Governance

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Unlike the other factsheets on this wiki, this is a first draft, and there is no pre-printed factsheets so please do take the time to read this and to amend as you see fit...

Contents 1 Leadership and governance 1.1 Leadership 1.2 Governance 2 Corporate governance 2.1 Key Principles of Good Governance 2.2 The 12 Board responsibilities 2.2.1 Set and maintain vision, mission and values 2.2.2 Develop strategy 2.2.3 Establish and monitor policies 2.2.4 Set up employment procedures 2.2.5 Ensure compliance with governing document 2.2.6 Ensure accountability 2.2.7 Ensure compliance with the law 2.2.8 Maintain proper fiscal oversight 2.2.9 Select, manage and support the chief executive 2.2.10 Respect the role of staff 2.2.11 Maintain effective board performance 2.2.12 Promote the organisation 3 Specific responsibilities

[edit] Leadership and governance

Leadership refers to the lead provided by the Chairman, the board and the CEO. Governance refers to the rules and systems, whether formal or informal, intended to keep an organisation on the ‘straight and narrow’.

[edit] Leadership

Organisations work well when there is someone, or a group of people, who sets a clear direction and who inspires the whole organisation to work towards a common purpose. Leadership is not about observing the rules or about telling people what to do, but rather about inspiration, example and confidence building.

[edit] Governance

Business membership organisations are usually constituted as an Association, a Company Limited by Guarantee or a Trust.

All the requirements of how the BMO’s affairs must be conducted are summarised in a legally registered governing document such as a Memorandum and Articles of Association or a Trusteeship Deed. These documents also specify the roles, powers and obligations of the BMO’s members and officials.

A membership organisation should maintain an up-to-date register of its members. Indeed, companies have a legal obligation to do this.

There is usually a governing Council of some description, elected by the membership. Either the members directly, or the Council, will elect officials – usually a Chair, Secretary and Treasurer. Larger BMOs may additionally create a management committee, typically comprising the officers and perhaps three or four others. The Council is typically responsible for setting the strategy and the policies of the organisation, for ensuring that all legal obligations are satisfied, and for monitoring the performance of the executive. Some BMOs may create sub-committees, on a standing basis such as a finance committee or audit committee or staffing committee, or on an ad hoc basis such as a committee to deal with a specific advocacy initiative.

It may take a little while for a BMO to develop to the point where it needs such a committee structure. Most BMOs start more like a club, providing some networking for members, and with a very informal structure. However, if the BMO is going to deliver value, it is likely that it will need to progress beyond that. Often the first step is to employ one or two people and to engage in advocacy. But it then needs to look at providing additional services in order to attract additional members.

[edit] Corporate governance

Corporate governance is the system by which organisations are directed and managed. This includes noting the laws and regulations with which they must comply. Corporate governance defines how the objectives of the company are set and achieved, how risk is monitored and assessed, and how performance is optimised.

Good corporate governance structures encourage organisations to create value (through entrepreneurship, innovation, development and exploration) and provide accountability and control systems commensurate with the risks involved.

What constitutes good corporate governance will evolve with the changing circumstances of an organisation and must be tailored to meet those circumstances. There is no single model of good corporate governance. Here, we articulate 10 principles that we believe underlie good corporate governance.

Although these recommendations are not mandatory and cannot, in themselves, prevent corporate failure or mistakes in corporate decision-making, they can help to minimise problems and optimise performance and accountability.

Any corporate governance structure requires establishing the roles of management and the board, with a balance of skills, experience and independence appropriate to the nature and extent of the operations. There is a basic need for integrity among those who can influence a company’s strategy and financial performance, together with responsible and ethical decision-making.

