Good governance encompasses an array of issues. When corporate and organizational issues are going well, we tend to give credit to good governance practices. On the flip side, we also tend to blame poor governance practices when companies and organizations aren’t doing well. Whether those beliefs are accurate or not, the fact is that good governance helps organizations and businesses run well today and in the future. You can easily find a board governance policy template online for virtually any policy that your organization would want to implement.
Qualified leadership and diverse boards are required to make good board governance policies. One of the best tools that boards of directors can use for this purpose is a board management software system by BoardEffect, which provides a secure platform for collaboration and decision-making. Board portals also assist boards in their efforts to be transparent and accountable. Boards that use the tools of creating governance policies in conjunction with streamlining their efforts with a board management software program demonstrate that they’re committed to due diligence and their duty of care.
What Is the Purpose of a Governance Committee?
The size of an organization generally determines whether boards take it upon themselves to manage governance matters or whether they delegate some or all of the governance decisions to a nominating and governance committee.
The purpose of the governance committee is to review the structures and practices of the organization and report its findings and recommendations to the board. Whether the board takes responsibility for governance issues or whether they delegate them to a committee, governance duties encompass making a careful assessment of board composition, assessing the ability of the board to fulfill its duties and responsibilities, adhering to the mission and vision of the organization, and properly filing and maintaining the articles of incorporation and the bylaws.
What Are Some Common Policies for Maintaining Good Governance?
Boards of directors are required to take and maintain official minutes of their board meetings. In addition, the bylaws sometimes require organizations to take meeting minutes for their committees. Most organizations are required to have a written conflict of interest policy that states that board members may not have a conflict of interest and outlines what constitutes a conflict of interest. For organizations that aren’t required to have a conflict of interest policy, good governance suggests that they should have one. Boards should review the written policy annually and document the existence of the conflict of interest policy in their minutes.
Good governance also requires organizations to have a whistle-blower protection policy. A whistle-blower is someone who reports an activity that he or she considers to be dishonest or illegal. The appropriate managers are responsible for investigating allegations and determining fault and corrective measures. Issues that fall under whistle-blower policies are violations of federal, state or local laws, billing for goods or services that weren’t received, or other instances of fraud. Whistle-blower policies usually include a statement that a person who intentionally files a false report of dishonest or illegal activity will be subject to discipline, including possible termination of employment.
Another important governance duty that boards have is to approve the executive director or CEO compensation package and benefits. As part of this process, boards or governance committees should document how they determined that compensation was appropriate and not excessive.
Nonprofit boards are required to fill out IRS Form 990 annually. Corporate boards must fill out other documentation for the IRS. Boards of directors must review all applicable IRS forms and other legal and regulatory documents before filing them.
Most organizations have a written document retention and destruction policy, which describes which documents the company must keep and how long they must keep them.
Nonprofit organizations also usually have written policies to protect themselves. For example, nonprofits usually have policies about disclosing publicly filed annual returns, applications for tax exemption, and related correspondence and attachments. Nonprofits may also have a gift acceptance policy that outlines how they manage non-cash gifts, such as in-kind donations, cars and other unusual gifts.
A specific area of interest for governments in relation to nonprofit organizations is joint-ventures, which can fall into conflict of interest situations. The IRS asks nonprofits to report joint ventures on Form 990 and note what steps they took to prohibit anyone from benefitting from it.
A Few Other Governance Issues of Importance
Some companies are required to do annual board self-assessments. Once again, it’s considered good governance to do self-assessments even if they’re not required. Self-assessments are the best way for boards to compare their performance with benchmarks and prime themselves for development. With a BoardEffect board management software program, a survey program is built right into the system. The survey feature makes it easy to store past copies of the board assessments to use for future reference. In addition, the platform allows board administrators to use various question-and-answer formats to get the most useful results.
As boards turn over regularly, it’s important to have a regular officer and board recruitment policy in place where boards or nominating and governance committees can take into account the skills and diversity that the board needs. A recruitment policy outlines a process for board director recruitment that has a consistent strategy.
Many boards have a policy for board orientation, which helps with onboarding for new board directors. The benefit here is that they become aware of issues surrounding good governance right from the start. During the orientation, boards usually touch on other policies like the conflict of interest policy with an emphasis on recognizing when one exists and reviewing situations that can cause conflicts. The board orientation policy should be followed by a board development policy so that all board directors have the benefit of continuing education, which strengthens the full board by sparking new ideas and motivating collaboration efforts.
As either part of a governing policy or practice, boards or governance committees should annually review foundational governance documents, such as the mission, vision, Articles of Incorporation, bylaws and compliance documents, to ensure that everything is properly done and in order.