The way in which the board is structured and operates can have a direct impact on the ability of an organisation to meet its strategic objectives.

To improve a board’s effectiveness the directors should consider:

  • Appropriate board structures
  • Planning activities in advance
  • Running meetings efficiently
  • Assessing board and director performance regularly
  • Making effective use of board sub-committees
  • Board succession planning [see Principle 2]

Board structures

Subject to their purpose, size and constitution, NFPs should consider the appropriate governance structure for their board to meet their specific needs. For example, whether the NFP would benefit from having a two-tiered structure – with a board of suitably experienced directors being the fiduciary board responsible for governance (satisfying all relevant legal and compliance requirements) and an additional panel of sector/subject matter/industry specialists taking on an advisory role to the board and allowing those individuals to offer their expertise without being concerned about taking on a directors’ formal duties and responsibilities.

Questions for consideration

  • Has the board considered how best to meet its needs from a governance and structural perspective?
  • Are there technical experts or advisors who may be better suited to sitting on an advisory panel, rather than the NFP board itself?

Careful forward planning of board-related activities

It is common for many boards to use a “board calendar” and have a work plan, whereby important and recurring governance matters are assigned to particular board or board committee meetings. For example, matters such as approval of budgets, a board strategy session, approval of financial statements, CEO performance review and remuneration review.

Many boards also have a program of stakeholder engagement [see Principle 10].

Questions for consideration

  • Does the board have a calendar and work plan covering important and recurring governance matters?
  • Does the board schedule discussion on strategy throughout the board calendar?
  • Does the work plan allow sufficient preparation time by board committees, management and any advisors supporting them, to achieve calendar deadlines?

Board meetings

Elements of a good board meeting would typically include:

  • A clear, concise and focused board agenda, covering the right matters
  • Papers delivered in good time (from the CEO and senior management) containing relevant, timely and accessible intelligence in a style and format that enables appropriate analysis
  • Prepared participants
  • An effective meeting chair
  • Relevant, robust and respectful debate
  • Minutes that accurately record information and decisions, that are finalised promptly
  • Regular in-camera sessions in which non-executive directors meet without executive directors or staff being present

Part of the chair’s role would include:

  • Having the meeting start and finish on time
  • Helping to ensure important issues are included on board agendas and board members have sufficient time to read board papers
  • Promoting inclusive debate and an appropriate tone throughout discussions
  • Dealing effectively with dissent

Factors that contribute to poor meetings include:

  • Poor performance by the chair
  • Absenteeism by board members
  • Conflict of interest issues not being appropriately dealt with
  • Dominant chairs and/or CEOs taking over board meetings/making decisions without sufficient regard for other directors’ views
  • Board members seeing themselves as representing the interests of a particular stakeholder or group of stakeholders
    rather than the interests of an organisation as a whole
  • Inappropriate agenda and papers (e.g. too detailed or not detailed enough, important information is missing or buried, wrong ordering of items of board papers)
  • Not enough time allowed for pre-reading and/or board discussion

Questions for consideration

  • Do board meetings keep to schedule, starting and finishing on time?
  • Are items requiring board consideration and approval tabled appropriately?
  • Are meeting agendas sufficiently focused?
  • Is enough time provided for reading of materials prior to each meeting and for board discussion on items of importance?
  • Does discussion occur in a constructive manner?
  • Are comments invited by the chair from all board members?
  • Is respect and collegiality maintained throughout and between all board meetings?
  • Where there is disagreement on issues among board members, how is this handled?

Assessments of board performance

The board should periodically review its effectiveness with a view to taking steps to improve the quality of its governance, boardroom discussion and decision-making. In some cases this review might include use of an external facilitator and a formal board or governance assessment tool. In other cases, this may involve informal one-on-one interviews conducted by the chair, another designated board member or an expert external facilitator (remembering one of the issues being assessed is often the effectiveness of the chair), supplemented by discussion at a board meeting(s) (typically without management present).

The performance of the board might be enhanced, for example, by:

  • A board orientation for new board members
  • Mentoring of less-experienced directors
  • Allocation of appropriate resources to the professional development of board members

Questions for consideration

  • Does the board evaluate and review the performance of its board members, the board itself and the organisation’s key management personnel?
  • How often does the board assess its performance and the overall quality of governance?
  • Is there a lack of particular skills, knowledge or experience which are needed on the board for it to function effectively? (e.g. industry experience, experience in fundraising, financial literacy)
  • What is the process by which the board reviews the skills, knowledge and experience of existing directors and determines any gaps?
  • Does the board use the induction process, director reviews and gap analysis to assess continuing professional development needs (relevant to the organisation) and to enhance the relevant skills and knowledge of board members and key management personnel?
  • Are board decisions being hampered by a lack of collegiality among board members?
  • What steps does the board take to promote a cohesive board team, both as part of a regular performance assessment and for new board appointments?

The effective use of sub-committees, where appropriate

Sometimes it makes sense for the detailed work of boards to be considered by board committees. Board committees can play a key role in assisting the board to fulfil its corporate governance responsibilities, and provide a vehicle for enhancing the participation of non-executive directors. In particular, board committees can help to:

  • Pay more detailed attention to designated areas that is not feasible in a full board meeting.
  • Share the workload among board members.
  • Address potential conflicts of interests (e.g. consideration of executive remuneration when there are executive directors).
  • Streamline full board meetings and thereby enable the board to function more effectively.

Importantly, the use of board committees does not diminish the responsibilities of those board members who are not on the sub-committee. The matters considered by a board committee remain decisions of the board for which the entire board must take responsibility.

The appropriate number and type of board committees varies based on issues such as organisational size, complexity of operations, the organisation’s constitution, and regulatory or grantor requirements.  Common board committees include, but are not limited to a:

  • Nomination, governance or human resources committee
  • Remuneration committee
  • Audit committee
  • Risk committee
  • Investment committee
  • Fundraising committee

Where board sub-committees are formed they need, among other things, clear terms of reference, and ideally a regular review of the ongoing need for such a committee and its charter.

Questions for consideration

  • Consistent with the NFP’s constitution and structure, in what areas (e.g. board nominations, audit, remuneration, risk, fundraising), if any, might governance be enhanced through the use of board sub-committees?
  • Do existing board committees have clear terms of reference?
  • Is there a process by which the chair of each board committee reports back to the full board regarding the activities of the committee? 

Download the full Good Governance Principals and Guidelines for Not-for-Profit Organisations as a PDF.