Boards rarely go wrong for lack of power. They go wrong when power is used for the wrong reason, or for the wrong people.

---

An archer holds an arrow in one hand. In the other rests a small bird.

I first saw the image as a sculpture, and it has stayed with me. The archer could kill the bird, yet the bird seems calm. The same hands hold both the instrument of harm and the creature exposed to it. Nothing tells us what happens next.

I think of that image often in boardrooms. Boards hold real power. They can buy and sell assets, raise capital, close businesses and appoint or remove chief executives. The bird is whatever is exposed to that power. Above all, it is the company itself, which can only act through the people sitting around the table.

Most board discussions centre on one question: can we do this? Do we have the authority, the approvals, the mandate? That question matters, but it is the easier one. The harder question is should we, and why?

Where Good Boards Go Wrong

Few board failures begin with a director who sets out to do harm. More often they begin with a decision that was permitted, but quietly misdirected.

Picture a listed company facing a shareholder group that wants to replace two directors. Within days, management proposes a share placement to “strengthen the balance sheet”. The board can approve it under the general mandate shareholders have already given, and the company could use the cash. The placement would also, conveniently, dilute the dissenting shareholders below the level they need to win their vote.

Nobody in the room has to say the second reason out loud. That is precisely the risk.

The same pattern appears in quieter forms. A board properly approves the purchase of an asset, and later someone uses that asset for personal benefit. The purchase was proper. What was done with it afterwards was not. Authority was never in doubt. Direction was.

Capacity is Not Justification

This is the idea at the heart of this article. The fact that a board can act tells you nothing about whether it should. These are two separate questions, and good boards keep them apart.

Malaysian company law is built the same way. The Companies Act 2016 first gives the board the power to run the business. It then requires directors to use that power for a proper purpose and in good faith in the company’s best interest. The power comes with a condition attached.

Two further layers reinforce the point, though they work differently. Bursa Malaysia’s listing rules now require the audit committees of listed companies to review conflicts of interest. The Malaysian Code on Corporate Governance, which is best-practice guidance rather than law, asks boards to adopt a code of conduct that addresses conflicts and the “abuse of power”.

In practice, directors do not need the legal detail. They need the habit of asking two things before any consequential decision: why are we really doing this, and for whom? A useful test is to ask whether the board would take the same decision, in the same form and at the same time, if the convenient side-effect did not exist.

Discipline Is What Buys Boldness

Here is the part directors often miss. Restraint about purpose does not make boards timid. It is what makes boldness safe.

Malaysian law gives directors a form of safe harbour for honest business decisions that turn out badly. In 2022, the High Court declined to hold nine former directors of Iris Corporation liable for a failed overseas investment, because the decision had been made honestly and on an informed basis. The Court of Appeal upheld that decision in 2025. The message is that directors should not be punished for honest risk-taking.

But that safe harbour has an entry condition. The decision must be made for a proper purpose, without a personal stake, on adequate information and in the genuine belief that it serves the company. In other words, boards that can answer why and for whom honestly earn the freedom to be bold. Restraint over purpose is not a brake on risk-taking. It is the licence for it.

The Objection Worth Taking Seriously

A seasoned chair might push back here, and fairly. In their experience, Malaysian boards err more often on the side of caution than of boldness. Talk of “restraint” may be heard as permission to defer, to ask for one more paper, or to form one more committee.

That risk is real, so boards should also ask the reverse question: are we holding back only because acting is uncomfortable? Restraint, as I use the word, is not about speed. My earlier article, The Photographer’s Boardroom, was about when boards decide. This one is about why and for whom. A board can decide quickly and still decide well.

Inaction is also a decision. A board that keeps a failing division open, or a struggling chief executive in post, because the conversation is uncomfortable has not protected the bird. It has simply chosen a slower kind of harm.

What Boards Can Do Now

• A purpose line on every major board paper. Ask management to open each paper with two sentences: what this decision is for, and what else it will affect.
• A conflicts check before the item, not after. Have the chair pause before each major item and ask whether anyone has an interest to declare.
• Minutes that record reasons, not just resolutions. Note the purpose, the information relied on and the alternatives considered. That record is what protects directors later.
• An annual look back. Once a year, revisit two or three significant decisions and ask whether the power was used for the reason the board gave at the time.

The Unreleased Arrow

Return to the placement. It may well be the right decision, since companies do need capital. But if the board cannot explain why it needs the money now, other than the shareholder challenge, the arrow is aimed at the wrong target.

Power without discretion is ineffective. Discretion without discipline is dangerous.

The best directors will sometimes release the arrow and sometimes hold it. What sets them apart is not the outcome they choose. It is that they can always say, plainly and on the record, what the power was for and whom it served.

The archer’s skill lies not in holding the arrow, but in knowing what it is for.

The article was written by Chong Wai Kuan.

Photo by Raju Kumar on Unsplash.