Governance – what are suitable governance models for associations ?

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Governance – what are suitable governance models for associations in the 21st century and how do they fit into the current legal/administrative framework in Europe?

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Governance – what are suitable governance models for associations ?

  1. 1. Governance – what are suitable governance models for associations in the 21st century and how do they fit into the current legal/administrative framework in Europe? Dr Marie Gemma Dequae ESAE Peer to Peer session, Brussels 13th March 2014
  2. 2. agenda Basic principles of corporate governance Own experience in NFP’s Corporate governance Owners/shar e-holders/ members Boards Specialised committees Executive committee
  3. 3. = a set of rules and behaviours which determine how organisations are managed and controlled (e.g. Code 2009, Code Buysse, …) Corporate governance Owners / Shareholders/ members Boards executive management specialised committees Leadership, entrepreneurship & performance Control & conformity Clear separation between: Governance and Management = responsibility of the Board
  4. 4. 1992 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 COSO report (US) DEY report (Can.) COCO report (Can.) CAN / CSA Q850 Rapport Vienot (F) Peters report (NL) UK Combined Code, Turnbull KonTraG (Germany) Groupe travail AFEP, MEDEF (F) US Blue Ribbon Comm. US Sarbanes- Oxley Act (US) Comm. Tabaksblat (NL) Code Lippens & Buysse (B) 2012 Code 2009 (B) Loi de Sécurité Financière (F) For update corp.governance regulations see www.ecgi.org Codes van deugdzaam ondernemen en standaarden
  5. 5. The organisation shall: 1. adopt a clear governance structure 2. have an effective and efficient board that takes decisions in the organisation’s interest 3. have a rigorous and transparent procedure for the appointment and evaluation of the board and its members 4. define a clear executive management structure 5. remunerate directors & executive managers fairly and responsibly 6. enter in dialogue with owners/shareholders/members based on a mutual understanding of objectives/mission and concerns 7. ensure adequate disclosure of its corporate governance Corporate governance Owners / Shareholders/ members boards executive management specialised committees Basic principles
  6. 6. 8. All directors shall demonstrate integrity and commitment 9. The board shall set up specialised committees STAKEHOLDERS Corporate governance Owners / Shareholders/ members boards executive management specialised committees Shareholders/ members ManagementBoard of Directors Basic principles
  7. 7. Communication with shareholders to be organised: promote an effective dialogue with them  good contacts between members (shareholders) and board are important General shareholders’ (or members’) Assembly to be organised: • Frequency? • Information provided? • Compulsory • Free Corporate governance Owners / Shareholders/ members boards executive management specialised committees
  8. 8. Build corporate governance charter (CG charter); Duties of the Board (oversight): • governing the organization by establishing broad policies and objectives; • approving and reviewing realisation of the organisation’s strategy • monitoring and reviewing the effectiveness of the board’s committees • selecting, appointing, supporting and reviewing the performance of the chief executive; • ensuring the availability of adequate financial resources; • approving annual budgets and follow up of financial statements; • approving and monitoring framework of internal control and risk management • accounting to the stakeholders for the organization's performance; • setting the salaries and compensation of company management. Corporate governance Owners / Shareholders/ members boards executive management specialised committees Defend & Satisfy the Corporate Interest
  9. 9. Board members: • Integrity and commitment • Transparant nomination procedure • Professional development • Evaluation (under lead of chairman) Max 12 years board member: 3à4 years and 2 times renewed Harmonious composition of board: Diversity amongst board members: gender, competences, nationality, sector, … Corporate governance Owners / Shareholders/ members Boards executive management specialised committees
  10. 10. Corporate governance Owners / Shareholders/ members Boards executive management specialised committees One-tier structure Two-tier structure General AssemblyGeneral Assembly BOARD SUPERVISORY BOARD EXECUTIVE SENIOR MANAGEMENT TEAM EXECUTIVE COMMITTEE Non executiveexecutive
  11. 11. Corporate governance Owners / Shareholders/ members Boards executive management specialised committees
