Non-profit Board Induction
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Board Board Basics - Orientation Information Prepared July 2007 This document to be read in conjunction with:
On Board: Serving on the Board of an Arts Organisation http://www.ozco.gov.au/arts%5Fresources/pu blications/on%5FBoard/ Organisation’s rules or constitution Induction material (see page 2 of this document)
Contents 1. Induction material 2. Board role 3. Governance model 4. Australian Institute of Company Directors Code of conduct 5. Characteristics of high performing boards 6. Board competencies 7. Maintaining enthusiasm 8. The difference between Board & Operations 9. Board role descriptions 10. Recruitment & renewal 11. Succession 12. Board meetings 13. Resources
Other information
How to read financial statements
1 Board Basics - Induction Prepared by Linda Carroli, July 2007
1. Induction material
2. Board role
Source: The Book of the Board
Source: http://www.managementhelp.org/Boards/brdrspo n.htm
As a new Board member you should receive a copy of the following:
The most recent Annual Report including most recent audited financial statements Rules of Association Business Plan including financial projections, list of current board members, titles and affiliations, Board organisation chart, Staff organisation chart Annual Program A biography of the CEO and other board members Two or three sets of Board meeting minutes and supporting papers relating to any key issues currently under discussion by the Board Code of ethics or code of conduct (AICD Code of conduct in this document) Board role descriptions (in this document) A list of key forthcoming dates (meetings, events) The newsletter, brochure or other publications Recent press cuttings relating to the organisation’s work A copy of On Board: Serving on the Board of an Arts Organisation
New board members should also: Meet with the CEO Meet with the Chair Visit office and meet staff (when practical)
5. Account to the public for the products and services of the organisation and expenditures of its funds, including:
to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources to accept responsibility for all conditions and policies attached to new, innovative, or experimental programs.
1. Provide continuity for the organisation by setting up a corporation or legal existence, and to represent the organisation's point of view through interpretation of its products and services, and advocacy for them
2. Select and appoint a chief executive to whom responsibility for the administration of the organisation is delegated, including:
"The board is responsible for creating the future, not minding the shop." John Carver
to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the Board, leadership in the organisation, in program planning and implementation, and in management of the organisation and its personnel to offer administrative guidance and determine whether to retain or dismiss the executive
A Board needs … Source: Cameron Ralph Pty Ltd People – Business acumen, courage, integrity, diligence, independence of thought, wise use of social skills Group Dynamics – Relationships between Board and between Board and management
3. Govern the organisation by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including to assign priorities and ensure the organisation's capacity to carry out programs by continually reviewing its work
Information – The right amount, about the right things
4. Acquire sufficient resources for the organisation's operations and to finance the products and services adequately
Monitoring – Overseeing implementation, assessment of Board and senior management
Decision Process – Agenda setting, problem scoping, decision criteria, alternatives, risk analysis
2 Board Basics - Induction Prepared by Linda Carroli, July 2007
3. Governance model Source: http://www.Boarddevelopment.org/display_docu ment.cfm?document_id=112
Broad Responsibilities Vision, Planning & Evaluation
Specific Responsibilities
Finances
Human Resources
Organisational Operations
The governance model draws on elements of the Policy Governance Model and Policy Models of governance. In general this means the Board takes responsibility for the following:
Community Relations
Creates vision, mission Sets policies for ends ie desired results Limits means ie procedures & practices Sets limits to CEO's financial decisions Board reviews financial statements May or may not be involved in fundraising ED = CEO Communication between Chair & ED CEO ultimately responsible to full Board Board receives reports Decisions made by voting CEO attends to all operations Board plans directs Board work No/limited committee structure; only when needed to support the work of the Board Develops awareness of agency in community Interprets & reflects community needs to the organisation
4. Australian Institute of Company Directors - Code of conduct
A director must act honestly, in good faith and in the best interests of the company as a whole. A director has a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office. A director must use the powers of office for a proper purpose, in the best interests of the company as a whole. A director must recognise that the primary responsibility is to the company's shareholders as a whole but should, where appropriate, have regard for the interests of all stakeholders of the company. A director must not make improper use of information acquired as a director. A director must not take improper advantage of the position of director. A director must not allow personal interests, or the interests of any associated person, to conflict with the interests of the company. A director has an obligation to be independent in judgement and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions taken by the Board of directors. Confidential information received by a director in the course of the exercise of directorial duties remains the property of the company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorised by that company, or the person 3
Board Basics - Induction Prepared by Linda Carroli, July 2007
from whom the information is provided, or is required by law. A director should not engage in conduct likely to bring discredit upon the company. A director has an obligation, at all times, to comply with the spirit, as well as the letter, of the law and with the principles of this Code.
