PolicyGovernance®PrinciplesandModelConsistencyFrameworkdocument
PURPOSEANDDESIREDOUTCOMESOFTHISDOCUMENTIn 2012 an operational task force working for the IPGA CEO was charged with developing a system for objective review which could be used to ensure, as much as possible, that IPGA presentations and publications were model consistent. It was estimated that the Principles had to be the foundation but that something more than just the Principles would be needed to conduct an objective review. It was determined to look at the further writings by the Authoritative Source, as well as surveying leading consultants to ascertain probable lower level definitions of the Principles. These would then be extensions of, or logical expectations, given the Principles themselves. In order to apply this set of Principles and lower level definitions of the Principles, it would be necessary to create observed criteria by which to judge whether or not they were being followed and were not being contradicted. This led to the proposed "Potential Criteria for Judging Consistency of materials" which can be found below. It also seemed to make sense while looking at this to define "Potential Criteria for Judging Consistency of board behavior" which are also below.
These are not thought of as exhaustive further definitions or observable criteria to judge their application. It is expected that over time as more writings are considered and as more people use the tool they will likely expand. The goal was not to say all that could be but to say enough to achieve the desired outcome of having a way for IPGA to objectively assess model consistency.
In preparation for IPGA Conference 2013 a survey to gather the input of those who presented at the IPGA Conference 2012 was conducted as to their input concerning the contents of the Framework. These comments were drafted into a revised set of Definitions and Criteria which were then reviewed by the Authoritative Source. Responses from John and Miriam have now been incorporated into this new version.
PRINCIPLESBACKGROUNDANDCONTEXT§ Principles taken from Carver Policy Governance® Guides, revised and updated, © 2009 “Policy Governance® in a Nutshell” § Definition of a Principle: A fundamental truth or proposition that serves as the foundation for a system of belief or behavior or for a chain of
reasoning. § Applying the principles – what would you expect to see or do as a natural and required conclusion when the principle is followed.
PROCESSFORDEVELOPINGTHEPOTENTIALCRITERIA§ Developing the possible lower level definitions and the potential implications for how one would judge both presented and published
materials and board behavior for consistency was done by: § Identifying apparent expectations in the most recent Carver Policy Governance Guides. § Surveying several of the most regarded and experienced consultants who were Academy participants. § Using the operational task force (consisting of Richard Biery, Jannice Moore, Caroline Oliver, and Eric Craymer) to synthesize the above
information in order to identify expected observable criteria for filtering model consistency of presentations and publications by IPGA and of boards which were attempting to use Policy Governance.
§ These proposed criteria were checked against the current Carver Policy Governance Guides as well as the previous edition's "Your Role and Responsibility as a Board Member"
§ Any criteria which could not be confirmed as aligning with the writings was either edited or deleted. § Any criteria from the writings which had not already been identified were added.
©2012-2016,InternationalPolicyGovernanceAssociation. TheoriginalcollaboratorsareEricCraymer,CarolineOliver,JanniceMooreandRichardBierywithreviewbytheAuthoritativeSource.Thisdocumentisavailableforgeneralusewithproperattribution.Variationsonorextensionsofthisdocumentarepermitted,however,anyexpansionmademustbeidentifiedasnotoriginal.TheoriginaldocumentmaybeviewedontheIPGAwebsiteundertheresourcetab.
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1.Ownership: Theboardexiststoactastheinformedvoiceandagentoftheowners,whethertheyareownersinalegalormoralsense. Allownersarestakeholders,butnotallstakeholdersareowners,onlythosewhosepositioninrelationtoanorganizationisequivalent tothepositionof shareholdersinafor-profit-corporation.
Thisincludesatleast: Theboardclearlyidentifiesitsmoralownership.• Theboarddistinguishesitsaccountabilityto
ownersfromitsaccountabilitiestootherstakeholders.
Recognizingitsaccountabilitytoowners,theboarddevelopsandexecutesadeliberateplanforregular,consistentandon-goingtwo-waycommunicationwithowners.• ConnectionwithownersisprimarilyaroundEnds-
relatedissuesbutalsopotentiallyunacceptablemeans,notaround“currentcustomerissues”.
• Methodschosenforownershiplinkageare
designedtoobtaininputrepresentativeoftheentireownership,ratherthanrelyingonself-selectedvoices.
Thisimpliesthatthefollowingshouldbeobserved:
Referencestoownersareclearlynotconfusedwithcustomersorotherstakeholders.
Referencestoownershiplinkageorlinkageplansarerelatedtotheboard'scurrentorpotentialpolicies,particularlyEnds,andnotrelatedto“customer”typequestions.
Thereisrecognitionthatownershiplinkageshouldberepresentative(eventhoughitmaytakeseveralyearstogainacompletelyrepresentativepicture).
Thisimpliesthatthefollowingshouldbeobserved:
Boardhasapolicystatingwhoitsmoralownersareand itsmoralaccountabilitytothem.
