By Dorothy Dalton of Governance Magazine at WCVA's Charity Law Conference 2013.

1. Governance Top Tips
How to avoid some
of the dangers
© 2013 Dorothy Dalton
©Cartoons by Anthony Kelly

2. Prof Andrew Kakabadse,
Cranfield Sept’10
 80% of board members are not sure
of their role

4. Tip one
Understand roles, responsibilities and
liabilities of board members and
understand what governance is all
about.

5. Trustees: who are they?
persons having the general control
and management of the
administration of the charity.
Charity Law

6. Expectations of trustees
What is expected of trustees
 To act only in the best interests of the
charity
 To be involved in major decisions and
to take decisions jointly with other
trustees
 Not to benefit

7. Personal liability
Trustees will put themselves at risk of personal
liability only if they
 cause loss to the charity by acting unlawfully,
imprudently or outside the terms of the charity’s
governing documents; or
 in the case of unincorporated charities, commit
the charity to debts which amount to more than
its assets; or, in the case of charitable
companies, continue to operate when they know
or ought to know that they cannot avoid insolvent
liquidation

8. Ignoring governing documents

9. Tip Two
Work hard to get the relationship
between trustee and executive right i.e.
a partnership built on mutual respect,
trust and confidence

10. The role of the Chair
 To provide leadership to the board
and to ensure that the board fulfils its
duties and responsibilities for the
proper governance of the charity.
 To support, and where appropriate, to
challenge the CE and to ensure that
the board as a whole works in
partnership with executive staff.

11. Holding the CE to account
Low challenge
Supporters club
“We’re here to
support the CE”
Partner or
critical friend
“We share
everything
– good or bad.”
High
challenge
Abdicators
“We leave it to the
professionals”
Adversaries
“We keep a very
close
eye on the staff”
High support
Low support

13. Board effectiveness
An effective board should not necessarily
be a comfortable place. Challenge, as
well as teamwork, is an essential feature.
Guidance on Board Effectiveness (Financial Reporting Council March’11)

14. Julia Unwin’s 5S model
STEWARDSHIP
SCRUTINY
STRETCH
SUPPORT
STRATEGY

15. Higgs Report:
Advice for non-executive directors
 Question intelligently
 Debate constructively
 Challenge rigorously
 Decide dispassionately

17. Spot the signs of a
deteriorating relationship
 Trustees demand more and more detail then complain there is too
much detail and feel that the executive are trying to bury problems
and contentious issues in the detail.
 Atmosphere of suspicion and blame spreads.
 Private/closed meetings/sessions of the board begin or increase.
 Executive start to get nervous and consciously or sub-consciously
start hiding problems (both actual and potential) from each other
and from the board.
 Culture of hiding mistakes and contentious issues grows.
Everything is given a positive spin in the hope that weaknesses,
problems etc. are not spotted. Learning stops.
continued

18. Spot the signs of a
deteriorating relationship (continued)
 The CE rather than showing judgement retreats into only bringing
‘matters reserved to the board’ to the attention of the board.
 The executive retreat into their own silos. Team work is affected and
mistrust spreads within teams e.g. to within the executive team and
sometimes within their departments too.
 Rate of resignations among executive increases rapidly causing
instability in executive leadership.
 Members of executive align themselves to rival factions (e.g. chair,
or CE, or next CE, or …) in the hope they pick the winning side.
 Lot more major decisions are made by email (often with executive
not copied in)

19. Decisions by email
 Exceptional circumstances only. Danger there
 isn’t due consideration of all the relevant factors, risks and
alternative solutions
 no opportunity for the proposal to be queried and challenged
and
 for a sharing of opinions, as at a meeting
 Establish procedures and ground rules for decisions by
email.
 clarify the recipient of the emails
 notify all board members of the outcome and
 record the minute.
 It is more usual for decisions by electronic means to require
unanimity and the procedure can therefore not be used where
one of the board members is conflicted.

20. Tip Three
Work hard to get the board to stick to
governance by careful planning and
high-quality board papers.
This is a particular, and joint,
responsibility of the CE and the chair

21. The chief executive’s role
Responsibilities of the CE are:
 for the management and administration of the
charity within the strategic, policy and
accountability frameworks laid down by
Board.
 together with the chair to enable the board to
fulfil its duties and responsibilities for the
proper governance of the charity and to
ensure that the Board receives timely advice
and appropriate information on all relevant
matters.

22. Planning agendas to get the board
to keep to governance
Purpose
 Enable trustees to fulfil their duties and responsibilities
for the proper governance of the charity
Agenda planning group
 Chair, CE (+) in consultation with board and executive
team
Main contributors to planning agendas
 Board’s routine work of planning and monitoring
 Programme of review of high-level board policies
 Annual programme of 2-3 ‘spotlights’ or ‘trustee audits’
 Board’s additional work plan for next 12 months
 The strategic big issues and strategic challenges to be
addressed in the next twelve months

23. Quality-control of board papers
 The executive should take the task of preparing board
papers very seriously recognising that papers need to
concentrate on governance aspects and should allocate
sufficient time to the task.
 The board should agree basic rules for board papers with
which the CE and senior managers must comply.
 All papers to the board should be sent to the CE and the
chair a fortnight before each meeting in order to ensure
they are quality-checked i.e. governance focussed. Both
should take this responsibility very seriously.

