from design to realization intentional...
TRANSCRIPT
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INTENTIONAL GOVERNANCE From Design to Realization
Beyond the Bottom Line Seminar Nashville, TN, March 26, 2013
Presenter: Lowell C Cooper
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Legal Notice and Terms of Use
Copyright 2013 by the General Conference of Seventh-day Adventists®. All rights reserved. The information is provided for training purposes only and is not intended nor should it be used as legal counsel. This program may not be used or reformulated for any commercial purposes; neither shall it be published by any person or agency other than an official organizational unit of the Seventh-day Adventist® Church, unless prior written authorization is obtained from the General Conference of Seventh-day Adventists® Office of Global Leadership Development. Subject to the foregoing terms, unlimited permission to copy or use this program is hereby granted upon inclusion of the copyright notice above. “Seventh-day Adventist” and “Adventist” are registered trademarks of the General Conference of Seventh-day Adventists® and may not be used by non-Seventh-day Adventist entities without prior written authorization from the General Conference. Use of all or any part of this program constitutes acceptance by the User of these terms.
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Why board processes matter:
1. Most leadership training is for individualized positions of responsibility. Most major decisions are made in groups.
2. Institutional success is ultimately the responsibility of the board/exec committee.
3. Effective group decisions do not arise spontaneously. They result from deliberate designs in structure and social dynamics.
4. Good governance builds membership trust.
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The most important human resource for the Church is
TRUST
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Two SDA governance systems:
Ecclesiastical system “Executive Committee” Each entity part of a
chain of organizations Many employees--voting
members of exec comm Ex Com chair—internal 3 officers accountable
to Exec Comm More involved—mngmnt Unincorporated status
Institutional system “Board of Trustees” Each entity a ‘stand-
alone’ organization Few employees—voting
members of board Board chair—external CEO primarily
accountable to board Less involved—mngmnt Incorporated status
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The Bottom Line
Both systems can function effectively Effective functioning of the system
requires: Skilled leadership in group decision-making Group members with diversity of competencies
appropriate to the business Intentionality about mission
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Our challenge:
“…there is one thing all boards have in common, regardless of their legal position. They do not function.”
—Peter Drucker
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Board diseases: (Larry Walker, Trustee, September 2011)
1. Agendasclerosis—clogging of valuable meeting time with unproductive activity
2. Dialog deficit disorder—leads to irritable trustee syndrome
3. Knowledgedystrophy—making decisions without sufficient information
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Board diseases: (cont’d)
4. Successionitis—lack of long-term governance succession/development plan
5. Leadershipresbyopia (also missionmyopia)—short-sighted mission, cloudy vision
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What good boards do
1. Shape mission and strategic direction 2. Maintain SDA identity of organization 3. Establish key policies and strategies 4. Select, develop, and evaluate officers 5. Ensure adequate financial resources 6. Build/enhance organization’s reputation 7. Provide adequate risk management 8. Assess performance against mission 9. Improve board performance
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10 Commandments about boards
1. Thou shalt appoint boards having competency-based membership.
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Bylaws generally do not address skill sets required among trustees.
General practice has been to focus on employee/laity, proportional representation and gender balance.
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Encouraging change…
Administration may need to suggest to Nominating Committee the range ofcompetencies needed.
Governance committee of the board adopts trustee compentency grid for use in identifying potential trustees.
Constituency session nominating committees charged with responsibility to include trustee competencies in board nomination process.
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Director competency
Personal Professional
Reputation (integrity) Time and commitment Objectivity in thinking Ability to function
beyond ‘self-interest’ Team member or soloist Social behavior
Training/education Experience Skill and judgment
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10 Commandments about boards
2. Thou shalt conduct trustee orientation and
on-going education.
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What trustees need to know:
Selection process and term of service Expectations of trustees Organization’s mission/purpose/policies Organizational chart(s) Constituencies served Existence of corporate documents Protection against director liability Director/member rights—access to management
and records, attendance at meetings, right to speak and vote
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Unless new trustees receive orientation it will take several board meetings before they begin to understand their role and how to contribute.
