Hello. I'm Professor Vic Murray of the School of Public Administration at the University of Victoria, located on Vancouver Island, part of Canada's beautiful West Coast. As you may know by now, I'm a co-instructor along with Professor Yvonne Harrison in the State University of New York's new specialization, improving leadership, and governance in non-profit organizations. You are now in course one of this series, which provides you with an introduction to the non-profit sector, non-profit organizations, leadership, and governance. Last week, Professor Harrison introduced you to the non-profit sector and the organizations that make it up. This week, we're going to discuss the important topics of the nature of non-profit organization governance, leadership, and the role of the board of directors. Here are the topics that we're going to cover in the next 15 minutes or so. They deal with some pretty important basic concepts related to this course. So, it's quite important that you master these ideas here. We start with the question of what is non-profit governance and how's it different from management? We go on to, what is good governance and management? Third, why does good governance matter? We'll cover trends in the changing role of boards and the governance process. Then we'll move specifically to boards of directors, what is a Board of directors? What do board members do? Who can join a board? Finally, we'll end with some questions to inform your peer-to-peer discussions. Let's start by looking at this term governance and what it really means, and how is it different from the term management? First of all, let's be clear that there's no single universally accepted definition of this concept of governance. It varies from one context to another. For example, in the public sector, governance refers to the processes that go on in governments, national governments, provincial and state governments, municipal governments. The process of deciding what laws should be enacted, regulations that go with those laws, and so on. It involves the input and influence and authority of a number of different entities, elected officials, public officials, courts, other interested stakeholders. All this is a different use of the term from the one we use in this course because here, we're referring to governance at an organizational level. Let's look at some of the ways that term governance, has been used in that context. Here's three definitions from three writers we find are quite helpful. Chris Cornforth, for example, in his article in the book Nonprofit Governance, one of the texts recommended for this course says, "Governance at an organizational level is the system and processes concerned with the overall direction, control, and accountability of an organization." Mel Gill, who's the author of another book recommended in this course has a slightly different take. He says, "Governance is the exercise of authority, direction, and control of an organization in order to ensure its purpose is achieved. Dave Renz, a well-known and highly respected writer on non-profit organizations and governance defines it this way, "Non-profit governance refers to the process of providing leadership, direction, and accountability for a specific non-profit organization. Now, all these, as you can see, basically see governance as dealing with the big picture questions. It's the organizations mission, its goals, what priority those goals should have, how we're going to find out how well we're doing in trying to achieve those goals. It's a different component than the world of management. A definition of management offered by Gill is this one, "Management is the tasks, people, relationships, resources, and technology necessary to achieve the organization's purpose." Here we're talking about the implementation of the big picture, the answers to the big picture questions. How we're going to achieve the mission of the organization, achieve the goals, implement various policies that will get us to the achievement of those goals. Let's start by looking at this term governance and what it really means, and how is it different from the term management? First of all, let's be clear that there's no single universally accepted definition of this concept of governance. It varies from one context to another. For example, in the public sector, governance refers to the processes that go on in governments. National governments, provincial and state governments, municipal governments. The process of deciding whether laws should be enacted, regulations that go with those laws, and so on. It involves the input and influence and authority of a number of different entities. Elected officials, public officials, courts, other interested stakeholders. All this is a different use of the term from the one we use in this course, because here we're referring to governance at an organizational level. Let's look at some of the ways the term governance has been used in that context. Here's three definitions from three writers we find are quite helpful. Chris Cornforth for example, in his article in the book Nonprofit Governance, one of the texts recommended for this course says, "Governance at an organizational level is the system and processes concerned with the overall direction, control, and accountability of an organization." Mel Gill who is the author of another book recommended in this course has a slightly different take. He says, "Governance is the exercise of authority, direction, and control of an organization in order to ensure its purpose is achieved." Dave Renz, a well-known and highly respected writer on non-profit organizations and governance defines it this way, "Non-profit governance refers to the process of providing leadership, direction, and accountability for a specific non-profit organization. All these as you can see, basically see governance as dealing with the big picture questions. It's the organization's mission, its goals, what priority those goals should have, how we're going to find out how well we're doing in trying to achieve those goals. It's a different component than the world of management. A definition of management offered by Gill is this one, "Management is the