Governance – Do we need to build Capacity?

[Roshanga Wickremesinghe]

Governance is generally taken for granted with NGOs; it is assumed that the board members know what to do, when to do it and how to do it. However the reality is quite different. Most issues with establishing legitimacy, trust and the accountability with all stakeholders can be traced to weaknesses in the governance structure. In this article I will focus on one element of Governance which is the “Board”. Some call is the Board of Directors, while others may call it the Board of Governors or Board of Trustees; the “Board” in general will be the highest decision making body of the organization. Some people confuse it with the membership body which selects and appoints the board. This is a part of the governance structure but it is not the highest decision making body of the organization and as such it should not be confused with the board of an organization.

Given below are some key elements that should be considered when conducting an organization assessment (OA). Most OA tools do not provide adequate references to assess this aspect; however it is up to you to expand on this area to provide a comprehensive assessment of the organization.

• The board should include a balance of executive and non-executive directors (including some independent non-executive directors) such that no individual or small group of individuals can dominate the board’s decision making
• Board should lay down solid foundation for oversight and management of the NGO through:
  • Clear division of responsibilities of the Chairperson and the directors of the board and the Chief Executive;
  • Recognizing and publishing respective roles of the board and management; and
  • Establishing an effective ethics and compliance framework.
• Members of the Board and its Committees (must have at least an Audit committee) should not be over extended. All directors should receive induction training upon joining the board and there should be an effective orientation program for directors to regularly update and refresh their skills and knowledge.
• Board should establish a process of performance evaluation in the NGO (including the CEO/Executive Director) to ensure its sustained success.
• Levels of remuneration should be sufficient to attract, retain and motivate directors and members of senior management of the quality required to run the NGO successfully, but the NGO should avoid paying more than is necessary for this purpose. A reasonable proportion of executive directors’ remuneration should be structured so as to link rewards to NGO and individual performance.
• The board should ensure planned and progressive refreshing of the board.
• The board should establish formal and transparent arrangements for considering how they should apply the financial reporting and internal control principles and for maintaining an appropriate relationship with the NGOs auditors.
• The board should present a balanced and understandable assessment of the NGOs position and prospects through periodic financial reporting which should be accessible to key stakeholders.

Since there is a reluctance to assess the governance of NGOs along with the OA it is important to do a capacity assessment of the “Board” prior to the OA. This will help in the establishment of a separate program to develop the capacity of the board which will finally assist in the implementation of operational plans and strategies.