Good Governance #4: Board Performance, Behaviour and Culture
It should not be surprising that when a group of individuals with different backgrounds, skill sets and personalities get together that challenges in board function and dynamics can occur. Boards need to invest time into constantly nurturing a positive board culture to prevent conflict amongst its members and to ensure that they are best serving the interests of their members.
4.1. Creating a Positive Board Culture
A board with a positive culture will demonstrate unity and commitment to an agreed set of values that guide decision making. Boards should strive to make ethical decisions that are in the best interests of members and the organisation as a whole.
According to the ASC Sports Governance Principles (2012) each board should ensure, and actively promote, ethical behaviour and decision-making within their organisation. Good corporate governance ultimately requires people with integrity and leadership to ensure that the reputation of an organisation is managed, protected and enhanced.
A culture of integrity and ethical behaviour is characterised by:
- An effective code of conduct,
- Quality decision-making processes,
- People of the highest integrity and ethical standards, and
- An intent to put the organisation ahead of individual gains.
4.2. Leadership and the Role of the Chair
Board members who were interviewed as part of Vicsport’s governance research suggested that the Chair can strongly influence the behaviour of board members and boardroom culture. The Chair should lead by example and can set the scene for a boardroom culture that is productive, respectful and inclusive. Board meetings should be managed by the Chair in a manner designed to encourage diversity of opinion, ensuring that all board members are given an opportunity to contribute to board discussion. This leadership can greatly enhance the experience for females sitting on male dominated boards.
The Chair is responsible for the leadership of the board, ensuring its effectiveness in all aspects of its governance role (ASC Sports Governance Principles, 2012). The Chair is pivotal in creating the conditions for overall board and individual board member effectiveness and ensures constructive relations between board members and staff.
The roles and responsibilities of the Chair include:
- Representing the board:
- The Chair is usually the board’s representative to outside parties, though this responsibility may be delegated as appropriate.
- Setting the agenda and ensuring board members receive timely and clear information:
- The agenda should take full account of the issues and concerns of all board members. Agendas should be forward-looking and concentrate on strategy, rather than focusing on management issues.
- Managing board meetings:
- Direct or control meetings to ensure that sufficient time is allowed for discussion of agenda items and proper decision-making takes place.
- Liaising with the CEO:
- While the board has responsibility as employer of the CEO, the board is usually represented through the Chair in managing the working relationship with the CEO.
- Board member development and encouragement:
- Taking the lead in inducting and developing individual board members, with a view to enhancing the board’s overall effectiveness as a team.
- Performance assessment:
- Ensuring that peer and self-assessments of performance are undertaken regularly for all members of the board, including the Chair.
4.3. Inclusion and Diversity
It is important for all board members to understand and be supportive of a process to improve board diversity for it to be successful. Demonstrating the benefits of board diversity through education and training may be a useful way to build commitment from board members and the organisation as a whole.Your board may choose to embark on formal diversity training or perhaps choose to introduce the topic by using case studies, podcasts, online clips or including an agenda item for discussion.
4.4. Access and Equity Policy
Board diversity contributes to a dynamic and positive boardroom culture. Diversity, including access and equity, should be considered for culture, race, age and gender in order to adequately address both legal and moral responsibilities.
The Institute of Community Directors Australia Access and Equity Policy is based on the model of the Australian Government’s Charter of Public Service in a Culturally Diverse Society. The Charter is the key document guiding the Australian Government’s Access and Equity strategy. It helps to ensure that government programs (and those programs funded by the government but delivered by contractors, including NFPs) meet the needs of our culturally and linguistically diverse society.
4.5. Targets and Quotas
Due to the low representation of women on boards in most industries the enforcement of quotas or self-imposed targets has long been a topic of debate. The ‘Gender Balance in Global Sport’ Report (Women on Boards, 2016) built upon the initial 2014 dataset and outlined the participation of women on sports governing bodies internationally in the lead up to the 2016 Olympic Games in Rio. It revealed that many of the top governing bodies in sport still have fewer than 20% of board seats held by women.
It is generally accepted that quotas can lead to an increase in the representation of women on boards and possibly act as a conduit for cultural change in organisations by:
- Allowing women to make an impact at board level by affording them an opportunity they may not otherwise have had access to,
- Increasing the awareness of the benefits of gender diversity on boards, and
- Acting as an opportunity to break down barriers and improve the confidence of women to apply for board positions.
In many cases quotas are a result of frustration and imposed as a last resort for progress to occur due to the following concerns:
- Women only being brought onto boards because women’s voices were underrepresented and as a compensatory gesture (tokenism),
- Quotas being viewed as ceilings, and
- Positions may no longer be afforded to the best possible candidate.
