Membership Organisations – balancing good governance and member relations
As with all types of organisations membership and trade organisations have their fair share of governance headaches.
Some governance requirements apply to everyone – importance of risk management; clear strategic direction, regulatory compliance; importance of internal control…but in today’s blog we concentrate on some governance challenges that may particularly apply to membership and trade bodies.
Across the sector, the structure of membership bodies and particularly that of the Board, can cause unique challenges. There is often a fine balance to be had between needing a Board that is representative of the members it represents and avoiding boards that are too large and cumbersome to efficiently and effectively serve those members.
Depending on the size and nature of the association, some Boards have been known to have upward of 100 members, with others having a more traditional (in terms of the commercial sector) number of around 12. It is hard to see how a Board of more than 20 can efficiently and effectively discharge its legal duties as a Board let alone follow general good governance practices, and it is common for such large boards to have delegated smaller “executive committees” which take on more of the traditional board duties. Often associations know that there is a need to streamline or update their structure but the task can be daunting when faced with different members’ needs and desires. Many members do not want to see their input or representation reduced which can often be a barrier to effective governance reform.
Appointment of Board members
Many associations appoint board members via election processes whereby members vote for people that represent their sector/category/region in a hope that their voice remain heard in the Board room. There are many advantages to this approach as it is imperative to an effective membership organisation to ensure it is representative.
However, this can also result in the wrong type of individual being elected as a Board director of the association (which is itself normally a company in its own right). It is important that even where representation of membership is essential, that the association still considers what experience, skills and characteristics are required for the Board.
Training for new Board members is imperative. It can be very difficult for Board members who have been elected on the basis that they represent a particular sector of the industry or region, to start acting and thinking in the best interests of the membership as a whole and the organisation itself. Indeed, it can be a stiff challenge to govern through a situation where the best interests of the organisation as a whole, of which a director is legally required to consider, is in direct conflict with the part of the industry that the director was elected to represent. Training can be a useful tool in helping directors navigate through this.
It can also be helpful to look at the structure and consider whether there is a more effective model to help combat this difficulty. For example, a structure which includes a representative Council or body ensuring membership views are collated and heard, which feeds into a smaller governing board (which could still be made up of members, but with a clearer focus on the legal requirements and governance of the association). In such a structure, the membership ‘council’ acts in a similar way to an institutional shareholder and can retain powers such as appointment of Board members, approval of strategy and approval of accounts, to ensure that the membership voice cannot be ignored by the governing Board of Directors.
To ensure that member voices are heard throughout the organisation, committee structures can be heavy. Some trade associations have more than 30 committees, representing members across regions or sub-sectors – all of which feed into the overall governance structure. These may work very well and provide optimum governance for the association in question, ensuring appropriate levels of industry input, happy members and ensure that the issues of most concern to members are raised.
However, associations should keep their governance arrangements and committee structures under regular review to ensure that they remain the most effective way of securing member involvement. Consideration should be given to the administrative burden of delivering such high numbers of committees and associated meetings as well as whether this is the best use of membership fees. To this end, associations would be best advised to keep an eye on technological advancements and communications channels as a way of maintaining strong stakeholder involvement – traditional face to face meetings no longer being the only way to communicate and ensure effective engagement. It may also be worth considering whether, instead of standing committees, time-limited focus groups could more effectively direct and deliver projects.
In many cases, the governing documents of membership organisations can be cumbersome and complex. They can compose of Articles; Standing Orders; Terms of Reference; Engagement rules; Codes of Conduct for members which also tie into the overall governance arrangements. From experience, it is often the case that, due to the fact that most governing documents can’t be amended without member consultation and approval, it is easier to ‘bolt-on’ additions to the standing orders/governing documents and avoid wholesale review of the documents, as it can often be perceived that to try to get members to agree to wholesale changes is far more difficult than agreement to small changes.
Whist this may be true, the downside is that many organisations are left with lengthy, unwieldly, complicated and sometimes contradictory governing documents. This can impose a significant burden on those responsible for the day to day governance management of the organisation and can lead to difficulties when trying to advise board members what is and isn’t constitutional. Therefore, it is strongly recommended that membership organisations take time to review their governing framework and consider updates and streamlining where possible.
To help improve governance across the organisation, membership bodies should consider adopting a Governance Code of Practice or a set of Governance Principles. Whilst there is not a specific Code of Practice for membership bodies, there are a number of codes where some of the principles fit neatly into the not-for-profit status of membership bodies, such as the Charity Governance Code; National Housing Federation Code of Governance; Co-operatives Code of Governance and other industry guidance such as the Trade Association Forum’s ‘Best Practice Guide’ for Trade Associations. Looking at these codes and drawing out the governance principles which best suit your organization can be a useful way to guide you in your governance practices.
Help where you need it
Bridgehouse Company Secretaries can help your organisation by carrying out independent governance reviews; reviews of structure and Terms of Reference; reviews of governing documents; as well as working with boards and members to help navigate governance change projects. We also offer company secretarial and governance retainer services, so that you always have someone available to support and advise on your governance requirements.
For advice on all your governance requirements and to get in touch click here.