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26th March 2015

Board development

Working with the Council of Governors

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Working with governors

Purpose:

The purpose of this session is to:• Introduce the Board members to the role of governors and their statutory

duties• Agree proposals for how the board and council interact

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The governance model for FTs

Becoming an FT means a new governance model, a concept based on local accountability :

• A membership community – made up the public, patients, their carers and trust staff• A Council of Governors – elected from the membership community and staff plus stakeholders

appointed from key partner organisations, to work closely with the trust in developing the overall strategic direction, and holding the Board of Directors to account.

• A Board of Directors – operationally accountable for delivering the trusts strategy and objectives.

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The Council of Governors - composition

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The role of a governor

Statutory duties / powers

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Governors’ duties / powers

Statutory roles and responsibilities of the council of governors Additional powers

2006 Act Appoint and, if appropriate, remove the chair; Appoint and, if appropriate, remove the other non-executive

directors; Decide the remuneration and allowances and other terms and

conditions of office of the chair and the other non-executive directors;

Approve (or not) any new appointment of chief executive Appoint and, if appropriate, remove the NHS foundation trust’s

auditor; Receive the NHS foundation trust’s annual accounts, any report

of the auditor on them, and the annual report at a general meeting of the council of governors

In preparing the NHS foundation trust’s forward plan, the board of directors must have regard to the views of the council of governors

Amendments by the 2012 Act

Hold the non-executive directors, individually and collectively, to account for the performance of the board of directors;

Represent the interests of the members of the trust and the interests of the public;

Approve “significant transactions”; Approve an application by the trust to enter into a merger,

acquisition, separation or dissolution; Decide whether the trust’s non-NHS work would significantly

interfere with its principal purpose, to provide goods and services for the health service in England, or performing its other functions;

Approve amendments to the trust’s constitution

The council of governors may require one or more of the directors to attend a council meeting to obtain information about performance of the trust’s functions or the directors’ performance of their duties, and to help the council to decide whether to propose a vote on the directors’ performance;

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Governors’ duties / powers by theme (1)

Appointments and terms and conditions Process

Appoint and, if appropriate, remove the chair; Appoint and, if appropriate, remove the other non-executive directors; Decide the remuneration and allowances and other terms and

conditions of office of the chair and the other non-executive directors; Approve (or not) any new appointment of chief executive Appoint a deputy chairman and Senior Independent Director; Appoint a Lead Governor; Appoint and, if appropriate, remove the NHS foundation trust’s

auditor;

Council of Governors’ meeting February 2015 & April 2015

See Appendix A for details

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Governors’ duties / powers by theme (2)

Annual planning / reporting Process

In preparing the NHS foundation trust’s forward plan, the board of directors must have regard to the views of the council of governors

Approve “significant transactions”; Approve an application by the trust to enter into a merger, acquisition,

separation or dissolution; Decide whether the trust’s non-NHS work would significantly interfere

with its principal purpose, to provide goods and services for the health service in England, or performing its other functions;

Council of Governors’ meeting – April 2015

• Receive the NHS foundation trust’s annual accounts, any report of the auditor on them, and the annual report at a general meeting of the council of governors

Council of Governors’ meeting – July 2015

See Appendix B for details

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Governors’ duties / powers by theme (3)

Holding to account / representing the interests of the membership Additional powers

Hold the non-executive directors, individually and collectively, to account for the performance of the board of directors;

Council of Governors’ meeting – July 2015 (appraisals) andongoing

The council of governors may require one or more of the directors to attend a council meeting to obtain information about performance of the trust’s functions or the directors’ performance of their duties, and to help the council to decide whether to propose a vote on the directors’ performance;

Represent the interests of the members of the trust and the interests of the public;

Approve amendments to the trust’s constitution

Ongoing

See Appendix C for details

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Fulfilling governors’ duties / interests

Board / Council engagement

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Council sub-committees

Guidance:

The Council of Governors cannot delegate authority to sub-committees, but can establish advisory groups to formulate recommendations for consideration by the Council. One group already established is the Nominations and Remuneration committee. The remit of this committee includes:• Nomination and recruitment arrangements for the appointment of non-executive directors and the

chairman;• Establishing the remuneration, allowances and other terms and conditions of office for that

appointment• Setting the arrangements for annual appraisal and performance assessment of chairman and

non-executive directors

As well as the Nominations and Remuneration committee, the Council may wish to establish working groups to support the Council and provide an opportunity for governors to add value in specific areas. The Council cannot delegate its duties and therefore any group must be advisory to the Council.

It is for the Council to determine which groups to establish. Best practice points to fewer, more focused groups.