The introduction of gender-based targets and quotas is becoming more prevalent across the sporting industry. The ASC requires National Sporting Organisations (NSOs) to achieve a target of 40 per cent representation of women on their boards, which is reviewed pending their progress and the overall skills mix of boards. They also require NSOs to report annually on their progress on the achievement of the 40 per cent target at board level and the disclosure on gender representation at executive management level. (Australian Sports Commission, Mandatory Sport Governance Principles, 2015)
From 1 July 2019, the Victorian Government will require all state government funded sport and recreation organisations to have a minimum 40% women on their boards. Sports that are not currently funded by the State Government, but which wish to receive funding in future, are advised that they should also seek to meet the target.
Similarly, VicHealth will require SSAs, RSAs, national and elite sporting organisations to have a minimum of 40% self-identified female board representation by 1 July 2019 in order to access certain streams of funding.
4.6. Effective Board Meetings
‘Meetings can make or break a board. Ill-directed or ill-prepared meetings can sap the energy and motivation of board members, whereas purposeful and well organised meetings can build an organisations sense of direction and motivate the board members and staff involved.’ Fishel (2003:141)
The decision to commit your time to a board position is one that requires strong consideration. Vicsport’s governance research revealed some of the main motivations for individuals joining a board. These included:
- Wanting to contribute something valuable back to their sport,
- To feel as though they are making a worthwhile contribution to their community, and
- To have the opportunity to apply and develop specific skills.
The main reason cited in our research for females not applying for board positions was due to family and/or work commitments. For this reason, it is important for meetings to run effectively as lengthy and unproductive board meetings can frustrate all board members and act as a deterrent to potential applicants.
The ASC Sports Governance Guidelines (2012) state that the conduct of board meetings should:
- Focus on governance matters affecting the control and direction of the organisation, such as policy-making and review, financial health of the organisation, legal compliance, strategic thinking and progress towards Key Result Areas, rather than on administrative and operational matters.
- Reflect an appropriate apportionment of focus between compliance with formal requirements, for example, monitoring financial performance and monitoring overall achievements of Key Result Areas and engaging in strategic thinking.
- Act as the ideal forum for the board to engage in strategic thinking in order to ensure the ongoing relevance and appropriateness of its strategic plan and Key Result Areas. The meeting should adopt a future building on past learning.
- Be managed in a manner designed to encourage diversity of opinion, ensuring input from all board members as appropriate without prejudicing effective and efficient decision-making.
The board meeting templates provided throughout the following sections (4.7 Board Meeting Agenda to 4.10 Board Meeting Assessment) aim to make board meetings more effective by improving the decision-making process.
4.7. Board Meeting Agenda
A good meeting agenda will serve as a guide to participants, making the meeting more efficient and productive by encouraging the group to prepare and clearly think about what needs to be accomplished at the upcoming meeting.
4.8. Board Paper
A board paper provides board members with information to consider, usually for decision, discussion or noting, prior to the board meeting. The paper should provide a proposed resolution, all relevant information and recommendations.
4.9. Conflict of Interest
Conflicts of interest for board members will arise. The key is to identify, declare, document and manage real, potential and perceived conflicts of interest in a transparent, prudent manner.
A conflict of interest provision should specify that:
- A board member must disclose actual/potential conflicts of interest,
- The process for disclosure of real or potential conflicts of interest,
- A process that governs a board member’s involvement in any decisions with which they have a conflict of interest,
- The requirement for a register of ongoing interest to provide a record of all potential conflicts, and
- A board member should not hold any other official or corresponding administrative position within the organisation at any level that creates a material conflict of interest. This is to ensure no actual or perceived conflicts of interest.
It is recommended that calling for a declaration of any conflicts of interest becomes part of the standard meeting opening and are documented in the minutes of the meeting. This should be done in conjunction with the development of a conflict of interest register that records the nature of all conflicts and their date of declaration.
4.10. Board Meeting Assessment
The board may consider utilising an independent body, such as Vicsport, to undertake a board meeting assessment to determine areas of board meeting effectiveness and identify opportunities for further improvements. The table contained on the following template outlines some key characteristics of an effective board meeting.
4.11. Member and Stakeholder Engagement
Effective stakeholder engagement requires a commitment from the board to actively engage with stakeholders through communication, listening to member’s views and building a relationship of trust and respect.
The board should ensure it exercises leadership, integrity and good judgment by always acting in the best interests of the organisation as a whole and demonstrating transparency, accountability and responsibility to its members and stakeholders.
An effective organisation should ensure its members and key stakeholders are:
- Consulted and involved in the development of the sport’s strategic plan,
- Supportive of, and actively involved in, achieving the outcomes of the plan,
- Well-informed and actively participating at its general meetings, and
- Regularly provided with timely and accurate disclosures on all material matter regarding the governance and performance of the organisation.
Existing boards should canvass the interests, aspirations and requirements of key members. The board should have a process in place to report to and receive feedback from members.
