finance & governance forum

Finance & Governance Forum

Managing Change18th October 2012

Chair’s Introduction

Mark Palios

Doing What is Right When Things go Wrong

Hilary S Carty

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Overview• Sensing what is Wrong

• Judging what is Right

• Just Do It!

• …………. Leadership Resilience

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• The answers are in the room

• Opportunity to step back from the coalface

• Draw from own/shared experiences

• Reflect, Review and Refresh

Assumptions

Learn from Everything

• The Good

• The Bad

• The ‘Shouldn’t be shared’

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Leadership Resilience• Recover quickly from setbacks• Absorb impact… and keep going• Spring back quickly into shape after being

bent, stretched or deformed• Cope with stress and adversity• Drive forward the vision

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When Things Go Wrong

• Expectations Unmet

• Early Warning Signs?

• …Emotional Intelligence

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So What’s Right?• Finding Authenticity

• Faith• Trust• Community• Individual Freedom• Ends? Or Means?

• Authenticity through Values

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Just Do It! • Courage is

• ….. not the absence of fear – it is the determination to act despite it.

• ….. a transaction with fear.

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The Seven Acts of Courage• Courage to dream• Courage to see current reality• Courage to confront• Courage to be confronted• Courage to learn• Courage to be vulnerable• Courage to act

Staub: The Seven Acts of Courage: Bold Leadership for a Wholehearted Life

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Working with Courage• Judgement / Reputation / Personal Brand

• Listen / Engage / Inspire / Enlist Support

• Leadership…

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When Things Go Wrong• Opportunity – new knowledge, new equilibrium,

new strategies

• Reflection• Emotional Intelligence• Authenticity• Courage

• Leadership Resilience

Governance review

Fiona Twycross AMFormer Head of Governance,

Diabetes UK

Governance reviews

• (Why) do you need a governance review?• Steps to take: Case study of Diabetes UK• ‘Banana skins’ (pitfalls and ways round them)• What does success look like?• Moving on from a governance review

Do you need a governance review?

• Are your processes and structures getting in the way of what you are trying to achieve?

• Is changing them likely to make you more likely to reach your goals?

• Do you have the time and resources to carry out a review?

Steps to take

• Plan a realistic timescale (we didn’t)• Identify the problem and what impact it is

having on your organisation• Be clear (very clear) on what you are trying to

achieve• Benchmark with similar organisations but be

clear what will work for you

Steps to take

• Consultation• Consultation• Consultation– Make sure you keep people on board (as far as

possible) and that you understand and address stakeholder concerns

Plan realistic timescales

Identify the problem• What is it that isn’t working?• How do you know it isn’t working?• What impact is it having?

So what was wrong?

Board of Trustees

Governance Committee

Research Committee

Finance Committee

Audit and Risk Committee

UK Advisory CouncilCouncil of Healthcare

Professionals

Council of People Living with Diabetes

Scotland Advisory Council

WalesAdvisory Council

EnglandAdvisory Council

Northern Ireland Advisory Council

Task and finish groupsExpert Working Groups

Decision making

Advisory/engagement

Involvement NetworkTask and finish groups

You don’t need to continue exactly as before in the meantime

• Introduced Board audit• Introduced Annual Review of Board

performance• Strengthened information we gave to

prospective trustees and induction/training process

• Put elections on hold

Identifying what we needed

Appointed Board of Trustees

Learning from others

• Spoke to other organisations• Research online• ICSA documentation (eg on accountability)• Advice from the experts• Learning from others internally

Consultation, consultation, consultation

Be as open as you can• If you need to change for funding purposes,

say it• But where the changes also have wider

benefits, also say that• If you are having a consultation, be as open as

you can about submissions• Explain why points are/aren’t taken on board

Avoiding banana skins

• Lack of champions on Board• Blockers• Hidden opposition• Don’t take it personally• Don’t just change things for change’s sake

Life after governance reviews …

What does success look like?

• Felt simpler• Not discussing governance any more• All members on councils wanted to stay on

BreakTime

Workshop session:Changing your Articles of

Association

Tom BruceFarrer & Co

Workshop Objectives1. Does your NGB need to update its Articles in light of changes brought in by the

Companies Act 2006?

2. Focus on Board Composition– The Sport England and UK Sport governance criteria for NGBs (2013 –

2017)– Case Study: What does your NGB need to change in its Articles to comply?

3. Drafting the changes and adopting new Articles – How to draft the changes to your Board provisions– Managing the transition from an existing Board to a new Board– The process for adopting new Articles

1(a). Does your NGB need to update its Articles?

• Memorandum of Association – Name, Objects, Powers, Guarantee and Dissolution provisions now deemed to

be included in the Articles

• Board Composition– Company Secretary no longer compulsory

• Conflicts of Interest– Directors with situational conflicts or conflicts with a proposed arrangement or

transaction

1(b). Does your NGB need to update its Articles?

