BRIEF BACKGROUND
The concept of the ourGOVERNANCE was proposed after discussions around the critical issues that face the Governing Body of Non-profit Organisations. Development work on ourGOVERNANCE began back in May 2001, as there appeared to be much work done in the area of For-Profit Governing Bodies, but minimal if nothing in the way of Not-For-Profit Governing Bodies.
The General consensus is that Not-For-Profit Governing Bodies could have as high as 80% of their governing body members who may never have sat on a Governing Body before. The feeling was that these governing body members may not be aware of how onerous their appointment is with respect to their fiduciary and statutory responsibility, corporate governance and due diligence issues.
OurGOVERNANCE was developed in the interest of making available to such Governing Bodies and their Chairpersons a tool through which they could individually review their understanding of their responsibility of being a Governing Body Member on such a Board, and embark on personal Governing Body Member Development. The core focus is to empower each Board member with the knowledge to improve their application of this learning/understanding and in so doing improve the effective and efficient decision making that such a Board member has to make, plus to protect the investments made in the Company by the Incorporators and Funders of such company.
The personal impact on a Board member will be felt nationally and possibly globally as these individuals may have seats on other Governing Bodies/Forums/Councils etc, and this will in turn have a positive impact on the Organisations that they have a governing body membership/executive responsibility for.
The philosophy of corporate governance cannot rely on statutory requirements, generally accepted codes of practice and ethics alone, but must embrace social and economic transformation imperatives. OurGOVERNANCE is one way of beginning to address this with specific focus onto corporate governance standards, which are directed at three aspects of any enterprise’s activities, namely:
- Competent Management
- Responsible and ethical conduct
- Accountability to others with vested interest and the society
The under- pinning concept for Non-Profit Organisations and their Governing Body is the propensity to serve and this is the essence of the corporate governance philosophy for enterprises without share capital, which by their very definition of legal form, suggest a motive other than making profits for their investors.
PREAMBLE
OurGOVERNANCE was conceived out of the need for competent, knowledgeable and effective governing body members to be at the helm of Non-Profit Organisations (NPOs).
An easy solution could have been to simply bring together all the publications of professional institutions, the codes of good practice and various summaries and commentaries on legislation, and to extract and reconfigure only the text relevant to such entities within a new format. This approach would, however, not have encapsulated the intent and ethos of a governance standard for the spirit of service and dedication to the greater good that characterises responsible stewardship governing body membership within a public enterprise having no shareholders. The King Report qualifies that its recommendations are aimed at business enterprises of a certain size and one of its fundamental premises is that entrepreneurship and enterprise are among the most important factors that drive business. Enterprise is defined as “the disposition to engage in undertakings of risk for profit”. This philosophy of corporate governance is derived from the notion that governing body members must act in the best interest of the corporation and thereby ensure that through their enterprise and integrity, the company’s investors be rewarded with acceptable profits. Governing body members are regarded as being individually and collectively responsible to the shareholders.
Clearly then, the philosophy of corporate governance for corporations with a purpose other than the undertaking of business with risk for the acquisition of profit, must be based on a different value system. The challenge confronting the composition of such a corporate governance model was to find a credo or ethos that expressed the true spirit and purpose of public entities without shareholders and share capital, by which their very choice of legal form suggests a motive beyond the bottom line. This value statement provided the objective of a study to construct a corporate governance model based on the legal, ethical and duty provisions of contemporary codes, but with a philosophy of service.
OurGOVERNANCE contains many points that can be found in most of the available publications, which in any event are merely extracts from or references to King IV, and other legislation governing the direction and management of Organisations. It does offer a more concentrated and directly relevant content, but most importantly emphasises the propensity to serve the aims of the corporation, the imperative of delivery and the respect of diversity among its people as values esteemed above the dispensation to take business risk for profit.
Responsible Stewardship Model.
INTRODUCTION TO ourGOVERNANCE
OurGOVERNANCE is an e-learning programme specifically designed for executives and governing body members of Non Profit Organisations.
The programme was developed because of the need for competent, knowledgeable and effective Governing body members and Executives to be at the helm of Non-profit Organisations.
The manual consists of three different books:
- An Introduction to ourGOVERNANCE
- The Study Manual
- The Self assessment
Simply reconfiguring all the existing publications on corporate governance would not have fully addressed the core difference between the philosophy of a company established to make profits for investors, and the philosophy of a company established to serve a public cause
The business company is driven by enterprise, defined as “the disposition to engage in undertakings of risk for profit”.
The social or public service company must be driven by a different ethos, and no better one can be found than the value of “batho pele” which underpins the new coat of arms. This is a Sesotho phrase meaning “people first”
The ethos of a public entity without shareholding and share capital must express the true purpose and spirit of its existence
If “people first” is the credo, then the Non-profit organisation can only be driven by ‘a propensity to serve’.
The 1995 white paper on the transformation of the public service expressed a heart cry of a nation to the ideal of excellence of government and civil society based on four tenets:
- Representivity
- Accountability
- Service delivery
- Institutional change
These tenets still hold true today. OurGOVERNANCE allows for the diversity of people that will serve on primarily Non-Profit Company Governing Bodies and for the different worldviews and philosophies that they will bring with them
The emphasis is therefore on THE NEUTRAL NEED for responsible, informed decision-making, service delivery and accountability.
The content of the manual is grouped under four modules covering fifteen sections:
Module 1 – Introduction to corporate governance, and the nature of the Non Profit Organisation.
Module 2 – Duties and functions of a governing body
Module 3 – Governing body effectiveness
Module 4 – Financial requirements and code of conduct.
The essence of ourGOVERNANCE is that once the Governing Body Member of the Non- profit has registered with ‘third sector insights’ they will gain access to their personal development programme through ourGOVERNANCE.
