4. NFP Governance
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NFP governance – nothing to be shy about
• Governance is better now than 3 years ago
NFP governance – nothing to be shy about
• Governance was no worse than commercial sector
anyway
7. NFP Governance
7
Governance guides
ASX Corporate Governance
Principles
ACNC Governance for Good
AICD Good
Governance Principles
and Guidance for NFP
Organisations
9. NFP Governance
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Top things to improve board performance
1. More highly skilled directors
2. Better information for decision-making
3. Higher levels of governance skills
4. More innovation
5. Better chairmanship
6. More highly skilled CEO
7. Better risk management
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“I wouldn’t give a fig for the simplicity on this
side of complexity, but I would give my very life
for the simplicity on the other side of
complexity.”
Oliver Wendell Holmes(1841 -1935)
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12. NFP Governance
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Understand the
role of the
board
Understand the
organisation
Understand the
financials
Set policy
Oversee
management
Oversee
compliance & risk
Practical tips
Management Board
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Understand the role of the board and
directors’ duties
Role of the board
• Strategy
• CEO
• Monitoring performance
• Risk management
• Compliance
• Policies
• Networking
• Stakeholder communication
• Approve major decisions
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Governance – Tricker model
Past and present Future
Outward Accountability Strategy formulation
Inward
Supervising executive
activities
Policy making
Approve and work with and through the CEO
ACNC governance standards
1. Comply with purposes
2. Account to members
3. Comply with the law
4. Check directors not disqualified
5. Comply with directors’ duties
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Directors’ duties
• Good faith
• Proper purpose
• Reasonable care and skill
• Avoid insolvent trading
• Proper use of information and position
• Disclose conflicts of interest
Role Clarity
• Be clear on the role of the board
• Be clear on the role of management
Board charter
CEO delegations
CEO position description
Role of the chair
Relationship – chair/CEO
Conversations
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What’s the board’s role in strategic planning?
• Drive, provide input, develop?
• Sit back and approve?
Who should be the decision maker?
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James Hardie – asbestos case
• Approval of media release
• Delegated to management?
• Can’t abdicate
Board role – get fit challenge
Is there a board charter?
Is decision-making effective?
Are conflicts of interest declared routinely?
Does the board and management work well
together in developing strategy?
Is it time for a board workshop on directors'
duties?
Is there adequate induction training for new
directors?
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Deal with legacy issues
• What historical anomalies have you been living
with?
- Land ownership
- Mission drift
- Dormant stakeholders
• Is it time to deal with them?
Evaluate
• Board evaluation
- If not why not?
• Horses for courses
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Board evaluation
1. What are our objectives?
2. Who will be evaluated?
3. What will be evaluated?
4. Who will be asked?
5. What techniques will be used?
6. Who will conduct the evaluation?
7. What will you do with the results?
Helping the board with its role
– tips for management
• Board papers should make decision-making easier
- Clear recommendations
- Suggested resolutions
- Standard format cover sheet
- Optimum length?
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The Goldilocks test – board papers
• Not too much
• Not too little
• Just right
Helping the board with its role
– tips for management
• Board calendar
- Accounts / audit
- Strategic planning cycle
- Business plan / budget
- Progress against plan
- Compliance / risk
- CEO performance review
- Board evaluation
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Understand the organisation
Back to basics
• What type of entity?
• What does your constitution say?
- Purpose
• Any assets held on trust?
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Understand your business model
Business model canvas
Business model canvas
• Customer segments
• Value proposition
• Customer relationships
• Channels
• Key activities
• Resources
• Key partners
• Costs
• Revenue
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Understand the financials
“Not my
problem”
problem
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Centro
• more than a mere ‘going through the paces’ is
required for directors ...a director is not an
ornament, but an essential component of corporate
governance’
Checklist
Don’t abdicate to experts or management
Ask yourself: is this reasonable?
Ask questions
Ask more questions
Don't go along with the crowd
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51
Keys to success - directors
Keys to success - management
• “95% of what I produce for my clients is useless”
• Prepare management reports that directors can
understand
• Is it time to review?
• Ask directors what they want
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What’s insolvency?
• Inability to pay debts as and when they fall due
• Don’t incur debts while insolvent
• Are we insolvent?
- Temporary cash flow difficulty, vs
- Endemic financial problem
Red flags
• Consistent losses
• Juggling payments
• Unhappy creditors
• Problem with reporting
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Checklist
Don’t stick your head in the sand
Ask: can we pay our debts when they fall due?
Have a working knowledge of the financials
Seek advice early
Checklist
Give directors regular reports to confirm
solvency
Raise potential concerns early
Tabloid test
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Compliance – how do you even know?
A raft of legislation
• health and safety
• employment
• anti-discrimination
• tax concessions
• fundraising
• working with children
• privacy
• negligence and defamation
• contracts
• planning and environment law
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Criminal liability
• Type 1 – director presumed innocent - prosecution
must prove beyond a reasonable doubt
• Type 2 – director must point to evidence that
suggests a reasonable possibility of due diligence
• Type 3 – director must prove s/he was diligent
Checklist
Be alert but not alarmed
Make sure someone is responsible
Consider a health check
Have a process for
monitoring compliance
keeping up to date
Insist on compliance reports
Manage risk
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Risk management is simple…
…or is it?
• Identify
• Analyse
• Evaluate
• Treat
• Monitor and review
• Communicate and
consult
Risk management standard
AS/NZS4360:2004
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Heat map
Risk management
• Is common sense
• Don’t get bogged in it
• But make sure you do it
• Don’t forget positive risk
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Board’s role with the CEO
• CEO succession planning
• Appoint
• Remunerate
• Mentor
• Assess
• Dismiss
Management authority
• Does CEO/CFO authority clear?
• Does CEO have decision making authority for
matter for which s/he is accountable?
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Don’t…
• Be afraid to challenge your CEO
• Assume a long term CEO is a good thing
Resources