5. Characteristics of high performing Boards Source: Pathways Australia, Australian Institute of Company Directors
They know their mission and purpose They understand their roles Members have a range of skills and they make the best use of them They have ownership (of the Board and of their roles) They establish multiple sources of significant revenue They make correct CEO hiring decisions Appropriate new Board members are recruited as needed They assess their own performance regularly They expect commitments to be met They bring resources to the organisation They plan for succession Set a performance culture Meet legal requirements
A high performing board includes: leaders visionaries or strategic thinkers practical people analytical people communicators who can deal with stakeholder groups
6. Board Competencies Source: Australian Institute of Company Directors Competencies for board members can be broken into job-related skills necessary to do their job and personal qualities. Job-related competencies
Strategic expertise – the ability to review the strategy through constructive questioning and suggestion Accounting and finance – the ability to read and comprehend the company’s accounts, financial material presented to the board, financial reporting requirements and some understanding of corporate finance Legal– the board’s responsibility involves overseeing compliance with numerous laws as well as understanding an individual director’s legal duties and responsibilities Managing risk –experience in managing areas of major risk to the organisation Managing people and achieving change Experience with financial markets Industry knowledge – experience in similar organisations or industries.
Personal qualities While different directors can bring different technical skills and knowledge to a board, there are personal qualities that are desirable in all board members:
Integrity – fulfilling a board member’s duties and responsibilities, putting the organisation’s interests before personal interests, acting ethically 4
Board Basics - Induction Prepared by Linda Carroli, July 2007
Curiosity and courage – a board member must have the curiosity to ask questions and the courage to persist in asking or to challenge management and fellow board members where necessary Interpersonal skills – a board member must work well in a group, listen well, be tactful but able to communicate their point of view frankly Genuine interest in the organisation and its business Instinct – good business instincts and acumen, ability to get to the crux of the issue quickly An active contributor – there is no room on boards today for those who do not contribute. Commentators also suggest that board members ensure that they have adequate time to devote to the organisation’s affairs.
7. Maintaining enthusiasm Source: Pathways Australia
Undertake an annual Board review Be sure that roles within the Board are clearly defined Ensure that each member is clear about the organisation’s goals, mission and ethics Ensure Boardroom procedures are effective and efficient. If they don’t suit those on the Board, change them Take plenty of time to recruit Board members. The right people ensure a strong and effective Board Pay attention to the needs and moral of Board members Expect a high standard and hold people accountable Make full use of your Board members’ skills and expertise Ensure the workload of all Board members is comparable Keep the Board informed about and interested in the organisation Determine an appropriate length of service for your Board members Recognise Board decisions that are successful Keep the organisation informed of Board decisions Make the Board accessible so a great divide does not occur between members, volunteers, workers and the Board (but establish some protocols for Board-staff contact) Implement a mechanism to allow members to have their say or to suggest ideas for the organisation Conduct exit interview with Board members
8. The difference between Board & Operations Board responsibilities Source: Adapted from Pathways Australia, Australian Business Arts Foundation
Meets, develops coherent decision-making processes and gets results Sets long term goals and ensures effective planning – strikes a balance between short term and longer term health of the organisation Having the final say when determining yearly objectives Confirms policy and ensures the mission of the organisation is adhered to – is highly mission focused Finalising budgets and allocating funds Maintains it health - Appointing new Board members, evaluating the Board’s performance and providing appropriate induction Taking ultimate responsibility for all legal matters Taking ultimate responsibility for compliance with regulatory requirements (eg annual general meeting etc) Appointing auditors and approving the audit of the financial records (via AGM) Managing committees Maintaining and building the organisation’s public profile and enhancing organisation’s public profile Managing risks Approving any changes of additions outside the budget Taking responsibility for the company’s financial records 5
Board Basics - Induction Prepared by Linda Carroli, July 2007
Confirms and monitors organisation’s programs and services Evaluating Board members and their performance Employing the organisation’s CEO, supports them, setting their remuneration and evaluating their performance against agreed targets and plans. Adapts to the environment in which the organisation operates Serve as Court of Appeal Ensures adequate resources and that those resources are effectively managed
Operational responsibilities (CEO & Staff) Source: Pathways Australia
Providing information to the Board, including recommendations for action Supporting the Board’s planning function Determining community needs – clients, members etc Operating programs and reporting on their successes and shortcomings Evaluating performance Organising the organisation’s events, fundraising activities etc once approved by the Board Managing volunteers and staff (other than the CEO) Implementing Board decisions Conducting day-to-day financial operations Monitoring and managing daily operations Discussing ideas and forming long-term goals Planning organisational strategies Designing programs to achieve the group’s mission Proposing fundraising ideas
Ensuring risk management programs are implemented Ensuring that achievements are recognised and documented Promoting the organisation
Joint Responsibilities Discussing ideas and forming long-term goals Planning organisational strategies Designing programs to achieve the group's mission – mostly CEO’s role Proposing fundraising ideas Ensuring risk management programs are implemented Ensuring that achievements are recognised and documented Promoting the organisation In understanding the difference between Board and Operations, we understand more fully our roles, are equipped to fulfil our duties and roles, and diminish the risk of micromanagement. Micromanagement Source: Wikipedia Micromanagement is a management style where a manager [board] closely observes or controls the work of their employees [CEO], generally used as a pejorative term. In contrast to giving general instructions on smaller tasks while supervising larger concerns, the micromanager monitors and assesses every step.
9. Board role descriptions Source: The Book of the Board Refer also to the organisations rules of constitution Board Member Function
Provide governance to the organisation Represent the organisation to the community Accept the ultimate legal authority for the organisation
Qualifications/Skills
Knowledge and skills in one or more areas of Board governance eg policy, finance, programs or personnel
Term
Board members are elected by the members at the Annual General Meeting and serve a two year term. A maximum of three two-year terms may be served.
