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Governance implications from Associations Forum Board Survey 2013

John Peacock, General Manager of Associations Forum, comments on what we can learn from the statistics and trends in the 2013 Associations Forum Board Survey.

 

Although there are numerically more associations incorporated under the Associations Incorporation legislation of the Australian states and territories, the organisations completing the survey are evenly balanced between the Associations Incorporation Acts and being Companies Limited by Guarantee under federal law. As Associations Forum members represent economically significant entities, it is more likely that they will choose to be a Company Limited by Guarantee, which is seen as having higher standards of governance.

Number of directors
As in recent years, the average number of directors on the board is 10 directors. Interestingly, in the past 2 years surveys, there has been one association with 39 directors, four times higher than the average. 

Ideal number of directors
Also following the trend of previous surveys, the ideal number of directors is lower than the actual number directors, with 8.4 directors. The trend is certainly for smaller Boards.

Directors external to membership
The statistics support anecdotal evidence of an increase in the number of directors on the Board who are not connected to the membership, and who are instead chosen for their expertise and judgment. However, membership-linked directors are and should remain in the clear majority.

Gender of directors
With an average of 6.6 male directors and 3.9 female directors, it would appear that the associations and charity sector has a greater percentage of females on Boards than listed companies.

Method of election of President/Chair
Associations Forum recommends to associations and charities that it is better for the Board to elect its President or Chair, rather than having the members directly elect this pivotal role. This recommendation is supported by the statistics that show approximately 63% of not-for-profits use this method. 

Maximum years for a President or Director
From the perspective of Associations Forum, it is wise to have term limits on the position of President/Chair. This allows ordered transition from one leader to the next, and having a requirement to move on locked into the constitution means that no acrimony arises from someone staying too long. Whilst we do not make recommendations on having term limits for being a director, some associations do have this restriction.

Number of meetings
The average of 5.6 face-to-face meetings per year makes sense as there is usually no need for Boards to meet every month, yet it is important for them to meet regularly in order to discharge their governance responsibilities. Teleconference and Skype Board meetings are used as well, but to a lesser extent, as they are less effective.

Fees for President/Chairs and Directors
Whilst they are in a minority, it is suitable for some associations or charities to pay directors. The average amount payable for a president rose from $2,700 in 2012 to $3,400 in 2013, which is a noteworthy increase. Similarly, director fees increased from just under $700 to just over $900 per year.

Office Bearer positions
The statistics reflect the reality that virtually every association or charity needs a President/Chair, and they are usually supported by a Vice President/Vice Chair. However, only 64% of NFP’s have a Treasurer, reflecting the increased use of Finance and Audit Committees comprising more than one individual. It is interesting to notice that only 20% of entities have Immediate Past President positions, likely reflecting the belief that a good former President can be helpful without being on the Board, and that a bad former President would best not be on the Board in that capacity. 

Is your CEO a voting member of the board?
86% of associations and charities do not give a vote at board meetings to the Chief Executive Officer, presumably because they see that the CEO should be influential without being granted a vote, and also because the Board is directly elected by the members whereas the CEO is an appointment to the Board – and removable for poor performance.