Published July 4, 2019
Over the past 27 years, the Sport Law & Strategy Group (SLSG) has written hundreds of articles on topics related to the law, planning, leadership, and governance. Some of our articles have pushed boundaries and buttons. Our intention is always to serve in the best interest of the sport community. As lawyers and strategists, we study the law, good governance practices, and leading-edge management theories so we can help the sport sector stay ahead of some of the bigger risks and threats facing 21st century social profit organizations. While we are proud of the work we are doing to support sport organizations at the international, national, provincial, territorial and community levels, we are still a long way off from Sportopia.
Lately, we are noticing a number of poor governance practices in boardrooms across the country. In part, we believe this is due to complacency (people are so busy they fail to uphold sound business practices or groupthink sets in with Boards where there are no fixed terms) and a sense of entitlement (when people have been serving on the Board for a number of years and feel at some level that the organization owes them or they feel they own the organization). These are both troubling risks that are directly connected to ineffective and insufficient governance practices.
Risks of directors’ not managing conflict
Over the past two years we have received dozens of calls from staff and volunteers expressing frustration with the lack of understanding within their sport organization about the fiduciary responsibility to avoid conflict whenever possible, and the responsibility to manage it according to sound legal practices if it cannot be avoided.
For instance, the Directors of a large sport organization failed to manage conflict when they appointed a sitting President to be the organization’s senior staff person without opening up the hiring process. This came after the sitting President fired the current senior most staff person (who himself had previously been a Board member). The Board did not communicate the firing and hiring to its membership. At one point, the current President held the role of president and senior staff person, and also served as President of another organization within the same sport. Previous approaches to employment in this organization had involved rigorous hiring practices in place that included striking a hiring committee, job postings on SIRC and in the local paper, interview processes, and a media release announcing the new hire. But either complacency or a sense of entitlement – the governance gremlins – had invaded this organization and caused a serious and troubling governance risk.
Another example of not managing conflict occurs when senior staff or Directors are permitted to hire family members, specifically through closed hiring processes, effectively ‘appointing’ the individual into a job. We would argue that this presents a clear conflict as the staff person has a pecuniary interest by hiring a member of his or her family. Regardless of the motivation to do so, the Board must stand united, as the elected voice for the membership and the organization, to serve the best interest in a manner that upholds legal requirements and ethical standards. In these cases, the Board failed to consider whether the decision would be supported by the members of the organization and whether it presents a conflict that places the organization’s best interests at risk.
Methods to mitigate and manage conflicts such as the ones described above include:
Risks that Boards are not focused on the right things
One of the higher-level governance risks we see regularly is that Boards often focus on operational or management type discussions when their primary focus ought to be one of oversight, management of risk, and ensuring the monetary and strategic viability and relevance of the organization. Too often, Boards get caught up discussing the colour of the jersey when more important conversations need to be had. Examples of questions that good governing Boards ought to have include: Are we providing the right amount of oversight? What is our tolerance for risk? Does our CEO/ Executive Director/ General Manager have the operational policies in place to make fair, ethical and sound business decisions? Are we financially diversified enough? What is our success planning?
Good practices to ensure that the Board stays focused include:
Risks of not modernizing the governance structure
In many sport organizations we are seeing outdated governance structures that are capping the potential of organizations to meet the challenges and mine the opportunities available to them. We wrote about this risk in a previous blog. We reiterate that the current structure of sport boards is reducing the likelihood that sport will attract younger generations and preventing sport leaders from coordinating a national effort to attract new sponsors, educate coaches and officials in a streamlined manner, ensure financial security, and meet minimum legal obligations.
We spent time recently with the CEO of the National Golf Owners Association who successfully modernized his governance structure in 2001 and has reaped the benefits ever since. We will be sharing more about what CEO Jeff Calderwood had to share with us. For organizational leaders interested in exploring a better way to govern, we offer up the following to support your inquiry:
We appreciate hearing from you and we are interested in knowing if your organization is also struggling with some of the governance gremlins we have written about. Drop us a line at DBL@sportlaw.ca or SJI@sportlaw.ca.