• General Meetings – AGM optional– 14 days’ notice of general meetings– 5% or more of your voting members can call a general meeting– Chair casting vote (only if he/she had one prior to 1 October 2007 which is to

be retained)

• Proxies

• Written Resolutions

• Electronic Communications

2(a). Board Composition: Governance Criteria

• Sport England and UK Sport governance criteria for NGBs (2013 – 2017)

• To be included in your NGB’s Articles:– Ideally the Board should not exceed 12 members– Terms of office should be limited, usually to a maximum of 2 x 4 years

• To be included in your NGB’s [Articles] / Rules / Bye Laws:– A balance of skills and experience on the Board– An open recruitment process to the Board– At least 25% of the Board and ideally 1/3 to be independent

• Requirements to be met by October 2014

2(b). Board Composition: Case Study

• Organisation “NGB” has 20 Board members who are elected by its membership and can hold their positions for as long as they choose to. In order to comply with its funding requirements, NGB needs to change to a Board of 12 individuals, 6 of whom are elected by its membership and 6 of whom are appointed by the Board (of which at least 3 must be independent). All 12 directors must only be able to serve on the Board for 2 terms of 4 years before they are required to retire.

(A) What does NGB need to change in its Articles?

(B) NGB wants some of its existing Board members to continue on the new Board. Can NGB do this? If so, how?

(C) NGB may wish to apply the 2 x 4 year maximum term to existing Board members so they can’t be re-elected or appointed to the new Board. Can NGB do this? If so, what would the drafting in NGB’s revised Articles look like?

3(a). Drafting the Changes

• What does NGB need to change in its Articles?

– Maximum of 12 Directors on the Board;– 6 Directors to be elected by its membership;– 6 Directors to be appointed by the Board (of which at least 3 must be

independent);– Maximum of 2 x 4 year terms for all 12 Directors.

3(b). Drafting the Changes• NGB wants some of its existing Board members to continue on the new Board. Can

NGB do this? If so, how?

• Yes. Transitional provisions can be included in the new Articles to manage the change from the existing Board to new Board.

• For example:-– All existing directors retire at the AGM at which the new Articles are adopted

but are eligible for re-election / appointment;OR – Staged implementation: Board members retire but are eligible for re-election /

appointment in rotation (e.g. 1 immediately, 1 at the AGM next year etc.) to avoid the sudden loss of a substantial number of the Board.

3(c). Drafting the Changes• NGB may wish to apply the 2 x 4 year maximum term to existing Board members

so they can’t be re-elected / appointed to the new Board. Can NGB do this? If so, what would the drafting in NGB’s revised Articles look like?

• Yes. Transitional drafting can be included in the new Articles to provide that a Director who has already served for at least 2 x 4 years will either:

(a) not be eligible for re-election / appointment for any further terms;(b) be eligible for re-election / appointment for one further term of 4 years; or(c) be eligible for re-election / appointment for two further terms of 4 years.

• Should Board members be appointed / elected in rotation (e.g. 4 elected directors, 1 to be elected for a 4 year term at each AGM?) to manage the transition?

3(d). The process for adopting new Articles

1. Prepare draft revised Articles– Working Party to draft first before a legal review?– Members’ consultation meeting?

2. Circulate draft revised Articles to your members with the notice of the general meeting or AGM and an explanatory note of the changes

3. 75% majority needed to adopt the revised Articles4. Articles to be effective immediately upon adoption?

– Transitional provisions?5. File prints of the resolution and the new Articles at

Companies House

Contact DetailsTom BruceAssociate, Sports Group Farrer & Co LLP66 Lincoln's Inn FieldsLondon WC2A 3LHTel: +44 (0)20 3375 7192tom.bruce@farrer.co.uk www.farrer.co.uk

LunchTime

Governance News UpdateJoy Tottman, Governance and

Compliance OfficerSport and Recreation Alliance

Initiatives

• Code of Good Governance – case studies• Board Members for Sport• Board Skills for Sport – working with the IOD• Leadership Convention 2012• Legal Panel Framework• Shared Services

Voluntary Code of Good Governance for the Sport and Recreation Sector

Case Studies:

1. What do you want case-studies on?

2. Do you want to help us create a case-study on your organisation?

Board Members for Sport• Launched on 25th September 2012• Network of interested people 75+• Advertise to the full network or to targeted

skill sets within it

Tell us:1. The skills you are in need of?2. Would you be interested to present to the network at a future

event?3. Do you have links with companies to help us expand the

network?

Board Skills for Sport

• First bespoke training course for board members in sport and recreation organisations.

• Fully booked for January – setting up a second date – waiting list

Tell us:1. What is it important for Day 2 to cover?2. Do you want us to explore bespoke courses for your full Board

with IOD?

