Former CBA Chair Catherine Livingstone explains how boards exercise judgement, when to stop asking for more information, and why process matters.
"The perfect decision is rarely the right decision. That's a starting point. And if you're looking for perfect information before you make a decision, information has a shelf life, and time matters."
In my conversation with Catherine Livingstone AC, former Chair of the Commonwealth Bank and Telstra and current Chancellor of UTS, we explored a topic that sits at the very heart of what it means to be a director: the exercise of judgement in board decision-making. Her insights illuminate not only how directors should approach ambiguous decisions, but how Company Secretaries can design the processes and frameworks that enable good judgement.
Catherine's opening insight cuts through the noise: "The whole point of a board is to deal with ambiguity where the answer isn't clear. If the answer was clear and the decisions were easy, you wouldn't need a board." This fundamental truth frames everything that follows - boards exist precisely because judgement is required, not because there's a perfect answer waiting to be found.
One of the most practical insights for directors is Catherine's framework for understanding when you have enough information to decide. She explains that continuously asking for more information can be an avoidance strategy, and that "no decision is, by default, a decision." Information has a shelf life, and while the board delays, the subject matter keeps moving.
For Company Secretaries, Catherine provides a compelling framework for understanding your role. Rigorous board processes aren't bureaucratic obstacles - they create the essential foundation for director judgement. "The processes around a board, style of board papers, the templates. The rigour there then can just be relied upon as the substrate, if you like, to the decision-making and judgement process."
Catherine is explicit about what happens when this substrate is missing: "If boards are chaotic, papers aren't good, the agenda setting is haphazard. If there's no forward plan for the agenda in terms of the cycle looking ahead 12 months, it can be chaos. And the board becomes very ad hoc. And finding the discipline to provide the space to make the judgement calls becomes very difficult."
The practical implication for governance professionals: your work in designing consistent paper templates, planning agendas with a 12-month forward view, and maintaining rigorous processes directly determines whether directors can focus on strategic judgement or get lost in noise and chaos.
Catherine provides specific guidance on how proposals should be structured to enable good board judgement. "It's very helpful if management outlines options and also options that have been discounted. Because what's being said no to by management, is often as instructive as what's actually being recommended."
This has direct implications for Company Secretaries working with executives on board papers: effective papers don't just present a recommendation - they show the options considered and discarded, giving directors the full context needed to exercise judgement.
Catherine introduces a crucial framework for directors: calibrating the scale of each decision. Is this a "bet-the-business" decision that warrants lengthy analysis (like major mining investments), or is it a smaller-scope decision where the best approach is to decide, monitor, and course-correct if needed? This calibration determines how much time and information is truly required.
Catherine explains that as Chair, she sometimes needs to make a judgement call about the board's deliberation itself: "There are some times when you feel: we have enough information. And again, calibrating the scale of the decision, we need to move and make a decision. Or agree not to."
For Company Secretaries, understanding when the Chair is making this call - transitioning from deliberation to decision - helps you capture the board's reasoning accurately in minutes and identify when action items should be created versus when the board has made a final call.
Catherine directly connects good governance processes to director protection under the business judgement rule. "If you have solid board processes, good documentation, good minutes, and good evidence of how you arrived at a particular decision, then there's protection under the rule. If you can't provide that and it's not documented, then of course you're sacrificing that protection."
This underscores the critical nature of minute-taking and documentation - it's not just record-keeping, it's creating the evidence trail that protects directors when they exercise the judgement they're appointed to exercise.
Catherine emphasises that judgement ability should be the number one criterion in director selection. Yet assessing judgement is difficult - you can't always see individual judgement when someone sits on another board. Her approach focuses on interrogating a candidate's experience, as "it's through that experience that they will have actually built their reserves of judgement."
This conversation with one of Australia's most experienced governance leaders provides essential frameworks for directors making tough calls and Company Secretaries designing the processes, papers, and documentation systems that enable good judgement to flourish.
Richard Conway is the founder of boardcycle, the board meeting platform designed for Company Secretaries. Create, manage and automate your board agendas, run sheets, shell minutes, action tracking and more with boardcycle CoSec.
[00:00:00] In today's episode, Richard Conway interviews Catherine Livingstone, Chancellor of the University of Technology Sydney, Chair of Pacific National, and Director of the Australian Ballet, as they discuss the art of exercising good judgement in board decision-making.
[00:00:17] Richard Conway: Welcome to Minutes by boardcycle. I'm your host, Richard Conway, and today my guest on the podcast is Catherine Livingstone. Catherine has chaired some of Australia's leading organisations, including the Commonwealth Bank, Telstra, and the CSIRO. And today, she's the Chancellor of the UTS, the Chair of Pacific National, and a Director at The Australian Ballet. Welcome, Catherine.
[00:00:38] Catherine Livingstone: Thanks, Richard.
[00:00:40] Richard Conway: So, Catherine, today I wanted to talk to you about the importance of judgement in decision-making, which is a theme that comes up in many of your speeches and particularly where you make the distinction between the perfect decision and the right decision.
