Doing The Right Things

The Right Way

- Balancing Purpose with Compliance

MOH VWO Excellence Seminar 2009

Beyond Compliance: Embracing the Spirit of Good Governance

Caroline OliverChief Executive, Good to Govern Ltd.

www.goodtogovern.com

Bits about Me

Working with boards in Canada, USA and UK since 1995

Founding Chair of the International Policy Governance Association

Current Chair of the UK Policy Governance Association

The Policy Governance Fieldbook - Practical Lessons, Tips and Tools from the Experience of Real-World Boards, 1999, General Editor, Jossey Bass Publishers Inc., Wiley Group.

Corporate Boards That Create Value – Governing Company Performance from the Boardroom, August 2002, co-authored with John Carver, foreword by Sir Adrian Cadbury, Jossey Bass Publishers Inc., Wiley Group.

Governing for Velocity – Getting Started with Policy Governance, January 2009, Jossey Bass Publishers Inc, Wiley Group.

Bits about Me

© Good to Govern Ltd.

Today’s Seminar - The Context

Scandal - Canadian Red Cross, Enron, Worldcom etc.

More Codes and Regulations More Scandal - National Kidney Foundation

Singapore, The Credit Crunch, Northern Rock etc.

More Codes and Regulations

Today’s Seminar - The Context

United Kingdom-The Combined Code on Corporate Governance (Revised June 2008) June 2008-Guidelines for Disclosure and Transparency in Private Equity 20 November 2007-The Combined Code on Corporate Governance June 2006-Good practice suggestions from the Higgs Report June 2006-Internal Control: Revised Guidance for Directors on the Combined Code October 2005-Corporate governance in central government departments: Code of good practice July 2005-Pension Scheme Governance - fit for the 21st century: A Discussion Paper from the NAPF July 2005-Good Governance: The Code of Governance for the Voluntary and Community Sector June 2005-Corporate Governance: A Practical Guide 24 August 2004-The Combined Code on Corporate Governance 23 July 2003-Audit Committees - Combined Code Guidance (the Smith Report) January 2003-The Higgs Report: Review of the role and effectiveness of non-executive directors January 2003-The Responsibilities of Institutional Shareholders and Agents - Statement of Principles 21 October 2002-The Hermes Principles 21 October 2002-Review of the role and effectiveness of non-executive directors (Consultation Paper) 7 July 2002-Code of Good Practice January 2001-The Combined Code: Principles of Good Governance and Code of Best Practice May 2000-Hermes Statement on International Voting Principles 13 December 1999-The KPMG Review Internal Control: A Practical Guide October 1999-Internal Control : Guidance for Directors on the Combined Code (Turnbull Report) September 1999-Hampel Report (Final) January 1998-Greenbury Report (Study Group on Directors' Remuneration) 15 July 1995-Cadbury Report (The Financial Aspects of Corporate Governance) 1 December 1992

Source: Index of Codes, European Corporate Governance Institute http://www.ecgi.org/codes/all_codes.php

SINGAPORE: REGULATORY REQUIREMENTSContingent on the each charity’s legal structure:

Charities Act (Cap 37) Trustees Act (Cap 337) Companies Act (Cap 50) Societies Act (Cap 311) Regulation (e.g. IPC Requirements, et cetera) External Code of Corporate Governance (e.g. NCSS Code) Memorandum and Articles of Association or Constitution or

Charter, et cetera Internal Code of Corporate Governance

http://statutes.agc.gov.sg/)

Balancing Purpose with Compliance

You must meet every relevant regulatory

Requirement in Singapore.

But you don’t exist in order to comply with regulations!

THE TONE AT THE TOP

The board’s imperative for good governance

must come from the top ….. it must come from

a board’s accountability to its ownership.

Doing The Right Things in the Right Way

An international perspective on non-profit governance and practical tips to improve

governance in charity sector.

Balancing Purpose with Compliance

How Do you Know if You Are Doing “the Right Things”?

Right Things Achieve Right Purpose

Who has the Right to Determine your Purpose?

The Government?

Your “Members”?

Others?

Whose Purpose is it?

YOUR ORG

YOUR BOARD IN CONTEXT

SOCIETY’SLICENCE TO OPERATE

THE LAW

OWNERSHIP

BYLAWS

BOARD POLICYCONTROLS AND MONITORING

REGULATORSBOARD

MANAGEMENT

SOCIETY

Legal and Moral Dimensions of Ownership:

Legal - those who have the vote at your Annual Meetings

Moral - those who care about your organization’s ability to fulfill its purpose

Getting to the Right Purpose

Who are your owners?

Some examples.

What difference do they want you to make in the world?

Asking the right questions.

More on Getting to the Right Purpose

How do you Ensure that your Purpose is Being Achieved?

Some tips:

Specify and monitor outcomes for people not activities

Give your delegates as much freedom as possible to achieve the outcomes within bounds of prudence and ethics.

Right Things Achieve Right Purpose

How do you Keep Your Purpose Alive?

Monitor it… Review it… Be accountable for it…

Keeping Your Focus on Right Purpose

How Do You Know if You Are Doing Things “the Right Way”?

Who has the Right to Determine “the Right Way”?

The Government?

Your “Members”?

Others?

How Do You Know if You Are Doing Things “the Right Way”?

How Do you Ensure that You Are Doing Things “the Right Way”?

Some tips:

1. Forbid all you must (what your owners should or do regard as imprudent or unethical) - not all

you could

2. State prohibitions - in writing - as broadly as possible before getting more specific.

3. Allow anything that you have not forbidden within any reasonable interpretation of your purpose

and prohibitions.

How Do You Know if You Are Doing Things “the Right Way”?

