The new CEO reads the policy manual and finds familiar words.
Prudent. Adequate. Timely. Material.
Then she asks the board what each word means.
The request sounds sensible. If the board answers case by case, the CEO’s authority can disappear one definition at a time.
Miriam Carver and Bill Charney place this question in rehearsal 3.8 of The Board Member’s Playbook. A new CEO asks the board to define vague policy phrases and explain how it interprets them.[1]
I think the board should resist becoming a dictionary for operating decisions.
Policy cannot describe every future circumstance. Words require interpretation. Policy Governance handles that reality by giving the CEO authority to use any reasonable interpretation of the board’s Ends and Executive Limitations. The CEO then explains the interpretation and presents evidence of compliance.
“Any” matters.
The board may prefer a different interpretation. Preference is not the test. The question is whether the CEO’s interpretation falls inside the range a reasonable person could draw from the board’s language.
That test gives the CEO genuine room to lead.
Suppose the policy says the CEO may not expose the organization to material financial risk. The CEO must define material for the report, explain the measure, and show data. The board may decide that the definition is reasonable even if members would have chosen a lower number. If the range is wider than the board intended, the board can narrow the policy for the future.
It should not rewrite the rule merely to make this one decision come out differently.
I would give a new CEO three promises.
We will tell you what results we expect and what conditions we will not accept.
We will not punish you for choosing a reasonable interpretation we did not personally prefer.
We will change our policy when our words fail to express our values.
Those promises make accountability possible. The CEO cannot hide behind vagueness, and the board cannot hide a new expectation inside a monitoring judgment.
Govern for Impact defines “Any Reasonable Interpretation” through an operational definition: measures or standards, the rationale for them, and credible data.[2] That structure turns a philosophical phrase into a working report.
The board still has work to do when it receives the interpretation.
It asks whether the measure addresses the whole policy. It checks whether the rationale is coherent. It tests the evidence. It decides compliance as a body. One member’s stricter reading does not become a board instruction unless the board changes policy.
The approach asks a lot from both sides. Weak policies can leave a range so broad that almost any choice looks reasonable. Weak reports can hide assumptions in technical language. A board that lacks subject knowledge may struggle to judge the evidence. The answer is better policy education and, when needed, independent expertise. It is not a return to preapproval.
There are also legal limits. A contract may define a term. A statute may set a threshold. An accounting standard may remove the room for personal interpretation. The CEO’s interpretation must comply with those external rules as well as board policy.
Orientation matters here. A new CEO should receive more than the policy manual. Walk through a completed monitoring report. Show how the board judged reasonableness. Explain when a policy was changed because the wording was too broad. The CEO needs to see that interpretation is a real grant of authority, not a phrase that disappears under pressure.
You can test the system with one word.
Choose “material,” “prudent,” or “adequate” from your manual. Ask the CEO to offer an interpretation, measures, rationale, and evidence. Let the board decide whether the interpretation is reasonable. Then ask whether the policy itself still says what the board means.
Authority becomes real when a leader can decide without guessing whether the board will invent a new rule afterward.
That is not freedom from accountability.
It is the ground accountability stands on.
Footnotes
[1] Miriam Carver and Bill Charney, The Board Member’s Playbook (Jossey-Bass, 2004), rehearsal 3.8, pages 52–55.
[2] Govern for Impact, “Policy Governance Glossary,” entry for “Any Reasonable Interpretation”.
Additional reading
John Carver’s Boards That Make a Difference gives the clearest full treatment of policy, interpretation, delegation, and monitoring.
John Carver and Miriam Carver’s Reinventing Your Board shows how to convert those ideas into a working policy manual.