaching decisions is a key role for any Board. It is the process of
finding the "will of the Board" and codifying it in the form of a decision
calling for action. It is helpful in this process to think of the goal as
the will of the collective Board - the best decision that can be made with the
minds around the table - than to enter into a test of wills between individual
Board members, or a contest of who has the best idea. Various methods of
decision making are given below. The Chairman, Lead Director, or an
explicitly appointed designee should take on the role of ensuring all viewpoints
are heard and that the group converges using one of the following approaches:
- Unanimous Agreement - here all Board members share the
same viewpoint. Unanimous agreement may come immediately as all Board
members are of a like-mind, or after debate where some of the Board members
either change their mind or come to see the course of action held by other
members as optimal. By definition, all Board members can actively
support a Unanimous Agreement decision.
- Consensus - often groups become confused about what a
consensus really is. Consensus is not total agreement with a decision, it
means that everyone can consent to a selected decision without serious
reservations. When a Board reaches such an agreement they share both the
decision and the result equally and their actions should reflect that
agreement. Consensus represents a decision that everyone can
ultimately support, and is targeted at what the Board can agree is an
optimal decision given the alternatives. Boards should differentiate
between consensus and compromise.
- Compromise - to compromise is to make a deal where at
least one person gives up part of his or her view on the right course of
action. Compromise involves agreement where at least some of the group
cannot support the intended decision as optimal but are willing to go along
"for the good of the order." Compromise is often seen by at
least some of a group as very different from what they would do and have
suggested to the group. Compromise is a way of moving forward, albeit
perhaps not optimally. When a Board cannot get Consensus, they can
agree to Compromise with the full understanding of the alternative views.
In a Compromise situation, the Board should overtly agree on whether each
member can at least support the decision to the extent of agreeing to
proceed with implementation, or whether they wish to withhold support and
remain silent. A Compromise decision is a less desirable form of
decision making than Consensus.
- Voting - although voting is often the formal expression of
Unanimous Agreement, Consensus, or Compromise decisions; it is also a form
of decision making. Where Directors cannot agree, or reach Consensus
or Compromise - voting is an option to reach a decision. Boards
should embrace Voting as a decision making mechanism on par with the
alternatives for several reasons. First, Board diversity is an
important aspect of any high performing Board, and the more diverse a Board,
the more likely is that views will differ and the other forms of decision
making will not succeed. Second, Compromise decisions are by
definition suboptimal in the minds of at least some Directors - and
potentially exposes the Company to a higher level of risk (associated with
the possibility of dissenting Directors being right). Third, voting
allows the Board to move on rather than avoid decision making.
Decision Support:
- Regardless of which decision method is used to reach a decision,
individual Board member support should be explicit. Any Director that
cannot bring themselves to actively support the will of the Board should
make that position known to the Board, and the other Board members should
respect that viewpoint. Only in the most dire and extreme
circumstances however, should a Director take a public position differing
from the "will of the Board."
- Positive Board camaraderie is a desirable state for any Board.
Diversity of opinion can stress relationships, and each Director must be on
the lookout for danger signs within themselves and with fellow Board members
for any deterioration in relationships because of differing views with
respect to various historical and pending decisions. A mature,
professional Board member can find a way to "get along" and at the same time
clearly express their own opinion, and hear and respect the opinions of
others.
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