Leadership Convention 2012• 14/15 November – Stratford Upon Avon• 100+ booked on already• Chairs and Chief Executives• Theme = ‘Innovative Leadership’• Session specifically for Chairs

Tell us:1. What topics do Chairs need us to work with them on?

It’s just a wonderful opportunity to be in a relaxed environment with so many key influencers in the sports sector

Legal Panel Framework• 20 minute free helpline for all organisations• Pro-bono legal fund – applications open• Newsletter• Conference – 4th December – Leicester – book your place!

Tell us:1. What topics do you want covered in the legal

workshops?

Services and Support

• Payroll – BOND• HR assistance - SHE Q • Research - SRA• Administrative Support - SRA

Tell us:1. What other services do you want us to look

into for you?

Governance News UpdateAmanda Bennett

UK Sport

UK Sport Update• Rio planning• Rio Investment Panels underway – thank you• 2013-17 funding triggers and required standards

• Governance support• Dedicated Governance Manager • Support for Governance improvement - based on

business case• Equality and Safeguarding funded support – individual

2013-17 targets

UK Sport Update• Leadership development• UK-wide initiative with Home Country Sports Councils• Broad range of activities and support tools, e.g. Board

evaluation and skills audit • Build skills and competencies which complement

corporate governance frameworks • Working with SE and SRA to maximise impact

Governance News UpdateHilary Milne

Head of Audit, Risk and GovernanceSport England

Future direction?

Next steps………• Governance strategy • Governance understandings, Preliminary

assessments, action plans etc • Self-assurance • Audit and assurance process • Thematic review• Club governance

Questions?

Reserves and Reserves PoliciesJeremy Beard

Partner, haysmacintyre020 7969 5503

jbeard@haysmacintyre.com

Reserves and Reserves Policies• Definition of “Reserves”• Net assets• Liquid assets/free reserves• Liabilities and deferred income

•Why hold reserves?• To meet future commitments• Liabilities arising on winding up• To cover short term reduced income• To cover short term increased expenditure

• Reserves Policy• Reasons why• Level of reserves or range• Steps to establish or maintain reserves• Arrangements for monitoring

•Scrutiny of Reserves Policy• Funders• Members• General public

Reserves and Reserves Policies

Reserves and Reserves Policies• Setting a Reserves Level• Security of present income stream• How long would it take to close• Costs of winding up• Unforeseen (or known) major liabilities

•Disclosure and Review• Brief details of policy and level• Annual report, financial statements, website• Annually• Through review every 2/3 years

Reserves and Reserves Policies

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

60.0%

70.0%

80.0%NA's/Income

Net Assets/Total IncomeFor most NGBs income will match expenditure over a relatively short period of time, as they strive

to reinvest all income whilst maintaining reserves at a suitable level. Whilst measuring net assets to income is a very basic indicator of sufficiency of reserves, it is nevertheless a useful comparison

against other NGBs and also over time if the organisation is contracting or growing significantly. All NGBs should have a more sophisticated reserves policy which takes into account "free" reserves

(excluding fixed assets)and also considers the level of grant income. It is probably unreasonable to build an adequate level of reserves that takes into account significant grant income and matching

expenditure.

0.00%

10.00%

20.00%

30.00%

40.00%

50.00%

60.00%

70.00%

80.00%

90.00%

100.00%%grant inc./other inc.

Reserves and Reserves Policies

Grant Income/Total IncomeIncreasing pressure is being put on NGB's by major funders to increase

their own income, whether it is membership income, sponsorship income or commercial activities. The ratio demonstrates how reliant

NGB's continue to be on UK Sport and Sport England to fund a significant proportion of their activities.

ExampleIncome - Grant 700 - Other 300 1000Expenditure 1000Fixed Assets 100Current Assets 100Current Liabilities (50) 150

Reserves and Reserves Policies

BreakTime

Governance change management, NGB experiences –

Open ForumJenny Frommer

CEOBaseball/Softball

Governance change management, NGB experiences –

Open ForumDavid Pond

CEOGB Wheelchair Rugby

Governance change management, NGB experiences –

Open ForumJane Nickerson

COOAmateur Swimming Association

ASA

Proposed Governance Changes

The Journey

• Strategic Review:Realisation NGB life is changingNo longer just about members

• Recognition change was neededDeciding on that change was challenging

The Journey

• Consultation period:Interested parties?Motivations

• TimetableSlow, steady, incremental progress

Proposal

• Group Board

• Sport Governing Board

• Council

Current Position

• Oct 12 ASA Council approved motions

• June 13 EGM to consider rule changes

• June 13 Recruit and set up new structure

• Oct 13 New structure fully operational

Wrap Up & Close

Chair - Mark Palios