Boarddevelopsandimplementsadeliberate,ongoingplanforregular,two-waycommunicationwitharepresentativeselectionofownersaroundboardpolicies,particularlyEnds-relatedissues.
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2.PositionofBoard: Theboardisaccountabletoownersthattheorganizationissuccessful. Assuchitisnotadvisorytostaffbutanactivelinkinthechainofcommand. Allauthorityinthestafforganizationandincomponentsoftheboardflowsfromtheboard.
Thisincludesatleast: Theboard’sprimaryrelationshipiswithowners,ratherthanstaff.
Theboardhasanobligationtoactonbehalfofowners.
Endspoliciesaredevelopedbasedonanunderstandingofowners’perspectives,values,wantsandneeds.
Iftheboardbelievesadecisionisinthebestinterestsofowners,butitisnotconsistentwithowners’wishes,theboardmayengageownersindialoguetohelpthemunderstandbroaderimplications–tobemore“responsibleowners”.
TheboardhasclearwrittenEndsandExecutiveLimitationsfortheCEOtoensurethatthereisclarityofexpectations.[cross-refwithPrinciples3&6]
Theboardmonitorsanyareathathasbeendelegated(totheCEOortoaboardcommitteeorindividualmember)toensurethattheaccountabilitylinkismaintained.[cross-refwithPrinciple10]
TheboarddoesnotinterfereinareasithasdelegatedtotheCEO.
• TheboarddoesnotexpecttheCEOtofollowthe“advice”ofanyboardmember.
Thisimpliesthatthefollowingshouldbeobserved:
Referencestoboard’srelationshiparerelatedtoownersandrecognizetheboard’saccountabilitytothem.
Itisclearthattheboard,nottheCEO,initiatesthedevelopmentofthebroadestEndsandthendelegatesfurtherdefinitionstotheCEOafteritcanacceptanyreasonableinterpretationofwhatithaswritten.
IfEndsarebeingdiscussed,thereisevidencethattheyhavebeendevelopedbasedonanunderstandingoftheowners’perspectives.
Thisimpliesthatthefollowingshouldbeobserved:
Board’sagendacycleincludessignificanttimedevotedtoownershiplinkage.
BoardhasclearEndsinplaceandthereisevidencethatownershiplinkagehasbeencloselyconnectedtotheEndsdevelopmentprocess.
BoardmonitorsEndsachievementregularly.
Boardleadershipdoesnotconsistof“approval”ofmanagementplans.
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3.BoardHolism: Theauthorityoftheboardisheldandusedasabody.Theboardspeakswithonevoiceinthatinstructionsareexpressedbytheboardasawhole. Individualboardmembershavenoauthoritytoinstructstaff.
Thisincludesatleast: Alldecisionsoftheboardarespokenwith“onevoice”whichisarrivedatafterappropriatedeliberation.• Theboard’s“onevoice”takestheformof
writtenpolicy,orinthecaseofdecisionswhichhaveonlyaone-timeactionassociatedwiththem,aminutedboarddecision.
• Boardmembersrecognizetheycanrespectively
disagreeindividually,butmusthonorandnotsabotageordisruptfulfillmentbyothersofBoardexpectations.
Nomemberorsubsetoftheboard,officersandcommitteesincluded,exercisesanyauthorityunlessgrantedbythefullboard.• NeithertheChairnoranyothermemberor
subsetoftheboardsupervisesordirectstheCEO.
• NoboardmemberevaluatestheCEO.
• Noboardmemberinstructsorevaluates any
staffreportingtotheCEO. • BoardCommitteesarenotassignedto“help”in
areasdelegatedtotheCEO. • TheChairhasnoauthorityovertheboarditself
otherthanauthoritygrantedbytheboard.
Thisimpliesthatthefollowingshouldbeobserved:
Referencestoboardinstructionsareclearlyreferringtotheonevoiceoftheboardasawhole.
Referencestoboardcommitteesareconsistentwiththerequirementthattheyareonlytohelptheboarddoitsownwork.
ThereisnoreferencetotheCEObeingaccountabletotheChair.Board committees are rarely, if ever, given authority to act as if they were the board
Thisimpliesthatthefollowingshouldbeobserved:
Boardminutesdonotshow“directions”totheCEOapartfromboardmotions.
Boardmotionstaketheformofamendmentstopolicyunlessadecisionhasonlyaone-timeactionassociatedwithit.
Theboardhasandenforcespolicystating itsexpectations thatboardmembershonourboarddecisions.
TheboardhasandenforcespolicythatpreventsindividualboardmembersfromdirectingorevaluatingtheCEOandstaff.
Committeeshavespecificcharters/termsofreferencefromtheboardspecifyingexpectedresultsandscopeofauthority.
TheboarddoesnotassignboardmemberstooperationalcommitteesformedbytheCEO.Board committees do not act with the authority of the board unless they are specifically granted that authority by the board for a limited purpose.
