Policy Governance defines and guides appropriate relationships between an organization's owners, board of directors, and chief executive.
The Policy Governance approach was first developed in the 1970s by John Carver who has registered the term as a service mark in order to control accurate description of the model.
In this space, the board, as a single entity, assumes a governance position that is the link between ownership and the operational organization.
Experts in the model argue boards should govern with an emphasis on (a) outward vision rather than an internal preoccupation, (b) encouragement of diversity in viewpoints, (c) strategic leadership more than administrative detail, (d) clear distinction of board and chief executive roles, (e) collective rather than individual decisions, (f) future rather than past or present, and (g) proactivity rather than reactivity.
Model-consistent practice is assessed by considering whether board performance aligns with the model's principles, not by reviewing the policy language that is adopted.
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.” [10]: 9 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.
[7]: 10 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.
[15] 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.
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.
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 accompanied by careful monitoring to ensure it achieves the results intended is an exercise of the "due diligence" expected of the board.