By Rachel Corbett and Kevin Lawrie.
We continue to help National Sport Organizations (NSOs) comply with the new Not-for-Profit Corporations Act and, as part of the governance restructuring that some NSOs are undergoing, we thought it would be valuable to review the current voting structure of ALL NSOs. We found some interesting results.
With assistance from some NSO leaders, we were able to access the governing documents of fifty-one (51) NSOs (not all of them, but close enough!). Particularly, we were interested in answering the following questions:
- At the NSO’s annual meeting, which categories of members may vote? Board members, provincial/territorial sport organizations, clubs, athletes, or others?
- How many votes does each category or each member have?
- Is there proportional voting, whereby one Provincial/Territorial Sport Organization (P/TSO) has more votes based on membership or other factors?
Each NSO may have very good reasons for instituting the voting structure that they currently use. But even though every NSO is different we did find some commonalities that helped us answer our questions.
Of the 51 NSOs included in our sample, 19 NSOs (37%) give their directors a vote at the annual general meeting (AGM). In every case, the directors each have 1 vote. Occasionally the voting positions are identified, such as in Baseball Canada where the President, Treasurer, and Secretary have voting privileges, or in the Canadian Luge Association, where 11 identified director positions may vote. Most NSOs assign voting privileges to the President in the case of a tied vote and some NSOs specify explicitly that directors may cast votes for regular AGM issues – but may not vote for elections. In every NSO that allows directors to vote, there are also other groups that hold voting privileges. There are no examples among NSOs where directors are the only voting members at the AGM.
Forty-seven NSOs (92% of our sample) give their P/TSOs a vote at the AGM. Only 4 NSOs do not permit P/TSOs to vote and in each of these cases the P/TSOs have a reduced role in the operation of the NSO or do not exist at all for that sport (such as in Skate Canada, which follows a ‘unified model’ of governance, wherein provincial and territorial organizations are not independent corporations but are rather branches of the national body). Golf Canada is somewhat unique in that P/TSOs are not a class of member, but each provincial golf association names a representative to a Provincial Council and this representative carries an individual vote at the AGM. For the purposes of this study, we considered that P/TSOs in the sport of golf exercised a vote at the AGM, albeit indirectly.
Seven NSOs in our sample (14%) give their clubs a vote at the AGM. These NSOs include Golf Canada, Rowing Canada Aviron, Skate Canada, and the Canadian Yachting Association. In every NSO where clubs are given a vote, they are assigned a number of votes or voting delegates based on a proportional voting system. Swimming Natation Canada has a unique system in that only the country’s Top Six clubs are given voting rights at the AGM.
Voting privileges are not limited to directors, P/TSOs, and clubs. Eight NSOs (16% of our sample) give voting privileges to athlete representatives. But athletes are usually only given votes when the total number of votes is small and thus a single vote is more meaningful. For example, Judo Canada gives 600+ votes to P/TSOs depending on membership numbers and therefore Judo Canada’s directors do not vote and there are no voting privileges assigned to athletes. But for Diving Canada Plongeon, where P/TSOs are assigned one vote each, there are three athlete representatives who serve as voting delegates and the athletes’ vote in this scenario carries meaningful weight.
Occasionally NSOs will assign voting rights to delegates from other organizations. For example, Canada Basketball provides NBA Canada with one vote, and WTF Taekwondo Association of Canada allows ‘Special Community Bodies’ to each have a vote. Rowing Canada Aviron grants a single vote to Special Associations, which are rowing entities other than rowing clubs and provincial rowing associations. Other NSOs that are arranged by regions or leagues (like Canadian Soccer Association) assign voting privileges to the league or regional entity.
HOW MANY VOTES?
In every case where directors are given voting privileges, they are only permitted a single vote. But the process is different for P/TSOs. There are 47 NSOs (92% of our sample) that assign voting privileges to P/TSOs and 18 (38%) of these NSOs give an equal number of votes to each P/TSO. Softball Canada (three votes each), Ringette Canada (five votes each), and Table Tennis Canada (one vote each) are examples of this equality.
A few NSOs (such as Badminton Canada, Baseball Canada, and Hockey Canada) do not assign an equal number of votes to the P/TSOs but also do not use a proportional system. The larger provinces are assigned more votes but the rationale for such numbers is not provided. For example, Hockey Canada assigns five votes to Quebec and Ontario but only two votes to each of the other provinces and territories.
The majority of NSOs that assign voting privileges to P/TSOs do so in a way that supports a weighted proportional voting system. In these systems, P/TSOs are given more votes based on one of either membership numbers or the percentage of membership fees paid to the NSO.
Well over half of NSOs we sampled assign voting privileges to P/TSO members by a proportional system whereby a P/TSO can have more votes based on a factor that they can influence. In most cases, but not all, these additional votes are capped after a certain number. The two most common proportional voting structures are based on membership numbers and fees paid to the NSO.
For example, Alpine Canada Alpin permits one vote for each P/TSO but also allows additional votes for every 100 Alpine Competitor Cards issued and additional votes for every 500 general members registered. There is no limit to the number of votes a P/TSO can hold – so it would be in their best interests to recruit more members so they can have more votes at the AGM. Similarly, the Canadian Amateur Boxing Association permits one vote for each P/TSO but allows additional votes for every fifty members registered – but in this case there is a vote cap of four votes for each P/TSO. Speed Skating Canada assigns from one to 13 votes based on registered members, with only one province (Québec) maxing out at the top level (13 votes for having more than 5,000 registered members).
