TSI believes more than ever before that the leadership of nonprofit (npo) and social impact (si) organisations is core critical, more particularly as we emerge from the unprecedented challenges that have already been faced by them due to COVI 19, and as we emerge from this leading in the ‘new norm’.  They have a critical role to ensure financial sustainability and accountability to internal and external stakeholders.

In fact, it is a strongly held belief that governing body members of non-profit and social impact organisations should hold themselves to a higher standard.

It is admirable to accept a position on a governing body of a non-profit and social impact organisation. However, experience over the years has shown that it could be as high as 80% of these individuals may not have served on a governing body (Board) before…..

This is an onerous decision!!!!!

Before agreeing to serve on a governing body, do your homework. Be aware of what the expectations of you as a governing body member are.  Such an opportunity to serve is great, but be sure to gain a solid understanding of your role and responsibilities, fiduciary requirements and legislation etc.

Good governing bodies protect the organisation’s values and resources. There should be clear roles and responsibilities demarcation between CEO and board.

Roles of governing bodies and management

Governing BodyManagement
Determining policy and strategyImplementing policy and strategy
Appointing and overseeing the chief executive officerAppointing managers and staff
Monitoring the performance of the entire organisationMonitoring day to day activities
Managing the governance processDelivering services and conditions
Providing insight, wisdom and judgmentProgramming activities

The governing body is not there to run the NPO and to get involved in the day-to-day management of the organisation; that is a management function which needs to be performed by the management and staff.

A recent article on directors duties by Parmi Natesan, Executive: Centre for Corporate Governance at the Institute of Directors in Southern Africa (IoDSA)  – “says that in South Africa, directors’ duties as set out in our common law and in the Companies Act include the fiduciary duty to act in good faith and for a proper purpose in the best interests of the company and also acting with due care, skill and diligence. 

Apart from the law, the governance code in South Africa, King IV, sets out the expected governance best practice, and contains specific principles and practices around ethical conduct, good corporate citizenship, compliance with laws, rules, codes and standards, fraud, corruption as well as risk and tax governance”.

So, when deciding to accept an invitation to serve on a NPO’s governing body take the following into account…

Common law duties

In the discharge of their functions, the Governing Body members must satisfy common law and statutory requirements by always acting in good faith, with care, diligence, skill and within the laws of the country. Acting in good faith means that each Governing Body member must do what they believe to be in the best interests of the organization. Acting within the law implies that they must know the laws that govern their activities.

Fiduciary duties

The Governing Body must satisfy three principles that fall under fiduciary duties. Here the Governing Body and its members should avoid conflict of interest. A Governing Body member should not be involved in making a decision that he or she has vested interests in as this would bias his / her decision. A Governing Body member in an NPO should not profit from being a member of that organisation. He or she should not use the resources of the organisation as collateral for his or her personal gain.

Providing strategic direction

The Governing Body has the responsibility for the long term strategic direction of the organization, whereas the management team is responsible for operations. Although the responsibility for setting the direction remains with the Governing Body, in most organizations the process of establishing the vision, mission and strategy is a joint one involving the Governing Body and management. In some cases this process is driven by the CEO. The Governing Body is ultimately responsible for creating an environment which is conducive to good governance.

Formulating policies and providing direction

The Governing Body should be at the centre of determining the key challenges and opportunities that the organization should respond to. Governing Body members are expected to have the ability to read and respond to the environment. The other key role of the Governing Body is to develop the relevant policies that are needed in the organisation and to approve them.

Provide standards and control mechanisms

The Governing Body should ensure that a proper management structure, systems and procedures are in place and functioning properly. It should regularly review systems, processes and procedures to ensure the effectiveness of its internal system of control for accuracy and informed good decision-making. In addition, it ought to monitor and evaluate the programmes of the organization, as well as its financial sustainability.

Financial responsibilities

The Governing Body has the overall responsibility to ensure sustainability of the organization through successful resource mobilization and management strategies. The Governing Body’s financial responsibilities includes improving the financial reporting systems, accounting systems, and budgeting processes; ensuring that annual auditing takes place; appointment of auditors and designing their terms of reference and setting tender procedures.

Protecting the organization

Governing Body members have the responsibility to shield the organization from external threats to ensure that it continues to survive to serve its purpose. Protecting the organization also means meeting the requirements of its stakeholders such as the government, donors, members and the beneficiaries.

Some serious food for thought before serving on a NPO or SI governing body!!!