Industry Canada in the Primer For Directors of Not-For–Profit Corporations expressed concern about Policy Governance. They argue that “Some models of board governance—notably originating in the United States—advocate that directors limit themselves to policy matters only and leave responsibility for administration and day-to-day matters with the executive staff of the corporation. This limited role for directors does not reflect the obligations that are legally imposed upon directors.”
Hugh Kelly QC of the Canadian legal firm Miller Thomson LLP responded directly to this criticism concluding that: “The board of a Canadian charitable corporation that adopts Policy Governance has performed ‘due diligence’, and fulfilled all legal obligations imposed upon its directors. On a comparative basis, such boards and directors are far ahead of most corporations, even those in the world of commerce, in observing their legal and moral obligations.”
Others have expressed concern that the Policy Governance model may not be as universally applicable as suggested by Carver and that the model has a tendency to break down during times of crisis.
Addressing the universality concern, proponents of Policy Governance argue that, because the model is rooted in the generic purpose and nature of board authority rather than current practice of the specifics of any industry, at the level of its fundamental principles Policy Governance is indeed applicable to all governing boards. Proponents also argue that at times of crisis, holding onto the precepts of Policy Governance is in fact key to organizational survival and that rehearsing the use of the system in light of various scenarios can help build an organization’s resilience to risk.
Two more widely accepted criticisms are that the model demands a level of precision that boards can find hard to achieve—even though it is usually no more than they demand of their staff—and without care, that the model’s use can deteriorate over time and its protections fail to function.
Many proponents point to the challenges presented by board member turnover and the need, as with any other professional discipline, for boards to continuously invest in their own training and support.
Some authors and users of the model may misinterpret the distinction between ‘ends’ and ‘means’ to require a strict separation of responsibility between the board, which should focus exclusively on ‘ends’, and management, which should focus on the ‘means’ by which to achieve those ends.
This interpretation is not supported by a close reading of the Policy Governance model. Carver states: “because the board is accountable for everything, it is accountable for means as well. Accordingly, it must exercise control over both ends and means, so having the ends/means distinction does not in itself relieve boards from any responsibility”.
Another, related, misinterpretation is a belief that boards following Carver’s model should not involve themselves with detailed understanding and/or monitoring of the organization’s activities.
This belief is based on Carver’s caution against excessive intrusion into the operational details. However, Carver is clear that boards remain accountable to their owners for all operational details and must therefore control them—the question is how to make this practical. As a way to avoid excessive intrusion, he advises the use of ‘nested sets’ of expectations, in progressively more narrow policy language, in order to define its meaning with greater precision until: “At some point, the board will have narrowed its words to the point that it can accept any reasonable interpretation of those words. Now the board has reached the point of delegation”.
Because a board has ultimate power over the organization, to include all its operations, some critics point out that a board should not delegate any of its authority, because it ignores major areas of its responsibility if it “hands over” part of its power to the CEO. This criticism points out that delegation, the granting of authority to the CEO, can become an “abdication” of the board’s responsibility to control all organizational actions.
Delegation can become an abdication if it occurs without adequate supervision. Delegation accompanied by careful monitoring to ensure it achieves the results intended is an exercise of the “due diligence” expected of the board.
Further criticism relates to the failure of some boards to follow their own policies. Following policies that guide the board in its own governance process, and its relationship with the CEO, is an act of self-discipline by which the board imposes checks and balances on its own power. These self-limiting policies protect staff from board actions that might get in the way of successful organizational performance. They also protect the CEO, and the board itself, from possible actions of individual board members. A board may give a false sense that it is acting in the best interests of the organization while ignoring its own policies, and therefore promotes a “veil” of legitimacy behind which it acts in capricious ways. Such a board distracts itself from the real job boards should be doing.
Ultimately, whether a board remains true to its own policies is a matter for the board itself to determine. Carver notes this concern when he acknowledges that Policy Governance will not make “a bad board good.”