- Posted by Rose Mercier
- On September 6, 2016
- Governance Failure, Strategic Foresight
I have yet to encounter a board that doesn’t want to be proud of its organization’s achievements. A board might even hope to be front page news for something brilliant the organization does. I recently read about an organization which had just received a significant Foundation grant, matching the amount it had previously been granted because it was singularly successful at enabling higher risk research that led to breakthroughs in dementia diagnosis. Now that would be something to brag about.
However, it is unlikely you would be bragging about being front page news if you were on the board of Volvo, Tesco, FIFA, the Canadian Olympic Committee, the IAAF, Toronto & District School Board, Toronto Humane Society, Toronto Goodwill Society, Hull House in Chicago, or Community Action of Minneapolis – to name but a few of the organizations that have made news over the last year as result of a failure in governance.
Over time boards have been guilty of a myriad of well-reported governance failures:
- Allowing endowments and physical assets to go unprotected
- Allowing the organization to take on unnecessary debts
- Short sighted view of the future
- Permitting insufficient diversification in holdings in the face of financial instability
- Allowing accounting violations
- Allowing executive incentives that are at odds with ethical executive behaviour
- Not holding themselves to standards of ethical conduct
Imagine being on the board of an organization which had helped immigrants build responsible self-sufficient lives since 1889 but which failed – along with its staff – to recognize it was in crisis until it was too late. Ultimately, the organization delivered layoff notices and final paychecks to 300 employees and closed. That is a bad news day you might want to avoid.
Did you hear about the board that spent hundreds of thousands of dollars in public funds on trips and other lavish expenses – ending up as a front page headline when state officials, subpoena in hand, raided the organization’s offices and seized records, files, and computer hardware? Sometimes governance failure prompts action by others who are invested in the organization’s long-term well-being (moral owners, anyone?). When the director and board of a women’s college announced that it was closing due to insufficient finances, a committed alumna led fundraising efforts to save the school. One newspaper article described the decision to close as a gigantic breach of trust on behalf of the alumni and others who were committed to single gender education but who were unaware of the limited vision of the board who believed there was no future in single-gender education.
Enough of this depressing litany of governance failure, the impact of which can be catastrophic in all sorts of ways. But it does serve to illustrate that governance failures do not only arise from poor oversight; they are also created by lack of strategic foresight, being out of touch with the values of those on whose behalf the board holds the organization in trust, over-dependence on executive leadership, lack of moral courage, tolerance of unethical or unlawful behaviour, abdication of duty, etc.
Policy Governance is a system for governing that when implemented with discipline and conducted with an ethic of servant leadership can mitigate the likelihood of governance failure. Policy Governance is characterized by board accountability for delivering results consistent with the values of those served, policies which clearly define boundaries of ethics and prudence, and a rigorous system of monitoring that demands verifiable evidence of policy compliance. Assurance that the operating organization is functioning as it should frees the board to concentrate on long-term organizational relevance, ensuring strong leaders come into and are able to contribute to the board, and developing strategic foresight – governance that could keep your organization on the front page…as a good news story!