Regular followers of these blogs will recall that we ended last week on a contemplative note, pondering the dilemma facing not-for-profit super funds that might well have to change the make-up of their boards if proposed Federal Government legislation to improve governance in the sector gets through the Parliament.
To recap, the dilemma was that while these funds have tended to perform better than their corporate cousins, arguably because of their ‘we’re here for our members’ rather than ‘we’re here to make money for our shareholders’ philosophy, they’ve also historically had weaknesses.
So how do we retain those vital values while ensuring the boards have the requisite skills and diversity?
One way is for these boards – and this is a departure from what the government is proposing – to set up independent nominations committees, who then take a look at the board’s make-up, identify areas of exposure and recommend the skills and diversity required to address the shortcomings.
This should be widely welcomed as few would argue against the necessity of skills that match the strategic needs of the organisation; even fewer would dispute the benefits of diversity.
There’s always the exception, though, as I have found in my extensive work with super boards. I recall telling one board I was surprised and alarmed to learn that none of the members had any investment expertise – and as investment is their core business, this represented a gaping – and dangerous – hole.
I was told in no uncertain terms that I need not worry as they used the services of an investment consultant, and this was more than adequate. Not good enough, Jan!
But back to my solution…
Our nominations committee identifies the gaps on the board and prepares brief person descriptions of the types of individual the board needs to bring in to address the deficiencies. The committee then notifies the employer or the union – whichever party has to nominate to fill the vacancy – and tells them precisely what sort of person they need to find.
The decision is still theirs, they still have the power to go out and find the individual who matches the criteria, but – and here’s the clincher – the nominations committee must have the authority to review the preferred candidate and decide whether he or she fits the brief.
If nothing else, this will force both employer and union to extend their tentacles a little further than simply finding a buddy who is owed a favour and then offered a board position.
It will also force them to concentrate their minds on a clear brief and deliver accordingly.
This way, they will remain intimately involved in the process but the Board will get the skills and diversity needed, while retaining the intrinsic value of the not-for-profit board.
Until next time,