Advice on Making Corporate Governance Changes
It’s not uncommon for an association’s corporate governance to become stale, a relic of the past, perhaps from the days of the association’s founding or from the last time the governance was overhauled two or three decades ago. The governance structure that was perfect for the association in the 1950’s or 1970’s is not necessarily the right one for 2014 or 2020. And yet many association leaders are reluctant to tackle corporate governance issues. Like a can that gets kicked down the road, governance problems are pushed off onto the next in line for association leadership at both the board and staff levels.
Dramatic changes in corporate governance are often brought about by one of three events impacting the association: 1) a new chief executive who is sometimes appalled by the governance structure in place at his or her new association; 2) a merger with another association or other entity where two different governance structures are forced to meld together or flow into a new structure; and 3) financial difficulties causing the association to do a complete overhaul of its mission, programs, membership and governance. As the baby boomer generation retires from association staff leadership, we are seeing more associations with a new chief executive reexamining the governance structure they have inherited – articles of incorporation, bylaws, constitution, policies and procedures, and customs.
To be successful, a corporate governance change needs these 10 factors:
1. Strong leadership at the staff and board level supporting change.
2. Buy-in from the rest of the board and executive staff.
3. A willingness to put everything on the table with no “sacred cows”.
4. A willingness to compromise; taking small steps is sometimes the only way to for change to happen.
5. The timing of board and member meetings and elections must be tracked since the schedule for making any significant changes is closely tied to these events.
6. Transparency in the process.
7. Education of the members (particularly if they vote) about the reasons for the change(s), the benefits to the association, and the process for implementing the change(s).
8. Disciples, whether board or staff, who will go out among the members and preach in favor of the change.
9. An impartial consultant to lead discussions, challenge assumptions and traditions, play devil’s advocate, and keep the change process on schedule.
10. Someone on the board akin to a legislative “whip” to keep the vote counts and shepherd directors who might stray from the message back to the task at hand, achieving a governance change.
To get the process of governance change started, the association’s leadership should answer these basic questions: who, what, when, where, how and why.
Who: Who will discuss the challenges or problems, discuss the options and make the recommendations for change? If the association’s board has a governance committee, this is usually the group of people who, along with the board’s leadership, will be most involved in the process of discussing and identifying changes that will help the association and its board function better. In the absence of such a committee, the executive committee will often play this role. The third option is to form a task force or committee of directors and senior staff who are interested in moving the association forward.
What: What changes are needed in the association’s governance structure? This can be arrived at by conducting surveys of the board, staff and membership. Or a consultant can be hired to conduct in-depth interviews of samples of each group. In some cases the board and staff leadership together can identify areas where a change would lead to an improvement in some part of the governance.
When: Depending on the association’s governing documents and state law, the changes are likely to be made at a meeting of the board of directors and/or the voting members. The meeting schedule should be identified as well as any notice periods, such as those required for amendments to the articles of incorporation and bylaws. All of the tasks that the committee undertakes will be tied to that schedule. It is important to keep on schedule or to change the schedule if it becomes apparent that the committee is not ready to take its recommendation to the board and/or members in a timely manner.
Where: While changes by the membership are likely to be voted on at the annual meeting (unless voting occurs prior to the meeting), there are likely to be other needed communications with members on a state or regional basis. For this reason, the location of upcoming meetings at the regional or state level should be identified. If the committee is not planning to travel to each of these meetings, a selection of meetings for the committee to visit should be made so as to spread the communications among the membership in an even manner.
How: Depending on the change, amendments might be needed to the association’s articles or bylaws. Knowing how the changes must occur is tied in with the timing and location. If there is a bylaws committee, they should be brought into the process early on as more than one bylaws committee has derailed a planned governance change, whether for spite or political reasons or because they are not kept informed and feel ambushed when changes are proposed without their involvement.
Why: This might be the most important question. Directors and members will want to know why each change that is recommended is either needed or suggested. If a major change is being proposed, a cogent case must be made as to why the association will function better under a different governance structure.