  12. 12. Corporate governance Owners / Shareholders/ members boards executive management specialised committees Be entrepreneurial and drive forward the business Exercise prudent control Sufficiently knowledgeable to be answerable for its actions Able to stand and retain an objective and holistic view Sensitive to the pressure of short term issues Responsive to broader longer-term trends Understand local issues Be aware of international competitive and other influences – both potential and actual Focussed on the commercial needs of its business Act responsibly towards its employees, business partners and society ComplexroleoftheBoard
  13. 13. Corporate governance Owners / Shareholders/ members boards executive management specialised committees Strategic direction Ability to contribute to vision, mission, values and purpose; effective resources (people & financial) Business judgement Ability to weigh evidence and analyse ideas & options Relationships Ability to build team cohesivenesss within board and executive colleagues whilst giving constructive challenge Governance Ensure the organisation is managed with integrity and probity BoardCompetencies
  14. 14. Corporate governance Owners / Shareholders/ members boards executive management specialised committees Makes strategic decisions rather than operational & management decisions Works with the executive staff to ensure that the decisions of the Board are acted upon Delegates to sub committees, but doesn’t abdicate makingtherightdecisions: aSTRONGBOARD
  15. 15. The board can set up specialised committees which will provide advices to the board for approval by all board members. Most important committees are: • audit committee (only NED) & risk committee • nomination & remuneration committee • strategy committee • finance committee • … • At least 3 members per committee and • external professional advice can be interesting Corporate governance Owners / Shareholders/ members boards executive management specialised committees
  16. 16. Board appoints the CEO, indicating executive management’s responsibilities, duties, powers, composition and operation (in CG charter)  Nomination committee assists the board. Duties of executive management: The executive management should at least: - be entrusted with the running of the organisation; - put internal controls in place (i.e. systems to identify, assess, manage and monitor financial and other risks) without prejudice to the board's monitoring role, based on the framework approved by the board; - present to the board a complete, timely, reliable and accurate preparation of the company's financial statements, in accordance with the applicable accounting standards and policies of the company; Corporate governance Owners / Shareholders/ members boards executive management specialised committees
  17. 17. - prepare the company's required disclosure of the financial statements and other material financial and non-financial information; - present the board with a balanced and understandable assessment of the company's financial situation; - provide the board in due time with all information necessary for the board to carry out its duties; - be responsible and accountable to the board for the discharge of its responsibilities. Corporate governance Owners / Shareholders/ members boards executive management specialised committees
  18. 18. My experience in NFP: • BELRIM: president 1994-2005 • FERMA: president 2005-2009 Many thanks for your attention! Questions? Mariegemma.dequae@gmail.com
  19. 19. ‘Governance – what are suitable governance models for associations in the 21st century and how do they fit into the current legal/administrative framework in Europe?” Florence Bindelle ,Executive Director, FERMA ESAE Peer to Peer session, 13th March 2014
  20. 20. Opening remarks • Evolution from private sector, to the public sector and recently not for profit where words « transparency », « performence », « responsibility » are more and more used • Can we transfer the governance models of companies centered on the creation of economic value to the associations? What about management tools? Is performance also transferrable? • Companies evolve towards « social responsibility » whist association evolution towards reinforcing « governance models » and « management tools » • There is a main differenciation on the focus which is not the internal activity but the values and objectives that need to be adapted to fit in the managerial analysis scope and therefore the concept of performance be linked to the accomplishement of the mission • What are the limits? The risks? • Could associations have their own model of organisation?
  21. 21. Agenda 1. What is FERMA? 2. How is « association » governance applied? 3. What is the challenge?
  22. 22. Part 1: What is FERMA?