24. Preparing for the board meeting
 The CE and chair should meet (or speak on the phone)
about a week before each board meeting to prepare for
the meeting. This should include: identifying proposals
likely to attract robust scrutiny and on which aspects the
board is likely to focus; and identifying potential
contentious and/or sensitive issues and how best these
should be aired at the board meeting.
 If board members identify what they believe is potentially a
contentious issue, they should notify the chair in advance
of the meeting, copying the CE into the correspondence.

25. Tip Four
Get the ‘tone at the top’ right

26. Organisational culture and
values
Why are core values so important
Core values are important building blocks of
culture and are deep-seated and enduring. They
motivate behaviour and emotional responses.
They underpin the very way people approach their
work, make choices and decisions, and deal with
each other.

27. RNLI
Core Values:
Our work is based on and driven by our values.
Our volunteers and staff strive for excellence and are ...
Selfless: willing to put the requirements of others before our own
and the needs of the team before the individual, able to see the bigger
picture and act in the best interests of the RNLI, and to be inclusive
and respectful of others. Prepared to share our expertise with
organisations that share our aims.
Dependable: always available, committed to doing our part in
saving lives with professionalism and expertise, continuously
developing and improving. Working in and for the community and
delivering on our promises.
Trustworthy: responsible, accountable and efficient in the use of
the donations entrusted to us by our supporters, managing our affairs
with transparency, integrity and impartiality.
Courageous: prepared to achieve our aims in changing and
challenging environments. We are innovative, adaptable and
determined in our mission to save more lives at sea.

28. Tip Five
Understand the finances and get the
money right especially in such
economically difficult times

29. Prof Andrew Kakabadse,
Cranfield Sept’10
 Board members knew their company
would fail 50 months before it happened
but would do nothing to prevent it
 47% of UK board members never
discussed issues deemed ‘too sensitive’
 70% of board members did not know
how to raise difficult issues

30. Challenging financial climate
 Hard economic times are here for at least another 5
years i.e. decade of cut backs
 Largest charities
 Pension fund deficits
 After continued income growth, income starting to
drop
 Medium/Smaller charities
 Income hit hard early on
 Insufficient oversight and understanding of finances
 Pension auto-enrolment

31. Common solutions
 Reducing costs by cuts
 Reducing costs by sharing
 Working differently – partnerships
 Possible mergers
 Possible takeover/acquisition
 Commercial ventures

33. Where problems can arise
 Public services
 Full cost recovery?
 Risk appetite
 Claw back
 Trading companies
 Weak risk management
 Fraud
 Board / auditor relationship

34. Tip Six
Recognise that change isn’t easy

35. Bumps in the road on the
journey through change
 Different levels of involvement affecting risk
appetite
 Confidence in those driving change decreases
 Private/closed meetings of the board
 Cracks appear – teams fall out
 Cold feet – courage fails
 One or two break ranks and start briefing against

37. Tip Seven
Make identifying and managing strategic
risk an important part of governance.

38. Risk management

39. A strategic look at risk
includes:
 Consider Risk Appetite i.e. identifying the charity’s
capacity and tolerance for different categories of risk.
(Note: Defining appetite for risk across different business activities will
provide the foundation for a more strategic discussion at board level. It will
also give the CE a clear, consistent and precise understanding of the levels
of risk your charity is prepared to take, mitigate, respond to or avoid
altogether.)
 Consequences and scenarios – Introduce the
discipline of considering consequences (both intended
and unintended) and various related scenarios should
be part of a strategic look at risk

40. Advice to boards:
 discuss, set and annually review (with guidance and
advice from the executive) the risk strategy and risk
appetite across the main different business activities;
 use the trustees’ and executive’s diverse
professional expertise and experience of ‘horizon
scanning’ to help identify potential ‘new’ risks and
possible impact on the charity of major changes
occurring elsewhere;
 consider in partnership with the executive (and the
Audit Committee if you have one), what might be the
‘big events’ that could make or break the charity;
continued

41. Advice to boards: (continued)
 consider whether the board is comfortable with the
assumptions and dependencies behind core business
activities;
 ask the CE to report at each board meeting what the
current top two or three risks are and how they are
being managed on behalf of the board; and
 insist that every major proposal to the board
(including the budget) carries a genuine risk
assessment.

42. Tip Eight
Even though being a trustee is a serious
business especially in such difficult
economic times, have fun and celebrate
success

44. ©2012 Dorothy Dalton
dalton.dorothy@btopenworld.com
020 8426 6686
07777 660356
www.dorothydaltongovernance.com