Improving your governance – workshop for membership organisations Sandra De Lord, Partner, Kingston Smith LLP Thea Longley, Partner, Bates Wells & Braithwaite LLP
As a reminder… As a reminder… As a reminder… As a reminder… ...about Kingston Smith Top 20 UK full service accounting firm � Over 60 partners and around 450 staff � Largest non-national firm of accountants � Founding member of KS International � 15 years of Sunday Times “Business � Doctor” 4 partners dedicated to trade � association sector In-house association management team � Specialist fundraising advisory � department dedicated trade associations Regular newsletters and updates � team...
Workshop outline � Overview of governance � Alternative constitutional forms and attracting the ‘right’ board - followed by group discussion and feedback � Refreshment and comfort break � The framework for good governance: decision making and the role of the board - followed by group discussion and feedback
What is a governance Governance is the Governance is the Governance is the Governance is the process by which process by which process by which process by which decisions are made and decisions are made and decisions are made and decisions are made and implemented… implemented… implemented… implemented…
What is a governance ….taking account of the need to: � Deliver the purpose and vision of the organisation � Operate within a framework that complies with internal rules; organisation culture; external regulation � Understand the risks and rewards of decisions and actions � Move the organisation forwards in a timely way
Benefits of good governance
Useful frameworks � NCVO NCVO code of governance for the voluntary and code of governance for the voluntary and NCVO NCVO code of governance for the voluntary and code of governance for the voluntary and community sector community sector community sector community sector http://www.governancecode.org/full-code-of-governance/ � Financial Reporting Council UK corporate Financial Reporting Council UK corporate Financial Reporting Council UK corporate Financial Reporting Council UK corporate governance code governance code governance code governance code http://www.frc.org.uk/Our-Work/Codes-Standards/Corporate- governance/UK-Corporate-Governance-Code.aspx � Nolan Principles Nolan Principles Nolan Principles Nolan Principles – – Committee for standards in – – Committee for standards in Committee for standards in Committee for standards in public life public life public life public life http://www.public-standards.gov.uk/about-us/what-we-do/the- seven-principles/
Useful frameworks NCVO Code of Governance NCVO Code of Governance FRC FRC UK Corporate Governance UK Corporate Governance Nolan Principles Nolan Principles NCVO NCVO Code of Governance Code of Governance FRC FRC UK Corporate Governance UK Corporate Governance Nolan Principles Nolan Principles Code Code Code Code Understand the role Leadership Selflessness Deliver organisational purpose Effectiveness Integrity Work effectively as individuals and as Accountability Objectivity a team Exercise effective control Remuneration Accountability Behave with integrity Relations with shareholders Openness Be open and accountable Honesty Leadership
Trade Associations Constitutional forms and getting the ‘right’ Board Thea Longley Thursday 14 March 2013
What will we cover? • Introduction – legal forms • Terminology • Incorporated / unincorporated • Directors’ Duties • Governance triangle • Chair/CEO relationship? • Getting the ‘right’ Board • Conflicts of Interest • Bear traps
Legal forms – boring but important! • Lots of legal forms for membership organisations e.g. Incorporated: – Company limited by guarantee – Industrial and Provident Society – Royal Charter Body – Community Interest Company Unincorporated: – Unincorporated association
What is a constitution? Constitution = governing document Company → Articles of Association IPS → Rules Royal Charter → Charter Unincorporated Association → rules/ constitution/byelaws (lots of names) NB: may also be: standing orders, byelaws, regulations etc.
Why does the Constitution matter? • Sets out procedures for meetings, appointments etc. • Must be followed or decisions can be challenged
Who is the Board? (1) Board Members
Who is the Board? (2) • Directors • Management committee • Council etc etc
Who are the members? • Members can be: – Democratic (members in a legal sense) with legal rights to vote at the AGM, elect in whole (or part) the Board and dismiss Trustees (e.g. National Trust); and – Participative (members in a colloquial sense) these can be termed Friends or Supporters (e.g. Tate Gallery).
Liability to third parties and structure (unincorporated) • Cannot contract in its own name • Board members: – contract in their own names – are responsible for performing contract – Are personally liable even if the organisation runs out of funds • Members can be liable
Liability to third parties and structure (incorporated) • A company can contract in its own name • Directors have limited liability • Directors and members are not liable to third parties for breach of contract or tort claims • Directors not liable even if the company runs out of funds (subject to wrongful and fraudulent trading exception)
Directors Duties (1) A director’s general duties under the Companies Act 2006 are: 1.1 to act within the company’s powers; 1.2 to promote the success of the company for the benefit of the members as a whole, having regard to:
Directors Duties (2) (a) the likely consequence of any decision in the long term; (b) the interests of the company’s employees; (c) the need to foster business relationships with customers and suppliers; (d) the impact of the company’s actions on the community and environment; (e) the desirability of the company maintaining a reputation for high standards of business conduct; and (f) the need to act fairly as between the members of the company.
Directors Duties (3) 1.3 to exercise independent judgement; 1.4 to exercise reasonable care, skill and diligence; 1.5 to avoid conflicts of interest; 1.6 not to accept benefits from third parties; and 1.7 to declare an interest in proposed transactions or arrangements. This is in addition to the existing duty to declare an interest in existing arrangements.
The governance triangle • The board is the supreme governing body as set out in the governing document, led by chair/president • The secretariat are the employed operational staff, led by CEO/director • The members are the entities which the TA represents and who belong to the TA
Governance process The Board Board meeting Objectives Governing body Staff, volunteers on behalf of Informs itself via membership reports from staff, Implement Within framework sub-committees, decisions of its own rules & expert advice Deliver strategy the law of the land Takes decisions Report progress to the Board
Chair/CEO relationship • Key to successful governance • Chair usually line manages the CEO – supervision meetings, appraisals • Need a strong professional working relationship – open/hones/mutual respect/understanding • Regular meetings (but not too regular) • Board should be supportive and also provide constructive challenge when necessary
What is the right board? • Identify skills • Audit skills • Identify gaps • Do you want executive members (e.g. staff) on the board?
Democracy and Board Skills – get the balance right • What is the problem? • Appointed vs elected
Possible solutions • Appoint to posts – e.g. “Treasurer”, “Regional representatives” • Selection Panel, Appointments Committee, Nominations Committee • Co-option • Terms in office • Automatic retirement and sunset provisions • Staggered retirement to ensure continuity
Lots of variations • Do co-opted board members have to be reappointed at the AGM or not? • Selection panel – only those selected put forward for members to elect – all those nominated put forward with flags on those recommended – selection panel appoints? – who appoints selection panel?
Conflicts of Interest • Register of Interests • Conflicts policy – follow constitution • Those conflicted don’t participate ?
Bear Traps • Mutual Trading exemption • Member buy in – consultation is key!
Discussion session 1 � How is your association constituted? � Do you have an advisory council that supports the board? � What size is the board/council? � Do you face conflicts of interest? � What works well and what doesn’t about this structure? � How could it be improved?
Session 2 – The framework for good governance What we will cover � What should the board be doing � How should the board act � The board’s role in decision making � Strategy and planning � Appraising effectiveness - of the entity and of the board
Recommend
More recommend