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3.BoardHolismcont’d Thisincludesatleast: Officersandcommitteesexisttohelpthefullboardaccomplishitswork,nevertohelptheCEOand/orstaff.[OverlapwithPrinciple8]
Topreserveboardholism,delegationofboardauthorityattheboardlevelshouldbeaccompaniedbyappropriatelimitsonthatauthority(similar to the way that the board delegates and limits authority to the CEO but these may be stated in either the prescriptive or proscriptive manner rather than only in a proscriptive one).• Theboarddoesnotallowindividualboard
memberstospeakfortheboardwithoutauthorizationofthefullboard.
CEOisexpectedtodealwiththeboardasawhole• CEOisexpectedtocommunicatetotheboardas
awholeandavoidlobbyingindividualboardmembers/groups.
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4.EndsPolicies: Theboarddefinesinwritingitsexpectationsabouttheintendedeffectstobeproduced,theintendedrecipientsofthoseeffects,andtheintendedworth(cost-benefitorpriority)oftheeffects.TheseareEndspolicies.Alldecisionsmadeabouteffects,recipients,andworthareEndsdecisions.AlldecisionsaboutissuesthatdonotfitthedefinitionofEndsaremeansdecisions.HenceinPolicyGovernance,meansaresimplynotEnds.
Thisincludesatleast:
1. EndspoliciesatthebroadestlevelcontainallthreeelementsofEnds.
2. Endspoliciesareclearlyseparatedfrom
meanspolicies.
3. Endsmustbebroadenoughtocapturethefullnessoftheboard’sintentbutrealisticallyachievableoverthelongtermorthetermspecified.
4. Givenprinciples1and2,becauseEnds
defineorganizationalpurposethelinktoowners’intentmustbeclear.
Thisimpliesthatthefollowingshouldbeobserved:
1.DorelevantreferencestoEnds
mention all three elements ofEnds?
2.AreEndsandmeansaccurately
separatedinrelevantreferences? 3.DorelevantreferencestoEnds
refertofullnessofintentandwithintheorganization’sabilitytoachieve?
4.Istheimportanceofdiscerning
owners’ intent as theprimary,though not necessarily only,basis for Ends developmentclear?Thatis,doesit illustratethat the owners’ intent isknown and weighed with anyother pertinent information intheformationofEnds.
Thisimpliesthatthefollowingshouldbeobserved:
1.Dotheboard’sEndspoliciescontain
allthreeelementsofEnds,atleastatthebroadestpolicylevel?
2.Dotheboard’spoliciesseparateEnds
frommeans? 3.Cantheboardevidencethatithas
considereddo-ability? 4.CantheboardevidencethatitsEnds
andEndsrevisionsreflectawisesummationofowners’intent?a.Cantheboardevidenceregular
dialoguewiththeownersonEnds(statistical,personalorattitudinal)?
b.Cantheboardevidenceotherinput
fromCEO,otherstakeholders,expertsetal.inordertoinformitsEndsjudgments?
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4.EndsPoliciescont’d 5.Istheboardspendingasignificant
amountofitstimeformulating/revisingitsEnds,talkingtoitsownersabouttheEndsandassessingtheimpactoforganizationalachievementofEnds(whichisclearlyforthecollectionofdecisioninformation,notmonitoringorincidentalinformation)?
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5.BoardMeansPolicies: Theboarddefinesinwritingthejobresults,practices,delegationstyle,anddisciplinethatmakeupitsownjob.Theseareboardmeansdecisions,categorizedasGovernanceProcesspoliciesandBoard-ManagementDelegationpolicies.
Thisincludesatleast:
1. Theboardisaccountableforitselfandmustsystematicallyandcomprehensivelyestablish,andreviewitsadherenceto,boardmeanspolicies.a.Theboardwilldelineateexpectations
untilitcanacceptanyreasonableinterpretationandthendelegatefurtherdefinitionsanddecisionstotheChairorotherofficialbodiesoftheboard.
2. Boardmembersrecognizetheirobligation
tobringtotheboard’sattentionanythinginboardmemberorfullboardconductthatisinconsistentwithGovernanceProcessandBoard-ManagementDelegation(orequivalentlynamed)policies.
3. Theboardhasclearwrittenpolicies
outliningitsownprocesses,andregularlyevaluatesitselftoensureitisaccountabletoowners.
Thisimpliesthatthefollowingshouldbeobserved:
AremattersofboardmeansaddressedseparatelyfromEndsandmattersofstaffmeans?
Arethecoreelementsoftheboard’sjobdescriptionclear?1. ConnectionwithOwners?2. DeterminationofEnds,
ExecutiveLimitationsandboardmeanspolicies?
3. AssuranceofOperationalPerformance?
Thisimpliesthatthefollowingshouldbeobserved:
Theboardhaspoliciesthatsetoutallitsexpectationsrelatingtoitsownjobresultsandconduct.Itsjobresultscoveritsconnectiontoitsownersaswellasthedevelopmentofandmonitoringofgoverningpolicies. Itsconductincludestheconductandsupportofitsmeetings,thefulfillmentofitslegalandfiduciaryduties(includingaboardmembercodeofconduct)throughpolicysettingandmonitoring,aswellasitsdelegationandaccountabilityrelationshipwithitsofficers,committeesandexecutive.