Requirements
Commitment to the work of the organisation Willingness to serve on at least one committee and actively participate Attendance at Board meetings A time commitment of five hours per month (include Board preparation, meeting and committee meeting time) Attendance at Annual General Meeting where possible 6
Board Basics - Induction Prepared by Linda Carroli, July 2007
Be informed of the services and programs provided by organisation and publicly support them Prepare for an participate in the discussions and the deliberations of the Board Be aware and abstain from any conflict of interest
Be assured that management succession is properly being provided Appoint independent auditors subject to approval by members Review compliance with relevant material laws affecting the organisation Undertake Board development and training as opportunities arise
Major Duties
Chair
Govern the organisation by the broad policies developed by the Board Establish overall long and short term goals, objectives and priorities for the organisation Recommend policy to the Board Promote the organisation membership through community networking and other agreed methods Be accountable to the funders for programs and services provided and funds expended Monitor and evaluate the effective of the organisation through a regular review of programs and services Provide candid and constructive criticism, advice and comments Approve major actions of organisation, such as capital expenditure and major program and service changes Annually review the performance of the Board and take steps to improve its performance Seek nominations for election to the Board when appropriate Prepare for and participate in the discussions and the deliberations of the Board Foster a positive working relationship with other Board members and organisation staff Be aware of and abstain from any conflict of interest
Function
Ensures the Board fulfils its responsibilities for the governance of the organisation Be a ‘partner’ to the CEO, helping them achieve the mission of the organisation Optimise the relationship between the Board and management
Qualifications/Skills
Completed one year of Board membership term and has an understanding of meeting procedures
Term
The Chair serves for a one year term
Requirements
Commitment to the work of organisation Knowledge and skills in one or more areas of Board governance: policy, finance, programs and/or personnel Willingness to serve on at least one committee Attendance at Board meetings
A time commitment of 5-8 hours per month (includes Board preparation, meeting, subcommittee and meeting time) Attendance at Annual General Meeting Be informed of the services and programs of organisation and publicly support them Prepare for and participate in the discussions and the deliberations of the Board Foster positive working relationships with other Board members and the organisation’s staff Be aware of and abstain from any conflict of interest
Responsibilities
Provide leadership and direction to the Board Chair meetings of the Board. See that it functions effectively, interacts with management optimally and fulfils its duties. With the CEO develop agendas Serve as ex-officio memer of other Board committees Call special meetings if necessary Arrange for Vice to Chair meetings in the absence of Chair With the CEO recommend composition of the Board Committees. Recommend committee chairperson with an eye to future succession Work with the nominating committee to recruit new Board members Assist the CEO in recruiting Board and other talent for whatever volunteer assignments are needed Periodically consult with Board members on their roles and help them assess their performance Establish overall long and short term goals, objectives and priorities for the organisation in meeting its core business 7
Board Basics - Induction Prepared by Linda Carroli, July 2007
Ensure Board members receive agenda and minutes in a timely manner Reflect any concerns management has in regard the role of the Board or individual trustees. Reflect to the CEO the concerns of the Board and other constituencies. Prepare a review of the CEO and recommend salary for consideration by the appropriate committee Oversee searches for a new CEO Annually focus the Board’s attention on matters of organisational governance that relate to its own structure, role and relationship to management Work in partnership with the CEO to make sure Board resolutions are carried out Service as an alternate spokesperson Enhance relationships with other community groups and agencies Fulfil such assignments as the Chair and CEO agree are appropriate and desirable for the Chair to perform Adhere to general duties outlines in the Board member job description Undertake development and training as opportunities arise
Vice-Chair Function
Fulfil Chair position in the absence of the Chairperson at meetings Co-chair meetings where appropriate
Qualifications/Skills
Completed one year of Board membership term and have an understanding of meeting procedures
Function Term ?
The Vice-Chair serves for a one year term Qualifications/Skills
Requirements
Commitment to the work of the organisation Knowledge and skills in one or more areas of Board governance: policy, finance, programs and personnel Willingness to serve on at least one committee Attendance at Board meetings A time commitment of five hours per month (includes Board preparation, committee and meeting time) Attendance at Annual General Meeting where possible Be informed of the services and programs provided by organisation and publicly support them Prepare for and participate in the discussions and deliberations of the Board Foster a positive working relationship with other Board members and the organisation’s staff Be aware of and abstain from any conflict of interest
Major Duties
Fulfil Chair position in the absence of the Chairperson at meetings Adhere to general duties outlines in the Board member job description
Treasurer
Completed one year of Board membership Able to read, understand and interpret financial statements
Term
The Treasurer serves a one year term
Requirements
Commitment to the work of the organisation Willingness to serve on at least one committee Attendance at monthly Board meetings A time commitment of five hours a month (includes Board preparation, meeting, committee and meeting time) Attendance at Annual General Meeting if possible Be informed of the services and programs provided by the organisation and publicly support them Prepare for and participate in the discussion and the deliberations of the Board Foster a positive working relationship with other Board members and the general staff Be aware and abstain from any conflict of interest
Major Duties
Ability to read, understand and interpret financial statements for Board members
8 Board Basics - Induction Prepared by Linda Carroli, July 2007
Signing authority on behalf of the Board for financial matters if practical Ensure audited financial statements are presented to the Board on an annual basis Calls the motion at the Annual General Meeting to appoint the Auditor (if possible) Acts as a response to other committees Adhere to general duties outlines in the Board member job description
10. Recruitment & renewal
11. Succession
Source: Adapted from Australian Business Arts Foundation
Source: Australian Institute of Company Directors
Board members are primarily drawn from and elected by membership. There are occasional temporary vacancies on the Board that can be filled by invited appointees.