Assigning a number of votes based on a percentage of fees paid is a proportional system used by the Canadian Orienteering Federation, Squash Canada, and Water Polo Canada.
The Canadian Freestyle Skiing Association uses a proportional voting system whereby additional votes are assigned to a P/TSO based on the number of licensed athletes and youth participants. However, this NSO has included a clause stating that one P/TSO may not carry more than 40% of the total votes. A similar clause also exists for Canadian Soccer Association and for Judo Canada (which prevents one or two P/TSOs from having a majority of votes).
PROXIES, TIES AND OTHER INTERESTING RESULTS
- Some NSOs permit proxies, some NSOs do not permit proxies, and most NSOs do not specify whether proxies are permitted or not. Under the Canada Corporations Act, proxy voting is allowed but only where the mechanism for it is stated clearly in the bylaws. If the bylaws are silent, proxy voting is not allowed.
- Some NSOs permit the President to break a tied vote, some NSOs prefer a tied vote to be automatically defeated, and some NSOs do not specify what to do if there is a tied vote.
- A handful of NSOs (such as Ringette Canada) only permit P/TSO votes to be cast as a block.
- One NSO (Tennis Canada) assigns the number of votes to P/TSOs based on the population of the province or territory, and not based on registration or participation numbers.
- A couple of NSOs (Equine Canada and Bobsleigh Canada Skeleton) permit every individual member to have a vote. This creates some logistical and communications challenges as every member entitled to vote must also receive a direct notice of member meetings.
THE BEST APPROACH
Though it is difficult to recommend a ‘best’ approach because of the many differences between the sports and their contexts, it is easier to identify the most ‘common’ approach to NSO voting structures. With a few exceptions, there appear to be three main categories:
- NSOs that permit directors to vote and give each P/TSO an equal vote
- NSOs that do not permit directors to vote and give each P/TSO votes on a proportional system
- NSOs that are too unique to fit into the previous two categories
Certainly with the changes arising in the new NFP Act, choosing the ‘best’ approach to who should vote at an NSO’s annual meeting would take the following issues into consideration:
- Who should have a vote? (Directors, P/TSOs, clubs, athletes, other organizations, etc.) Under the new Act, directors do not need to be members which could call into question whether a director should vote. Our perspective is that this is an antiquated approach – directors are elected to serve the members, and should not step into the role of a member by voting at a meeting of members.
- How many votes should P/TOs have? (Should they be equal, unequal, or weighted proportionally based on membership numbers or fees). Just as we liken Canada to a confederation of equal provinces, should a national body be a confederation of equal provincial bodies? Should tiny PEI have the same democratic clout as massive Ontario?
- Should there be limits to the number of P/TO votes or the percentage of overall votes cast? The concern here is that the affairs of the national body should not be controlled by just one or two provincial bodies. Virtually all sports have varying capacities and sizes across provinces and territories. Depending on the sport, Ontario, Quebec, B.C. and sometimes Alberta usually dominate in terms of participant numbers. Care may need to be taken to ensure that they do not dominate the business of the national body.
- Will ‘absentee voting’ be permitted? This is the language used in the new Act, whereas the term ‘proxy voting’ is used in the current Canada Corporations Act. Canada is a big country presenting huge challenges to mobility and travel, and absentee voting may be the only logical option.
There is an argument to be made, in the words of Carters (Canada’s leading charity law firm) that “organizations may want to collapse all membership classes into one class and remove non-voting membership classes”. This is excellent advice. It will help avoid future problems related to the new Act’s requirement that non-voting members will gain the right to vote on certain future matters relating to membership. It will also help avoid the problem of having to put certain future changes to a ‘special class vote’ where each class of member has to independently approve a change. In our view, member classes should be reduced in number as much as possible, and any class of members should have neither too many members/votes, nor too few.
TRENDS WE’RE SEEING
The trend we are seeing among those NSOs that have now spent some time considering their future membership structure is that simpler is better. Rowing Canada Aviron is considering shifting from a complex structure of 12 classes of voting and non-voting members to a single class of voting members made up of various rowing associations (provincial bodies, special bodies and rowing clubs). Other NSOs are leaning towards the same simple structure.
In almost all cases, NSOs are also moving away from multiple categories of non-voting members (associates, affiliates, individual athletes, individual coaches, leagues, teams, honourary members, life members, etc.) towards different terminology – the ‘registered participant’. By distinguishing registered participants from members in the strict legal sense, they are taking steps now to ensure that desired changes in the future can be more easily achieved. This approach of shifting to ‘registered participants’ has been endorsed by Sport Canada and many insurance companies.
These are interesting times for national sport bodies in Canada. While the main challenge is compliance with a new law, this is also an opportunity to make changes to improve overall governance structures and practices. We encourage NSOs to communicate with each other and share what they are learning and considering.
For further information on the new Not-for-Profit Corporations Act and how sport is making the transition, feel free to contact us.