Expectations of trustees:
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Treasurer’s job description (GCWP)
A co-officer
Reports to Executive Committee after consultation with the President
Receive, safeguard and disburse funds in harmony with Exec Comm actions
Provide financial info to President, Executive Committee and division.
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Treasurer’s functions:
Custodian of funds Safeguarding
Knowing where funds are/how used
Producing timely financial statements
Preparing realistic budgets
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Treasurer’s functions:
Inform Executive Committee Provide financial statements
Interpret financial statements
Educate members re: financial condition
Counsel on cost and feasibility of proposed actions
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Treasurer interactions
Time (quantity and quality) to present information to Committee
Written narrative comments accompany circulated statements
Take into account the level of financial understanding among members
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Treasurer interactions (contd)
Provide financial forecasts
Look at trends over longer periods of time (not just current month/year)
Portray use of funds not just amounts (admin, employees, education, evangelism, insurance,etc.)
Use financial consultants
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Treasurer interactions (contd)
Be an active member of the officer team
Be available/accessible to dept dirs
Coach and mentor local conf treasurers
Earn the trust of committee members
Guard against ‘possessive’ attitude with respect to organization’s resources
Prepare for emergencies
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Treasurer interactions (contd)
Explain the use of internal controls
Strive for ‘clean’ audit opinions
Become known as a trainer of young financial leaders
Be careful how you say “No”
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Expectations of trustees: (Loma Linda boards)
1. Be active and supporting members of a local Seventh-day Adventist church.
2. Commit sufficient time to become oriented to trustee responsibilities and to be an informed participant in governance decision-making.
3. Attend Board meetings regularly (4/year). Two consecutive unexcused absences are automatically considered to be a resignation.
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4. Attend and participate in periodic special events, including the quinquennial membership meeting.
5. Serve as a member on a Board committee(s).
6. Review agenda materials sent in advance of Board meetings and be well prepared for meetings.
7. Contribute to Board discussions and decision-making.
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8. Support Board decisions and demonstrate a commitment to teamwork.
9. Positively promote the work of the organization and advocate for its interests.
10. Comply with the organization’s Conflict or Interest Policy.
11. Assist the Board in evaluation of its performance and a trustee’s own involvement.
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12. Serve without compensation.
13. Attend, at least once per quinquennium, a Board-approved off-campus educational seminar/conference.
14. Participate in institutional support through personal commitment of resources and through the encouragement of others to actively support the organization.
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Fiduciary obligations of trustees
Care
Obedience Loyalty
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The duty of care
Refers to the level of competence expected Common standard: “ordinary prudent person” Duty to attend meetings regularly Duty to show independent judgment in voting Duty to be informed Duty to rely on/delegate to trusted sources
Duty of diligence (perfect judgment not required)
Duty of risk management …
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The duty of loyalty
Corporate position not for personal advantage Standard of faithfulness to the organization Undivided allegiance when making decisions Duty of loyalty breached when members use
organizational property for personal purposes Maintaining confidentiality of privileged info
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The duty of obedience
Making sure the organization remains obedient to its purpose and role (i.e. faithful to SDA mission, beliefs, culture, policies and practices)
Duty of compliance with laws Fulfilling commitments, including previous
ones
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10 Commandments about boards
3. Thou shalt make decisions and assess performance in light of the organization’s mission, vision, and values.
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Mission Defines fundamental purpose
Vision
Values
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Mission Defines fundamental purpose
Vision Defines future state
Values
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Mission Defines fundamental purpose
Vision Defines future state
Values Defines culture and priorities
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10 Commandments about boards
4. Thou shalt focus on the future while learning from the past.
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Use the
more than the
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3 Windows on the Board Agenda
1. Window to the past Minutes of last meeting CEO report (written summary preferred) Financial statements
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3 Windows on the Board Agenda
2. Window to the present Administrative or staff appointments Policy approval Board member education Reports from various board committees
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3 Windows on the Board Agenda
3. Window to the future Reviewing/updating strategic plan Capital needs and planning Succession planning/leadership development
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“Long range planning does not deal with future decisions. It deals with the future of present decisions.” —Peter F. Drucker (1909 - 2005) U.S. management consultant and author.