Develop Board nomination materials for members and distribute PRIOR to nomination ie with call for nominations Board members resigning from their roles prior to an election should suggest potential replacements Maintain a list of potential Board candidates, including the particular skills they can bring to the organisation. Board members should make recommendations. Solicit information about potential new Board members including biographical information, why they want to join the Board, what they hope to bring to the Board, what they would like to get from their Board membership and any questions they might have Identify any skills that are desirable to meet any strategic goals – refer to Business Plan and undertake Board skills audit Prospective Board members should meet with the Board Chair and/or CEO, hear an overview of the organsiation and receive relevant organisational materials describing the organisation’s services to the community and receive a Board member job description. Prospective Board member may wish to meet with other Board members. Identify any potential conflicts of interest Ensure induction material is assembled
Succession planning is closely connected with the processes for recruitment, induction and appraisal of Board members. Board succession planning allows Board members to match the organisation’s future needs based on long term vision with the best qualified potential board members available. A regular skills audit of the current board and comparison with future needs will highlight any gaps and assist in targeting succession plans. The Board should maintain a list of potential candidates and monitor it regularly. The availability of highly sought after directors will vary so Board members should keep in touch with all potential candidates. The Board should also use existing services such as AbaF’s BoardBank. A successful process will: Be continuous, driven and controlled by the board, involve CEO input Be easily executed in a crisis Consider the corporate strategy Develop talent pools at all levels Avoid the loss of key skills and knowledge
9 Board Basics - Induction Prepared by Linda Carroli, July 2007
Decision making
12. Board meetings Source: Pathways Australia, The Book of the Board
Purpose of Board meetings
Plan for the future CEO to consult the Board on specific issues Formulate policy Make decisions beyond the remit of the CEO Discuss ideas Allocate tasks Receive information - obtain regular updates on progress Monitor progress - evaluate organisational performance Get to know one another
Rules of order
For Board meetings to work
There should be high attendance Agenda should be well prepared Clarity about decisions to be made Papers distributed in advance Board members are well prepared A balance between routine monitoring and strategic long range issues Effective chairing Run to time Constructive atmosphere Everyone contributes Decisions taken with proper evidence and well structured debate Board agrees on decision making process
Clarify what is being decided Spend time generating and exploring alternative courses of action (there are usually more than two options) Consider the strengths and weakness of the alternatives Ensure any necessary factual data or expert advice has been sourced Make the decision Ensure those implementing the decision are clear on what they have to do Follow up
A Board member moves that a decision be made (this is proposing that the Board go on record in favour of a certain definite action) Another member of the group will second the motions which means ‘support’ for the action proposed (this ensures the issue is of interest to more than one person) Once the motions has been made and seconded there is discussion, clarification and debate When the subject has been covered fully, there is a vote Prior to the discussion and vote, the person in the Chair should restate the motion to be certain everyone knows what is being discussed and decided
Checklist for meetings Before the meeting
At the meeting
10 Board Basics - Induction Prepared by Linda Carroli, July 2007
Be sure you are clear on the decisions needed Prepare more. Do your homework Form a tentative judgment on all issues Be aware of the particular customs, rules and etiquette for meeting
Approach the meeting and your Board colleagues with a positive attitude Arrive early If you’re leading, be prepared to separate the process from substance for your meeting partners. As a participant, watch for tendencies to mix process and substance Separate facts from beliefs, look out for emotional build-ups, clarify agreement and disagreement, make people feel important, protect the integrity of the group and the individual members As a participant, contribute early, clearly and often – but thoughtfully Divide big problems into sub-problems, and address them separately whenever possible Separate the problems discussed from the people discussing them Make your own points clearly and concisely. Don’t get lost in philosophy Don’t waste bullets on issues not important to you. Know when to quit Look for every opportunity to show courtesy and respect. Listen attentively and demonstrate your attention to others Be there in mind as well as body - give 100%
13. Resources
After the meeting
More information about boards and governance available here:
Follow up assignments quickly
Boards, Committees & Governance Centre http://www.ourcommunity.com.au/boards Australian Institute of Company Directors http://www.companydirectors.com.au Board Source http://www.communitybuilders.nsw.gov.au Australian Business Arts Foundation http://www.abaf.org.au Board Development http://www.boarddevelopment.org The Centre of Philanthropy and Nonprofit Studies http://www.bus.qut.edu.au/research/cpns/ Not for Profit Network http://www.nfpn.com.au/ Pathways Australia http://www.pathwaysaustralia.com.au/Publication s_Articles.asp Community Door http://www.qld.gov.au/ngo
11 Board Basics - Induction Prepared by Linda Carroli, July 2007
On Board: Serving on the Board of an Arts Organisation http://www.ozco.gov.au/arts%5Fresources/pu blications/on%5FBoard/ Organisation’s rules or constitution Induction material (see page 2 of this document)