  23. 23. Some facts and figures… • National Associations of Insurance and Risk Management appeared in Europe in the early 70’s • In 1974, six of them decided to create a European Federation called AEAI • In 1986, AEAI became FERMA with 10 associations • Today FERMA gathers 22 Associations in 20 countries and is still growing – Representing over 4500 risk and insurance managers – Cross Sectors (80% Private and 20% Public) Countries (20) Members (22) Belgium BELRIM Czech Republic ASPAR CZ Denmark DARIM Finland FinnRima France AMRAE Germany BfV & DVS Italy ANRA Luxembourg ALRIM Malta MARM Norway NORIMA The Netherlands NARIM Poland POLRISK Portugal APOGERIS Russia RUSRISK Slovenia SI.RISK Spain AGERS & IGREA Sweden SWERMA Switzerland SIRM Turkey ERMA UK AIRMIC
  24. 24. Our Mission & Objectives The Federation of European Risk Management Associations (FERMA) exists to lead and enhance the effective practice of risk management, risk financing and insurance. 1. To be a significant stakeholder in the decision making process at the European level on Risk Management , Insurance and Risk financing issues Strategic actions:  To monitor new regulations and standards  To detect early issues that can impact our profession  To propose and co-ordinate positions with member associations on relevant issues  To issue guidance and position papers  To maintain interest representation with the European institutions  To establish technical alliances and ad hoc coalitions with other stakeholders 2. To coordinate, promote and support the development and use of risk management, insurance and risk financing in Europe Strategic actions:  To set and promote professional practices and standards  To organize conference, seminars, forums  To maintain a two way communication with national associations on development and application of risk management  To set up surveys and benchmarks to identify and share current practices  To facilitate the development of new associations in European countries
  25. 25. Structure & Governance Structure General Assembly • Meets once a year, in June in Brussels • One representative of each association member Board of Directors • Risk and Insurance Managers only • Composed of minimum 7 members and maximum 12 members, • Elected for a 3 years period by the General Assembly Executive Board • President, Vice Presidents, Executive Director, General Secretary , Treasurer Management team • Executive Director, Project Coordinator, Project & Administrative Assistant, European affairs, Press Coordinator, Webmaster Governance Bylaws • Articles of the statutes • Under Belgian Law, non-profit association Governance and Administrative procedure • Internal rules and governance of the association Board meetings • One hour conference call per month • 3 face-to-face meetings a year Presidents meetings • One hour conference call per month • President summit in October Finance • 20% membership fee and 80% self financed
  26. 26. What is the value for our members ? • Promoter • Advocate • Network • Catalyst • Advisor • Knowledge center • European Presence
  27. 27. Part 2: How is « Association » Governance applied?
  28. 28. Implementing Governance « Governance is the process by which decisions are made and implemented » Today •By laws (light) are reviewed every 5 years •Governance and administrative procedure (inclusive and simple) is reviewed every year •These documents govern the role and power of the governing bodies and the decision making processes of the Federation. 2008 •After a long process, role of General Assembly and Board were distinguished and number of Board members reduced (22 to 7-12) •Need to redefine the role of the Board « identity and role »: an administrative procedure including the commandments was adopted •Move from a non active board to an active board •Shift from a national minded representative to a european minded representative •It worked! 1999 •FERMA opened an office in Brussels •Board and General assembly meetings were two separate meetings with the same attendees and same topics discussed leading to a confusion of roles and responsibilities •From 1999 to 2008 FERMA Board/General Assembly increased from 9 to 22 •Need for a more manageable size and structure representing carrying FERMA/ European voice rather than a national voice 1974 • In 1974, FERMA was created •9 members • One general assembly and 2 board meetings a year •No permanent office •Governed by by-laws only
  29. 29. By-Laws 1. Membership  Membership categories  Membership fees  Admission of new members  Members governance 2. General Assemblies  Composition, voting rights, powers  Functioning (when and who?)  Voting rights  Amendments to by-laws  Association register Members Board Committees Executive Management Governance and administration procedure 1. GA : Organisation and attendance  Location  Observers  Nb of Proxies & template 2. Votes  Counting  Secret or not  Renunciation  Several members in one country The General Assembly appoves the accounts, reviews the strategy and discharges the Board of Directors.
