Death by popular election; Avoiding poor popularly elected directors

13740073235_22d4a1051e_zIn today’s article I’m contemplating popular election as a model for selecting directors for an association. I often wonder what single big thing would vastly improve the quality of governance in the association space, and you know it might just be to appoint better directors.

I’m inherently torn between two concepts I firmly believe in. Firstly Association members aren’t stupid, the very tuned into their own needs and they can smell BS a mile away. The second is that many popular elections for boards are unmitigated disasters. So how do I reconcile those two concepts and explain the outcome? I think the answer rests in the simple fact that even the smartest among us will struggle to make a good decision if they are not well briefed, are not provided good information and are generally treated as a means to an end in the director’s selection process. So how do we do it better?

If I suggested to any board of directors that the CEO should be appointed by providing a maximum of 500 words on each of the candidates to all of the staff of the organisation and that the CEO will be selected on a popular vote, they would think I’ve gone completely nuts. Of course it would be completely nuts because we all know how much damage can be done by appointing a CEO that is a poor match to the organisation in culture, skills, experience, aptitude and attitude. Now cast your mind to most popular elections of board members.

The first thing I’d say is that the director appointment process is the first and most important point of failure in any organisation. The time is spent on finding and appointing new directors should be similar to that that you would spend on finding and appointing a senior staff member. For a CEO appointment, a board needs to ensure that at least committee or at most the board needs to understand the role, needs to gain a good understanding of the merits of each shortlisted candidate and needs to spend time weighing up the strengths and weaknesses of each potential appointment. For a board appointment by popular election, every member should ideally have the same in depth understanding of the needs of the role and the strengths and weaknesses of each candidate. If you consider the processes used by most organisations, it’s no surprise that there are a significant number of poor appointments.

So who do we blame? Well I’m sorry directors but this time it’s on you. Can it be done better? Of course!

  • The starting point to doing it better is to formalise a nominations committee. This is a committee designed to assist the board to ensure the organisation gets good talented and experienced people who fit the desired culture of the board.
  • The nominations committee should be made up of directors and may include external appointments with expertise in governance and potentially areas like executive recruitment.
  • If you haven’t already, develop a position description for a board member. Be explicit about what the work of the board is (and isn’t) and be very clear that the board is not a committee or a working party of volunteers to help run the conference. Be very clear about needing people who can contribute to strategy, policy and the assessment, evaluation and mitigation of risk.
  • Develop a process that achieves several goals:
    • provides a clear brief for the types of skills, experience and attributes that will complement the board at that moment in time given the board’s understanding of the challenges that it is likely to face currently and in the near future. This brief should guide electors on what they should be looking for in electing a candidate.
    • Provides a clear process for candidates to address the selection criteria. If the board has described key challenges around the organisations financial and investment risks, then the process should insist that candidates address how they will contribute to meeting those challenges as well as outlining their skills experience and attributes as it relates to governance.
    • Requires candidates to outline how their education and experience meets the selection criteria.
    • Requires candidates to identify and disclose to electors any real or perceived conflicts of interest or duty.
    • Is transparent about how the board prepared its brief. While it is perfectly appropriate for a board to outline the needs of the organisation, scope of the role and the types of skills and attributes needed, any board that abuses the trust of its members by manipulating appointments for any reason other than the best interests of the organisation should be removed. Transparency is the best way to avoid this.
  • Once candidates have provided their election information, the nominations committee has a further piece of work to do. Each candidate statement needs to be checked to ensure that it is truthful, not misleading or likely to mislead and that it does not make promises that cannot be delivered. At a minimum, process should allow the nominations committee with the approval of the board to make a statement identifying any concerns that the committee had regarding the accuracy of the nomination statement. The rules around this should limit the statement to addressing conflicts of interest or duty, misleading statements and statements that make commitments or promises that cannot reasonably be upheld.
  • The types of statements that should attract a response from a nominations committee include:
    • “if elected, I will ensure that the CEO is directed to…..”
    • “if elected, I will have three new staff appointed to…..”
    • “if elected, I will ensure that we boycott suppliers that refused to give us…..”
    • any statement fails to adequately disclose a conflict of duty for a conflict of interest.
    • “I am qualified in…..” if the person doesn’t actually hold a qualification.
    • “I was on the board of….” when this was in fact a committee and not a board.
  • I have seen similar comments pop-up election statements all too often and I’ve seen office bearers elected on the back of statements that were misleading.

Director selection is far too important for organisations to ignore under the excuse that the members will decide. It’s incumbent on current board’s to ensure that members receive good quality information about the role of directors, the needs of the organisation and the appropriateness of candidates. If members are kept in the dark and not given information, you may as well have chosen directors out of a hat. My advice to members of organisations who feel they are not receiving good quality information is to ask a question at the AGM about how the board expects you as a member to select the best directors with no information.

As usual, this is just my view of the world and I’m happy to be enlightened through alternative views.

Damian Mitsch

0403 372 900

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