Contents 1. Induction material 2. Board role 3. Governance model 4. Australian Institute of Company Directors Code of conduct 5. Characteristics of high performing boards 6. Board competencies 7. Maintaining enthusiasm 8. The difference between Board & Operations 9. Board role descriptions 10. Recruitment & renewal 11. Succession 12. Board meetings 13. Resources
Other information
How to read financial statements
1 Board Basics - Induction Prepared by Linda Carroli, July 2007
1. Induction material
2. Board role
Source: The Book of the Board
Source: http://www.managementhelp.org/Boards/brdrspo n.htm
As a new Board member you should receive a copy of the following:
The most recent Annual Report including most recent audited financial statements Rules of Association Business Plan including financial projections, list of current board members, titles and affiliations, Board organisation chart, Staff organisation chart Annual Program A biography of the CEO and other board members Two or three sets of Board meeting minutes and supporting papers relating to any key issues currently under discussion by the Board Code of ethics or code of conduct (AICD Code of conduct in this document) Board role descriptions (in this document) A list of key forthcoming dates (meetings, events) The newsletter, brochure or other publications Recent press cuttings relating to the organisation’s work A copy of On Board: Serving on the Board of an Arts Organisation
New board members should also: Meet with the CEO Meet with the Chair Visit office and meet staff (when practical)
5. Account to the public for the products and services of the organisation and expenditures of its funds, including:
to provide for fiscal accountability, approve the budget, and formulate policies related to contracts from public or private resources to accept responsibility for all conditions and policies attached to new, innovative, or experimental programs.
1. Provide continuity for the organisation by setting up a corporation or legal existence, and to represent the organisation's point of view through interpretation of its products and services, and advocacy for them
2. Select and appoint a chief executive to whom responsibility for the administration of the organisation is delegated, including:
"The board is responsible for creating the future, not minding the shop." John Carver
to review and evaluate his/her performance regularly on the basis of a specific job description, including executive relations with the Board, leadership in the organisation, in program planning and implementation, and in management of the organisation and its personnel to offer administrative guidance and determine whether to retain or dismiss the executive
A Board needs … Source: Cameron Ralph Pty Ltd People – Business acumen, courage, integrity, diligence, independence of thought, wise use of social skills Group Dynamics – Relationships between Board and between Board and management
3. Govern the organisation by broad policies and objectives, formulated and agreed upon by the chief executive and employees, including to assign priorities and ensure the organisation's capacity to carry out programs by continually reviewing its work
Information – The right amount, about the right things
4. Acquire sufficient resources for the organisation's operations and to finance the products and services adequately
Monitoring – Overseeing implementation, assessment of Board and senior management
Decision Process – Agenda setting, problem scoping, decision criteria, alternatives, risk analysis
2 Board Basics - Induction Prepared by Linda Carroli, July 2007
3. Governance model Source: http://www.Boarddevelopment.org/display_docu ment.cfm?document_id=112
Broad Responsibilities Vision, Planning & Evaluation
Specific Responsibilities
Finances
Human Resources
Organisational Operations
The governance model draws on elements of the Policy Governance Model and Policy Models of governance. In general this means the Board takes responsibility for the following:
Community Relations
Creates vision, mission Sets policies for ends ie desired results Limits means ie procedures & practices Sets limits to CEO's financial decisions Board reviews financial statements May or may not be involved in fundraising ED = CEO Communication between Chair & ED CEO ultimately responsible to full Board Board receives reports Decisions made by voting CEO attends to all operations Board plans directs Board work No/limited committee structure; only when needed to support the work of the Board Develops awareness of agency in community Interprets & reflects community needs to the organisation
4. Australian Institute of Company Directors - Code of conduct
A director must act honestly, in good faith and in the best interests of the company as a whole. A director has a duty to use due care and diligence in fulfilling the functions of office and exercising the powers attached to that office. A director must use the powers of office for a proper purpose, in the best interests of the company as a whole. A director must recognise that the primary responsibility is to the company's shareholders as a whole but should, where appropriate, have regard for the interests of all stakeholders of the company. A director must not make improper use of information acquired as a director. A director must not take improper advantage of the position of director. A director must not allow personal interests, or the interests of any associated person, to conflict with the interests of the company. A director has an obligation to be independent in judgement and actions and to take all reasonable steps to be satisfied as to the soundness of all decisions taken by the Board of directors. Confidential information received by a director in the course of the exercise of directorial duties remains the property of the company from which it was obtained and it is improper to disclose it, or allow it to be disclosed, unless that disclosure has been authorised by that company, or the person 3
Board Basics - Induction Prepared by Linda Carroli, July 2007
from whom the information is provided, or is required by law. A director should not engage in conduct likely to bring discredit upon the company. A director has an obligation, at all times, to comply with the spirit, as well as the letter, of the law and with the principles of this Code.