Examples of types of groups established for non-statutory duties include:• Quality• Membership strategy and engagement

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Board / Council engagement

Board of Directors development needs

Council of Governorsdevelopment needs

Joint working

In thinking about how the Board engages with the Council and governors, we should consider some guiding principles:

• Governors want to be engaged and to be helpful

• Governors have got experience and skills which we should use

• Avoid duplication of work wherever possible

• Governors have statutory duties that need to be fulfilled

• Both board members and governors have different roles

• But have similar goals and interests – the patient

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Board / Council engagement

In designing a programme of engagement that meets these principles and both parties’ needs, we may consider a mixed model of engagement methods. There are several existing opportunities:

• Board of Directors’ meetings – monthly

• Board of Directors’ board development sessions – every two months

• Board of Directors strategy sessions – every two months

• Board sub-committee meetings (e.g. QRC meetings & seminars, F&P, Workforce) – monthly

• Council of Governors meetings - quarterly

The proposal is that we use the range of these opportunities for both parties:

• Specific sessions for Board members

• Specific sessions for governors (Council meetings or seminars)

• Joint seminars including Board and Council

• Observation of Board and Board sub-committees

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Board / Council engagement

A proposed programme, based on topics of interest raised so far by governors:

Topic Proposed approachTopics raised by governors as areas of interest:Finance – understanding NHS finances and the trust’s financial plan

Additional Council of Governors workshop (April 2015?)

Staff experience – staff survey results and bullying and harassment

Joint seminar at Board development session (May 2015) (or Workforce committee seminar?)

Understanding mortality data Joint board development session (July 2015)Aligning / triangulating data – patient and staff experience

Joint board development session (July 2015)

Outpatients – patient experience Joint board development session (September 2015)

How do we deliver the values and customer care? Joint board development session (September 2015)

Learning from complaints / incidents / patient feedback

Joint QRC seminar (October 2015)

Community / Public health Council of Governors workshop (November 2015)Partnerships in health – external relationships and how they support the delivery of quality

Council of Governors workshop (November 2015)

Equality training / awareness Joint board development session (January 2016)Workforce planning and profile Joint board strategy session (February 2016)Annual planning – draft annual plan Joint board strategy session (February 2016)

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Board / Council engagement

Attendance / observation of board sub-committees:

Why the need?• Enables governors to hold the non-executives to account – observing them in their role as

chair / members of board sub-committees

How would it work?• Attendance in capacity as observer, not participant – though allowed to ask questions at the end

at chair’s discretion• Maximum attendance at two meetings per year per governor per committee• Committees limited to:

• Quality and Risk Committee• Workforce Committee• Finance and Performance Committee

• May need to have two parts to committee meetings to enable confidential discussions, if required

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Statutory duties

Appendix A: Appointments

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Appointing the Chair and NEDS

Guidance:

The 2006 Act requires that an NHS foundation trust has non-executive directors. In making appointments, the governors must consider relevant aspects of the trust’s constitution and the Code of Governance, such as:• the requirements of the NHS foundation trust’s constitution concerning the number of non-

executive directors;• the independence of non-executive directors;• the balance of skills across the Board;• The composition of executive and independent non-executive directors

Provisions:

Trust constitution:

26.1 “The Council of Governors, at a general meeting […] shall appoint or remove the chairman of the trust and the other non-executive directors”

27.1 “The Council shall appoint the chairman of the applicant trust as the initial chairman of the trust, if he/ she wishes to be appointed”

27.2 “The power of the Council to appoint the other non-executive directors of the trust is to be exercised, so far as possible, by appointing as the initial non-executive directors of the trust any of the non-executive directors of the applicant trust who wish to be appointed”

27.4 “An individual appointed as the chairman or as the initial non-executive director …shall be appointed for the unexpired period of his/her term of office … but if, on appointment, that period is less than 12 months, he / she shall be appointed for 12 months.”

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Appointing the Chair and NEDS

Subsequent appointments

For each appointment, the Nominations and Remuneration Committee will convene to:• Recommend to the Council of Governors approach to appointment (i.e. open competition or re-

appointment)• Agree a job description and person specification defining the role and capabilities sought• Form the interview panel, including:

– Chairman– Three governors, one of whom is an appointed governor– Independent external assessor where appropriate

• Make a recommendation to the Council of Governors for approval of the appointment

Non-Executive Directors Appt. from To TermChair Christopher Smallwood 01/11/2011 01/02/2016 1Non-Executive Michael Rappolt 01/09/2004 01/02/2016 3Non-Executive Sarah Wilton 29/12/2010 01/02/2016 2Non-Executive Judith Hulf 01/01/2013 01/02/2017 1Non-Executive Stella Pantelides 01/01/2013 01/02/2017 1Non-Executive Kate Leach 01/02/2014 01/02/2017 1Non-Executive (University) Peter Kopelman 30/09/2014 30/09/2018 2

Council of Governors resolution, meeting 10th February:To appoint the chairman and non-executive directors, for terms set out below

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Deciding the remuneration and terms of office

Guidance:

It is for the council of governors to decide the remuneration and allowances, and other terms and conditions of office, of the non-executive directors (2006 Act). (The remuneration of the chief executive and executive directors is decided by the non-executive directors.)