[edit] Key Principles of Good Governance

• The organisation is led and controlled by an effective Board of trustees with a clear understanding of purpose, direction and priorities, which provides leadership and which takes collective responsibility to ensure delivery of its objects with a focus on long term impact and which is the guardian of the organisation’s values.
• Structuring the board to add value: have a board of composition, size and commitment to discharge effectively its responsibilities and duties; ensure that the board has clear responsibilities and functions and organise itself to discharge them effectively; consider whether to co-opt directors in addition to those elected by the members in order to bring specific expertise; avoid conflicts of interest; set out clearly the functions of sub-committees, officers, the chief executive, other staff and agents in clear delegated authorities, and monitor their performance
• Everyone on the board and all the senior staff have read and understand the Memorandum & Articles, or other governing documents, and is confident that the organisation’s systems and procedures reflect the requirements set out in the governing documents (and any other legal or regulatory requirements), the organisation’s values and the organisation’s plans
• Everyone on the board and all the senior staff have read and understand the organisation’s strategy, business plan and financial plan and are clear about the organisation’s objectives and priorities;
• Trustees take collective responsibility and are accountable for ensuring that the organisation is performing well, is solvent and complies with all its obligations; everyone understands the part they play in achieving success for the organisation, including recognising the importance of effective and focussed board meetings, with the board focusing on strategy, holding the executive to account, and its legal responsibilities and not interfering in the day to day management of the organisation; set out formally the respective roles and responsibilities of board and management; review regularly board and management effectiveness;
• Act in accordance with high ethical standards; promote ethical and responsible decision-making; ensure that conflicts of interest are properly dealt with; ensure everyone is properly informed, with well prepared reports, papers and proposals, and with information flows designed to enable effective decision making;
• Preparing management accounts in a comprehensive and timely way, appropriate to the needs of the organisation, and everyone understands how to read and interpret them; ensure accounts are audited and published annually;
• Develop and maintain good relationships amongst all stakeholders based on trust, openness, transparency and accountability (especially, but not exclusively, between board and executive); respect the rights of the members and ensure that members can exercise their rights; recognise the legitimate interests of stakeholders;
• Ensuring resources are well targeted;
• Trustees should periodically review their own and the organisation’s effectiveness and take steps to ensure that both continue to work well.
• Ensuring risks are assessed, mitigated and effectively managed.

The Governance Hub in the UK has set out 12 specific responsibilities for boards:

[edit] The 12 Board responsibilities

[edit] Set and maintain vision, mission and values

The trustee board is responsible for establishing the essential purpose or mission of the organisation. They are also responsible for guarding its vision and values.

[edit] Develop strategy

Together, the board and chief executive officer develop long-term strategy. Meeting agendas reflect the key points of the strategy to keep the organisation on track.

[edit] Establish and monitor policies

The trustee board creates policies to govern organisational activity. These cover:

• Guidance for staff
• Systems for reporting and monitoring
• An ethical framework for everyone connected with the organisation
• Conduct of trustees and board business

[edit] Set up employment procedures

The trustee board creates comprehensive, fair and legal personnel policies. These protect the organisation and those who work for it. They cover:

• Recruitment
• Support
• Appraisal
• Remuneration
• Discipline

[edit] Ensure compliance with governing document

The governing document is the rulebook for the organisation. The board makes sure it is followed. In particular, the organisation's activities must comply with its charitable objectives.

[edit] Ensure accountability

The board should ensure that the organisation is accountable as required by law to:

• the Charity Commission
• the Inland Revenue
• Customs and Excise
• the Registrar of Companies (if it is a company limited by guarantee).

The board also needs to make certain that the organisation is accountable to donors, beneficiaries, staff, volunteer, and the general public. This means publishing annual reports and accounts and communicating effectively.

[edit] Ensure compliance with the law

The board is responsible for making sure that all the organisation's activities are legal.

[edit] Maintain proper fiscal oversight

The board is responsible for effectively managing the organisation's resources so it can meet its charitable objects. It:

• Secures sufficient resources to fulfil the mission
• Monitors spending
• Approves the annual financial statement and budget
• Provides insurance to protect the organisation from liability
• Seeks to minimise risk
• Participates in fundraising (in some organisations)
• Ensures legal compliance

[edit] Select, manage and support the chief executive

The board creates policy covering the employment of the chief executive. It selects and supports the chief executive and reviews his or her performance.

[edit] Respect the role of staff

The board recognises and respects the domain of staff responsibility. At the same time, it creates policy to guide staff activities and safeguard the interests of the organisation.

[edit] Maintain effective board performance

The board keeps its own house in order. It takes steps to establish:

• Productive meetings
• High standards of trustee conduct
• Effective committees with adequate resources
• Development activities
• Recruitment and induction processes
• Regular performance reviews
• Partnership with consultants where necessary

[edit] Promote the organisation

Through its own behaviour, governance oversight and activities on behalf of the organisation the governing Board enhances and protects the reputation of its organisation. Board members are good ambassadors for the organisation.

[edit] Specific responsibilities

Like all legally constituted organisations, BMOs have a number of legal responsibilities. These include:

• A fiduciary duty to the company to act honestly, in good faith and in the best interests of the company as a whole;
• A duty to exercise the level of skill and care in carrying out their duties that could reasonably be expected from someone of their ability and experience; and
• A duty to carry out the statutory obligations imposed by the Companies Acts and other legislation including
  • Annual returns
  • Notifications (eg of new directors)
  • Maintaining accounts
  • Maintaining registers (eg of members) and minute book
  • Annual audit
  • Payment of taxes
  • Registrations and permits
  • Staff conditions of employment & personnel policies
  • Environmental requirements
  • Health & safety requirements
  • Data protection requirements
• Conflicts of interest