5. Characteristics of high performing Boards Source: Pathways Australia, Australian Institute of Company Directors
They know their mission and purpose They understand their roles Members have a range of skills and they make the best use of them They have ownership (of the Board and of their roles) They establish multiple sources of significant revenue They make correct CEO hiring decisions Appropriate new Board members are recruited as needed They assess their own performance regularly They expect commitments to be met They bring resources to the organisation They plan for succession Set a performance culture Meet legal requirements
A high performing board includes: leaders visionaries or strategic thinkers practical people analytical people communicators who can deal with stakeholder groups
6. Board Competencies Source: Australian Institute of Company Directors Competencies for board members can be broken into job-related skills necessary to do their job and personal qualities. Job-related competencies
Strategic expertise – the ability to review the strategy through constructive questioning and suggestion Accounting and finance – the ability to read and comprehend the company’s accounts, financial material presented to the board, financial reporting requirements and some understanding of corporate finance Legal– the board’s responsibility involves overseeing compliance with numerous laws as well as understanding an individual director’s legal duties and responsibilities Managing risk –experience in managing areas of major risk to the organisation Managing people and achieving change Experience with financial markets Industry knowledge – experience in similar organisations or industries.
Personal qualities While different directors can bring different technical skills and knowledge to a board, there are personal qualities that are desirable in all board members:
Integrity – fulfilling a board member’s duties and responsibilities, putting the organisation’s interests before personal interests, acting ethically 4
Board Basics - Induction Prepared by Linda Carroli, July 2007
Curiosity and courage – a board member must have the curiosity to ask questions and the courage to persist in asking or to challenge management and fellow board members where necessary Interpersonal skills – a board member must work well in a group, listen well, be tactful but able to communicate their point of view frankly Genuine interest in the organisation and its business Instinct – good business instincts and acumen, ability to get to the crux of the issue quickly An active contributor – there is no room on boards today for those who do not contribute. Commentators also suggest that board members ensure that they have adequate time to devote to the organisation’s affairs.
7. Maintaining enthusiasm Source: Pathways Australia
Undertake an annual Board review Be sure that roles within the Board are clearly defined Ensure that each member is clear about the organisation’s goals, mission and ethics Ensure Boardroom procedures are effective and efficient. If they don’t suit those on the Board, change them Take plenty of time to recruit Board members. The right people ensure a strong and effective Board Pay attention to the needs and moral of Board members Expect a high standard and hold people accountable Make full use of your Board members’ skills and expertise Ensure the workload of all Board members is comparable Keep the Board informed about and interested in the organisation Determine an appropriate length of service for your Board members Recognise Board decisions that are successful Keep the organisation informed of Board decisions Make the Board accessible so a great divide does not occur between members, volunteers, workers and the Board (but establish some protocols for Board-staff contact) Implement a mechanism to allow members to have their say or to suggest ideas for the organisation Conduct exit interview with Board members
8. The difference between Board & Operations Board responsibilities Source: Adapted from Pathways Australia, Australian Business Arts Foundation
Meets, develops coherent decision-making processes and gets results Sets long term goals and ensures effective planning – strikes a balance between short term and longer term health of the organisation Having the final say when determining yearly objectives Confirms policy and ensures the mission of the organisation is adhered to – is highly mission focused Finalising budgets and allocating funds Maintains it health - Appointing new Board members, evaluating the Board’s performance and providing appropriate induction Taking ultimate responsibility for all legal matters Taking ultimate responsibility for compliance with regulatory requirements (eg annual general meeting etc) Appointing auditors and approving the audit of the financial records (via AGM) Managing committees Maintaining and building the organisation’s public profile and enhancing organisation’s public profile Managing risks Approving any changes of additions outside the budget Taking responsibility for the company’s financial records 5
Board Basics - Induction Prepared by Linda Carroli, July 2007
Confirms and monitors organisation’s programs and services Evaluating Board members and their performance Employing the organisation’s CEO, supports them, setting their remuneration and evaluating their performance against agreed targets and plans. Adapts to the environment in which the organisation operates Serve as Court of Appeal Ensures adequate resources and that those resources are effectively managed
Operational responsibilities (CEO & Staff) Source: Pathways Australia
Providing information to the Board, including recommendations for action Supporting the Board’s planning function Determining community needs – clients, members etc Operating programs and reporting on their successes and shortcomings Evaluating performance Organising the organisation’s events, fundraising activities etc once approved by the Board Managing volunteers and staff (other than the CEO) Implementing Board decisions Conducting day-to-day financial operations Monitoring and managing daily operations Discussing ideas and forming long-term goals Planning organisational strategies Designing programs to achieve the group’s mission Proposing fundraising ideas
Ensuring risk management programs are implemented Ensuring that achievements are recognised and documented Promoting the organisation
Joint Responsibilities Discussing ideas and forming long-term goals Planning organisational strategies Designing programs to achieve the group's mission – mostly CEO’s role Proposing fundraising ideas Ensuring risk management programs are implemented Ensuring that achievements are recognised and documented Promoting the organisation In understanding the difference between Board and Operations, we understand more fully our roles, are equipped to fulfil our duties and roles, and diminish the risk of micromanagement. Micromanagement Source: Wikipedia Micromanagement is a management style where a manager [board] closely observes or controls the work of their employees [CEO], generally used as a pejorative term. In contrast to giving general instructions on smaller tasks while supervising larger concerns, the micromanager monitors and assesses every step.
9. Board role descriptions Source: The Book of the Board Refer also to the organisations rules of constitution Board Member Function
Provide governance to the organisation Represent the organisation to the community Accept the ultimate legal authority for the organisation
Qualifications/Skills
Knowledge and skills in one or more areas of Board governance eg policy, finance, programs or personnel
Term
Board members are elected by the members at the Annual General Meeting and serve a two year term. A maximum of three two-year terms may be served.
