Are you a director in a predicament? Being a director can raise all sorts of thorny issues, and solutions are not always so clear-cut. Enter AltoPartners Australia’s colleague, Julie Garland McLellan, who presents The Director’s Dilemma™ - a regular case study based on real events, together with at least three sample solutions from governance practitioners.
Each case study aims to amplify the power of directors and boards to build better businesses by providing a safe environment for testing their judgement using real-life scenarios.
Scenario:
Queenie has just joined her first not-for-profit board and is very excited about it. She has done a short course on governance and is looking forward to applying what she learned to help a cause that she is passionate about.
At her first board meeting the chair introduced her to the other directors and she was surprised to hear that some of them had special titles such as Donations Director, Finance Director and Members Director, while the rest were introduced as ‘just’ normal directors. Queenie was a bit surprised, as her understanding was that they were all non-executive directors and, as such, jointly responsible for performance of the board’s duties.
The meeting progressed pretty much as Queenie had expected it to, although each of the ‘specially designated’ directors gave a report about their area of focus. She did not wish to disrupt the smooth running of the meeting by asking about the titles. All appeared to be progressing well and there was nothing in any of the reports that gave her any cause for concern.
After the meeting she reread the company’s constitution and found no mention of these titles and only the expected statements about directors and the board. She is mystified. Should she ask the chair about these titles and the impact on director’s responsibilities and liabilities? Or is it something that they would expect her to know and understand?
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Rod’s Answer:
First and foremost, all directors are responsible for the governance of the NFP. Most corporate boards also have committees (e.g. remuneration, audit and finance among others). The chairs of these committees usually report to the whole board in similar fashion to the way Queenie describes the reports from these directors with specific responsibilities. This does not diminish the responsibilities of other directors in this area. Rather it spreads the load, but all directors need to ensure they are across the special reports those with specific responsibilities bring to the board and approve or otherwise interrogate such specific input to the meeting.
Often such NFP directors will work with other volunteers and bring a broad view of operations to the board table. But they remain Directors and are not Managers.
Queenie would be quite right to discuss this with the Chair and suggest it might be more appropriate to simply call them all Directors. They could remain the key Directors responsible for keeping the board well informed in their specific areas of interest or specific expertise. The Chair could then reinforce with the board his/her appreciation for the extra tasks some Directors took on between meetings, but that all were equally responsible for board decisions in these, as well as other matters.
Rod Elvish is Chair of DoggieRescue.com and a former President of the AusIMM. He is based in Sydney, Australia.
Julie’s Answer:
A board has the right to delegate anything that needs doing to anyone (or any organisation) that the board rationally and responsibly believes is capable of doing it. This includes delegations to members of the company’s board and/or executive.
In not-for-profit boards there is often a tendency to use any donated expertise or energy that becomes available, and many good board members are also passionate volunteers and advocates for their cause. This is great!
It is also dangerous if board members are unaware of the differences between their role as a director (non-executive and lacking formal authority unless acting with the board in a properly convened meeting) and their role as volunteers (empowered to do whatever their job description says they may, including committing the company to expenditure and other courses of action). Queenie is right to be concerned and should ask the Chair about these titles and what powers, if any, have been given along with the title to the relevant directors.
It is possibly wise to have a delegations document that sets out what is expected of each of these roles, even if the current incumbents are performing well, as it will be useful when there is a succession or a need for a holiday replacement. I would advise against putting these into the constitution, as the board may wish to change the delegations to better use the skills available and should not need to go through a general meeting each time it does.
Julie Garland McLellan is a non-executive director and board consultant based in Sydney, Australia.
Jim’s Answer:
Queenie is in a unique position as a new board member to the not-for-profit board. As a new director she has every right to ask obvious questions that were not revealed to her during the recruitment of her to the board or in the company’s constitution.
My assumption is that these directors with special titles were, in essence, acting as the head or chair of specific committees like for profit boards have around audit, compensation, nominating and other committees.
If Queenie wants to be an outstanding director, I would suggest that she serve by the ‘Truth To Power’ rule and always be willing to ask questions that others may not feel comfortable with. One suggestion is that the not-for-profit organisation put together a Board Charter for all pertinent information about the board to use for onboarding new directors and as a guideline of expectations for the board to adhere to.
Jim Zuehlke is a Principal at Cardinal Board Services. He is based in Wayzata, Minnesota, USA.