By Lyn McDonell CAE C. Dir.

You hope it never happens – your organization in the harsh spotlight of public scrutiny. Governance crises in associations don’t usually attract media attention. However the media, when it learns of trouble in organizations that depend on tax dollars or donations, can be swift to judge. Whether true or fair, before any formal investigation is done, often leaders are painted as villains. With that, much damage is done. The reputation of the entire organization suffers, morale plummets, and focus on the mission is lost.

Director responsibilities are common across the Board. What can associations learn from governance challenges and crises in other not for profit organizations? Let’s take a few examples from the past decade and extract the take-aways for directors today:

Toronto Humane Society 2009-2010

This was a news story in the Toronto media through 2009-2010. A former lawyer resigned presidency of THS in 1984, and then was re-elected to the Board in 2001. In 2009, again serving as president, he was led out of the shelter in handcuffs and animal cruelty charges were levelled against him and senior managers. The charges were later dropped, but not before the bad publicity cut into fundraising and damaged staff morale. A story emerged of a volunteer president micromanaging a crowded and understaffed shelter. That president left the Board but later sought re-election. In a mailing to the charity’s voting members he criticized the then-current Board which was recommending by-law changes that would limit directors to two terms. In the past some directors had served more than thirty years. Since then, with a new Board and CEO, the organization has righted itself.

Lessons learned:

• Strive for clear functional role descriptions and accountabilities for officers (including the senior volunteer, the CEO and others).
• Encourage Board turnover through term limits and/or director evaluation. 
• If you are the new leadership post-crisis, make decisive moves to send a message that things have changed.

Halifax School Board 2006

By 2006, the Halifax Regional School Board had a reputation for being dysfunctional. One member claimed violation of his civil rights when he was assigned a new Board seat. Members would walk out of meetings in anger. One trustee sold her company’s products to a school where her husband was principal. Nova Scotia’s then Minister of Education dismissed all thirteen directors for failing to comply with their code of ethics. The local Daily News on Wednesday, December 20, 2006 printed “you’re fired” in mammoth font ringed by the faces of all thirteen Board members.

Lessons learned:

• Establish Board teamwork and a respectful tone. Board members must be able to disagree without rancour.
• Ensure conflict of interest guidelines are in place, understood, and enforced.

MADD Canada 2007

In 2007, a media investigation revealed that Mothers Against Drunk Driving Canada was spending 81% of its money raised on fundraising and administration. The national charity had used paid telemarketers, door knockers and direct mail companies to raise funds. While not unusual, a disproportionately large portion of those expenses were being treated as charitable work because of the purported education involved in the fundraising methods. The founder of the organization, a volunteer, earlier dismissed from the charity’s finance and policy committee, told the media that he and other veteran volunteers were raising questions and had been critical of the national head office. Despite its good work and the efforts of many local volunteers, the organization found itself pilloried on the front page of a major newspaper.

Lessons learned:

• Boards should ensure accounting policies and practices pass the “sniff test” and reflect accepted practices. When in doubt, seek opinion from regulators.
• Welcome discomfort if it is on the important stuff. Boards in “groupthink” may alienate critics who ask tough questions.

Niagara Parks Commission 2009-2010

A governance review in 2009 uncovered problems at the Niagara Parks Commission. The Commission, a provincial agency, is overseen by governors appointed by government – essentially to act as a Board of Directors. The audit found ethical breaches, perceived conflicts of interest, questionable practices, and the culture of an “old boy’s club.” Commissioners were being treated “as if they were royalty,” and some were meddling in employee-related matters. There were gaps in recordkeeping, inconsistent tendering of contracts, and opaque decision-making in the commission’s procurement and leasing activities.

Lessons learned:

• Establish the proper atmosphere at the Board table. Directors have a serious job to do. It is not a social club.
• Establish strong and transparent processes regarding procurement.
• Ensure role clarity between employees and the Board.

“Epi Centre”/ Centre for Health Intelligence (IICHI), Alberta, 2011

Board members of the International Indigenous Centre for Health Intelligence (IICHI) found themselves again under criticism when they held their annual general meeting in Hawaii in the fall of 2010. Hawaii was where one of its Board members lived, and according to the Centre’s leadership, was the same cost or cheaper than meeting in Canada because of availability of a venue for the meetings. The agency, funded by Health Canada, had earlier come under scrutiny for its use of a sole-source contracted company to provide all its staff and services – a company owned by the physician lead for the Centre. The Centre did not have any direct employees. The physician lead/manager said the Board asked him to use his company to provide staffing saying that they did not want that responsibility. Several Chiefs had already expressed concerns to Health Canada.

Lessons learned:

• Ensure Board orientation instills the highest regard for fiduciary responsibilities and understanding that the Board cannot delegate its accountability.
• Ensure proper tendering of major contracts.
• Listen to stakeholders who may have legitimate concerns.

Montreal’s SPCA/Canadian Society for the Prevention of Cruelty to Animals, 2007

In 2007, the Globe and Mail revealed that some donors across Canada felt misled when they learned that the Canadian Society for Prevention of Cruelty to Animals was operating solely in Quebec and was Montreal’s SPCA. While CSPCA is the name under which the organization is incorporated, its French language fundraising did not use that name, and materials did not explain that CPSCA does not operate as a national organization. According to its internal fundraising documents, the Montreal SPCA had raised over the 1.6 million from more than 34,000 donors outside Quebec.

Lessons Learned:

• The Board should insist on clear and ethical communications to supporters.
• What may be legally correct may be offensive to some stakeholders.

In general, right-minded policy and practice will earn and build trust. Organizations run risk as a result of these issues: confused accountabilities, lack of internal controls, Board members not living up to their duty of trust, single dominant individuals allowed to run “rogue”, incompetence, and decisions on the slippery slopes of greed and hubris. In certain situations, Board members risk not only personal monetary liability, but their reputations.

Here are measures the Board and senior leadership can take to earn and preserve public and member trust:

• Adopt the gold standard: embrace the highest bar of good governance.
• Promote a culture of doing what is right. Ensure everything you do can withstand member scrutiny.
• Establish and maintain strong internal systems of accountability.
• Manage financial assets carefully.
• Assess prime areas of risk and strengthen risk mitigation and/or avoidance in these areas.
• Ensure Board members take their job seriously and work hard at it. Invest in Board development.
• Watch that the Board does not develop an overly “chummy” culture avoiding debate and conflict.
• Directors, don’t "make allowances" or give staff "the benefit of the doubt" when you have a concern; speak up and ask questions.
• Be especially alert to recommended shortcuts that keep administrative and governance costs down. Make sure that their rationales pass muster.
• Ensure diverse and validating sources of information to the Board regarding accepted standards of sector practice.
• Do deliberate succession-planning; plan for periodic Board turnover.
• Plan for transparency. Don Tapscott and David Ticoll said in 2003, "If you're going to be naked, you better be buff!"

Many organizations are rowing in this direction and there are good resources available. The Canadian Institute of Chartered Accountants (CICA) in 2010 produced a Director Alert (Increasing public scrutiny of not-for-profit organizations – questions for directors to ask). Imagine Canada, a national charitable organization has developed a Standards Program currently in pilot but opening to all charities and public-benefit non-profits in the future.

Even so, organizations doing all the right things can still be caught in a crisis, although the risk of it will be less. There is a silver lining, perhaps. They say good Boards facing challenge will come together, show their mettle, and emerge better, stronger and more effective.