Theboardoperatesinaccordancewiththeseexpectations.
Theboardhasanannualworkplanthatenablesittofulfillitsexpectations.
Theboardhasaprocesstoevaluateitsowncompliancewiththesepoliciestoassureitsaccountabilitytoowners.(Seealsoprinciple2).
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6.ExecutiveLimitationsPolicies:
Theboarddefinesinwritingitsexpectationsaboutthemeansoftheoperationalorganization.However,ratherthanprescribingboard-chosenmeans--whichwouldenabletheCEOtoescapeaccountabilityforattainingEnds,thesepoliciesdefinelimitsonoperationalmeans,therebyplacingboundariesontheauthoritygrantedtotheCEO.Ineffect,theboarddescribesthosemeansthatwouldbeunacceptableeveniftheyweretowork.TheseareExecutiveLimitationspolicies.
Thisincludesatleast: 1. Theboardmustcontrolbutalsoempower
operationaldecisionswhilemaintainingaccountabilityforthosedecisions.
2. Thisisideallytoasinglepointofdelegationand
isdonebybeingprescriptiveabouttheEnds(definingoutcomes,recipientsandworth)butproscriptiveabouteverythingelse(allofthemeans,includinghowtheoutcomesmaybeoperationallyachieved).
3. Mustcoverallunacceptableactionsand
situations,notjustsome. 4. Mustgotoalevelofdetailthatboardcan
acceptanyreasonableinterpretation. 5. ExecutiveLimitationsareboard’svaluesabout
operationalmeanswhichwouldbeunethical,unlawfulorimprudentwhichareclearlyputofflimitswiththeLimitations.
6. SothatitgovernsallstaffmeansinaresponsiblemannerbutdoesnotexcusetheCEOfromaccountabilityforachievingEnds,theboardmustsystematicallyandcomprehensivelyestablish,andreviewadherenceto,policiesthatproscribestaffmeansthattheboarddeterminesonbehalfofitsowners,tobeunacceptableeven if they worked for achievement of Ends or organizational capability to achieve Ends
Thisimpliesthatthefollowingshouldbeobserved:
• Istheneedfornegative
languagesetoutclearly? • Istheneedfor
encompassmentclear? • Istherelationshiptoriskclear?
• Istheneedtostopatthe
levelwhereanyreasonableinterpretationcanbeacceptedclear?
• IstheCEO’sfreedomclear?
Thisimpliesthatthefollowingshouldbeobserved:
Theboarddisciplinesitselftoitscommitmenttoacceptanyreasonableinterpretationofitspoliciesasstated.
TheCEOlistenspolitelytoindividualboardmembersbutonlyactsonthefullboard'spassedpolicies.
TheCEOchoosesthemostappropriatemeanstoachieveEndswithoutaskingboard’sapproval.
TheboardplacesnolimitsdirectlyonanystaffotherthantheCEO.
Theboardcanarticulatetothird-partieswhichexpectextensive“approvals”howthelimitationsapproachsimultaneouslyenhancesbothproductivityandaccountability.
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Behaviors 6.ExecutiveLimitationsPoliciescont’d
a.Such“ExecutiveLimitations”mustcoverallofthepossibleoperationalmeansthattheboardconsidersunethicalorunlawfulorimprudentandthereforelikelytojeopardizetheorganization.
b. TellingtheCEOhowtodothejobwhileusing
‘negative’language,ismerelyanotherformofprescription.Limitationsshouldnotprescribepreferredmeansorattempttoprovidemanagementconsultancy,(forexampleusingtheoutdated"shallnotfailto"doublenegativeorthe"shallnot....withoutboardapproval").
c.Theboardsays(inpolicyandotherwise)allit
MUST,notallitCAN. 7. TheCEOisfreetochoose(i.e.theboardhaspre-
approved)anymeansthatdoesnotbreachthesepolicies.
8. TheCEOdoesnotviolateprovisionsofanyof
theExecutiveLimitations,givenanyreasonableinterpretationofthosepolicieshe/shechooses.
9. When the CEO is required by an outside
authority to gain board approval for action already granted through the board’s policies, the board shall approve those decisions for which there is evidence of compliance with reasonable interpretations of the relevant board policy for which there is evidence of compliance with reasonable interpretations of the relevant board policy.
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7.PolicySizes:Theboarddecidesitspoliciesineachcategoryfirstatthebroadest,mostinclusivelevel.Itfurtherdefineseachpolicyindescendinglevelsofdetailuntilreachingthelevelofdetailatwhichitiswillingtoacceptanyreasonableinterpretationbytheapplicabledelegateeofitswordsthusfar.Ends,ExecutiveLimitations,GovernanceProcess,andBoard-ManagementDelegationpolicesareexhaustiveinthattheyestablishcontrolovertheentireorganization,bothboardandstaff.Theyreplace,attheboardlevel,moretraditionaldocumentssuchasmissionstatements,strategicplansandbudgets.