[00:00:53] Richard Conway: So, to start with, I wanted to ask if you could outline your view of the role that judgement plays in board decision-making as a whole.
[00:01:01] Catherine Livingstone: So the whole point of a board is to deal with ambiguity where the answer isn't clear. If the answer were clear and the decisions were easy, you wouldn't need a board.
[00:01:12] Catherine Livingstone: So the whole point of having a board, which is made up of a number of people with different perspectives, different experience bases, is so that in the discussion that occurs around the board table, that judgements can be explored, then exercised, and decisions made.
[00:01:30] Catherine Livingstone: But the point here is: the answer is not necessarily obvious and the question has to be explored so that judgements can be made.
[00:01:37] Richard Conway: And Catherine, to go to the distinction you've made in some of your previous speeches about the difference between the perfect decision and the right decision, what is wrong with trying to pursue the perfect decision, and what behaviours does that lead to?
[00:01:53] Catherine Livingstone: Well, one of my guiding principles is: the perfect decision is rarely the right decision. That's a starting point. And the perfect decision, there's no such thing, but if you're looking for perfect information before you make a decision, information has a shelf life, and time matters. And the effluxion of time matters.
[00:02:12] Catherine Livingstone: Now, sometimes you want to let time run a bit of a course before you make a decision, but at some point, no decision is, by default, a decision. And you need to be aware of that.
[00:02:23] Catherine Livingstone: I've seen directors who continue to ask for more information, more information, more information. But of course, the subject matter of the decision or the judgement that's being called for, doesn't stay still. So it's moving.
[00:02:37] Catherine Livingstone: So, you may find that by not making a decision, the default decision has put you and the organisation in, you're worse off by not having made it. You've lost whatever opportunity that might have been there.
[00:02:49] Catherine Livingstone: So taking time to get more information, there's a balance there. And absolutely, the board should ask for more information if they don't feel they have enough to make the judgement.
[00:02:58] Catherine Livingstone: But they have to remember: it's a judgement they're making, not the perfect answer. Because there is no such thing.
[00:03:05] Catherine Livingstone: It's remembering that time matters. And the judgement is around: at what point should you be making the decision, rather than the avoidance strategy of keeping on asking for more information so that you don't have to make a decision.
[00:03:19] Richard Conway: Yep, absolutely. And do you have any guardrails or guidance that you use to help you think about when you have the right amount of information, or when it is time just to make a call on something? Or it's just completely case-by-case?
[00:03:35] Catherine Livingstone: Well, it's case-by-case. But what do you have to keep in mind? Again, it's back to this: No decision is a decision by default. So, you have to keep in mind what the counterfactual is. If we don't make this decision what are the consequences?
[00:03:48] Catherine Livingstone: Have we really probed what appears to be the first right answer? And it's the process of saying, "Well, we could do A, but what if we did B? What if we did C?" Just as a way of elucidating the various options.
[00:04:02] Catherine Livingstone: Really thinking about the consequences of the decision: are there unintended consequences? Is the decision in the category of no regrets? Or does it have such significant consequences that if it's wrong, it bets the business, basically?
[00:04:18] Catherine Livingstone: So you have to calibrate what size of decision are you being faced with. And if it's a, shall I say, a smaller scope decision and if it's not right, you can undo it, then better to make the decision and move on.
[00:04:31] Catherine Livingstone: If it's a bet-the-business decision. So if you look at large mining companies with their investment decisions, they can take years to make those decisions because they lock them in for, you know, a decade or two hence.
[00:04:45] Catherine Livingstone: Calibrating how big a decision this is, and I've seen, sometimes, a lot of the time, spent on decisions that are not very big in the overall scheme of things, but they tie up management time with more information and analysis, when in fact, you could make the decision, and you just keep an eye on it. And if it's not the right decision, you can reverse, or adjust, or course correct, whatever you want to call it.
[00:05:05] Catherine Livingstone: So directors have a responsibility for calibrating how big a decision they are actually being faced with.
[00:05:12] Richard Conway: Absolutely. And Catherine, one area which I feel is quite tricky to make a judgement on is making the call, "you don't need to make a decision right now and you can just let things play out." I guess it's sort of all of those rules that you've talked about play into that, but it's a different view of time in that case, you are deciding that, I suppose, things are too uncertain or there's too many moving pieces and you need to let things just move a little bit more to understand what's going on. Do you agree that's a tricky area, and any approaches you have around deciding not to make a decision right now?
[00:05:49] Catherine Livingstone: I agree there are times when you should absolutely do that. But you should be doing it consciously saying, "We are not going to make a decision now. " As distinct from avoiding the decision. And this comes back to: no decision is a decision in itself. So, making a decision we're not going to make a decision is a really important step. But it's often not as easy as that and sometimes, it's actually important to let time run a bit, and some situations resolve on their own or become clearer if you let time run. But, as I say, deciding that that's what you're going to do is the key point.
[00:06:27] Richard Conway: Yes. And Catherine, going back to what you were talking about before about asking for more information to delay a decision, it's, I guess, a very human thing to just ask for more information when you're unsure about something.
