Good governance, what’s involved?
The role of the Board is to ensure things are done, not necessarily doing it all itself. The board or ‘management committee’ should be clear about its responsibilities and expectations.
You have been entrusted with the responsibility to look after the organisation. The trust you have accepted – by agreeing to come on the board, or by being elected or appointed – is called a fiduciary relationship, which means you have a number of duties.
Briefly you have to act in good faith and with due care and diligence.
What does fiduciary duty or responsibility mean?
The board has a fiduciary duty to the organisation and its wellbeing. As a board member you must:
• Exercise a duty of care
• Act honestly
• Avoid using your position for personal advantage
• Comply with all relevant legislation and organisation constitutional requirements
• Act in the best interests of the organisation as a whole.
From ‘Getting on Board, a governance resource for arts organisations’, Creative New Zealand, 2014
Roles & Responsibilities
Roles of the Board are to:
Establish a clear vision, mission, purpose and values for the organisation
and review them every so often.
- Define and approve strategies for achieving the vision, mission, purpose,
programmes and services.
- Obtain resources and community support for the organisation.
- Provide financial oversight and ensure the organisation meets legal and
- Develop appropriate risk management practices and policy guidelines
- Employ the Chief Executive Officer (if applicable), managing all aspects of
the recruitment process and employment contract.
Role and tasks of Office Holders
The following are some of the tasks for which office holders are typically responsible.
The chair’s role includes running board meetings, ensuring the board does its tasks and operates effectively; keeping the organisation focused on its goals and representing the organisation to others.
A good board chair provides effective leadership; has the confidence of the board; has a productive working relationship with the CEO if there is one; a good understanding of the purposes and operational challenges of the organisation, skills to build a cohesive board and is an effective ‘conductor’ of meetings.
If your organisation has a CEO, the chair’s role includes being a sounding board for the CEO’s proposals, ideas and concerns; leading recruitment and in some circumstances termination of a CEO’s employment.
The chair oversees in partnership with the Board that the appropriate, lawful and expected actions are done for the organisation to achieve its purpose. Read more about chairing a board.
(some relate to the type of organisation)
With the Chair the secretary prepares the agenda in advance of Board meetings, organises meeting papers for distribution before the meeting, takes minutes and circulates them at Board and Annual General Meetings. The secretary usually deals with correspondence in line with Board decisions.
Ensures preparation and adoption of board policies; if applicable, keeps a register of members and handles procedures for new member admissions, resignations and discipline/suspension and expulsion.
Organises General Meetings and notifies members in advance; receives nominations for positions on the Board.
Keeps all books and documents associated with the organisation (eg trust deed, constitution, copies of minutes). Liaises with regulators such as Charities Services. As required, produces in partnership with the board other documentation on correspondence and policies/plans.
At each board meeting the treasurer reports to the board on the financial situation and any variation from the approved budget, prepares accounts for auditing; and reports to the AGM on the organisation’s financial situation.
Advises the Board on financial matters, including fundraising.
Ensures that appropriate financial policies and procedures, such as financial controls, are adequate and safeguards against fraud are in place; ensures risk management strategies are in place; Oversees investment strategy and that expenditure limit approvals and checks are in place and fully documented.
Depending on organisational size, the treasurer may collect and receipt all money received.
Employing and supporting a Chief Executive
The interrelationship between a board and chief executive is critical to governance success. Think of it as a partnership in which each respects the other’s roles, responsibilities and prerogatives.
If you are a small organisation currently without a chief executive, you will need to clarify if you want or need a chief executive or an administrator. You might decide that the board volunteers will carry out operational tasks as well as
being the governing body.
If you do decide to recruit firstly:
- Make clear what the chief executive is to achieve – the organisational outcomes you want that the chief executive then carries out operational to achieve.
- Determine the authorities that the chief executive will be granted – policies and protocols to guide them (for example around financial control).
Good chief executives are in high demand. Just when things are going well, you may find you need to replace them.
Key elements in a successful relationship between the board and chief executive include:
- Role clarity
- Mutual expectations must be explicit and realistic – what the board and chief executive want of each other
- Reporting and information requirements
- A fair and ethical process for chief executive performance management
- A sound chief executive-chair relationship
- Helping the board understand the risks faced by the organisation
The chief executive’s two primary roles at board meetings are:
- helping the board understand and address the future by providing advice and support to the board’s discussion and decision making; and
- helping the board analyse and understand the past and providing evidence that everything within the organisation is as it ought to be.
(Based on advice in Nine steps to effective Governance, Sports NZ).
Policy Development Responsibilities
A policy is an agreed basis for action, made ahead of time. It provides guidance and expectations on the course of action.
Policies are a vital form of ‘remote control’, allowing the board to influence what goes on in the organisation without having to make every decision. They should be seen as living documents and not as ‘tick box and put on the shelf’ exercises. They should be reviewed every so often to ensure they are fit for purpose.