Thisincludesatleast:1. Thebroadestpolicyinacategoryshouldbe
carefullyexpressed(written)tocaptureallcontingenciesthattheboardcanthinkofthatwouldbeencompassedunderthispolicycategoryandexpressesthevaluescoveredbythispolicycategory.
2. Themorespecificpoliciesbeneath,must
logicallyfallwithinthescopeoftheone“above”it.
3. Theboarddoesthis“untilreachingthelevelof
detail,i.e.,specificity,“atwhichitiswillingtoacceptanyreasonableinterpretationofitswordsbythedelegateetowhomthepolicyisaddressed,(seeprinciple9).”1
4. Subordinatepolicies,takentogether,donot
need,norshouldbeexpected,tocomprehensivelydefinethesuperiorpolicyunderwhichtheyfall.
5. Thesedocuments,takentogether,are
exhaustive,eliminatingsuchotherseparateboardexpressionsasmission,vision,philosophy,values2,strategy,andbudget.
6. Theyarecalledpoliciesintheterminologyof
PolicyGovernancebutcanbecalledbywhatevernameaboardchooses,aslongastheconceptisstrictlypreserved.
Thisimpliesthatthefollowingshouldbeobserved:
Architectureandprocessforpolicydevelopmentareaccuratelydescribed(value,category,level,increasingdefinitionwithlowerlevelsstopwhenanyreasonableinterpretationwouldbeacceptable).
Illustrationsofpoliciesindicatetheneedforcontainment(nothingbelowwhichisnotabove;sizeandbreadth).
Policydevelopmentshouldbedescribedasstoppingattheearliestlevelofdetailneededfortheboardtoacceptanyreasonableinterpretationoftherequirementsaswritten,allowingthefreedomofinterpretationbeyondthatlevel.
InExecutiveLimitations,thepolicyshouldalwaysstopshortofbeingbackdoorprescriptionorreachingthelevelofpreferredmethods(managementconsulting).
Thisimpliesthatthefollowingshouldbeobserved:
Boardmeetingsandpolicydevelopmentfollowthearchitectureandprocess(identifyvalue,sharedinterest,category,level,increasingdefinitionwithlowerlevelsstopwhenanyreasonableinterpretationwouldbeacceptable).
EachdirectionfromtheBoardiscapturedbyanddelegatedwithinpolicy.
Boardrefrainsfromgoingintoanymoredetailofdefinitioninpolicythanitneedstoreachacceptabilityofanyreasonableinterpretation.
Whentheboardisconsideringapotentialpolicydevelopmentitusestheconceptofpolicysizesandanyreasonableinterpretationindeterminingwhetherornotapolicyisneededand,ifso,atwhatlevelandplace.
Theboardexhibitsdisciplineinthisarea,identifyingandcorrectingthetimesortopicswheretheymaygoastray.
1 Carver Policy Governance Guide, latest ed. 2 Items such as core values, philosophy, statement of faith, etc., can be encompassed with the policies, generally under Governance Process policies.
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7.PolicySizescont’d
7. Itispossiblethataboardissueorconcerncould
fallundertwodifferentpolicies;theboardmustconsiderwherethebestpolicy“location”isfortheissueandplaceitappropriately.However,ifthedeliberationleadstothediscoverythattherearereallytwoormoreverydifferentvaluesorissuesthenthereisnothingwronginexpressingthosedifferentconcernsindifferentpolicylocationsorasseparatepoliciesinthesamelocation,oneforeachofthedifferentvalues.
8. EndspoliciesonlyrefertoEndstopics.Any
furtherdefinitionofthebroadestpolicybytheboard,nomatterhowspecific,isstillanEndspolicy.
Allboarddirectionisencompassedwithinthepolicies(broadtonarrow,allfourcategories)sotherearenodirectionsoutsideofpolicy.
Theboardisdisciplinedtoallowanyreasonableinterpretation,nottheirfavorite,ownorexpectedinterpretation.TheboarddoesnotgetinvolvedwithmattersorinterpretationsdelegatedtotheCEOinpolicyunlesstheyaredulynotedinpolicyandusedintheinterestofprotectingthatdelegation(suchastheuseofaRequiredApprovalsAgenda,boardissuedhonorariumsorrecognitionsdefinedasthepartoftheboard’sroleorwhentheyhavereservedtothemselvesthejoboftakingapublicpositiononanissueorissuesintheirjobdescription).
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8.ClarityandCoherenceofDelegation:
Theidentificationofanydelegateemustbeunambiguousastoauthorityandresponsibility.Nosubpartsoftheboard,suchascommitteesorofficers,canbegivenjobsthatinterferewith,duplicate,orobscurethejobgiventotheCEO.
Thisincludesatleast:1. Theboard’sexpectationinpolicycoveringthe
domainbeingdelegatedmustbeclearconcerningtowhomthepolicyisdirected.
2. Nosubpartsoftheboard,suchascommitteesorofficers, (aspositionsoftheboard),canbegivenjobsthatduplicate,interfere,obscure,oroverlapthejobofanotherdelegatee,suchastheCEO.