Requirements
Commitment to the work of the organisation Willingness to serve on at least one committee and actively participate Attendance at Board meetings A time commitment of five hours per month (include Board preparation, meeting and committee meeting time) Attendance at Annual General Meeting where possible 6
Board Basics - Induction Prepared by Linda Carroli, July 2007
Be informed of the services and programs provided by organisation and publicly support them Prepare for an participate in the discussions and the deliberations of the Board Be aware and abstain from any conflict of interest
Be assured that management succession is properly being provided Appoint independent auditors subject to approval by members Review compliance with relevant material laws affecting the organisation Undertake Board development and training as opportunities arise
Major Duties
Chair
Govern the organisation by the broad policies developed by the Board Establish overall long and short term goals, objectives and priorities for the organisation Recommend policy to the Board Promote the organisation membership through community networking and other agreed methods Be accountable to the funders for programs and services provided and funds expended Monitor and evaluate the effective of the organisation through a regular review of programs and services Provide candid and constructive criticism, advice and comments Approve major actions of organisation, such as capital expenditure and major program and service changes Annually review the performance of the Board and take steps to improve its performance Seek nominations for election to the Board when appropriate Prepare for and participate in the discussions and the deliberations of the Board Foster a positive working relationship with other Board members and organisation staff Be aware of and abstain from any conflict of interest
Function
Ensures the Board fulfils its responsibilities for the governance of the organisation Be a ‘partner’ to the CEO, helping them achieve the mission of the organisation Optimise the relationship between the Board and management
Qualifications/Skills
Completed one year of Board membership term and has an understanding of meeting procedures
Term
The Chair serves for a one year term
Requirements
Commitment to the work of organisation Knowledge and skills in one or more areas of Board governance: policy, finance, programs and/or personnel Willingness to serve on at least one committee Attendance at Board meetings
A time commitment of 5-8 hours per month (includes Board preparation, meeting, subcommittee and meeting time) Attendance at Annual General Meeting Be informed of the services and programs of organisation and publicly support them Prepare for and participate in the discussions and the deliberations of the Board Foster positive working relationships with other Board members and the organisation’s staff Be aware of and abstain from any conflict of interest
Responsibilities
Provide leadership and direction to the Board Chair meetings of the Board. See that it functions effectively, interacts with management optimally and fulfils its duties. With the CEO develop agendas Serve as ex-officio memer of other Board committees Call special meetings if necessary Arrange for Vice to Chair meetings in the absence of Chair With the CEO recommend composition of the Board Committees. Recommend committee chairperson with an eye to future succession Work with the nominating committee to recruit new Board members Assist the CEO in recruiting Board and other talent for whatever volunteer assignments are needed Periodically consult with Board members on their roles and help them assess their performance Establish overall long and short term goals, objectives and priorities for the organisation in meeting its core business 7
Board Basics - Induction Prepared by Linda Carroli, July 2007
Ensure Board members receive agenda and minutes in a timely manner Reflect any concerns management has in regard the role of the Board or individual trustees. Reflect to the CEO the concerns of the Board and other constituencies. Prepare a review of the CEO and recommend salary for consideration by the appropriate committee Oversee searches for a new CEO Annually focus the Board’s attention on matters of organisational governance that relate to its own structure, role and relationship to management Work in partnership with the CEO to make sure Board resolutions are carried out Service as an alternate spokesperson Enhance relationships with other community groups and agencies Fulfil such assignments as the Chair and CEO agree are appropriate and desirable for the Chair to perform Adhere to general duties outlines in the Board member job description Undertake development and training as opportunities arise
Vice-Chair Function
Fulfil Chair position in the absence of the Chairperson at meetings Co-chair meetings where appropriate
Qualifications/Skills
Completed one year of Board membership term and have an understanding of meeting procedures
Function Term ?
The Vice-Chair serves for a one year term Qualifications/Skills
Requirements
Commitment to the work of the organisation Knowledge and skills in one or more areas of Board governance: policy, finance, programs and personnel Willingness to serve on at least one committee Attendance at Board meetings A time commitment of five hours per month (includes Board preparation, committee and meeting time) Attendance at Annual General Meeting where possible Be informed of the services and programs provided by organisation and publicly support them Prepare for and participate in the discussions and deliberations of the Board Foster a positive working relationship with other Board members and the organisation’s staff Be aware of and abstain from any conflict of interest
Major Duties
Fulfil Chair position in the absence of the Chairperson at meetings Adhere to general duties outlines in the Board member job description
Treasurer
Completed one year of Board membership Able to read, understand and interpret financial statements
Term
The Treasurer serves a one year term
Requirements
Commitment to the work of the organisation Willingness to serve on at least one committee Attendance at monthly Board meetings A time commitment of five hours a month (includes Board preparation, meeting, committee and meeting time) Attendance at Annual General Meeting if possible Be informed of the services and programs provided by the organisation and publicly support them Prepare for and participate in the discussion and the deliberations of the Board Foster a positive working relationship with other Board members and the general staff Be aware and abstain from any conflict of interest
Major Duties
Ability to read, understand and interpret financial statements for Board members
8 Board Basics - Induction Prepared by Linda Carroli, July 2007
Signing authority on behalf of the Board for financial matters if practical Ensure audited financial statements are presented to the Board on an annual basis Calls the motion at the Annual General Meeting to appoint the Auditor (if possible) Acts as a response to other committees Adhere to general duties outlines in the Board member job description
10. Recruitment & renewal
11. Succession
Source: Adapted from Australian Business Arts Foundation
Source: Australian Institute of Company Directors
Board members are primarily drawn from and elected by membership. There are occasional temporary vacancies on the Board that can be filled by invited appointees.
