Corporate governance: authority, decisions and control
Governance is the system that brings order to a company: who sets direction, who makes decisions, how management levels interact, where resources go and how people are held accountable for results. It operates both in the boardroom and in teams’ everyday work.
Governance is how a company is run
The articles of association and internal rules define formal powers, but they do not, by themselves, explain how the company works. A governance system connects strategic direction, resource allocation, decision rights, rules for interaction and the review of results. When these parts conflict, a familiar situation emerges: the strategy promises speed, the budget preserves old priorities and important decisions wait months for approval. In McKinsey’s operating model framework, governance describes precisely how priorities are set, resources allocated and performance managed, rather than a separate control policy.6
Separate the roles of owners, the board, the CEO and teams
Owners set expectations for capital and exercise their rights through the company’s governing bodies. The board, where one exists, provides strategic oversight, assesses management and oversees material risks and major decisions. The CEO translates the chosen direction into goals, a team and resource allocation; C-suite leaders are responsible for cross-functional execution, while teams make decisions within their delegated mandate. Specific rights depend on the jurisdiction, articles of association and company structure. The OECD recommends clearly defining the responsibilities of the board and management; this reduces both micromanagement and gaps in accountability.3
Set rules at the boundaries between functions
An organisation chart shows who a person reports to, but does not resolve a dispute between sales, product and finance. For important recurring decisions, name one person responsible for the choice, identify whose expertise is mandatory, set a budget limit and define when escalation is required. The right to be heard does not always mean the right to veto. Atlassian separates these roles in DACI; there is no need to use the full matrix for every minor step. Start with decisions that are currently delayed or return to the CEO after formal delegation.14
Connect the management rhythm to resources
The weekly review should identify deviations that require action; the monthly review should show the economics, customers and people; the quarterly review should test strategic assumptions and the portfolio of initiatives. The annual cycle sets major bets and the budget, but does not prevent resources from being reallocated during the year. Bring matters within the board’s mandate to it with alternatives and consequences, rather than simply presenting the option already chosen. In McKinsey’s research, better board processes and more open interaction with the CEO are associated with higher self-reported effectiveness of collaboration; this does not replace checking how your own system works.447
Define risk boundaries and the right to escalate
The same approval process for buying stationery and acquiring a business will create either bureaucracy or dangerous casualness. Distinguish decisions by the size of the bet, the ability to correct a mistake, the impact on customers and legal requirements. The team must know what it can decide independently, which facts to pass to the risk function and who has the right to stop an action. The board receives a picture of material risks and deviations, rather than every operational exception. A 2025 McKinsey survey showed that even in large companies, a formal governance framework is not always backed by procedures and a decision log; having a policy does not mean applying it.356
Examine the behaviour that rules create
Governance lives beyond documents: it is visible in how leaders report bad news, reach agreements across functions and respond to mistakes. If bonuses reward only sales and nobody is responsible for customer experience quality, formal service requirements will have little influence on choices. Check whether the system penalises early escalation of risk or forces people to conceal non-performance. Netflix publicly connects freedom of action with context and accountability; McKinsey recommends aligning incentives with risk and compliance. These are different practices, but both are reminders that rules should support the desired behaviour, not merely describe it.2556
Inside the CEO practice
Take one decision that regularly passes through several levels: a product launch, a major hire or a price change. Reconstruct its path from proposal to outcome. Record who prepares alternatives, who decides, who must be consulted, where financial and risk limits apply, when the board becomes involved and who reviews the consequences. In one cycle, remove an unnecessary approval or close a gap in accountability. After the decision, check not just speed, but also quality, costs and customer impact. This way, rules change on the basis of real work rather than an idealised chart.
Questions before a decision
- Which important decision currently lacks a single clear owner?
- Where has consultation quietly become an additional veto?
- How do the board, CEO and teams learn whether a decision produced the intended outcome?
Sources
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- 25Netflix · Netflix Culture Memo2024 edition; checked 2026-10-02
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