By Rebecca Lambert-Smith, Catherine Brooks and Rena Ou Yang, Moores
Best-selling author and business guru Jim Collins' observation is true: great organisations need to have the right people on the bus, and the wrong people off it. This is particularly true of not-for-profits, and particularly their boards. A cohesive, competent and ethical board is critical for the good governance and reputation of any NFP.
So what can organisations do when it becomes necessary for them to get the wrong people off the bus?
Often organisations want to remove a board member who hasn't breached any duties or laws but has simply failed to make a valuable contribution. This might include arriving late to meetings, missing meetings, being disengaged, or not interacting constructively with other board members.
In these cases, the chair has an important role to play. A good chair manages the board's activities. A great chair manages its culture. The role of the chair is critical - from explaining the role and duties of office to inexperienced board members to having difficult conversations with disruptive ones. Timely and appropriate intervention by a chair might just convert a difficult board member into a valuable team member.
An alternative to removing a board member may be simply to wait for their term to expire, if they have a limited term of office.
Occasionally, a board member is so intractable, or their conduct so egregious, that it really is necessary to remove them. In this case, the organisation will usually have a number of options. The availability of these depends on several factors:
Available options might include the following.
A private conversation: The chair can quietly, privately, invite the board member to resign. Some individuals would rather withdraw unobtrusively than confront the entire board or membership. Quiet withdrawal, however, may not be appropriate in the event of gross misconduct or criminal behaviour, which the board may need to report to the authorities or disclose to its members.
Removal by the members: The legislation governing companies, and in many states incorporated associations, has provisions allowing members to vote out a board member. These provisions are often reproduced or expanded upon in the organisation's governing document. Often, the organisation needs to comply with "natural justice". That is, letting the board member know why the organisation proposes to remove them and giving them an opportunity to respond. Some organisations prefer to avoid removal by the members as it has the potential to be public and divisive.
Expelling the individual from ordinary membership: In some organisations the governing document requires board members to be ordinary members as well. If this is the case, it may be possible to expel the individual as an ordinary member (through a disciplinary process managed by the board), indirectly triggering an automatic vacancy of their board position.
Removing an ex-officio board member from their role: An ex-officio board member is a member of the board by virtue of holding some other position. It may be possible, or even necessary, to trigger an automatic vacancy of the individual's board position by removing them from their other position. For example, terminating the employment of an executive director may be a necessary step in removing them from the board.
If, for some reason, none of these methods is available or appropriate, it may still be possible to remove the board member from any significant role, such as their place on a sub-committee or as secretary or treasurer, which may be sufficient to minimise their impact.
Ensure they don't take "the keys": Before removing a board member, ensure they aren't the only individual with physical or electronic access to board assets, particularly documents. We suggest changing passwords, and, if possible, having directors return board documents. You might have this stated as an obligation in a governing document or code of conduct.
Know your limits: Board members usually don't have the power to directly remove a fellow board member.
Be aware of employment law obligations: Improper removal of an executive director or a paid board member could constitute unfair dismissal.
Don't cover up bad behaviour: If a board member has committed a crime or engaged in gross misconduct, the board may be obliged to notify the police, regulators (such as the ACNC) or the members.
Both ASIC and the ACNC have powers: These authorities can disqualify individuals from acting as board members. In some governing documents (particularly for corporations), disqualification is a trigger for automatic vacancy.
Removing a board member can be distracting, disruptive and at worst damaging to an organisation's reputation. All organisations should take steps to reduce the likelihood of ever needing to remove a board member, and to make removal easier if it's unavoidable:
Selection and screening: Choose potential board members carefully. This process may include reference checks, working with children checks and police checks.
Communicating expectations: Induction of new board members and appropriate and timely feedback from the chair can help to get board members off on the right foot and manage behavioural issues before they become problematic. A code of conduct also helps to clarify expectations.
Term limits: These help ensure the board is continually renewed and refreshed. They also give organisations the option of waiting out the term of disruptive or unproductive board members.
Training: Regular training on governance and the duties of responsible persons may help to develop the board culture you want.
Governing document and policies: Organisations should ensure that their governing document includes term limits and appropriate provisions for removing board members. A code of conduct for board members also helps to set expectations and describe the grounds for removal.
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