Maintaining Your Prudential and Ethical Limits

•Monitor your Limits…•Review your Limits…•Be accountable for staying within

your Limits…

The Wrong Way - at Board Level

1. Personality dominated rather than group leadership

2. Battlefield mentality

3. Use of force rather than reason

4. Impossible quest to mirror management skills and knowledge

5. Unclear alignment between board and executive

6. Inflexibility of board approved strategies © Good to Govern Ltd.

The Wrong Way - at Board Level

7. Overlapping roles

8. Unclear accountability

9. Unchecked conflicts of interest

10. Things “falling between stools”

11. A slave with two masters is a free man

© Good to Govern Ltd.

T.O.O.

Think of Others

An Intelligent Person’s Guide to Ethics, Mary Warnock, Chapter 3

The Right Things at Board Level - The Ethical Board

The Ethical Board - Thinks of Others

1. Represents all owners at their best (most responsible)

2. Seeks to create transferable value

3. Aspires to transparency

4. Focuses on external impact

5. Focuses on accountability

6. Empowers its delegates

7. Requires evidenced assurance

8. Knows that its job is to THINK OF OTHERS!

© Good to Govern Ltd.

The Difference

Compliance with Regulators Wishes - is the Cost of Doing Business

Compliance with Owners’ Wishes - is the Purpose of Doing Business

The Gold Standard

Tips and Tools Or.. a total approach

Policy Governance®

A theoretical and practical approach to owner-accountable, ethical and effective

corporate governance

Policy Governance® is the registered service mark of John Carver. Used with permission. The ® after Policy Governance is a symbol used to protect the integrity of the principles and practices that make up the Policy Governance model. Its use

does not imply any financial obligation to the service mark owner. The authoritative website for the Policy Governance model can be found at www.carvergovernance.com.

Sir Adrian Cadbury

“as near a universal theory of governance as we at present have.”

Foreword to ‘Corporate Boards That Create Value’ (John Carver with Caroline Oliver, Jossey Bass 2002),

Sir Adrian Cadbury on Policy Governance®

A Cautionary Note!

They constantly try to escape

From the darkness outside and within

By dreaming of systems so perfect that no one will need to be good.

Choruses from the Rock: T. S. Eliot 1934

Corporate governance exists …..to ensure that shareholders values, as informed by knowledgeable agency, are transformed into company performance.

To the extent a board fails in this, no matter how many other useful things it accomplishes, it has failed. To the extent it succeeds in this, no matter that it accomplishes nothing else, it has succeeded.

The worldwide surge of corporate governance codes, while acting to protect investors, does little to enhance the integrity and effectiveness of the governance process itself. Significant improvement in boards ability to fulfil their roles as shareholders agents requires going beyond the codes and today's best practices to develop conceptually coherent governance theory.

(The Promise of Governance Theory: Beyond Codes and Best Practices by John B. Carver, Corporate Governance: An International Review, Vol. 15, Issue 6, pp. 1030-1037, November 2007)

Policy Governance Theory

BOARD SUCCESS AREA I THE “OWNERSHIP” CONNECTION

Bylaw review and development

Board composition and remuneration

Owner relations programme development

Owners’ guides

Officer and Committee development

BOARD SUCCESS AREA IIINDIVIDUAL DIRECTOR RECRUITMENT AND DEVELOPMENT

Director job descriptions

Director search and recruitment process design

Director orientation

Director continuing education

Director evaluation

BOARD SUCCESS AREA IIIWHOLE BOARD TEAM DEVELOPMENT

Board assessment and evaluation Team building

Officer and Committee development

Governance administration development Company secretarial services

BOARD SUCCESS AREA IVEFFECTIVE CONTROL OF STRATEGY AND RISK

Board policy controls

Governance Process

Strategic Outcomes

Risk Management

Executive Performance Management

BOARD SUCCESS AREA IVEFFECTIVE CONTROL OF STRATEGY AND RISK

Board policy monitoring Rigorous Regular Against Clear Policy Control

Criteria Internal Review

supplemented with: Governance legal Governance

accounting Governance audit

Linked to CEO Evaluation and Compensation

OWNERSHIP

STRATEGICOUTCOMES

OWNERSHIP LINKAGE

DELEGATION WITHIN POLICY

CONTROLS

MONITORING AND

EVALUATION

THE BOARD’S LEADERSHIP JOURNEY

STEP THREE:STRATEGY AND RISK

CONTROLBoard Policy Control and

Monitoring System Development

STEP FIVE:BOARD SUPPORT DEVELOPMENT

Company Secretarial/AdminLegal Services

Accounting ServicesTechnology

Maintenance Planning

STEP ONE:FIRST THINGS FIRST

Initial AssessmentAccountability and Goals

By-law ReviewSolution Timetable

THE SOLUTION PATHWAY

STEP TWO:ROLE CLARITY

BoardDirectorOfficer

CommitteeCEO

Governance Process

STEP SIX:TEAM BUILDING

Team BuildingPolicy familiarization

Technology familiarizationProgress Evaluation

STEP FOUR:ANNUAL PLANNING

The Ownership ConnectionBoard Recruitment and

OrientationContinuing Board

EducationBoard Evaluation

Board Recruitment and Orientation

Monitoring and Audit Schedule

THE MAINTENANCE PATHWAY

Strategic Outcomes Review

Continuing Board Education

ANNUAL PLANNING

Policy Review

Ownership Linkage

Board and Executive Performance Evaluation

BOARD ADMINISTRATION SERVICES

[OURBOARDROOM™]

ANNUAL CONSULTANT CHECK-UP/REORIENTATION

YEAR ROUND CONSULTANT SUPPORT