Corporate Governance
19 October 2001 at 1:10 pm
It’s claimed that one of the biggest issues facing the Not for Profit sector in Australia today is organisations reassessing their constitutions — corporate governance for the 21st century!
The question that many organisations are asking is whether the structure of their governing body is outdated, has had too much tinkering over the years or in fact is in line with planned strategic development. Perhaps this is a question for many corporations as well.
Kate Costello is a national governance consultant and her company ProQualis is based in Adelaide. Costello says many older Not for Profits, in particular those constitutions that go back as far as fifty or even one hundred years, are now finding the going tough.
She says these organisations have strictly defined structures which tend to see them with very large numbers on their Boards. Originally, the thinking was that with the tyranny of distance, governing councils had to be large with 30 or more people.
Costello says today in many organisations the executive is now fulfilling the governing role with decisions ratified by the governing council, but many councils don’t appreciate that technically they are the directors and carry all the legal responsibilities of that role.
She says in some cases the board can be too large for effective decision making, with the organisations relying on the executive too heavily, loading the CEO with the same duties and responsibilities as the boss of a major corporation like BHP Billiton.
Costello says the sector should remember that the largest ever legal claim in Australia in terms of breach of responsibilities involved a Not for Profit.
The National Safety Council collapsed with its honorary chairman being found legally liable for $97 million!
She says organisations with a more commercial flavour have acted to reduce their Boards, while many charities in the education and welfare sector have a background that makes them less inclined to make changes.
Costello says the challenge for NFPs is how to reduce the number of Board members to an efficient decision-making size while maintaining a strong commitment to the membership and stakeholders.
She says the new thinking is that the optimum number of people on the Board of Directors is between five and seven.
One way is to set up several committees that include some Board members but also include the membership and stakeholders to ensure all parties have ongoing participation in reporting back to the board.
Kate Costello also offers some ways in which the quality of the Board can be maintained.
Costello says education is a key factor in ongoing Board performance. She points to the “Tricker Model” as a best practice option. The model is divided into four quadrants that generally covers the areas of Accountability (to the law and the stakeholders). Policy Management, Monitoring and Supervision and Strategies for the Future.
Many Charities are looking for leadership in making changes in corporate governance and look to their corporate sponsors and partners for assistance.
The issues around Corporate Governance are complex and varied. At Pro Bono Australia we are often asked for ongoing information and discussion. If you would like to add to the debate or would like a copy of the “Tricker Model” send us an e-mail to corpnews@probonoaustralia.com.au.