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10 Commandments about boards
5. Thou shalt manage conflicts of interest.
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Conflict of Interest
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Independent director/conflict of interest
Independent director
A structural matter Director’s positional
relationship to the organization
Conflict of interest
An episodic matter Director’s potential
for bias in a specific decision
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10 Commandments about boards
6. Thou shalt act in a timely manner
and record decisions.
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Board Minutes:
Accurate, official and legal record Front line of defense—“Where was the board?”
Offer guidance for future board action Document compliance with fiduciary duties Contemporaneous evidence in regulatory or
judicial proceedings Provides summary for trustees not present
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10 Commandments about boards
7. Thou shalt schedule and hold meetings regularly.
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Board calendar – dates known at least one year in advance
Calendar of annual agenda items Items at each meeting Yearly items Trustee education
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Types of Board Sessions
Regular sessions Cover routine and general institutional matters Administrative invitees present
Executive sessions Only board members and those requested by Chair
or administration are present Used for sensitive matters when open discussion is
needed Privileged sessions
Legal Counsel present Use for items where protection of information
from discovery in litigation is needed Only board members may be present
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10 Commandments about boards
8. Thou shalt establish an efficient board committee structure.
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Committees—Board “Workhorses”
Enhance board effectiveness & efficiency Break down complex issues/tasks Perform groundwork needed by board Ensure issues discussed thoroughly Engages members’ professional skills Can be ad hoc or standing
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Most Common Board Committees:
Finance Development Trustees/Nominating/Governance Executive
meets between boards to address special issues Academic Affairs Audit Student Affairs/Campus Life Buildings and Grounds Investment
Association of Governing Boards 2010 study (listed in descending order)
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Well-Functioning Committees:
Written charter Purpose and authority Committee’s responsibilities Desired competencies of those who serve Reporting requirements
Balance role of committee & board Work on behalf of board Report information to board in way easy to grasp Board shouldn’t re-hash committee’s work
Well-managed information flow Don’t overwhelm with information
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10 Commandments about boards
9. Thou shalt maintain an effective boardroom culture.
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Strategy/Procedures/Programs/Policies
Organizational culture
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Elements of boardroom culture
• Commitment to excellence
• Enthusiasm about mission Attitude
• Effective use of time
• Focus on strategic issues Attention
• Safe to talk
• Good group dynamics Atmosphere
• Governance not management
• Big picture/future perspective Altitude
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“I really had some strong convictions on that matter but I didn’t say anything about it…”
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“…the highest-performing companies have extremely contentious boards that regard dissent as an obligation and that treat no subject as un-discussable.” —Sonnenfeld
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Elements of boardroom culture
• Commitment to excellence
• Enthusiasm about mission Attitude
• Effective use of time
• Focus on strategic issues Attention
• Safe to talk
• Good group dynamics Atmosphere
• Governance not management
• Big picture/future perspective Altitude
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10 Commandments about boards
10. Thou shalt pursue excellence by indentifying where goverannce improvements can be made.
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The Board must assume responsibility for itself—its own effective and efficient performance. This includes its structure, design, direction and discipline.
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Board Self-Evaluation:
“The purpose of engaging in a self-assessment
process is to give the board an opportunity to reflect on how well it is fulfilling its responsibilities and to identify opportunities for continuous improvement.”
- Elements of Governance: Board Self-Assessment, A Core Responsibility, The Governance Institute
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Board Self-Evaluation:
In era of accountability, must show continual improvement in board operation
Should be done on a regular cycle Should identify:
Areas of excellence Areas for more discussion Top areas to address for improvement
Follow-up action plan developed Monitor progress
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“999” Plans
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What can be done to improve Board functioning in the next 9 days?
What can be done to improve Board functioning in the next 9 weeks?
What can be done to improve Board functioning in the next 9 months?