Improving your governance workshop for membership organisations - - PowerPoint PPT Presentation

Improving your governance – workshop for membership organisations

Sandra De Lord, Partner, Kingston Smith LLP Thea Longley, Partner, Bates Wells & Braithwaite LLP

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As a reminder… As a reminder… As a reminder… As a reminder…

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

• rganisation

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 NCVO NCVO code of governance for the voluntary and code of governance for the voluntary and 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 NCVO NCVO NCVO Code of Governance Code of Governance Code of Governance Code of Governance FRC FRC FRC FRC UK Corporate Governance UK Corporate Governance UK Corporate Governance UK Corporate Governance Code Code Code Code Nolan Principles Nolan Principles Nolan Principles Nolan Principles Understand the role Leadership Selflessness Deliver organisational purpose Effectiveness Integrity Work effectively as individuals and as a team Accountability Objectivity 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
• rganisations 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

• r 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

Governing body

• n behalf of

membership Within framework

• f its own rules &

the law of the land

Board meeting

Informs itself via reports from staff, sub-committees, expert advice Takes decisions

Staff, volunteers

Implement decisions Deliver strategy Report progress to the Board

Objectives

Chair/CEO relationship

• Key to successful governance
• Chair usually line manages the CEO – supervision

meetings, appraisals

• Need a strong professional working relationship –
• pen/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

The board and decision making Signs of Signs of Signs of Signs of a poor board a poor board a poor board a poor board

Board members declining in number / quality

/ attendance

Ineffective meetings – prevent issues being

resolved speedily

Board / staff / members have little

confidence in each other

Dominance at meetings by a few individuals

The board and decision making What should the board do?

Leadership Control Compliance Protection Monitoring Reviewing

How should the board act

Lead Lead Lead Lead Honest Honest Honest Honest Open Open Open Open Advocate Advocate Advocate Advocate Integrity Integrity Integrity Integrity Objective Objective Objective Objective Accountable Accountable Accountable Accountable Committed Committed Committed Committed Selfless Selfless Selfless Selfless

Making the right decisions

A strong board A strong board A strong board A strong board

Makes strategic decisions as opposed to

• perational and management decisions

Works with the Executive and staff to ensure

the decisions of the Board are acted upon

Delegates to sub committees, but doesn’t

abdicate

Making better decisions

Mission Vision for risk management

Protect /create value Support good governance

Risk as a ‘critical friend’ Vision for risk function Strategic goals for risk management

Risk aware culture and integrated use

• f risk management

in strategic decisions Clear risk governance and quality assurance to keep risk under control Risk function challenges and supports

• perations

Objects and objectives

Situation analysis Options analysis Feasibility study Business plan

Strategy and planning

Strategy and planning

Where are we now? Where do we want to be? How are we going to get

there?

How will we measure success?

Where are we now?

Are we doing what we were set up to do? How

well?

What are we measuring - numbers / income ?

What does that tell us?

What difference are we making? How do we

know?

What is the competition? What do our stakeholders think of us?

Where do we want to be?

Vision Drivers for change Why – change? Us? Now? What do our stakeholders need? What are the benefits and how can we

measure them?

Who else is there?

How will we get there?

Do we have strong enough leadership? Do we have the right staff? Do we have the right buildings? Do we have the right message? What will it cost and how can we afford it? Who can help us and how?

How will we measure success?

Stakeholder consultation SWOT PESTLE Board effectiveness review

PESTLE & SWOT

Economic Economic Economic Economic Social Social Social Social Technological Technological Technological Technological Political Political Political Political Legal Legal Legal Legal Environmental Environmental Environmental Environmental Strengths Strengths Strengths Strengths Weaknesses Weaknesses Weaknesses Weaknesses Opportunities Opportunities Opportunities Opportunities Threats Threats Threats Threats

Board effectiveness appraisal

Ask yourself how well you do the following:

Understand and promote mission and values Enhance the organisations image Understand the objects of the organisations/ main

• perational strands of activity/ how they contribute to

financial wellbeing and mission

Represent the views of your membership Participate in effective decision making Set clear targets and monitor outcomes

Board effectiveness appraisal

Can board members meet the time commitment

required?

Are board meetings conducted effectively? Are decisions made in a timely way? Are agendas and minutes adequate? Are conflicts of interest properly dealt with? Is confidentiality maintained?

Discussion session 2

Does your board have clear objectives, strategy

and timeframe?

Do you clearly identify and track KPIs? How do you measure and benchmark success/

failure?

Do you manage risk adequately? Have you undertaken board effectiveness

appraisal? Was it successful? Did you have to

• vercome resistance ?

Any questions?

• Sandra

Sandra Sandra Sandra De De De De Lord, Lord, Lord, Lord, Partner, Kingston Smith LLP T 020 7566 3764 sdelord@kingstonsmith.co.uk

• Thea

Thea Thea Thea Longley, Longley, Longley, Longley, LLP Partner, Bates Wells & Braithwaite London LLP T 020 7551 7831 t.longley@bwbllp.com