Raising the Bar - Questions Directors Should Ask

We ask our athletes and coaches to pursue excellence every day, and a recent article in National Post by Shaun Francis and John Kelleher (10 questions every director should ask: Time to raise the bar for non-profits, March 22, 2001 Page FP12) calls upon directors of non-profit boards to also do more. The context of the article is that the current trend towards smaller government will place a larger burden on Canada's not-for-profit sector. This sector is made up of 160,000 organizations that account for about ten percent of our country's Gross Domestic Product. The authors suggest that studies have shown that too many Canadian non-profits are following outdated governance practices.

This article goes on to present ten questions that every board director should ask at their next board meeting. While not all of the questions are applicable to sport organizations, some are nonetheless relevant. These are similar to the questions that I often pose of sport leaders in our discussions about board governance.

Here is a summary of Francis and Kelleher's questions that I found most intriguing:

Why is our board so big?
Academic studies have correlated a smaller board size with better governance and financial performance. Big board meetings allow only superficial discussions that are inconsistent with good governance. According to academics, optimal board size is nine members. In 2006, only about one in five of Canadian boards approached this optimum size. Recent research done by the Sport Law & Strategy Group reveals that only 15 Canadian NSOs (out of nearly 60 that are funded) have boards numbering nine or fewer directors.

Have we set clear expectations about attendance and preparation and are we calling out poor performers?
I like to say that the legal duties of a director in a non-profit are identical to the legal duties in the corporate, for-profit context. A directorship is a very serious position, and there is no excuse for lack of attendance, engagement or preparation. The authors say that public companies publish attendance records of directors and non-profits should do the same in their annual reports. A particular problem I have noted in some NSOs (not all) is the lack of participation by 'blue chip' directors. The NSO will applaud itself for having attracted to its ranks a high profile individual from the business community ... but what often happens is that the individual is so flat-out busy in all their corporate activities that they rarely participate in NSO board or committee meetings. I would question whether anything has been gained by the successful recruitment of such people.

Have we created a board culture that is hospitable to tough questions and maverick viewpoints?
I have noted that many boards I work with are made up of polite and pleasant rubber-stampers. Many high profile business failures (Enron, for example) came about as a result of a board being stacked with people friendly to management. A culture that values harmony over substantive (and often controversial) discussion is a clear indicator of a bad board. Boards should seek out free-thinkers who can challenge convention and tradition.

Are we spending enough time together as a board without the presence of management?
Francis and Kelleher suggest that it is entirely inappropriate for the Executive Director or CEO to attend every part of every board meeting. This comes as a surprising comment, as I have rarely seen a sport organization board meeting exclude their staff person, except where there is an 'in camera' session involving staff evaluation or compensation. The authors suggest that directors are less willing to question strategy or challenge management when management is sitting in the room. This is an interesting perspective.

The authors conclude that being a good director isn't a popularity contest. Leadership in the board room requires asking tough questions, even if they make everyone uncomfortable.

This article on "10 questions" brings to mind the excellent "20 Questions" series published by the Chartered Accountants of Canada. Their non-profit series consists of a collection of concise, practical booklets setting out the 20 questions that directors should ask about fiduciary duty, risk, governance, human resources, strategy, insurance and board recruitment and succession. These are a great resource for every sport leader, and they are free. Here is the link to download them.

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