By: Laura Edgar, Institute on Governance
While governance exists in a variety of contexts, when it comes to public purpose organizations, good governance certainly begins with an organization’s Board of Directors. A Board of Directors is the legal body that is collectively charged with overseeing and supporting the organization to achieve its mandate, consistent with all legal obligations. Given the significant responsibilities associated with serving on a Board – whether private, public or not-for-profit - it’s important that members understand their legal obligations and what they are (and are not) supposed to do.
Unfortunately, Boards often struggle to properly fulfill their roles and responsibilities. Among the most commonly cited challenges are: board members who don’t understand their individual or collective responsibilities; ineffectively dealing with conflicts of interest; Board micromanagement (or on the other hand, rubber stamping!); not following the agreed upon rules (i.e. bylaws and policies); interpersonal rivalries; no shared sense of direction; unproductive meetings and more.
While there is no “perfect” Board (even the best Boards will tell you some aspect of their governance is a work in progress), the Institute on Governance, drawing on its own 20 plus years of experience and the available literature, has found that strong Boards of Directors will focus on five key areas of responsibility:
- Strategy: Boards are the setters and keepers of vision and strategy. While engaging staff in vision and strategy is critical (after all, they have to work to make it reality!), it is the Board that has to take ownership of the strategy and ensure the organization stays true to its mandate and goals;
- Oversight and Compliance: Boards must oversee and ensure long-term organizational health, including the appropriate and effective use of resources and fulfilling all legal obligations. This does not mean micro managing! It does, however, mean defining the Board’s information needs and frequency of reporting, and ensuring staff are held to account;
- Ensure the Work Gets Done: Whether it’s all hands on deck (i.e. an operational board), effectively using committees and/or ensuring effective delegation to staff (with checks and balances), Boards need to ensure that the organization is effectively and efficiently delivering on its mandate;
- Leadership: Strong Boards go beyond compliance, strategy and ensuring the work gets done; they provide, and are seen to provide, leadership to the organization. Leadership has many aspects, but at a minimum Boards need to set and live the values for the organization, provide clear direction to staff, and serve as ambassadors for the organization; and
- Accountability: Boards are accountable to their members or shareholder(s), as well as to other key stakeholders or funders. And yes, accountability is about spending the money appropriately and according to the rules, but it’s also about demonstrating the impact of the organization’s work.
In fulfilling all of these roles, Boards and individual board members must always respect their fiduciary obligations. A strong Board requires members who understand their individual, as well as collective roles and responsibilities and are committed to fulfilling these obligations. Board members have a fiduciary duty to act honestly and in good faith with a view to the best interests of the corporation, and to exercise the care, diligence and skill that a reasonably prudent person would in comparable circumstances.
Respect for these roles, responsibilities and obligations is demonstrated by coming to meetings prepared, engaging in dialogue and decision-making at board meetings and following up on commitments. It also means understanding and respecting the role of the Board and that of staff, maintaining confidentiality of Board discussions, always keeping the interests of the corporation as a whole front and centre, respecting conflict of interest requirements, and supporting Board decisions once they are made.
So, why is all this important? Governance is not an end in itself. Boards need to focus on their governance because better governance supports better results for the organization. Good governance also leads to greater credibility in the eyes of members, shareholders and stakeholders, stronger relationships with funders, and the ability to more effectively address crises if and as they arise. The implications of poor governance can be equally great. If an organization’s Board fails to carry out its roles effectively, it stands to lose credibility with its stakeholders and the public at large, it may damage the organization’s ability to carry out policies or deliver services, and ultimately the organization may fail at its primary mission or objectives.