Boundary Management

An Extensive Policy Governance® Resource for Boards of Directors

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Featured Question: What should our Board do when an Executive Limitation Policy has been exceeded?

Answer: There are several options, and it depends on the Limitation that has been exceeded. There are some Limitation Policies that, when exceeded, mean the Executive is removed. These tend to be ethical types of Limitations such as fraud and misrepresentation. The first question that the Board has to ask itself is whether the condition or action can be corrected. If it can not be corrected, the Board should remove the Executive.

The second type of violation of a Limitation Policy should be governed by the Board's policies on corrective actions. Unfortunately, Policy Governance® has little to say about violations of Limitation Policies, and therefore most Policy Governance® boards have given little direction to "corrective actions." Most of the literature on Policy Governance® acts as if Limitation Policy violations shouldn't occur.

The Board should first strive not to assume responsibility for the corrective action yet assure that the Executive is responsible and accountable. This is done by effectively monitoring the Limitations and assuring that the Executive is responsible for the corrective actions. Effective monitoring suggestions can be found in the Mastering Monitoring Board Work Guidebook. The real question is what is expected for corrective actions.

When Limitations are exceeded, the Executive should first report the violation to the Board. If severe enough, the Board should expect an immediate report rather than waiting until the next board meeting. However, this too is left to a reasonable interpretation of the Board's policies. If the Board has not been clear enough about what requires an immediate report, they are left to what will be interpreted from their policies.

The second thing that the Executive should provide to the Board is the proposed actions needed to correct the Limitation that has been exceeded. Additionally, a timeframe should be provided that identifies when performance or conditions will be within the Limitations. These will have to be specified within the Board-Executive Policies, or there is no real accountability.

Boards have the option of accepting or rejecting the corrective actions and timeline. Boards may wish to draft policies that identify acceptable timelines for certain Limitations or leave the decision of acceptability as each violation is addressed. However, boards should avoid identifying the specific actions that need to be taken, or they will reduce the accountability of the Executive.

A limitation policy that directs executive corrective actions can be found in the Sample Board Policy Manual at 4.1.6.

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