Keith Roberts FCIS of NFP Analysts, shares 10 solutions to common governance problems he sees at associations and charities.
1 Critical importance of the objects
Not-for-profits exist to advance the purpose or purposes for which they were established, commonly called the objects, in the constitution. Whilst mission statements and strategic plans may be more directly actionable than the objects, the objects are paramount and overriding. If your objects are verbose and less relevant as your association develops, revise them by amending your constitution in line with what you are trying to achieve. However, objects are a key factor in determining tax status so be cautious in the outcome.
2 Be accountable to someone else
Being accountable to someone else is a key pillar of good governance. Having NFP Boards report to themselves makes for easy board meetings and safe AGMs but they favour the status quo. Whilst some justify the practice by claiming to be accountable to stakeholders or funders, that is not the same as being legally accountable to someone who can remove you.
3 Lock in director turnover
Boards must be able to alter or discard policies that are no longer appropriate, but this is difficult if the architect of an outmoded policy still sits on the board. Constitutions requiring directors to leave for a period after several years on the board ensure that new perspectives will routinely be brought to the board. Having a maximum term also makes it easier to recruit directors - they understand they will not be on the board indefinitely.
4 Ensure staggered terms for directors
Having part of the board up for re-election each year protects an association or charity from losing all directors, and their knowledge, at one go. It helps board development by progressively feeding new directors and perspectives onto the board.
5 Get the board size right
If an association or charity has too few directors, decisions are too easy with dominant personalities prevailing. Too many directors risks cliques developing, difficulties in achieving consensus and non-performers at the board table - plus they cost more. Having 8-10 is small enough to be efficient while large enough to provide diversity and robust decisions.
6 Consider independent external directors
Associations traditionally, and understandably, source their Directors from among their members. Yet an independent perspective and different skill set may assist your organisation to better achieve its mission. Look at including in the Constitution the opportunity for a Board, comprised primarily of members of the association, to be able to appoint one or two extra Directors from different backgrounds and qualifications.
7 No nominations from the floor at the AGM
It is poor process to allow candidates for the board or office bearer positions to nominate from the floor of the AGM. Apart from effectively disenfranchising members who have submitted proxies based on prior circulated information, nominations from the floor allows no time for due diligence on the candidate or for ensuring the candidate realises the obligations that they are taking on.
8 Focus the board agenda on strategy
Boards should spend the bulk of their time on future strategic matters that will advance the mission, not being updated with detailed reports on the past. Monitor yes, rehash or look backwards no. Your association's annual planning process should have identified key strategic issues, so those issues can be used to guide your agenda.
9 Expect draft minutes to be received in days
Minutes should be out for comment while the meeting is still fresh in the minds of participants - good practice is out in 48 hours. Prompt and accurate minutes remove directors' temptation to keep their own notes which can raise questions on what the real minutes are during potential litigation. Also, in the case of acrimonious board meetings (alas, they happen), consider data-projecting and confirming the minutes as you progress through the meeting.
10 Minutes are not verbatim records of meeting
Minutes are a record of the proceedings and resolutions of meetings - not a transcript of who-said-what. Less is better, apart from key decisions where, for the Business Judgment Rule, sufficient detail should be included to substantiate the reasoning behind the decisions. Even if your board follows formal meeting procedures, don't include names of movers and seconders as these individuals may be targeted first in litigation.
Keith Roberts is a consultant with NFP Analysts.
he can be contacted at kroberts@nfp.net.au
This article first appeared in Edition 29 - June 2011 of Associations