tasks, people, relationships, resources, and technology necessary to achieve the organization's purpose." Here we're talking about the implementation of the big picture, the answers to the big picture questions. How we're going to achieve the mission of the organization, achieve the goals, implement various policies that will get us to the achievement of those goals. This might be a obvious question, but let's discuss it anyway. Why does good governance matter? If you have hung around, been close to non-profit organizations yourselves, especially if you've seen things from the upper end, you know that some organizations are governed very well with the answers to these big picture questions and others not so well. Doing a good job of governance has several very important benefits. It results in meeting societal needs. Non-profit organizations exist to help other people. Sometimes it's only their members, sometimes it's various publics in society in general. It helps prevent organizational failure, especially the part about assessing the achievement of goals. It helps protect the interests of the public, funders, and other key stakeholders. If you lose their support, the organization can die. It contributes to building trust among stakeholders. If has done well, all the parties involved trust one another. Finally, it can increase the effectiveness of the organization. There is a growing body of research that shows there is a positive relationship between good governance practices which we'll be discussing throughout this course, and organizational effectiveness. We've said that governance is a process. As a process it involves a number of different parties. People who have information have to be contributing that information, others have to make decisions. Boards are very critical in the governance process, but others are involved. The involvement, the nature of that involvement of the various parties and governance has been changing over time. It's worth taking just a moment to look at the ideas of three authors whose book is recommended for this course, Chait, Ryan, and Taylor. Their book is Governance as Leadership. They discuss their observation of a number of recent trends in the role of boards in the governance of non-profit organizations. They maintain, for example, that in many non-profit organizations in recent years, the role of managers has changed especially the top manager, executive directors, or CEO. They are accorded more status and are expected to provide more leadership. These expectations sometimes closely resemble governing. They are expected to be more involved in the governance process. If Chait, and Ryan, and Taylor are right, what have been the consequences of this trend for boards? They feel that board members or trustees, as they call them, are acting more like managers. The idea of trusteeship has stalled as a concept, while emphasis has shifted to leadership. However, as they say, managers have been pushed to become more and more the key leaders. They say evidence for this can be seen in the governance structures themselves within boards. Look inside boards, for example, and they say you find committees that emphasize finance, resource development or funding, government relations, program evaluation, all functions that are also performed by managers. They say look at the background characteristics of board members when boards go seeking new members, who are they looking for? They are looking for people with certain sorts of skills such as law, labor relations, finance, marketing, human resources that parallel management. Is this the right way to go, they say? This means boards are predisposed to engage in routine technical work, a term they use that managers have attempted to shed. The crux of Chait, Ryan, and Taylor's book is their identification of what they call three modes of governance. Modes of governance, three of them. Only two of which involve leadership by the board, and only one of which involves innovative leadership by the board. Three modes are fiduciary, where the board is acting mostly as stewards of assets, ensuring that laws are complied with, that money is properly managed and accounted for. This is a very common mode, especially in the past or recently. There is the mode they call strategic, where the boards create partnerships with management to decide the strategic direction of the organization. This is definitely setting the big picture, answering the big picture questions about mission, goals, priorities, and evaluation of progress. Finally, they have the third mode called generative. Here the boards attempt to provide a critical source of leadership for the organization. They are more willing to question assumptions to search for different approaches to things and provide an independent voice on these kinds of questions. As they conclude, the more modes a board uses, the more the board will achieve governance as leadership. In other words, they're not saying that a board should just function with one mode. They admit and assert that all three modes are necessary. There contention is that the strategic has not been as well done as it could be, and the generative, which is their original contribution the board as an innovative source of ideas and leadership has been particularly lacking. This simple diagram illustrates the Chait, Ryan, and Taylor thesis. You can see they're the type I, type II, and type III boards. Type I, fiduciary. The board has purpose, and it's the reputation of the organization that it's trying to uphold. Type II, the board engages in strategic direction, has power and influence in partnership with management. Type III, the generative type where the board has a value, original value, through individuals and group. Before we leave this topic of governance, let's just quickly look at some other trends in the governance process. In addition to those, we've just discussed by Chait, Ryan, and Taylor, these made by Professor Chris Cornforth in the video interview that accompanies this course. He makes these points, and his perception, and it's from Britain, but with the knowledge of North America too. There is a blurring of boundaries between government and the nonprofit sector. Sometimes governments