  30. 30. By-Laws 1. Composition & Functioning  Nb of members 7 to 12  Duration of Mandate/Term period  Remuneration: free of charge  Revocability by GA  Independance : Represent the interest of FERMA  Voting rights and pesence quorums 2. Responsibilities  Elects the President, VP, SG, Treasurer  Term Two years renewable once  Settle interpretation of articles  Delegation of powers and binding deeds  Role of SG and Treasurer  Appoint the Audit and Finance Committee Members Board Committees Executive Management Governance and administration procedure 1. Election of board members  Requirements to apply  Decision making process to be elected  Rules if the member no longer meets the requirements  Serve FERMA’s intererest  Board meetings attendance, frequence, quorums for decision making 2. Responsibilities  One or more tasks  Performance assessed by the president  Executive committee  Handover of presidency The Board of directors defines the strategy by setting the objectives, empowers the executive management, sets up and leads committees, admits new members, defines the financial procedure.
  31. 31. Members Board Committees Executive Management Committees (Audit and finance & Working) are appointed by the board to support its strategy and action plan. The audit and finance committee • Established by the by-laws within the Board & defined in the Governance procedure • By –laws: Supervision of the accounting procedures, cash management and investment policy of the FERMA funds • Reports to the Board twice a year • Governance procedure : financial matters such as bank payments, credit cards, bookkeeping, external auditor, budget, financial investments, travel and reimbursement policy, expense reimbursement procedure Working committees • Task force working on industry issues • Assigned to a board member by the governance procedure and executed by the executive staff including senior advisors • Committees represent, involve, and serve the federation ‘s interest and its members, and are an effective work force to support the effective implementation of the strategic actions
  32. 32. Executive Director presents the outcome as FERMA is based on the model of a 2 tier structure. The supervisory board listen to the results and takes a decision. The Board acts on the strategy and is not in the dailymanagement to concentrate on real topics. The Executive director Supports the Board to present the strategy and monitors the evolution. The executive staff implements the decisions. The president of the board reports monthly the progress to the members. The Executive Committee Established by the By- Laws & defined in the Governance procedure. Composed by the President, Vice presidents, Secretary General, Treasurer, Executive Director Prepares the strategic plan, monitors its evolution and aligns actions with the budget Members Board Committees Executive Management The Executive Management implements the strategy, monitors of the actions and reports progress to the Board.
  33. 33.  The governance procedure governs the legal and administrative matters:  Authority for contracts signature  procurement rules  the organisation of conference calls  press releases procedure& approval of positions papers  participation of board members to outside conferences  non compliance with by-laws  The annexes of the governance procedure include:  the proxy template  the application template  the comandments  The renunciation template  the expense report template  the distribution list Members Board Committees Executive Management The Executive Management implements the strategy, monitors of the actions and reports progress to the Board.
  34. 34. Part 3: What is the challenge?
  35. 35. Conclusion • Governance should be constantly adapted to the life of the association (not too rigid – board members are busy) • Governance should establish the working environment with a framework and processes in place which are clear, known and recognized by all (members, staff, board) • Governance should be compliant with the culture and the regulation of the country • Governance is about managing the risks of the organisation • Governance is a tool to move the organisation forward in a timely manner and to implement decisions taken
  36. 36. A few points of discussion… • Are structures and processes defined and clear for Members, Board members and Staff? • Are members engaged in the decision making process? • Are risks properly evaluated? • Do we know our risk and opportunities? • Are mandates / role and responsibilities clearly defined? • Is there a financial plan? • Are the reserves sufficient? • Are major expenses in line? • How do we compare with our peers? • Have we paid our taxes? • Are we insured appropriately? • Do we have appropriate accounting policies and procedure?
  37. 37. Thank you for your attention ! Questions? FERMA Phone: +32 2 761 94 32 Email: florence.bindelle@ferma.eu www.ferma.eu

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