Governance & Restructuring

Who’s Running the Show? Clarifying Delegations of Authority in Joint Ventures

Who needs to approve this? It’s a question commonly asked by corporate executives. But in joint ventures, it’s not that simple.

SEPTEMBER 2022 — Who needs to approve this? It’s a question commonly asked by corporate executives. Usually, getting the answer is straightforward. Executives rely on their past experience, ask colleagues, or consult the company’s delegation of authority (DOA) policy or other organizational documents, and they have their answer.

But in joint ventures, it’s not that simple.

For starters, that’s because the question needs to be answered at two levels (Exhibit 1). First is at the joint venture. Consider any major decision in a JV – a proposed plan and budget, individual expenditure, third party contract, organizational restructuring, or any other decision. Does JV management have the authority to make that decision, or does it require the review or approval of a Board committee, the full Board, or the shareholders?

Exhibit 1: Levels of JV Governance

Joint Venture Structure Ankura Joint Ventures and Partnerships

© Ankura. All Rights Reserved.

Second is at the parent company. For a committee member, Board Director, or shareholder representative to “vote” on a matter, do they need to secure input or pre-approval from others within their company? For instance, does the JV’s proposed dividend distribution or new line of credit first require sign-off from the parent finance organization? Similarly, do other decisions require sign-off from the parent company’s human resources, legal, procurement, or other function?

The presence of these two levels is not the only complicating factor. In JVs, there are almost always numerous documents, including parent company DOA policies, JV legal agreements, and Board and committee charters, that lay out authorities. These documents may be incomplete, include different delegation line items, have different monetary thresholds, or contradict each other in other ways. Changing delegations – say, to fix inconsistencies or to reflect the JV’s maturity – often requires re-opening core legal agreements, something that partners are often reluctant to do.

What’s more, JVs lack certain cultural advantages of wholly-owned companies. For example, in a wholly-owned context, everyone is ultimately working for the same firm. People may have many shared experiences and touchpoints, and an expectation to be working together for a long period of time. This aligns interests and creates common norms. It also enables individuals to make decisions without always first clarifying or securing needed approvals (the “ask for forgiveness later” strategy).

In JVs, none of this may be true.

JV Board Directors and committee members may have never worked in a JV before and regularly turn over after just two or three years.[1]See “Public Company vs. JV Governance,” James Bamford, Tracy Branding Pyle, and Lois D’Costa Fernandes, Harvard Law School Forum on Corporate Governance, December 28, 2019 (showing median board … Continue reading JV management teams may be composed of secondees from different parents who have different loyalties. These circumstances make it hard to build strong personal relationships and to understand the rhythm of consensus-building and decision-making. They also depend on informal working norms. Additionally, JV Board Directors almost always have fiduciary duties to the venture, which make it hard for them to know where they can vote based on their own independent judgment versus when they must defer to guidance from their shareholders.


These added challenges give rise to two types of pitfalls in JVsoverly loose and overly tight delegations. History is replete with JVs falling into one of these ditches:

1) Overly Loose Delegations

Poorly defined delegations can lead to rogue, under-supervised decisions. For example, in a large industrial JV in the Middle East, the Directors from one parent approved the JV taking out a third-party loan without first vetting the decision with the finance and legal teams in the parent. The result: The loan tripped the parent company’s covenants in its own financing agreements, causing it to be in default. In another JV with that same parent company, the JV CEO reduced the amount of health, safety, and environmental (HSE) and maintenance training provided to staff without consulting the Board. Eighteen months later, the JV started to experience a performance drop and an uptick in HSE incidents – with the Board not discovering the cause until after a shareholder audit.

2) Overly Tight Delegations

In other instances, byzantine input requirements and a bias to over-inclusiveness can slow decision-making to a near halt. For example, in a large Canadian natural resources JV, one shareholder required all JV decisions to have the approval of a very senior executive. That executive was not on the Board, only had a few hours every month to dedicate to the JV, and almost always required the JV Directors to seek additional information from the JV after being presented with a decision for approval. This led to that shareholder requiring multiple months to approve any decision. This delay caused the JV to miss a deadline to lock in discounted third-party technology licensing fees that expired before the JV could obtain Board approval.

