The board of directors: a referee or a coach?

Abstract

PurposeThe author's original approach helps to understand the executives and their decision‐making process.Design/methodology/approachThe complexity of today's business requires the board of directors (BoD) to go beyond its traditional role of referee, and to become involved as appropriate with the business and with its top managers. The BoD should apply the 3<P>of governance: namely the official policies that tell it what to do and what not to do; a comprehensive process of governance that ensures the effectiveness of its activities; and, last but not least, basic psychology to understand the possible quirks of the top managers. This article complements the author's earlier contribution on the process of governance, and focuses on how the directors can monitor the behavioral patterns of the top managers and assess the impact on their decision making.FindingsThe author recommends that the BoD uses the methodology of “Creating Business Value” described in this article. By providing transparency over the whole business system, it brings out the proficiency of the top management, and reveals dysfunctional attitudes.Practical implicationsThe advocated approach contributes to the effectiveness of the directors as they interact with the executive on critical issues.Originality/valueThe author presents an application of “creating business value”, an original and holistic methodology that enables all concerned to see where, why, how, and how much business value has been, or will likely be, added or destroyed throughout the enterprise.