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Good Governance – What’s Involved?

Board Effectiveness

Your board or committee will be more effective and more satisfying to serve on if it has a sound recruitment and induction process for members, good planning and well-run meetings.

 It is a good idea to also regularly review your own performance as a board or management committee.  The following are some suggested areas where effectiveness can be enhanced.

Appropriate board structure

Generally the structure should be kept as simple as possible such as the one below based on one from ‘Getting on Board, a governance resource for arts organisations’, Creative New Zealand, 2014)

Induction/Orientation for new board members

A properly welcomed and inducted board member is a quickly productive one who will be pleased to contribute and add value. Don’t leave it to chance for new members to ‘pick up’ what your organisation is about, or what the roles and responsibilities of the board members. They may have experience as a trustee or may have served on a club committee, or be entirely new to a governance role.

 

Being a trustee of a charitable trust involves legal responsibilities and liabilities which people need to be clear about. They also need to know prior to joining if there are any expectations such as trustees giving a donation or undertaking hands-on fund-raising.  Not everyone is comfortable with doing this, but it doesn’t mean they can’t add value in other ways. 

 

An orientation package should include documents such as

  • constitution or trust deed
  • strategic plan,
  • policy manual
  • board code of conduct
  • key historical points about the organisation,
  • current year to date budget,
  • most recent annual report
  • any recent newsletters, recent board minutes and an i
  • biographical information about board members and if appropriate, staff
Identifying conflict of interests

As a board member you have to act in the best interests of the organisation. If there is any possible conflict of interest, you have to step aside. You can’t take advantage of your position on the board.  

Conflicts of interest occur when a board member’s personal interest or loyalties could affect their ability to make a decision in the best interest of the organisation – remember as a board member your duty and responsibility is to the organisation as a whole.

Conflicts of interest include the following:

  • When a board member could benefit financially or otherwise from the organisation, either directly or indirectly through someone they are connected or related to.
  • When a board member’s duty to the organisation competes with a duty or loyalty they have to another organisation or person.

Common situations of conflict of interest:

  • The board’s decision could lead to employing a board member or family member.
  • Board members could gain financially from business, programmes or services provided to the organisation (eg if engaged as a consultant, co-owner of a catering company or other supplier used by the organisation).
  • Information provided to the board in confidence might give an advantage to a board member’s business (for example when calling for tenders that the board member’s business might be interested in applying for).

Ways to deal with conflicts of interests:

  • Keep a register of board members’ perceived, current or potential interests
  • Declare interests at the beginning of meetings about any items on the agenda.
  • When there is a conflict of interest, the affected member does not take part in discussion or decision-making. You have to notify your board colleagues when a conflict comes up, you then can’t speak about the motion and you may have to leave the room while the issue is being discussed. 
  • Boards should act conscientiously, be transparent and document their processes and decisions so if an issue is raised, you can explain why you all took the decision you did.

 

RESOURCE

Planning board work activities in advance

This could include using a simple board calendar and work plan covering  ( as applicable to your organisation) fundraising events;  approval of budget; AGM, Charities Services reporting  requirements, board strategy session; policy development or policy review schedule, risk review, performance review of CEO, remuneration review.

Running efficient meetings

This includes having a clear concise agenda, sending out any papers in time for board members to read them; board members reading the papers; an effective meeting chair; relevant, robust and respectful debate; minutes that accurately record decisions and are finalised promptly; and board only sessions without the  CEO present.

The chair’s role includes ensuring the agenda and papers are prepared; promoting inclusive debate and appropriate tone during discussions; dealing effectively with dissent and conflict.

Factors contributing to poor meetings include:

  • poor performance by the chair;
  • absenteeism by members;
  • conflict of interest matters not being appropriately dealt with;
  • dominant chairs, board members or CEOs taking over meetings/making decisions without sufficient regard for other member’s views;
  • disrespectful talk or behaviour towards other board members, not striving to work as a team;
  • board members seeing themselves as representing particular stakeholder viewpoints rather than the organisation as a whole;
  • Inappropriate agendas and papers (eg too detailed, not detailed enough; important information missing or buried; wrong ordering of agenda items).
  • Not enough time for pre-reading or discussion.

Meetings from CommunityNet Aotearoa

https://community.net.nz/resources/community-resource-kit/6-1-meetings-introduction/

 

Making Decisions

To be an effective board of your organisation, you will want to make sure your decisions are well thought through and well made.  This applies whether you are making mainly strategic level decisions, with operational issues left to management, or if you are a smaller organisation where you may be involved in some management level decisions.

You still need to know what board business is and what it is not and document this in writing.  Sound decision making is part of building the credibility and integrity of the organisation to its stakeholders and is part of the expected stewardship role.  The following steps, based on Te Puni Kokiri’s helpful resource ‘Making Decisions:  a Process Guide’ provide an overview.

