Here's how to create an effective authority grid

THE Code of Corporate Governance requires every company to have "guidelines setting forth: (a) the matters reserved for the Board's decision and (b) clear directions to Management on matters that must be approved by the Board" and that "the material transactions that require Board approval under such guidelines should be disclosed in the company's Annual Report". (Guideline 1.5)

It is generally good corporate practice to formalise the approval authorities of the CEO, the chairman, board committees and the full board. Logically, this would be a document drafted with careful consideration of the various approvals needed, taking into account both the need for appropriate controls and decision-making efficiency.

Companies commonly document expense approvals such as who can sign cheques and so on. But it is both practical and essential to clarify the decision-making authorities for many other important matters such as long-term strategic plans, annual budgets, significant capital expenditures, hiring and firing of senior executives, issuing debt or equity capital, acquisitions and divestitures, compensation (overall compensation and that specific to individual senior executives), commitments to large contracts, extending credit, risk management and so on.