Governance Basics

2. Governance Basics Governance Training

3. Governing Board • Has ultimate corporate authority • Total authority matched by total accountability • Can be superseded only by organization’s owners or by the state • In SDA structure the owner is the constituency, or “membership” defined in the bylaws

4. Governance and Management: • Governance: • Requiring accountability by setting goals and evaluating performance • Setting strategic plans and major policies • Overseeing implementation of plans/policies • Management: • Implementing plans and policies • Managing day-to-day operations • Reporting on performance

5. Governance Documents 1 3 2

7. What Good Boards Do: • Shape mission and strategic direction • Maintain SDA identity of organization • Establish key policies and strategies • Select, develop, and evaluate officers • Ensure adequate financial resources • Build/enhance organization’s reputation • Provide adequate risk management • Assess performance against mission • Improve board performance

8. 7 Signs of Ethical Collapse: • Pressure to maintain those numbers • Fear and silence (dissent not tolerated) • Bigger-than-life president/CEO, aspiring colleagues • Weak boards • Conflicts of interest not addressed • Success is all that matters • Goodness in some areas atones for evil in others

9. Board policies:

10. Employees stunned most academics by saying that the code of ethics for their company had very little influence on whether they made ethically correct choices. It was the culture of their companies and the examples set by their leaders that influenced their conduct. —from a 2004 study by the Journal of Business Ethics

11. Conflicts of interest: Three basic rules:

12. Board Composition:

13. Choosing Board Members • How well does the person work in a group? • Is the person’s own house in order? • What is the person’s reputation? • Is the person capable of understanding the institution’s mission and work? • Can the person overcome territorialism? • Can the person commit sufficient time?

14. Director/Trustee Obligations

15. Directors/Trustees • As a body, a board of directors has considerable power. An individual director, acting alone, has almost no power. • Relate to several parties or interests: • constituency which elected/appointed him/her • constituency of service (i.e. students) • constituency of accountability (i.e. gov’t)

16. What directors need to know: • Who selected him/her? • What is the term of service? Re-electable? • What is organization’s purpose? • What constituencies are served? • What corporate documents exist…? Bylaws, policies, committee structure and terms of reference, etc.

17. Director/member rights: • Access to management • Access to records and documents • Ample notice of meetings

18. Duties of Board Members Care Obedience Loyalty

19. The duty of care • Refers to the level of competence expected • (need for orientation and training) • Common standard: “an ordinary prudent person…”

20. The duty of care • Duty to attend meetings regularly • Duty to show independent judgment in voting • Duty to be informed about organisational activities • Duty to rely on trustworthy sources of information

21. The duty of care • Duty to delegate to trustworthy individuals… • Duty of diligence, perfect judgment not expected (must not ignore what is believed to be illegal) • Duty of risk management …

22. The duty of loyalty • Corporate position not for personal advantage • Standard of faithfulness to the organisation

23. The duty of loyalty • Undivided allegiance when making decisions • Duty of loyalty breached when members use organisational property for personal purposes • Maintaining confidentiality of privileged information

24. The duty of obedience • Making sure the organisation remains obedient to its purpose and role (i.e. faithful to SDA mission, beliefs, culture, policies and practices) • Duty of compliance with laws • Fulfilling commitments, including previous ones

25. Board member orientation: • Director’s handbook • Legal documents • Organizational chart • Meetings (time and frequency) • Committee structures, if any • Fiduciary responsibilities

26. Effective Meetings

27. Officers frustrated by: Inappropriate involvement in day-to-day operations Unclear expectations Lack of honesty Cop mentality Going around the officer Leaks of confidential info Insufficient board member knowledge Late/absent members Grenades in meetings Boards frustrated by: Baked cakes Excessive time spent Attempts to control Being kept in the dark Overloaded board packet Too much jargon Too many staff reports Tension between admin and staff Board and Officer Frustrations

28. Conduct meetings on a regular basis. • Supply agenda information and reports in advance. • Help senior management determine “what matters most” (avoid syndrome of “everything matters most”). • Careful attention to sequence of agenda items. • Create opportunities for CEO to think out loud.

29. Encourage experimentation. • Monitor progress and performance (define the dimensions of success). • Model desired behaviors. • Establish basic rules of conduct. • Draft recommendations in advance. • Conduct orientation for new board members.

30. Involve all members. • Affirm the appropriate role of the chair. • Think carefully about seating arrangements. • Focus on decision-making that is informed by the mission statement. • Timely publication of minutes.

31. Conduct board evaluation and retreats… • Encourage good social dynamics. • Regularly review the board’s code of ethics, including conflict of interest policies.

32. And while the Great Ones repair to their dinner, the Secretary stays, growing thinner and thinner. Racking his brains to record and report what he thinks they will think they ought to have thought. London Institute of Directors 1971 Standard Manual

33. Governance best practices: • Create and use board member selection criteria. • Insist on mandatory orientation and on-going education • Create master board calendar (and website). • Conduct board evaluations. • Review board structure, composition, and policies on a regular basis. • Conduct rigorous review of conflict of interest declarations. • Clarify roles, responsibilities, and authority. • Focus on effective meetings.

34. Effective meetings: • Stay on the governance level. • Provide agenda materials in standard formats, with executive summaries, in advance. • Use consent agenda for routine items. • Create and monitor ‘dashboard’ performance indicators. • Facilitate conversations that build consensus. (Rules of order can be misused.) • Develop and support healthy board culture. • Use a meeting evaluation tool to obtain feedback.

35. ‘999’ Plans What can be done to improve governance in the next 9 days? What can be done to improve governance in the next 9 weeks? What can be done to improve governance in the next 9 months?

36. Acknowledgements: • Boards That Make a Difference, 2nd edition, John Carver, Jossey-Bass Publishers, San Francisco • Guidebook for Directors of Nonprofit Corporations, Section of Business Law, American Bar Association • Meeting the Challenge, Video, BoardSource—formerly the National Center for Nonprofit Boards • Ten Basic Responsibilities of Nonprofit Boards, Richard T Ingram, BoardSource • The Board Meeting Rescue Kit, BoardSource • What Boards Are Supposed To Do, The Governance Institute • “What Makes Great Boards Great”, Harvard Business Review, September 2002 • The Association of Governing Boards, Washington, DC. • Hansen, Kent—Attorney, various documents and seminar presentations • Hiroshima, Phil—Attorney, various documents and seminar presentations • Nixon, Robert—Attorney, various conversations and presentations. • Cooper, Lowell – Vice President SDA Church Headquarters

37. End