RESOURCE:  www.tpk.govt.nz/en/a-matou-mohiotanga/governance/making-decisions–a-process-guide-for-boards

 

a). Will the board accept the issue? – is it appropriate and has it been brought to the board through the right channels. This gives you the opportunity to be clear about governance and management boundaries and not get bogged down in something that is a management issue or really only of interest.

b). Identify the type of issue – this will help establish what you might need to do make a decision.  For example is it a standard issue with set procedures to follow such as approving minutes; is a new issue which may need more investigation and more than one meeting while you do that; is it significant where the board is committing to particular plans or actions or expenditure and may need to devote more time on it, or is it a crisis – an unexpected event requiring specific plans and responses. 

  1. Define what the ‘problem’ is –it’s important to be clear on what the issue or problem or opportunity is. Breaking decision-making into parts can help work through a process more efficiently and help a board be clearer about what series of decisions it needs to make. It reduces the risk going off on a tangent or worrying about how to fund something before you have said yes to doing it.

d). Understand the context does the potential decision fit with your legal status (eg your trust deed if you are a charitable trust) and your strategic plan – they should be on hand for reference.  How will it fit in with other plans and commitments the organisation has made, for example take on a new lease? What about external influences like changes in government policy?

e). Gather information, facts and advice – this is part of due diligence as a board member as is asking reasonable questions to collectively ‘stress test’ the idea.  You might want to look at a format for written proposals put before the board so that people writing them know what is required.  Don’t be afraid to seek external advice. You aren’t expected to know everything.

f). Analyse – keep an open mind,– at first glance the proposal may look like the next best thing since sliced bread but it could have been made on faulty assumptions, have risks or unintentional consequences. Seeking views from all board members can help unearth information, assumptions, gaps or misunderstandings. 

Boards can also consider alternative options, criteria for assessment, weighting, logical testing. Make your own decisions as a board member but in a respectful way towards other board members and that honours the integrity of the organisation you serve. 

g). Make the decision

The role of the chair in facilitating good constructive discussion is important. As well as assessing the analysis, using judgement and considering vision, values and cultural requirements are all aspects involved. Working to find a consensus decision is beneficial. It means the decision has support from the whole board which is then sharing responsibility and accountability; is focused on finding solutions, ensures buy-in, develops positive dynamics and provides leadership; and often supports the culture or tikanga of an organisation. 

h). Record the decision

Recording the decision is crucial and should be in the minutes of the meeting.  It should be brief and clear but with enough information that it is still meaningful at a later time.  You can use specific words to express such as ‘the board resolved to…’; the board ‘agreed’, ‘approved’, ‘deferred’, ‘noted’,’ sought further information’.

The minutes are the official record of a decision and therefore provide accountability. They provide authority for activity; evidence that board members met their governance obligations and are the key way to show the board is doing its job.  They also provide a historical record and source of information.

i). Communicate and get action

Make sure you let people who need to know about the decision, that an action plan is in place and that you receive reports from management on progress against the action plan.

Avoiding Poor Decisions

Signs that a board’s collective decision making is not as effective as it could be include:

  • An inability to explain to members, staff or media why the board made a certain decision
  • A feeling that decisions do not represent the best thinking of the board
  • A sense the board is rehashing old issues
  • Heated discussions based more on opinions and emotions than facts
  • Long drawn-out discussions that lose track of the original topic
  • Last minute introduction of ‘wildcard’ topics not on the agenda that divert time and attention
  • A decision that the entire board agreed to but isn’t in reality supported by every board member.

Poor or lack of information, not allowing enough time for good deliberation, cutting of debate, individuals under pressure to make decisions, tiredness, and emotional debate will likely lead to poor decisions.

Getting good information, being clear on board responsibilities, setting agendas to have time for important discussions, taking a break if debate becomes heated or tabling the issue until further investigation is done, will help avoid poor decisions the organisation may regret.

Make sure you always act within your organisation’s rules

Even if you are fairly informal as a governance group, following the rules and procedures of your organisation will save you a lot of trouble.

 

Constitutions and policies set out the rules. Have a copy of both at your meetings.

 

Make sure you have a quorum for your meetings. If you don’t, decisions made will not be legally effective. (For example if at a board meeting you decided to sell an asset, but you didn’t have a quorum, this decision can be challenged). 

 

Ensure you follow proper process in all decision-making (as stated in your governing documents) eg a resolution is moved, seconded and voted on.

 

Document your decisions in the minutes and get the minutes reviewed and approved at the next meeting, noting in writing any amendments by those present at the last meeting.  You can then prove you followed the right procedures and can also go back and check your own decisions and reasons.  Relying on memories won’t do.

What CEOs/management would like from their Boards

 (based on ‘What CEOs Really Think of their Boards by Jeffrey  Sonnenfeld; Melanie Kusin and Elise Walton, Harvard Business Review, April 2013).

