While ensuring compliance with the Code of Governance for Charities and IPCs without losing focus on operations remains a challenge, there are ways to build an effective charity board.
While ensuring compliance with the Code of Governance for Charities and IPCs without losing focus on operations remains a challenge, there are ways to build an effective charity board and improve governance in the sector, according to panellists at a workshop during the SIAS 8th Singapore Corporate Governance Week.
Focus of an effective charity board
The panel agreed that the charity board must determine its long-term strategy and set relevant objectives as the organisation works to achieve its vision. It must also be proactive in identifying service gaps and transparent with proper governance, as well as ensure proper succession planning and sustainability for the charity to effectively serve its beneficiaries.
Daniel Ang, Board Chairman of Care Corner Singapore, emphasised that sustainability should cover physical capacity, management capability and financial adequacy.
Achieving optimal dynamics between the board and executive director
Charities may face the problem of power imbalance between the board and executive director, resulting in operational inefficiency and lack of board oversight. If the board and executive director are supportive and open in their communication with each other, the charity would be able to maximise the collective benefits brought by both parties to the organisation. “Building mutual trust and respect between the board and executive director is an important step towards good governance and an effective charity board,” said Ando Yeo, Executive Director of Singapore Association of the Visually Handicapped (SAVH).
Evaluation of board effectiveness
A common tool used by charities to assess board effectiveness is self-evaluation, which is also a requirement for large charities under the Code of Governance for Charities and IPCs. Donors and regulators require more evidence and impact assessments to gain clearer insights on the intended results of fundraising activities, said Wendy Loo, Deputy Director of Tote Board’s Grant Management Division.
Sovann Giang, Senior Director and Deputy Industry Lead of the NPO Practice at RSM, noted that an effective charity board is a robust social system based on mutual respect, trust and candour that focuses on the organisation’s mission.
Board renewal and succession planning
The refined Code of Governance for Charities and IPCs, which takes effect for financial years beginning on or after 1 January 2018, requires a charity to disclose the reasons for retaining board members who have served for more than 10 consecutive years. This new 10-year board term limit requirement poses a big challenge to many charities as removing long-serving members from the board may mean a loss of valuable experience, institutional knowledge and even a source of funds. On the other hand, many charities concur with the Code’s reasoning that a limited term may provide the board with fresh ideas and perspectives for it to face new challenges in a rapidly changing world.
A way to address the dilemma over the board term limit is to stipulate staggered terms for the board as practised at SAVH. This enables the board to retain knowledge and introduces new insights to the organisation.
“Sustainability of the board should be one of the board’s top priorities,” Daniel said. “Potential candidates are identified at an early stage and groomed for board membership.”