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The Importance of Judgment for Directors
A Framework for Directors Seeking to Make Better Choices
There are strong and lasting links between India and the London Business School, where our Indian alumni have made us proud, contributing meaningfully to India's society and economy, while also enriching London and our own institution through their leadership and achievements. So, I am especially pleased to return to the Convention of IOD, India.
In keeping with our educational role and the purpose of this conference, I would like to emphasise the importance of Company Directors developing the quality of their judgment as Board members. This applies to the way in which they approach the many difficult choices with which they are faced - Strategy, Finance, Key people, Technology and so on. It also applies to the exercise of independent judgment required by the Section 166 (3) of the Indian Companies Act. To remind you, this states “A director of a company shall exercise his duties with due and reasonable care, skill and diligence and shall exercise independent judgment”.
As someone who has been on many Boards, I know what a difference the level of judgement in general and independent judgment in particular makes to the quality of the Board. It is not easy for anyone in a position of authority to acknowledge that they can improve their judgment. It is often assumed that people are either born with it or have already acquired all they need before they have joined a Board. But I have seen, in working on and with Boards in many countries, how judgment can be improved.
To be clear what we are talking about, 'Judgment' is the ability to combine personal qualities with relevant knowledge and experience to form opinions or take decisions. Doing so means
• Understanding the relevance of your knowledge and experience
• Awareness when listening, seeing or reading so that you understand
• Ensuring who and what you trust is based on evidence and your sources
• Awareness of your values, feelings and beliefs, mitigating them where necessary
• Ensuring you consider the right options as a part of the systematic choice
• (for decisions) Considering the practicability in delivery of a choice
Judgment is the ability to combine personal qualities with relevant knowledge and experience to form opinions or take decisions.
If you would like more detail, my recent book ‘Judgement at work; Making better choices’ (Profile UK 2025) has the full background and analysis, as well as actions you can take to improve your own.
If judgment is involved in all aspects of what a Board does, independent judgment is a very particular application. Using the framework above, it means, for the raw material of what the Board considers:
• Giving full attention to the written and spoken material presented
• Checking, and where necessary questioning, the information provided, including measures and assumptions used
• Avoiding undue reliance on a single individual's expertise or the majority view
• Taking account of context - objectives, precedents, relevant comparisons, legal requirements and ethical issues.
For the attitudes and feelings of Board members, it means:
• Developing an informed view based on the appropriate method of challenge
• Freedom from undue influence by sectional interests or agendas
• Awareness of one's own biases, agendas and emotions as well as collective values, such as fairness
• Understanding risk and uncertainty and how to mitigate them
And for choices it means:
• An environment where diverse views are encouraged and dissent is seen as safe
• Checking for the way options have been framed, including those which might have been excluded from consideration
• Appreciation of the implications of trade-offs in the choice, including timing, consequences and feasibility
• Awareness of the need for any consultation on the choice with relevant stakeholders and other interested parties
More detail and examples are available in ‘The 12 elements of independent judgment for a UK Board and its Committees’ published by the UK Chartered Governance Institute.
I hope that these precise indications of what judgment means in practice will encourage you to think of judgment on the Board as something well worth developing in its own right. May I wish you well for the rest of the rest of the Conference with interesting and productive sessions.
Back to HomeAuthor
Prof. Sir Andrew Likierman
Professor of Management Practice & Ex Dean, London Business School, UK
Owned by: Institute of Directors, India
Disclaimer: The opinions expressed in the articles/ stories are the personal opinions of the author. IOD/ Editor is not responsible for the accuracy, completeness, suitability, or validity of any information in those articles. The information, facts or opinions expressed in the articles/ speeches do not reflect the views of IOD/ Editor and IOD/ Editor does not assume any responsibility or liability for the same.