  • Don’t see risk in personal terms – healthy change or growth may require a level of innovation and risk.
  • Do the homework and stay plugged in – and don’t rely too heavily on management for the knowledge you need – they may not be right.
  • Diversity, different skills and perspectives are valuable on the board – including younger, digitally saavy members.
  • Board members should hold each other to account and police their own behaviour in meetings, rather than leave it entirely to the chair.
  • More energetic constructive debate would be welcome – to do this focus on teamwork skills and be aware of the way groups, including boards, behave as social entities (social group dynamics).
  • After board meeting decisions are made, disagreeing individual board members should not then try to overturn or shape decisions by ‘just having a word’ with the Chair or CEO.
  • Ask probing questions so board meetings can review and critique proposals properly as a team, rather than individual members staunchly advocate for a particular position. Think of the decision process as ‘intelligent stress testing’ rather than leaving it as ‘sounds like a great idea.’ That process makes it more likely a decision owned by the board who will then have the CEO’s back when challenges arise.
  • CEO succession planning – remember to consider your own organisation’s internal rising talent.
  • Strong partnerships between Boards and CEOs are invaluable to the organisation, where there is mutual respect, energetic commitment to the organisation’s success and strong bonds of trust.
Assessing performance regularly (of Chair, CEO, Board)

Regularly reviewing your effectiveness as a board can help sharpen your performance. The aim is to improving your quality of governance, discussion and decision-making. This could include using a self-assessment tool or external facilitator, or attending governance training.

If there are issues they may be holding the board back, such as chair effectiveness or board conflict an external expert facilitator may be useful.  That person could have one to one meetings with board members and then help the board work through the next steps. 

Enhancing board performance can occur through board orientation for new members, having clear policies and procedures, mentoring, and resources for training and professional development.

Making effective use of sub-committees

 

To help manage the amount of business a board has to deal with, you could consider setting up sub-committees for example a risk committee, investment committee, audit committee, fund raising committee, nomination, governance or human resources committee.

Sub-committees can help:

– give more detailed attention to a specific area that a full board meeting hasn’t got time to consider

– share the workload amongst members

– address potential conflict of interest eg executive remuneration

– streamline full board meetings.

The full board remains responsible for the work of sub-committees. Clear terms of reference and a regular review of progress are important.

Board professional development

Continuing to develop or refresh skills and knowledge about governance and about your organisation’s area of interest is beneficial. There are lots of ways to do this, especially with on line communication options –  YouTube clips, on line learning qualifications, podcasts, local courses and seminars, expert speakers and so on.

Your board could take a collective approach to this, setting aside time at meetings to discuss needs and learning.  Allocating budget for board development is also a good idea.

RESOURCES ON BOARD PROFESSIONAL DEVELOPMENT

This article from Exult, which help non-profits grow has lots of ideas:

https://www.exult.co.nz/articles/professional-development-for-non-profit-trustees/

Exult also runs workshops on effective meetings and chairing of boards.

https://www.exult.co.nz/workshops/governance-express/

!! Cautionary Tales !!

Cautionary tales…reprinted from Charities Services Annual Review 2017/18. Department of Internal Affairs, pg 13

“This year, Charities Services completed a number of investigations including looking into the activities of two registered charities where we received complaints that those in senior management and officer positions were receiving substantial personal benefits. The complaints alleged that charity funds were being used on excessive salaries, private club memberships, improper use of vehicles, expensive annual dinners, additional leave and unnecessary international travel. We recognised that both charities had a history of success and provided a benefit to those they were set up to support. What concerned us was that after looking into their activities, there appeared to have been a culture of complacency developed toward the existing management and governance processes. Neither organisation was able to provide adequate records to support and justify the use of charity funds for travel, leave, entertainment and memberships. In both cases we established that management and governance processes were either not being followed or did not exist. We acknowledge that it is appropriate for a charity to reward high performing staff with salaries and bonuses at a competitive market rate, however the officers of a charity must ensure that decisions are well documented, and that contracts and agreements are up-to-date. In these cases, the absence of good records made it difficult to determine if the officers were considering their fiduciary duties when governing the charities. Commendably, both charities cooperated with us throughout the investigations, responding to requests for information and engaging with us effectively to talk about our concerns. As a result, both charities went through major review processes to improve internal policies and processes to ensure management and governance practices improved. At the conclusion of both investigations, we determined that the spending itself did not represent a misuse of charity funds but that the shortcomings in the management and governance may have constituted gross mismanagement which is considered serious wrongdoing under the Charities Act. We issued both charities with ‘Letters of Expectations’ outlining our findings and reminded them of our expectations that officers put their fiduciary duties at the forefront of their decision making. These case studies are good examples of a graduated use of our regulatory responses. While at the far end of the scale is deregistration, our first position is always to engage and work with charities to help them achieve and maintain compliance with the Charities Act.”