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December 2019

The New Guide to Effective Board Decision Making

Every organization needs decision-makers that guide the direction of the company, oversee its activities and represent shareholders. In public companies, NGOs, and some private businesses it is the Board of Directors that is responsible for these actions. Board members are elected by shareholders to represent them and to protect the interests of the company, investors, and shareholders themselves, and to make sure the company’s future is stable and profitable. One of their most important roles is hiring and supervising the CEO or a general manager.

Photo by Charles Forerunner / Unsplash

The Board of Directors - responsibilities 

There are different types of committees, including Executive Committees (a part of the Board that can meet and make decisions when the full Board is not available), Nominating Committees (selecting new Board members), Compensation Committees (making decisions regarding salaries and bonuses), Audit Committees (overseeing financial statements with auditors). The fundament of decision making for each of them is voting

However, before the Board votes, they need to go through the decision-making process that can be complex and involve numerous members. On the first level, the Board of Directors discusses the needs and ideas with shareholders and/or association members and presents the result of these discussions during Annual General Meetings. Then, the major decisions are being made between the Board and the Executive Team. They are submitted and validated by both parties during monthly or quarterly steering committee meetings. 

The Board can decide on various matters,  for example:

  • Strategic direction. The Board is responsible for making sure the organization achieves its goals and core mission. 
  • Finances. The Board of directors approves annual budgets and different activity budgets. It can also approve large purchases or expensive long-term contracts. The finances are usually overseen by the treasurer.
  • Personnel issues. The Board typically is responsible for hiring top management that manages paid and/or volunteer staff.
  • Bylaws issues. There are some decisions that only the Board can make in the organizations, for example appointing new Board members or hiring core employees. 

Decision-making process

However, in the beginning, the Board needs to decide how they will make a decision and the process can be very different depending on the organization. Are they going to follow the culture or unanimity and vote in support of the motion or against it if that is the Board’s signal? It is so common that many Board members claim they don’t even remember voting any other way, but it doesn’t always have to be a rule. On the contrary, disagreements lead to thinking more deeply about the issues and they provide alternatives that may not have been obvious since the beginning. What needs to be obvious is a transparent and secure voting process, that guarantees anonymity. 

As mentioned before, the way the Board makes decisions may vary, but there are some standard ways that most of the Boards can follow. Before they meet, every member should receive the agenda and other Board materials. Then, once the quorum of Board members is present, they can take such steps:

  • Board members discuss and decide within the time allotted on the agenda.
  • They attempt consensus within that time.
  • If for whatever reason, consensus cannot be achieved, then a seconded motion is sufficient to call a majority vote to delegate to a committee to gather more information by a certain time frame.
  • If delegation is not selected by a majority vote, then a seconded motion is sufficient to call a vote about a certain suggested outcome of the decision.
  • The decision outcome goes to the majority vote.
  • The decision is documented in the Board minutes.

What can go wrong in the decision-making process

Despite well-prepared agenda and materials and following the formal steps, Boards don’t always make good decisions and there are many reasons behind it. First of all, if the directors don’t learn from the past and don’t do their due diligence, the outcome will most likely be wrong. The Board needs to seek the right advice, make decisions in a rigorous and professional way and always challenge the assumptions. Bad decisions also happen when Board directors are uncomfortable when they’re in the minority.

Especially when the Board follows the culture of unanimity, the directors with different points of view can suffer isolation and pressure to vote just like others do. 

Solution - is a perfect solution to overcome this issue because its blockchain-based technology enforces transparency and offers 100% anonymity when needed or necessary. Because it makes physical presence unnecessary, it allows an easier quorum and making decisions faster. Thanks to, immutable decisions can be cast and protect the Executive Team and the Board of Directors against tampered decisions. Its high security helps to secure the directors’ integrity in anonymous voting. 

Contact us at to discuss how can help your Board make the best decisions. 

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