How a Board Makes a Decision

How a Board Makes Decisions

Insight from CFO Secrets

Majority votes are rare - everyone talks about it, but you hardly ever see one in action. But when the stakes are high, like in that nail-biter finale of "Succession", everyone's on the edge of their seats, avoiding glances as if eye contact is radioactive.

But let's be real, most boardrooms aren't brewing with HBO-level drama.

An effective board will set a delegation of authorities (DOA). This is a fancy way of saying what the business can or can't do without getting permission from the BoD. The CEO, CFO, COO, etc. must then make sure to observe these.

This will include M&A, capital investment above a certain level, major strategy changes, entering contracts above a certain length, etc.

The DOA is a critical document. If you are a CFO, there is an expectation from the BoD that you will be a police(wo)man.

If the BoD DOA says that any capex above $5m must be approved by the BoD, but your VP of Ops exceeds that authority by committing to a $7m investment, you will be expected to blow the whistle on it to the BoD.

And then they'll ask you how it happened and why your controls didn't prevent it. Good questions.

Fail to follow the DOA? That's a fast track to getting fired.