Rather than work on policies it might be tempting to just get on with what seem more pressing issues, and ‘get back to policies later’, especially if you are in a small organisation where board or committee members are doing a lot of hands on management related work.
Unfortunately this can mean much policy making becomes reactive, developing in ad hoc fashion to solve a particular problem after it has occurred. Examples could be developing policy over conflicts of interest on the board or if it’s revealed the chief executive occasionally using organisational credit cards for personal matters.
An ad hoc approach can mean a policy becomes too tailored to resolving a specific issue and can also involve uncomfortable personal discussions.
It is better for the board to be proactive and work in advance as a team to think about and develop policies, so they act as guides and provide clarity about functions and expectations.
The constitution or rules is an important starting point for the development of policies, as well as the board’s legal and other responsibilities. Some boards develop a board charter which sets out the responsibilities and expectations of the board and board members. Whatever approach you take, have them in one document, rather than scattered.
One policy framework widely used is based on the concept of policy governance developed by John Carver (John Carver, Boards That Make a Difference, 3rd ed. San Francisco: Jossey-Bass, 2006). He has four policy categories that cover the core elements of the board’s job. The first two are related to the board’s job and its role as an employer; the third to preventing and minimising harm to the organisation and the fourth to the impact of the organisation in the world.
- Governance Process policies – these define the scope of the board’s own job and design its operating processes and practices.
- Board-Chief Executive Linkage policies – these define the nature of the board-chief executive relationship, specifying the details and extent of the board’s delegation to the chief executive and methods to be used in determining chief executive effectiveness.
- Executive Limitations policies – these define the constraints or limits the board wishes to place on the freedom of the chief executive (and by implication other staff and volunteers) has to select how he or she will achieve the outcomes for the organisation that the board has identified. These are written in a proscriptive way (telling the chief executive what they can’t do or shouldn’t let happen, rather than what they can do). This approach gives greater control to the board and at the same time offers more empowerment for the chief executive.
- Ends (or Outcomes) policies – these address the purpose of the organisation and set the outcomes or strategic results to be achieved by the organisation.
The chief executive and other key staff should participate in the development especially of Ends/Outcomes policies and Executive Limitations policies. You might want to bring in an outside consultant to help speed up the process, but it is important that the board and staff discuss them properly as they apply to your organisation.
Once they are adopted, staff and all board members are bound by them. They enable decisions to be implemented by the organisation even when the board members may not be unanimous on a particular issue.
Community Net Aotearoa’s guide on policy development:
Board charter and policies Online resources available.
Policy Bank Institute of Community Directors Australia
Boards have a financial stewardship responsibility for the organisation. While there is a tendency for board members to rely on board colleagues who have particular financial or accounting expertise, all board members are accountable for the financial well-being of the organisation.
It’s prudent to get training so you can ask informed questions and understand the organisation’s financial matters. The board should ensure this happens.
The board should develop policies to support its financial stewardship. They might include policies that set out limitations and expectations for the chief executive on:
- spending authority (eg the maximum level at which chief executive can spend without needing to seek board permission)
- budgeting/financial planning (eg CEO shall not use surplus funds inconsistent with the boards’ use of reserves policy)
- protection of assets (eg CEO shall not subject buildings and equipment to unauthorised or improper use, wear and tear or insufficient maintenance; or fail to have adequate insurance for prudent risk management).
Other policy areas could include policy on investments, working capital, net assets and reserves, and general guidelines for financial management, employee remuneration and benefits.
The board should get regular financial position and performance information so it can take remedial action if necessary.
CommunityNet Aotearoa’s guide on financial management:
The External Reporting Board (XRB) provides accounting standards for financial reporting for not for profit organisations (Tier 1,2,3,4), reporting templates, tips and FAQ at this link:
Capacity Building Webinars on finance
A blog on fraud and tips to avoid it from Charities Services:
The Troublesome Board Member, National Center for Nonproﬁ t Boards, Washington – Bailey, M 1996
Perfect Nonproﬁ t Boards: Myths, Paradoxes and Paradigms, Simon and Schuster Custom Publishing, Needham Heights – Block, SR 1998
Governance as Leadership: Reframing the Work of Nonproﬁ t Boards, John Wiley & Sons, Hoboken Chait, RP Ryan, WP & Taylor, BE 2005
Board charter and policies Online resources @ www.sportnz.org.nz
A series of ‘Getting on Board’ webinars by Creative New Zealand at this link posted by NZ Navigator Trust.
The webinars cover the following topics:
- Governance with impact
- Chairing the board
- Information for good governance
- Decision-making at board level
- Board succession and transition
- Board dynamics
- Health and safety and the role of the Board
- Boardroom excellence – the Chair/Chief Executive relationship
This on-line 2 to 3 hour New Governance 101 course is available to the wider Not for Profit sector and free on the SportTutor learning platform at SportNZ at the link below:
Policy Bank Institute of Community Directors Australia
Trustee’s liability: Trustees liability information