This issue highlights the fact that often important elements of corporate governance, in this case, the need to bring independent judgement to board deliberations to ensure that decisions are made in the best interests of the company and not distorted by other agendas, get reduced to to simplistic rules that miss the essence of what was intended, and with damaging consequences!
The tendency to reduce issues to ‘black and white’ is part of broader tendency that we see of seeking the comfort of certainty in an area which is often very grey and where personal judgement is an essential element. Judgement calls are inherently subjective and therefore seen to be risky, especially in our culture which is heavily legally based and regulated.
The need to use judgement is, however, unavoidable in the elevated arenas of executive and board decision making; it is a skill that needs to be consciously grown both in ourselves as individuals, and the people we are employing. It is always very telling when companies recruit their leaders externally rather than having future leaders that they have developed from within. Have they been developing their people well or at all?
Good judgement implies an ability to think well: to identify the core issues, get the right information, weigh it up to see what is really important and what is not, imagine consequences whether they be business, legal or ethical, personal or corporate, or the effects they might have on important stakeholders.
The problem is that the more rules you have the less people have the opportunity to exercise their judgement ‘muscle’, and the less chance they will have of making good judgements when they have to. A resilient, dynamic and adaptable business or organisation will be thinking about these things and consciously growing thinking skills – everywhere including in the board.