3. WithinthePolicyGovernanceframeworkEndsandELpoliciesaredirectedattheCEO,ifthereisone.GovernanceProcessandBoard-ManagementDelegationpoliciesaredirectedattheboard,itsofficers,membersandcommittees(thoughtheymayalsobeusedasinformativetothirdparties,suchastheownership).
4. Boardinstrumentssuchascommittees,aredelegatedworkthatpertainsonlytoboardresponsibilities,notoperationalormeansworkdelegatedtotheCEO.
5. Thedelegateeismonitoredaccordingonlytothosepoliciesdirectedtothem.Forexample,theCEOmustnotbemonitoredforsomeoneelse’sassignedaccountabilitiesfromtheboard.
Thisimpliesthatthefollowingshouldbeobserved:
Theneedforanidentifiedpointofdelegation(authorityandaccountability)shouldbeclear(beitsinglyinidealormultiplepointsorateam).
Descriptionsordepictionsshouldindicatethatspecificexpectationsshouldbestatedusingthepolicyarchitecture,theimportanceofputtingthedelegateeonnoticeofwhatisbeingdelegatedandhowtheywillbeheldaccountable,andthattheyareallowedanyreasonableinterpretation.
Alldelegationisdonebytheboardasawholeandinpolicy.
Noaction,behavior,process,orstructureoftheboardwillunderminethedelegationofthefullboard.
Depictsthattheboarddoesnotdirect,evaluate,ordictatetoanyindividualsorareaswhichhavebeendelegatedelsewhere.
Thisimpliesthatthefollowingshouldbeobserved:
Alldirectionsoftheboardarestatedinpolicyandclearlyassignedforfurtherdefinitiontosomepointotherthantheboard,(CEO,group,boardofficer,boardcommittee,etc.).
Neithertheboardnoranysubsetofitdirectsorevaluatesanypartyotherthanthedelegateeforthetopicunderconsideration.
Therearenoinstancesorindicationsofanypersonorbodyoutsideoftheboardoradulyappointedagentoftheboardmakingorevaluatingthedelegation.
Allexpectationsoftheboardarefullydefinedwithinitspolicies,nopersonorbodyisheldaccountableforexpectationswhicharenotfoundinpolicyorthatfallbelowtheanyreasonableinterpretationlevel.
Boardcommitteesandboardofficersworktosupporttheworkoftheboardanddonotexerciseanydirectauthorityoutsideofit(withotherpartsoftheboard,theCEOorstaff).
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8.ClarityandCoherence
ofDelegationcont’d
6. Theboardshouldnotdelegatetoasubordinate
personthrough,oraround,theaccountabledelegatee,suchasdelegatinganassignmentdirectlytoastaffpersonbeneaththeCEO.
a.WhenrequiredbylawornecessitytodelegatetoapartywhosefunctionsmightbenormallyunderthepurviewoftheCEO,theboardwillstillensurethatthedelegationsandaccountabilitiesareapportioneduniquelybetweenthatpartyandtheCEO.
7. TheboardholdstheCEOfullyaccountableforall
functionsbeneathhimorherandaccordstheCEOtheconcordantauthoritythatgoeswiththeaccountability.4
Indicatesthatdelegationmustbeclearlyapportionedsothatthereisnevermorethanonedelegatee(singleorgroup)foranygivendelegatedexpectation.
Theboardmustevaluatewhetherornottheexpectationhasbeenmet.ThisistruebeitdelegatedtotheCEO,agroup,theboard,oraboardofficerorcommittee.
Alloftheaboveshouldbedescribedaspertainingtobothoperationaldirections(EndsandExecutiveLimitations)aswellasboardmeans(GovernanceProcessandBoardManagementConnection).
Theboardhonorsitsdelegationsinwordanddeed.
Theboardneverdelegatesthesameexpectationtomorethanonedelegatee.
Theboardrecognizesthatanythingitdoesnotdelegate,itasabodyremainsresponsibleandaccountablefor.
3 Should this be necessary due to law, for example, (e.g., a professional in the organization such as a medical chief of staff), the same principles pertain. Two people must not be responsible for the same thing unless assigned it as team and jointly held accountable. 4 There is frequently confusion between accountability and responsibility. Accountability as used here is the collective or aggregate subordinate responsibilities throughout the organization for everything concordant with the scope of the authority granted. Accountability cannot be given away as can responsibilities, which are generally related to assigned or expected duties related to an individual.
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9.AnyReasonableinterpretation:MoredetaileddecisionsaboutEndsandoperationalmeansaredelegatedtotheCEOifthereisone.IfthereisnoCEO,theboardmustdelegatetotwoormoredelegatees,avoidingoverlappingexpectationsorcausingconfusionabouttheauthorityofvariousmanagers.Inthecaseofboardmeans,delegationistotheCGOunlesspartofthedelegationisexplicitlydirectedelsewhere,forexample,toacommittee.Thedelegateehastherighttouseanyreasonableinterpretationoftheapplicableboardpolicies.