Provisions:

Trust constitution:

“35.1 The Council at a general meeting shall decide the remuneration and allowances, and the other terms and conditions of office, of the chairman and the other non-executive directors”

Council of Governors resolution, meeting 10th February:For the Council’s Nomination and Remuneration Committee to recommend to the Council on 2nd April an initial remuneration for chairman and non-executive directors

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Approve the appointment of Chief Executive

Guidance:• The non-executive directors, including the chair, are responsible for appointing or removing the

NHS foundation trust’s chief executive. • The Council of Governors can decide whether or not to approve the appointment of the Chief

Executive.• However the initial appointment of the chief executive, if the same as the chief officer of the

applicant NHS trust, does not need Council approval.

Provisions:

Trust constitution:• 29.1 The non-executive directors shall appoint or remove the chief executive• 29.2 The appointment of the chief executive shall require the approval of the Council• 30.1 The non-executives shall appoint the chief officer of the applicant NHS trust as the initial

chief executive of the trust, if he / she wishes to be appointed.• 31.1 The appointment of the chief officer of the applicant trust as the initial chief executive of the

trust shall not require the approval of the Council

Council of Governors resolution, meeting 10th February:To note the appointment of the initial chief executive.

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Agree the appointment of Deputy Chair and Senior Independent Director

Guidance:

Role of the Deputy Chair

One of the NEDs should be appointed by the Board of Directors who deputises for the chair as and when appropriate.

Role of the Senior Independent Director

One of the NEDs should be appointed by the Board of Directors as the Senior Independent Director (SID).

The role of the SID is to act as the point of contact with the board of directors if governors have concerns which approaches through normal channels have failed to resolve or for which such approaches are inappropriate. For example, as the board of directors contact when the Council discuss chair’s appraisal or remuneration.

Provisions:

Trust Constitution: “28. The Council of Governors at a general meeting of the Council of Governors shall appoint one of the non-executive directors as a deputy chairman.”

Monitor guide: “The appointment [of the SID] should be made in consultation with the council of governors”

Council of Governors resolution, meeting 10th February:To confirm existing deputy chairman and SID – Mike Rappolt

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Appoint the Lead Governor

Guidance – role of the lead governor:• Monitor requires all NHS FTs to nominate a lead governor• The lead governor has the same level of authority as other governors, but provides a channel for

communication between the governors and Monitor in the event that either body has significant concerns about the leadership of the trust that it has not been possible to address through the Chairman and board of directors.

Provisions:

The role of the Lead Governor is detailed in Appendix B of the Code of Governance.

Council of Governors resolution:The Council of Governors have elected the lead governor – Kathryn Harrison

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Appointment and, if appropriate, removal ofthe trust’s auditor

Guidance:

The 2006 Act states that every NHS foundation trust must have an auditor, appointed by the Council of Governors. The scope of this includes external audit function only.

Governors must select the auditor and monitor the performance of the auditor, but are supported in this task by the Board of Director’s Audit Committee – the Audit Committee provides information to the Council on the auditor’s performance, as well as monitoring the internal audit function.

Provisions:• Trust constitution: “39.2 The Council shall appoint or remove the auditor at a general meeting of

the Council of Governors”• Code of Governance: “The audit committee should report to the Council, identifying any matters

relating to the external auditor where it considers that action or improvement is needed and recommending steps to take.”

Process:• Initial confirmation by the Council of the appointment of the current auditors at the first meeting;• An annual report from audit committee to the Council when the annual audit is completed; the

report should assess whether the auditor’s work is of sufficiently high standard and fees are reasonable;

• The audit committee must make a recommendation to the Council on retaining or removing the auditor, for consideration by the Council;

• The end of the existing auditor’s contract term will also trigger a new appointment process (the trust’s current auditor’s contract expires in 2017).

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Statutory duties

Appendix B – Annual planning and reporting

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Council involvement in preparing a forward plan

Provisions:• The 2006 Act requires NHS foundation trusts to submit forward plans to Monitor each financial

year. • In preparing the forward plan, directors must have regard to the views of the Council. This means

that governors should have the opportunity to discuss the plan, but can be implemented without approval.

Process:• Need to develop business planning process for 2016/17, to include input from Council of

Governors• For 2015/16, presenting the draft annual plan to the Council of Governors on 2 April – feedback

from that to the Board when the Board considers the plan at the end of April.

