Like many in the board leadership sector I am both fascinated and gobsmacked by some of the things that I see coming out of the banking royal commission.
Although some of the figures around remuneration have been enlightening, and the scale of personal gain being equal to the total income of some NFPs, if we put that aside as a sector for a second, we can actually glean some essential learnings that apply to all boards, remunerated or not.
Of particular interest was the report compiled by APRA on the Commonwealth Bank. I am not singling out CommBank as worse than the rest of the field, but some of the finding are excellent reminders of every Chair and Director’s responsibilities.
Lesson 1. The relationship of the senior team to the Chair and Board. APRA found that the board had failed to challenge the executive team, which tended to bury bad news. For a not for profit board whose directors may not be industry experts or work in other sectors this can be a big issue. I believe it is every board’s duty to hire the best CEO and let them get on with the job, however giving totally free reign or blind trust may be tempting but is never a good thing.
Putting the right processes in place for oversight and decision making is essential. NFP board directors must also ask the right questions and not give up until totally sure they are getting the right answers.
Lesson 2. Issues weren’t followed up. It is vital that as a board you not only note issues that arise but set an action plan in place that includes follow up at least for your next meeting or when appropriate. Measures and outcomes should be agreed. If the issues are of a compliance or legal nature then the action plan, follow up and reporting should be signed off and agreed to by the whole board.
Don’t be afraid of asking for physical evidence of mitigation. Whether it is a letter from the regulator, lawyers or relevant authority, the board should be taking note and attaching it to the minutes. For potential longer term issues a monitoring and reporting plan should be agreed to.
Lesson 3. Board agendas were static. All organisations operate in a dynamic and ever changing world. It is easy and comfortable to get caught up with only analysing the finances and dissecting operational issues. The board needs to lift itself above the ordinary and focus on exceptions when they arise.
If I was on a board that talked about the same things every meeting and didn’t include those difficult issues that the industry or organisation was facing there would be alarm bells. Ask yourself, “what are those things that are impacting or can affect the organisation in the near future?”
Lesson 4. Lack of meetings between the Chair and CEO. The relationship between the CEO and the board is important but in my experience the Chair – CEO relationship is most critical. There are lots of things that will determine the need and frequency of meetings but a clear action plan as a focus is a great tool to keep discussions on track.
In hindsight it is easy to look back at issues and see how obvious they were or what could have been done. As most NFP Chairs and Directors are volunteers, the availability of time to fully understand and dissect issues can be a strain. That said, it is not an excuse.
There are ways you can build your board’s processes and tools to ensure you are taking all reasonable steps to fulfil your governance duties. A good place to stand is drawing a line in the sand and evaluating what you have and what you need to develop.
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Robert Crowe is Founder & Principal of Leading for Purpose helping NFP Chairs and directors develop the skills, courage and confidence to collaborate and achieve their true purpose.