want to run things, other times they try to pass them off to the nonprofit sector, other times they try to create partnerships; there's a blurring. There's greater reliance by nonprofits on government funding. Along with it, means that there is a potential loss of independence in many nonprofit organizations. There's also growing expectations from governments, funders, other stakeholders for nonprofits to be efficient, effective, and accountable. However, as these expectations grow, they occur at a time when many of the smaller and medium-sized nonprofits have less and less capacity to meet them; the skills, the funds, the organization. Let's leave the broad general discussion of governance and turn our focus to the entity that is most closely and importantly involved in the governance process, that is the board of directors. What is a board of directors? First of all, we should understand it's a legal entity that is accountable for the organization's affairs. In many countries, states, provinces, a nonprofit organization can't exist as a society without getting approval from government, and those governments insist that it be headed by a board of directors. As such, it carries public trust. That's why boards of directors are sometimes called trustees. Of course, the question arises, whose trust? Who is the public? That is actually quite a complex question which we are going to be discussing in later parts of this course. There are a number of publics that nonprofits relate to. Thirdly, boards provide stewardship, that is to say, oversight, that it must be in the best interest of the organization as a whole, and not the interests of only certain parts or certain stakeholders. It's the entity that accepts responsibility for the conduct of the organization. What does that involve? A number of things. It creates and ensures compliance with the organization's constitution and bylaws. It ensures that contracts into which the organization enters are met, those obligations are met. It ensures compliance with applicable legislation and regulations. Most importantly, it ensures that suitable policies and practices are in place for conducting the organization's business. Note that it doesn't mean that they have to create all those policies themselves. In fact, in most cases, except for very small new nonprofits, the board delegates responsibility to a CEO, Chief Executive Officer, or ED, the terms vary, to implement a number of policies. They hold that person accountable for implementing them effectively. With that understanding of what the board as a whole does, let's turn to the question of what the job of individual directors consists of. There are three basic duties for individual members of boards. Let's just go through them one at a time. The first is the duty of due diligence. What does that mean? It means the individual must be informed, become informed. Before you join a board, review the articles of incorporation, bylaws, policies, board minutes, financial statements, audits, insurance, and filings. Review the characteristics of the organization, its board, its management, and it's accountability structure. After you join a board, read the minutes again and the crucial reports and financial statements about the organization's activities. Provide feedback to clarify, change or correct any information you don't understand. Another aspect of due diligence is to be engaged. To actually attend meetings, sit on, serve on committees, relate to the community, connect to stake holders, etc. The second basic duty of individual board members is the duty of care. It includes being prudent. Members must act as a reasonable person would act in making decisions. Believe me, there is quite a body of law that gets into the tricky business of deciding what a reasonable person would do. They also must operate within the law and the bylaws of the corporation. Duty of care includes; sharing your perspective, expressing your opinions in discussions. In particular, if there are matters that come up and you oppose the direction the decision is moving toward, it's your duty to voice that opposition. Thirdly, there's the duty of loyalty, very important one. Individual board members are expected to act ethically, to comply with the law. Very important to disclose conflicts of interest, and to make every effort to set personal agendas and politics aside. Finally, as part of the duty of loyalty to work in solidarity. The cliche word for boards is that boards must speak with one voice. This does not mean there can't be vigorous debate and discussion during a decision, but once the decision is reached, it's the duty of board members to, as far as the outside world goes, allow the board to speak with one voice on the matter, and to work with other members of the board and management in making decisions. Finally, a quick note on an interesting question that many people have which is, who can join a board? Actually the answer to that can vary greatly because individual organizations and their bylaws and constitutions often contain quite a number of clauses dealing with who may become a member, who can join the organization, who can sit on the board. It's also true that in different countries there are different regulations regarding board membership. For example, in the USA, board members of non-profits must be over the age of 18. In Canada, directors of registered charities are subject to background and criminal record checks. As far as you're concerned, wherever you are living, you do need to check what regulations may exist in your own political entity. That concludes this short introductory lecture on the nature of governance and boards. As you know, a big part of the learning we hope that will occur for our participants in this course, will happen in the peer-to-peer forums that we have created. Just to end, here are a few questions you might consider and raise in those forums. For example, what does non-profit governance look like in your country or region of the country? Who can join a board in your country or in non-profit organizations you know? How many of the boards that you know practice in all three modes of what Chait, Ryan, and Taylor call governance as leadership?