Thisincludesatleast:1.InthecaseofEndsandExecutiveLimitation
policies(whenaCEOexists),thatdelegateeistheCEOwhohastherightto,andresponsibilityfor,areasonableinterpretation.
2.InthecaseofGovernanceProcesspoliciesandBoard-Managementdelegation,thedelegateeistypicallythechairman(CGO)exceptwhenexplicitlystatedotherwise,whohastherightto,andresponsibilityfor,areasonableinterpretation.
3.Aninterpretationisdeemedtobereasonablewhenitprovidesanoperationaldefinitionwhichincludesdefensiblemeasuresandstandardsagainstwhichpolicyachievementcanbeassessed.a.Thetermusedtodescribetheinterpretation
isunimportantaslongastheconceptisapplied.(Someofthecurrentlyusedvariationsinclude"reasonableinterpretation","operationaldefinition","reasonableoperationaldefinition"andpossiblyothers.)
4.Defensiblemeasuresandstandardsarethose
that:a.Areobjectivelyverifiable(e.g.,through
research,testing,and/orcredibleconfirmationofobservablephenomena.
b.Arerelevantandconceptuallyalignedwiththepolicycriteriaandtheboard’spolicyset.
c.Representanappropriateleveloffulfillmentwithinthescopeofthepolicy.
Thisimpliesthatthefollowingshouldbeobserved:
Thereisnostandardformeasuringareportoractionmeetingexpectationsexceptbasedonanyreasonableinterpretation.
Theauthoritytouseanyreasonableinterpretationisclear.
Itdepictsthattheboardasabody,notindividuals,judgethereasonablenessoftheinterpretation.
Itdepictsthattheinterpretationalwaysbelongstothedelegateeregardlessthemannerofmonitoring.
Itsuggeststhatincaseswheretheinterpretationisreasonablebutdoesnotmeettheexpectationsoftheboardthenitisstillacceptableforthedelegateetouse,(thoughtheboardmaythenadjustitsownpolicytoaddresstheissue).
Itdepictsthat ifthe interpretationisjudgednotreasonablethenthedatacannotbevalidorrelevant.
Ajustificationorrationalefortheinterpretationisseenasprovidingassistancetotheboard'sabilitytoevaluateitsreasonableness.
Thisimpliesthatthefollowingshouldbeobserved:
Thefullboardactivelydeterminesthereasonablenessoftheinterpretation.
Nodelegateeisheldaccountableforanythingbutareasonableinterpretation.
Whentheboardfindsaninterpretationthatisreasonablebutnotwhatitactuallyexpectsitisaddressedinthepolicydevelopmentprocess.
Theboarddoesnotfoistitsownorpreferredinterpretationsonthedelegatee.
Whenconductingmonitoring,establishingthereasonablenessoftheinterpretationisdonebeforeconsideringthedata.
Theboarddoesnotwaiverfromitsdutytoevaluatewhetherornotareasonableinterpretationhasbeendefinedandusedandwilltaketheactionitdeemsappropriateifithasnotbeenachieved.
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9.AnyReasonableinterpretationcont’d
5.Whentheboardexaminesthedelegatee’sreasonableinterpretation,andsubsequentlyisconvincedthattheextent,depth,andreasonablenessofinterpretationareobjectivelyjustified,acceptableandsufficientlyaddressesthepolicy,theboardshouldacceptitasreasonable.
6.Iftheinterpretationisreasonablebutnot
acceptable–doesn’taccomplishwhattheboardwanted,theboardmustsubsequentlyaddfurtherspecificitytoitspoliciestofurtherclarifyitsintent.
7.TheCEOisallowedanyreasonableinterpretation
atanytime,eveniftheyhaveprovidedtheboardwithanearlierinterpretation,anynewone(evenatthepointofmonitoring)isvalidaslongasitisreasonable
Anyprocessforevaluationofreasonablenessisdefinedinawaythatmeetstheabovecriteria.
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10.Monitoring: TheboardmustmonitororganizationalperformanceagainstpreviouslystatedEndspoliciesandExecutiveLimitationspolicies.Monitoringisforthepurposeofdiscoveringiftheorganizationachievedareasonableinterpretationoftheseboardpolicies.TheboardmustthereforejudgetheCEO'sinterpretationforitsreasonableness,andthedatademonstratingtheaccomplishmentoftheinterpretation.Theongoingmonitoringofboard'sEndsandExecutiveLimitationspoliciesconstitutestheCEO'sperformanceevaluation.
Thisincludesatleast:
1. Monitoringrequirestwoacceptablethings;areasonableinterpretationanddatashowingevidencethattheinterpretationisbeingmet.a. Sincedatapointstointerpretation,
interpretationmustbefoundreasonablefirst.
2. Monitoringissimplycomparingdataagainstareasonableinterpretationofthecriteriastatedinthepolicy.a. CEOcanuseanyreasonableinterpretation
• CEO'sinterpretationisthefirststepnomatterwhatmethodofmonitoringisused.
b. Informationprovidedmustberelevantandsufficient.
c.Extraneousinformationistobeavoidedand/orignored.