Many JVs fall into one of these ditches – and some JVs careen from one side of the road to the other, falling into both.


At Ankura, we help clients navigate and simplify this complex web of authorities and decision-making, working with individual JVs and parent companies with portfolios of JVs.

Individual JVs

When we work with individual JVs on delegations of authority, we focus on answering three questions:

Are the agreed delegations still appropriate given the maturity of the venture? Delegations to JV management are, in most cases, quite low – often less than 1% of the JV’s operating budget (Exhibit 2).

Exhibit 2: Select JV CEO Sign-Off Authority Levels

N = 40 JVs Ankura Joint Ventures and Partnerships

© Ankura. All Rights Reserved.

This may make sense early in the JV’s life, when the parents want significant oversight as they build understanding of the business and trust in each other and the management team. But problems arise when companies do not revisit these low initial authority levels. For example, the CEO of a large LNG joint venture that had a billion-dollar annual budget only had the authority to sign off on expenditures up to $200,000. This meant the CEO was continually turning to the Board to approve contracts that were immaterial to the JV overall.

To address these issues, JV Boards should consider regularly reviewing and updating management delegations and increasing delegations to management, particularly to be at least 1% of the JV’s annual operating budget. As part of this process, we benchmark the JV’s delegations against the delegation levels in peer JVs to help JV Boards and CEOs calibrate delegations not just internally, but against the market.

Are there gaps or inconsistencies in formal delegations? A DOA policy, the JV Agreement, and other documents laying out authorities will inevitably not list every decision that will emerge in a joint venture, which can cause confusion and highlight different views among partners or JV management on who should decide what. Fortunately, there are actions JV partners can take to mitigate this issue. First is to ensure the thresholds and line items in the JV DOA policy align with delegations in other JV documents like the JV Agreement, bylaws, and/or articles of association – and vice versa. For example, if the JV Agreement states that the Board must approve material contracts over $10 million, the DOA policy should give the CEO authority to approve material contracts up to $10 million.

Second is to review the line items in the JV DOA policy, JV Agreement, and other documents outlining authorities against each parent company’s DOA policy to identify missing line items that may need to be added.

Third is to set a clear default rule about who makes decisions that are not listed in the JV DOA policy, JV Agreement, and other documents outlining authorities. In some JVs, such unlisted items are deemed to be delegated to JV management, while in others the Board must review all decisions not explicitly delegated to management. Either of these approaches can work. However, silence – not defining how unlisted matters should be decided – can be deadly.

Are shareholders sticking to an aligned-on approach to delegations? An owner of a Brazilian joint venture was concerned about the JV’s performance. In response, the owner convinced its partner to set up seven committees and eight working groups. In addition, the shareholder staffed a team of over 20 individuals to oversee the JV. While well-intentioned, these actions frayed relationships with JV management, who felt it had no authority to make decisions without shareholder involvement, despite having some authority per the JV’s DOA policy. Relationships with the other owner were also tense, as the other owner had neither the interest nor resources to be as involved in the JV. Ultimately, the problem – which is not unique to this JV – boils down to the fact that the partners and management were not aligned on an appropriate level of authority for JV management, despite what was clearly written in JV documents.

When this happens, JV stakeholders need to pause, come together, and align on expectations across the board. This may involve externally facilitated Board discussions to identify and bridge differences of opinion. Or it could involve developing procedures for sharing information between the JV and shareholders to avoid lopsided or ad hoc information sharing that can be detrimental to trust and also tax JV management who spend significant time responding to shareholder requests. Thus, JV partners need to align on an approach and stick to it, though this may be easier said than done given the number of stakeholders and interests in a JV.