4.12. Risk Management and Compliance
Whatever the size and purpose of the organisation, managing risk is a key board responsibility.Boards should develop a risk management framework that involves a process to identify all risks facing the organisation and implement effective risk management strategies.
It is essential that an organisation regularly reviews its risk exposure across all facets of the organisation. Through this process, organisations should address the likelihood and impact of all possible incidents and assess the actions required to minimise, avoid or eliminate potential risks. An organisation should ensure it also assesses the opportunities forgone as part of its risk assessment and evaluation process, as risk is not only a negative element and the cost of not doing activities should also be considered.
In addition, some events or activities often need a specific and comprehensive risk assessment to be done (i.e. the hosting of a large sporting event). In this situation, a business case should be developed as part of normal risk management processes to assess the impact and potential outcomes, negative or positive, of such an event. For Victorian based sporting organisations, the Victorian Child Safe Standards (the Standards) apply to all sporting organisations that provide services or facilities to children within Victoria. This is a legal requirement for sporting organisations of all sizes from grassroots clubs all the way through to National Sporting Organisations. The Standards relate to developing a child safe culture within an organisation and include requirements to have practices, procedures and policies in place to prevent and respond to allegations of child abuse.
In addition to this, Principle 4 of the Australian Institute of Company Directors, Good Governance Principles and Guidance for Not-for-Profit Organisations, outlines some of the common types and categories of risks to be considered.
The vast array of risks that NFPs should consider includes, but is not limited to:
- Staff or employment issues (e.g. wrongful dismissal, harassment),
- Volunteers (e.g. injury to the individuals themselves and/or damage caused to others or property as a result of their inadequate training or screening),
- Physical spaces and equipment (e.g. fire, workplace health and safety issues, theft or misuse, public liability),
- Records (e.g. legal requirements to keep records, confidentiality),
- Cash receipts and payments (e.g. inaccurate records, lack of internal checks and balances), and
- Financing (e.g. grant dependent organisations).
It can be helpful to think of risks in broad categories, such as:
- Compliance risks (e.g. failure to lodge statutory information in allowed time),
- Financial risks (e.g. loss of funding, insolvency, expense blow-out),
- Governance risks (e.g. ineffective oversight),
- Operational or program risks (e.g. poor service delivery),
- Environmental, including event risks (e.g. natural disasters and states of emergencies),
- Brand and reputational risks (e.g. due to worsened stakeholder or community perceptions, from major event failure or adverse commentary on performance via traditional and/or digital and social media channels), and
- Strategic risks (e.g. stakeholder behaviour change, increased competition for funding).
The board should implement an effective compliance system.It is recommended that this system comply with Australian Standard AS3806:2006 and requires, at a minimum, that:
- The organisation complies with all relevant statutes, regulations and other requirements placed on it by external bodies,
- Effective internal controls exist and there is full and accurate reporting to the board in all areas of compliance,
- The organisation is financially secure and is able to meet all its financial obligations when they fall due, in the normal process of business, and
- The legal duties of individual board members, including the requirement of board members to:
- Act in good faith and for a proper purpose,
- Exercise due care and diligence,
- Ensure the organisation does not continue to carry on its business while insolvent, and
- Meet the requirements of various other federal and state laws that directly impact on the organisation.
The following documents provide further information and guidelines on risk management and insurance:
4.13. Financial Reporting and Auditing
A requirement to provide financial reports and have your accounts audited depends on the legal structure of your organisation and your turnover.
Associations who are incorporated under the Victorian Association Incorporation Reform Act (2012) must present their completed financial statements to members at the AGM, which must be held within five months after the end of the financial year. The statements must be lodged online with Consumer Affairs Victoria (CAV) within one month after the AGM, along with the appropriate signed declarations. Lodgement can be made by either the secretary (formerly the public officer) or an authorised delegate of the association.
The financial statements of an incorporated association must give a true and fair view of its financial performance and position during and at the end of the year.
Auditing requirements vary based on the gross revenue for the last financial year and are outlined below:
CAV Reporting & Auditing Requirement
Less than $250,000
Associations do not need to have their financial statements reviewed or audited, unless a majority of members present at a general meeting vote to do so.
$250,000 - $1,000,000
Financial statements are required to be reviewed by an independent accountant – a process that typically costs about one third of a formal audit.
More than $1,000,000
Associations are required to have their financial statements audited by an independent accountant.
For more information about accounting and auditing for incorporated associations review the information provided on the CAV website link below.
4.14. Board Calendar
A board calendar should be mapped out at the start of each year and serves two important functions:
- The provision of a clear outline of board member commitments for the upcoming year (i.e. How often does the board meet and for how long?), and
- As a useful planning checklist to ensure that the board is carrying out all of its key roles including financial, legal, planning and risk management responsibilities.
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