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Approve significant transactions, mergers,and acquisitions

Provision:

Under the 2006 Act, more than half of the members of the full Council of the trust must approve:• The trust entering into any significant transaction

This is defined in the trust constitution as:– If the assets which are subject of the transaction exceed 25% of the fixed assets of the trust;– If, followed the completion of the relevant transaction, the gross income of the trust will

increase or decrease by more than 25%;– If, the gross capital of the business which is the subject of the transaction represents more

than 25% of the capital of the trust following completion.

• Any application by the trust to merge with or acquire another trust, separate the trust into two or more new NHS foundation trusts or to be dissolved.

Process:

Any proposal in regard to these transactions will be discussed with the Council as and when they arise

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Decide whether the trust’s non-NHS work would significantly interfere with its principal purpose

Provision:

The 2006 Act obliges NHS foundation trusts to ensure that the income they receive from providing goods and services for the health service (their principal purpose) is greater than their income from the provision of goods and services for any other purposes (non-NHS income)

NHS foundation trusts are obliged to publish, in their forward plans, information about activities other than the principal purpose and the income it expects to receive from doing so. The Council must decide whether it is satisfied that carrying out that activity will not to any significant extent interfere with the trust’s fulfilment of its principal purpose.

The 2006 Act also requires that the Council must approve proposals to increase by 5% or more the proportion of its total income in any financial year attributable to non-NHS income. (For example, the Council will be required to approve plans to increase non-NHS income from 2% to 7% or more of the trust’s total income).

Process:

Any proposals for an increase in non-NHS income would be discussed with the Council as part of the forward planning process.

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Receive the trust’s annual accounts

Guidance:

The Council will need to receive a range of reports during the year to be kept informed about the performance of the trust. The documents which the Council must receive include:• The annual accounts• Any report from the auditor on the accounts• The annual report

Monitor’s NHS Foundation Trust Annual Reporting Manual states that these documents should be presented at the annual general meeting of the Council.

The council of governors must understand the information in these documents, for example, on the performance of the chair or the other non-executive directors. This will ensure it has fulfilled its other statutory duties, for instance, to provide informed feedback to the board of directors and to inform external stakeholders (including any that they represent) on how the NHS foundation trust is performing

Process:• The Board of Directors must formally approve the annual report and accounts prior to them being

laid before Parliament (May 2015).• Then to be presented to the Council at the annual members’ meeting (July 2015)

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Statutory duties

Appendix C – Holding to account / representing the

membership

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Holding the NEDs to account

Provisions:

Governors have a statutory duty to hold the non-executive directors, individually and collectively, to account for the performance of the board of directors. The council of governors may require one or more of the directors to attend a council meeting to obtain information about performance of the trust’s functions or the directors’ performance of their duties, and to help the council to decide whether to propose a vote on the directors’ performance.

Approach:

There are a range of methods or activities that governors might undertake in seeking to hold the non-executive directors to account, including:• Receiving regular performance information• Invite non-executive chairs of Board sub-committees to Council meetings as appropriate and use

these opportunities to ask them questions.• Observation of board and board sub-committee meetings

The Council will also be involved in and receive information from annual appraisals of the chairman and non-executive directors.

For appraisal of non-executive directors:• Chairman conducts annual appraisals with non-executive directors and reports to the Council

For appraisal of the chairman:• The process of appraisal is led by the SID, involving governors in the process • The outcome of the evaluation should be discussed and agreed at the Council

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Represent the interests of Members and the public

Provision:

Under the 2006 Act governors have a duty to represent the interests of the members of the NHS foundation trust and the public.

Key principles include:• Governors should seek the views of members and the public on material issues or changes being

discussed by the trust;• Governors should feed back to members and the public information about the trust, its vision,

performance and material strategic proposals;• Governors should try to make sure when they are communicating with directors of the trust that

they represent the interests of members and the public rather than just their personal views.

How will this work?• Governor drop-in days where Members and the public can meet with Governors, for example as

at the Community Open Day• Members’ events where Governors would be available to meet with Members and the public –

e.g. Medicine for Members programme• Membership satisfaction surveys – these could go out once or twice a year with the Membership

newsletter (Gazzette or Members’ Update)• Email accounts set up for governors for members to contact governors.• Developing pop-up banner with ‘how to contact the governors’ details.

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Amending the constitution

Guidance:

The trust constitution has been approved by the Board of Directors and Monitor.

The Council of Governors may approve amendments to the constitution, following approval by the Board of Directors.

Provision:

Trust constitution:

45.1 the trust may make amendments to its constitution only if:• More than half of the members of the Council of Governors voting approve the amendments; and• More than half of the members of the Board of Directors of the trust voting approve the

amendments.