[00:06:42] Richard Conway: What is your framework for thinking about whether you do need to ask for more information? Is it around essentially looking at those options that are available and thinking about whether additional information will change them at all, or what's your approach to that?
[00:06:59] Catherine Livingstone: Well, I think it's very helpful when management, in presenting a paper for a decision, when it's a strategic decision, it's very helpful if management outlines options and also options that have been discounted. Because what's being said no to by management, is often as instructive as what's actually being recommended.
[00:07:18] Catherine Livingstone: The discussion around the board table can often highlight, "Oh, there is something more we need." And that's why the discussion is so important.
[00:07:26] Catherine Livingstone: But as chair, there are some times when you feel: we have enough information. And again, calibrating the scale of the decision, we need to move and make a decision. Or agree not to. And that's when you really have to make a call as a Chair: "Yes, we could have more information, but it's not clear that that's going to be helpful. So let's face the decision."
[00:07:45] Catherine Livingstone: And in all of this, what you're relying on as a director in making those judgements is the people - partly the people around the table as directors - but very particularly, management. And that's part of making judgements.
[00:08:00] Catherine Livingstone: You've got to make a judgement on the people who are proposing the judgement that the decision that you are being asked to make. And that comes back to: there's a wealth of information in assessing the judgements that the people who are making the judgements in the recommendation as well as the, sort of, clinical facts that you are being presented with.
[00:08:22] Catherine Livingstone: Being a director is really a people business.
[00:08:25] Richard Conway: Absolutely. And following on from that, Catherine, I guess, essentially we're saying here that each director needs to have fantastic judgement on a board. And so, as a Chair, I guess you are trying to recruit people to your board who have fantastic judgement.
[00:08:43] Richard Conway: I was wondering how you decide that, how you come to a decision whether someone does have that good judgement to come on your board. Particularly when they may be on other boards where you only see the collective judgement, as opposed to their individual judgement.
[00:08:58] Catherine Livingstone: So this is a really tough one. You're obviously looking, in the first instance for what skills you're seeking because you've got a skills matrix, where are the gaps on your board? So that's the starting point.
[00:09:09] Catherine Livingstone: Then you really interrogate the experience that the person's had. Because it's through that experience that they will have actually built their reserves of judgement.
[00:09:18] Catherine Livingstone: Then obviously, you meet them, and you take references. But it does happen that once they're in the board context, you realise actually their judgement skills are not what's needed. And that's very unfortunate, and it does happen from time to time.
[00:09:32] Catherine Livingstone: But mostly, you can assess people's judgement ability just from conversations and meeting them. To me, that’s number one element in a director, the selection is: what do you think about their judgement skills?
[00:09:45] Richard Conway: And Catherine, to kind of shift topic a little bit, one of the things that you've said, which you've brought home so far in this conversation, is that the centre of gravity of governance is judgement rather than the process. And so, I wanted to ask you a bit about what you see as the importance of process in governance in leading to those judgements. Particularly, when some definitions of governance are quite process focused.
[00:10:14] Catherine Livingstone: So, this comes back to the board process to some extent. And does that process support real strategic thinking? Which is the direction side of the definition of governance. And do those processes support the control dimension of governance, which is: is this business in a state of control? Is the business plan being implemented? Do we know how it's going? What are the design tolerances?
[00:10:38] Catherine Livingstone: So, the processes around a board, style of board papers, the templates. The rigour there then can just be relied upon as the substrate, if you like, to the decision-making and judgement process.
[00:10:54] Catherine Livingstone: If boards are chaotic, papers aren't good, the agenda setting is haphazard. If there's no forward plan for the agenda in terms of the cycle looking ahead 12 months, it can be chaos. And the board becomes very ad hoc. And finding the discipline to provide the space to make the judgement calls, becomes very difficult.
[00:11:17] Catherine Livingstone: So, the board process is really important.
[00:11:21] Richard Conway: Just to paraphrase that, Catherine, I think essentially you're saying that you need order surrounding the judgement process, and predictability surrounding the judgement process, in order for you as a director to be able to focus on exercising that judgement rather than questioning the process or questioning the information you're getting, etc.
[00:11:41] Catherine Livingstone: That's correct. The idea is to take out as much noise as possible from the operation of the board. So there's enough quiet thinking space, discussion space, around the board table. And discussion is a, that's a whole separate topic, as to how you, how you facilitate good discussion.
[00:11:59] Richard Conway: Absolutely. Last question on this, Catherine, given everything you've said about how important judgement is, I guess, the crux of board decision making, I wanted to link that to the business judgement rule in Australian law, and whether you think that that rule actually gives directors the protection that they need to exercise their judgement confidently. We have seen some cases recently of directors being protected by that, but not really very many.
[00:12:28] Catherine Livingstone: Well, I think it comes back to the process question. If you have solid board processes, good documentation, good minutes, and good evidence of how you arrived at a particular decision, then there's protection under the rule. If you can't provide that and it's not documented, then of course you're sacrificing that protection.
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