Develop Board nomination materials for members and distribute PRIOR to nomination ie with call for nominations Board members resigning from their roles prior to an election should suggest potential replacements Maintain a list of potential Board candidates, including the particular skills they can bring to the organisation. Board members should make recommendations. Solicit information about potential new Board members including biographical information, why they want to join the Board, what they hope to bring to the Board, what they would like to get from their Board membership and any questions they might have Identify any skills that are desirable to meet any strategic goals – refer to Business Plan and undertake Board skills audit Prospective Board members should meet with the Board Chair and/or CEO, hear an overview of the organsiation and receive relevant organisational materials describing the organisation’s services to the community and receive a Board member job description. Prospective Board member may wish to meet with other Board members. Identify any potential conflicts of interest Ensure induction material is assembled
Succession planning is closely connected with the processes for recruitment, induction and appraisal of Board members. Board succession planning allows Board members to match the organisation’s future needs based on long term vision with the best qualified potential board members available. A regular skills audit of the current board and comparison with future needs will highlight any gaps and assist in targeting succession plans. The Board should maintain a list of potential candidates and monitor it regularly. The availability of highly sought after directors will vary so Board members should keep in touch with all potential candidates. The Board should also use existing services such as AbaF’s BoardBank. A successful process will: Be continuous, driven and controlled by the board, involve CEO input Be easily executed in a crisis Consider the corporate strategy Develop talent pools at all levels Avoid the loss of key skills and knowledge
9 Board Basics - Induction Prepared by Linda Carroli, July 2007
Decision making
12. Board meetings Source: Pathways Australia, The Book of the Board
Purpose of Board meetings
Plan for the future CEO to consult the Board on specific issues Formulate policy Make decisions beyond the remit of the CEO Discuss ideas Allocate tasks Receive information - obtain regular updates on progress Monitor progress - evaluate organisational performance Get to know one another
Rules of order
For Board meetings to work
There should be high attendance Agenda should be well prepared Clarity about decisions to be made Papers distributed in advance Board members are well prepared A balance between routine monitoring and strategic long range issues Effective chairing Run to time Constructive atmosphere Everyone contributes Decisions taken with proper evidence and well structured debate Board agrees on decision making process
Clarify what is being decided Spend time generating and exploring alternative courses of action (there are usually more than two options) Consider the strengths and weakness of the alternatives Ensure any necessary factual data or expert advice has been sourced Make the decision Ensure those implementing the decision are clear on what they have to do Follow up
A Board member moves that a decision be made (this is proposing that the Board go on record in favour of a certain definite action) Another member of the group will second the motions which means ‘support’ for the action proposed (this ensures the issue is of interest to more than one person) Once the motions has been made and seconded there is discussion, clarification and debate When the subject has been covered fully, there is a vote Prior to the discussion and vote, the person in the Chair should restate the motion to be certain everyone knows what is being discussed and decided
Checklist for meetings Before the meeting
At the meeting
10 Board Basics - Induction Prepared by Linda Carroli, July 2007
Be sure you are clear on the decisions needed Prepare more. Do your homework Form a tentative judgment on all issues Be aware of the particular customs, rules and etiquette for meeting
Approach the meeting and your Board colleagues with a positive attitude Arrive early If you’re leading, be prepared to separate the process from substance for your meeting partners. As a participant, watch for tendencies to mix process and substance Separate facts from beliefs, look out for emotional build-ups, clarify agreement and disagreement, make people feel important, protect the integrity of the group and the individual members As a participant, contribute early, clearly and often – but thoughtfully Divide big problems into sub-problems, and address them separately whenever possible Separate the problems discussed from the people discussing them Make your own points clearly and concisely. Don’t get lost in philosophy Don’t waste bullets on issues not important to you. Know when to quit Look for every opportunity to show courtesy and respect. Listen attentively and demonstrate your attention to others Be there in mind as well as body - give 100%
13. Resources
After the meeting
More information about boards and governance available here:
Follow up assignments quickly
Boards, Committees & Governance Centre http://www.ourcommunity.com.au/boards Australian Institute of Company Directors http://www.companydirectors.com.au Board Source http://www.communitybuilders.nsw.gov.au Australian Business Arts Foundation http://www.abaf.org.au Board Development http://www.boarddevelopment.org The Centre of Philanthropy and Nonprofit Studies http://www.bus.qut.edu.au/research/cpns/ Not for Profit Network http://www.nfpn.com.au/ Pathways Australia http://www.pathwaysaustralia.com.au/Publication s_Articles.asp Community Door http://www.qld.gov.au/ngo
11 Board Basics - Induction Prepared by Linda Carroli, July 2007
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