Corporate Parents with a Portfolio of JVs

When we advise parent companies about corporate policies and approaches for delegations across their portfolio of JVs and subsidiaries, we focus on three questions:

  • Does our corporate DOA policy apply to JVs or not? If yes, to what JVs does it apply?
  • What obligations do our JV Board Directors have to secure input, endorsement, or pre-approval from our internal corporate functions or leadership prior to voting as a JV Director?
  • How do JV Directors reconcile their fiduciary duties to exercise sound and independent judgment with the need for internal input and pre-approval? Where can a JV Director over-ride corporate guidance?

In our experience, the first step in the solution is to develop a corporate delegation guideline for JVs. This guidance document might apply to all JVs or be limited to a major class of JVs (e.g., non-controlled joint ventures). It might be an appendix to the corporate DOA policy or a separate document. And it might provide specific delegated authorities or only offer a common framework and leave the specific delegations to be determined for each JV separately.

Irrespective of the scope, at the heart of this document is a delegations of authority table that maps with decision makers, decisions, and the nature of their roles (Exhibit 3).

Exhibit 3: Illustrative Joint Venture Decision Authorities Table

Ankura Joint Ventures and Partnerships

© Ankura. All Rights Reserved.

The guideline should include additional guidance on when and how to apply the table. For instance, are monetary thresholds calculated based on the amount the JV is seeking to expend or your company’s percent interest of that amount? Do Directors need to obtain approvals any time they vote on a JV matter or only when that vote is or may be dispositive (i.e., the majority partner cannot decide on its own)? How should Directors address situations in which they believe the parent company’s guidance on how to vote is contrary to their obligation as a fiduciary of the JV?

The table and accompanying guidance must work together in a way that actually works in practice for a company. There are risks of over-defining with whom, when, and how JV Directors must interact to vote on a JV matter. There can be internal political battles over who should decide what. There can be endless debates about what it means to “review” or “consult” versus “approve” or “decide.” After some experience with version one of a JV authorities guidance document, the company may decide decisions are being made too high up in the organization – or too far down. However, these risks can often be managed through a careful development process and by making a guidance document that is fit-for-purpose for the relevant company. After all, only if these risks become larger than the risks of leaving authorities up to individuals should the guidance document be set aside.

~ ~ ~

Ankura and its clients create fit-for-purpose solutions to delegations of authority issues. Whether it means amending an existing DOA policy, making a new one, providing a JV-specific addendum to a DOA policy, or creating a handbook explaining what individuals involved in a JV need to know, we help clients simplify and address how delegations work in a JV context. A thoughtful approach to delegations, paired with strong JV governance, can improve JV performance, reduce risk, and ultimately save both the JV itself and its owners from significant, painful, and costly mistakes.

To learn more about how Ankura advises clients on JV and partnership transactions, governance, restructurings, and exits, please contact James Bamford or Tracy Branding Pyle

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About the Authors

Tracy Branding Pyle

Tracy Branding Pyle is a Managing Director at Ankura who specializes in helping organizations navigate complex transactions, and, in particular, joint venture-related transactions. She works with a wide array of U.S. and international companies across industries to help them structure, negotiate, approve, and launch joint ventures to set these ventures up for success. She additionally advises on governance of individual joint ventures and portfolios of joint ventures to help companies to minimize risk, increase efficiencies, and find value. Prior to joining Ankura, Tracy practiced law at Hogan Lovells, where she advised clients on joint ventures, public and private mergers and acquisitions, and corporate governance matters. Tracy is based in Washington, DC.

James Bamford

James Bamford is a Senior Advisor at Ankura based in Washington, DC. He joined Ankura with the firm’s 2020 acquisition of Water Street Partners, which he co-founded in 2008. Water Street Partners has been independently ranked as the number one global advisor on joint ventures since 2017. Prior to Water Street, he was global co-lead of the Joint Venture & Alliance Practice at McKinsey & Company.


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