3. Boardcontrols monitoringprocess,generallyavoidingsurprisesbyusingaschedulethatdetailsexpectationsoftheprocessa. Boardselectsfromthreedifferentformsof
monitoring(internal,externalanddirect),b. Boardselectsfrequencyofmonitoringfor
eachpolicydelegated,c. Boardselectsdateatwhichitrequires
reporttobeprovided,(orthedateissetbytheCGOiftheboardhasnotdoneso),and
d. Boardcanrequiremonitoringoutsideofthescheduleasisagreedtobytheboardasawhole
Thisimpliesthatthefollowingshouldbeobserved:
Whendescribingmonitoringitshouldalwaysindicatethetworequirementsforsuccess(areasonableinterpretationanddatashowingaccomplishmentofit)andnothingelse.
Itshouldnotsuggestlookingatorworryingaboutdataormetricspriortojudginginterpretation.
Anyformsorprocessesshouldconform.
CEOinterpretationisstartingpointformonitoring,canbechangedatanytime.
MonitoringprocessmuststartwithCEOinterpretation.
Extraneousdataorcriteriaarenotincludedasvalidorinformingtheboard'sassessment.
Boardshouldbedeliberateandproactiveinitsmonitoring,notreactive.
Nodescriptionofmonitoringorproposedprocessforconductingitconflictswiththesedefinitions.
Thisimpliesthatthefollowingshouldbeobserved:
Doestheboardappropriatelyassessthereport;
• Interpretationjudgedreasonable
• Dataevidencesinterpretation• Onlyrelevantcriteriaanddata
considered • Processisrecordedasboardact
Hastheboarddevelopedanddoesitfollowascheduleofmonitoringdesignedtofulfillitsaccountabilitytoowners?
Doestheboardinsistonandonlyassessrelevantinformationconcerningbothinterpretationanddatatoevidenceit?
Doestheboardinsistonthestandardoffindinginterpretationreasonableanddatasufficient
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10.Monitoringcont’d 4. MonitoringgivestheBoardtheconfidencethat
itisassuredofowneraccountableperformance.
5. Thedefinitionandprocessofmonitoringare
consistentwiththisprincipleandtheselowerleveldefinitions.
6. Newissuesthatarisewhichareoutsideofthe
existingsystemareundefinedcriteriaandnotrelevanttomonitoring.
7. BecauseEndsarestatementsofthe
organizationalpurposetobeachieved,thelinkoftheEndsinterpretationtoorganizationalimplementationmustbeclear.
Any"offschedule"monitoringshouldbeclearlyadecisionofthefullboard,notasinglememberorsubsetoftheboard.
Referencestoanymonitoringcriteriaordataoutsideofthosefoundinthepoliciesarenotedasnotmeetingstandardsofmonitoring.
Anymethodof"overseeing"managementshouldincludeanyreasonableinterpretation,data,andacomparisonofactualagainstexpectedbasedontheanyreasonableinterpretation.
IftheboardbecomesawareofinformationthatwouldcauseachangeincriteriaoriftheydiscoverthatareasonableinterpretationofthepolicyaswrittenisunacceptabletheydonotholdtheCEOaccountableforit,theydeveloppolicytoshiftthecriteria.
Doestheboardrequirethatmonitoringbeginwithareasonableinterpretationregardlessofthemethod?
Doestheboardtakeappropriateandofficialactionfornon-compliance(e.g.settingadeadlineforcompliance)?
Doestheboardchangeitsmonitoringschedulebyavoteoftheboard?Issuchavoteincorporatedintothepolicy?
Doestheboardprovidecommunicationtotheownersitrepresentsastoacceptableperformancewithinacceptableparametersofoperationalmeans
NojudgmentbytheboardoramemberofitliesoutsideofthemonitoringprocessandneverfocusesonanypositionbuttheCEO's.
Whentheboarddiscoversthepotentialneedfornewcriteriadoesithaveamechanismtoaddressitinpolicydevelopment?Ifso,doesitactuallyusethatmechanism?
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10.Monitoringcont’d Themonitoringprocessingeneralisdescribedasincludingthefollowingsteps:
1.Theboardbecomesawareoforascertainsdesiredcriteria.
2.Theboarddevelopspolicydefiningthecriteria.
3.Themonitoringisconductedagainstthedefinedcriteria.
4.Theboardrequiresbothareasonableinterpretationandactualdatashowingthatthereasonableinterpretationisaccomplished.
5.Incaseswherethereisnotareasonableinterpretationorwherethedatadoesnotshowaccomplishmentoftheboardassignsadeadline
DoesitmaintainthedisciplineofonlyholdingtheCEOaccountableforcriteriaasstatedtodateintheboard'sofficialpolicy,disallowinganyjudgmentonthingsnotstated?Istheboard’sprocessforassessingtheCEO’sperformanceofareasonableinterpretationofEndsbeingconductedinanappropriatemannerandtimeframe?