Good Governance in Bad Times

The year 2020, for all of us, has been unprecedented. For some, it has been the worst of times. For others, even the best of times. The not-for-profit sector has been devastated from the perspective of fundraising and programing. But there are also opportunities during these times – many organizations are using these times to plan new ventures or build up policy and governance strength.

Bad times are not restricted to these COVID times. Bad times can come about at any time in the life cycle of an organization. Each organization has its own cycle and transitions. New executive directors, new members, new directors, new funders, new legislation – all or any of these issues can affect an organization to varying degrees and can present unique challenges.

Lessons From the Trenches

As a lawyer, I have been privileged to learn my craft from the inside out, as a director, officer, and volunteer of a national charity with international affiliations. In Canada, I came into the organization as a very inexperienced board member in 2000. In 2003, we experienced a seismic shift that affected fundraising and the ability of some directors to continue to serve. We went from a board of about 10 directors down to 3. As a volunteer director with only three years under my belt, I was propelled into the role of President and later Country Director. Fortunately, I had the benefit of seasoned and experienced mentors on the “old” board who I was able to imitate and emulate when rebuilding the new board.

• Funding challenges can change board involvement and program capabilities
• Partner other organizations and politicians at all levels and of all stripes
• Leverage your personal connections for the benefit of your organization
• Attract board members through vital and dynamic programming
• When funding is a challenge – engage in low-cost grass-roots programs
• Conduct event-type programming to engage members and volunteers
• Find community partners your organization can support and uplift
• Start pilot projects and then add-on to existing program

The volunteer work I have been involved with is a bridge to many legal situations faced by organizations and gives context to client problems.

Here are some guiding principles by Abraham Lincoln that can be applied to the good governance in bad times discussion:

“When you reach the end of your rope, tie a knot and hang on.”

“Be sure you put your feet in the right place, then stand firm.”

In my view, good governance can be the knot in the rope and the right place you want to put your feet. Here are some guiding principles that could help your organization to navigate through the troubled seas of difficult times and hard situations:

1. Respect Members

• Maintain an up-to-date membership list
  • Communicate and consult with members
  • Keep members informed and respond to inquiries
  • Conduct fair and independently observed elections

2. Avoid Splits on the Board

• Ensure all directors understand their fiduciary obligations
• Hold regular board meetings
• Provide the following information prior to board meetings:
  • Notice of meeting
  • An Agenda
  • An opportunity to add agenda items, and to comment on proposed agenda items
• Ensure all directors have access to all financial and corporate information
• Establish a committee for complex issues or change of direction consisting of some directors, members and external persons with expertise in the matter.
• Act collectively whenever possible

3. Avoid Conflicts of Interest

• Directors have a duty to avoid a conflict of interest situation.
• They must not have a personal interest in the result of a decision made by the charity. 
• The interests of the charity must be paramount
• In Ontario, directors are prohibited from being employed by a charity or receiving payment from the charity’s funds, other than reasonable out-of-pocket expenses
  • This includes contracts, such as a lease or loaning funds
  • Directors may receive benefits from the charity offered to the public, provided they meet the criteria and receive no preferential treatment

4. Finding New Directors

• Look for persons who have experience working for another charity
• Management skills; book-keeping experience; fund-raising abilities
• Retired persons with time
• Users of the charity’s services
• Recruit a diverse board: balanced by gender, age, culture, skills
• Check if a candidate is an undischarged bankrupt, convicted of offence involving theft or dishonesty,
• Check if their interests conflict with the charities’ activities

5. Provide Guidance to Directors

• Provide directors a manual or package of material or hold an information session to explain the work of the charity and what is expected of them by the Charity
• Provide copies of the governing documents, the latest financial statements and T3010 Returns
• Inform directors of specific problems or challenges facing the charity
• New directors should be advised of their fiduciary duties
• Provide security with Directors and Officers liability insurance

6. Become Familiar with Legislation

• Canada Not-for-profit Corporations Act
• In Ontario: Charities Accounting Act; Religious Organizations’ Lands Act; Trustee Act; Corporations Act; Not-for-Profit Corporations Act (not yet in force)
• Other Provinces: Applicable corporate and other legislation

7. Provide Vision

A favourite quote from Antoine de Saint-Exupery, author of The Little Prince, teaches volumes about the importance of providing vision to your organization:

“If you want to build a ship, don’t drum up people to collect wood and don’t assign them tasks and work, but rather teach them to long for the endless immensity of the sea.”

Mills & Mills LLP Charity and Not-For-Profit Services

Mills & Mills LLP Charity Law Group lawyers can provide governance advice and assistance on a wide variety of issues affecting with Canadian organizations. Contact Taras Kulish at Mills & Mills LLP to assist with your good governance strategy.

If your organization would like one of our lawyers to speak to your board or members on general governance issues, give us a call – we would be happy to be your educational partner.

Disclaimer

The comments in this blog are of a general nature. This blog is not meant to be an authority or to take the place of legal advice relating to specific facts or situations. It is meant to provide information and suggestions for good governance practice.

Readers are strongly advised to stay abreast of current government legal requirements and to obtain legal advice to guide their own not-for-profit organization. If you have specific concerns or questions, please contact Taras Kulish.