Many of the same good governance principles apply across all sectors. However, being on a charity or for-purpose board means facing added challenges to those in the commercial sphere. By considering the unique dynamics of charity boards, this article aims to present essential lessons to improve governance in practice, based on helping many hundreds of such groups as the most active law firm in this area.
The unique dynamics of charity boards
Charity boards must find a balance between promoting organisational and public interests and charitable purposes. While board members with expertise in finance, law, or governance are valuable, without a strong understanding of the charity sector and their organisation’s work, their governance may have limited success.
This is particularly so as charity governance is often grounded in ethical or values-based considerations. For example, if a board takes actions which don’t align with values or goals, this can undermine the organisations foundation and reputation. This is particularly detrimental in a sector where maintaining strong stakeholder relationships is key to success. Additionally, where activities are seen as inherently virtuous there can be a lack of organisational accountability.
Key challenges for charity boards
Let’s unpack a few of the key challenges for charity boards:
- Role blurring – a common place where things go wrong in charity governance is the blurring of lines between governance and management roles. This creates risk of board members being pulled into day-to-day operations. Although in smaller organisations it is common for people to wear multiple ‘hats’ (often as volunteers), issues arise where the board becomes too concerned with management. To avoid this, clearly define the role of board members to prevent a pull into day-to-day operations and stay focused on the board’s strategic goals.
- Legal considerations and checking of rules – along with governance best practice, for many charitable organisations there are specific officer or trustee duties to be complied with under New Zealand law. Additionally, the Charities Act now requires boards to review their rules every three years and ensure they are fit for purpose. For more information see our Charities Handbook and this article on reviewing rules.
- Measuring success and impact – this may be difficult in a sector where impact is often qualitative and long-term, making navigating organisational direction difficult.
- Aligning organisational and board development – governance must keep pace with organisational growth and goals and aim to keep growing.
- Structuring onboarding and reflection – set out clear objectives and ensure regular evaluation of performance. This should include continuing to assess and improve governance practices. A clear board charter will also offer overall guidance – setting out role, relationships, how decisions are made, procedures, inductions, committees.
- Understanding your organisation’s purpose – this will help guide decision making, assess the effectiveness of governance, and navigate further growth and goals. Consider, do all your board members say the same thing when asked about purpose?
- Balancing professionalism and idealism – in purpose driven organisations this may be particularly difficult amongst board members with different backgrounds.
We help many charities with their governance – let us know if you would like to talk through your situation.