The executive and Governing Body Member can in the privacy of their office or home and in their own time, work through the study manual and conduct the self assessment at the end of each module. This will positively allow them to gain an understanding of their areas of further research and study to assist them in improving their knowledge of Governing body membership and Corporate Governance and the true application of responsible stewardship.
MODULE ONE – COVERS THE FOLLOWING:
- OBJECTIVE AND SCOPE
The objective is to bring greater understanding of the implications of governing body membership so that they will be enabled to fully and effectively meet their obligations in discharging their duties and act as responsible stewards.
- WHAT CORPORATE GOVERNANCE IS ALL ABOUT
In this context, it advocates and promotes superior board performance through the greater level of understanding that governing body members will acquire of their role. It is based on the positive aim of enhancing performance and not on the negative of preventing failure.
- LEGAL NATURE OF THE NON-PROFIT ORGANISATION
This confirms that profits may be made but can only be applied to the object of its registration and states that the company is a separate legal entity with its own rights and obligations, distinctly separate from its members. Essential characteristics are:
- Is a legal personality
- Offers limited liability
- Has the right to perpetual succession
- MAIN OBJECT OF THE NON-PROFIT ORGANISATION – WHY IT EXISTS
Is derived from the incorporators and this can be found in the Founding Document.
- WHO ITS STAKEHOLDERS AND BENEFICIARIES ARE
This stresses that all organisations have a variety of stakeholders with vested interest in its performance and ongoing success. The key stakeholders and ultimate beneficiaries are described
- THE MEMBERS OF THE ORGANISATION
Simply being the parties who signed the founding documents submitted with registration. They have no entitlement to any profits (surplus) made.
This module has 6 sections with 28 of 95 questions in the self-assessment.
MODULE TWO – COVERS THE FOLLOWING:
7. THE GOVERNING BODY
Is stated as being the body through which the organisation acts, and its main responsibility is to ensure that the organisation sticks to its purpose and operates in compliance with all laws. Governing body members must be given all important strategic and contractual documents on their commencement of duty. The governing body must retain full and effective control over the organisation and ensure that they take all material decisions.
The main functions, duties and responsibilities of the board collectively, as distinct from individual roles, are highlighted.
8. DUTIES AND RESPONSIBILITIES OF A GOVERNING BODY MEMBER
States that governing body members individually and collectively are responsible for the direction of the organisation and are accountable to its members. Main function is responsible stewardship over the plans, funds, and resources of the organisation and their application to the stated purpose of the organisation.
To perform with utmost loyalty, good faith, care, skill and attentiveness.
Governing body members must always be sure that they have sufficient information and time to make well informed decisions.
The section sets out the rights, duties, obligations and liabilities of a Governing Body Member.
9. THE CHAIR ( CHAIRPERSON )
This section sets out guidelines for the role and effectiveness of the chairperson.
Primarily to manage the process, protocols, productivity and effective decision making of the governing body meetings and to ensure that all governing body members fully participate.
This module has 3 sections with 22 of 95 questions in the self assessment.
MODULE THREE – COVERS THE FOLLOWING:
10. GOVERNING BODY EFFECTIVENESS
The section emphasises that board effectiveness refers to the performance of the governing body members not only in their meetings, but also to their consistent attention to and carrying out of duties and responsibilities throughout their term of office.
Effectiveness begins with the selection and appointment of the right people. There should be no element of tokenism or cronyism in appointments. Dedication cannot be fabricated or faked.
Political behaviour, being behaviour that is not sanctioned by the board or does not serve the objectives of the company, must not be condoned.
Governing body members must abide by final decisions of the board, but may have their reservations placed on record. Recommends that the board subject themselves to self and outside appraisal.
11. MANAGERS AND COMMITTEES
States that the board is required to appoint managers to operate the business on a day-to-day basis and to set up ad-hoc and standing committees, e.g.
Internal audit committee
Remuneration committee
Managers must have appropriate authority, be fully informed and enjoy board support o act within their powers and limits of authority.
12. EMPLOYEES
Confirms the board’s responsibility to ensure that all employment legislation is complied with. The common law and constitutional rights of individuals must also be respected.
Employees must have formal contracts. The company can reasonably expect certain standards of behaviour and performance from their employees.
This module has 3 sections with 22 of 95 questions in the self assessment.
MODULE FOUR – COVERS THE FOLLOWING:
13. AUDITING REQUIREMENTS
In terms of the relevant legislation, it is generally required of every organisation to appoint an auditor. The role and duties of auditors are set out. The governing body members are responsible for the preparation and presentation of annual financial statements including a governing body members’ report. The auditors must satisfy themselves that records have been kept, minute books and registers have been kept and that the financial statements reflect the true state of the company’s accounts. It is general good practice and according to the relevant legislation accounting records should be kept by the organisation and these are listed in this section.
14. LEGAL AND STATUTORY REQUIREMENTS
Legal and statutory requirements on governing body members are extensive and onerous. Governing body members must be aware of the full implications of appointments to Governing Bodies. Governing body members share equal responsibility regardless of specific duties. Acts of governing body members remain valid despite defects found afterwards in their appointment or qualification. Negligence, fraud or recklessness may result in civil and criminal action against them. The removal of a Governing Body Member must follow certain procedures.
15. FINANCIAL REQUIREMENTS AND CODE OF CONDUCT
Ethics and morality pertaining to business are defined and it is confirmed that it is the responsibility of the governing body members to determine the moral and ethical climate of the company. The subject of shared values is also dealt with.
A code of conduct is applicable to everyone in the company.
The code must be made available to all. The OurGOVERNANCE is also a code of conduct, but each company should specify its own code of behaviours and ethics.
This module has 3 sections and 23 of 95 questions in the self assessment.
