Corporate governance: Charity begins with the board of directors

Much has been written about ethical governance in the corporate and government spheres in the last few years.

Hollinger, Enron, Nortel - the list of companies implicated in corporate wrongdoing of some sort is long.

Laws have been enacted across the continent to combat the perceived lack of corporate ethics. The U.S. Sarbanes-Oxley Act and similar laws in Canada have closed loopholes with the hopes of engendering good governance.

In Canada, the federal advertising scandal in Quebec led to a judicial inquiry and possibly even to a regime change after an intricate vote-buying scheme was discovered by the auditor general. It led to the federal Accountability Act, law since December, and changes in 45 statutes and amendments to 100 others, affecting rules on lobbying, political donations and whistleblowers.

But who’s regulating the not-for-profit sector? Just last December, a furor was kicked up after a Toronto Star investigation revealed more than 80 per cent of the $12 million raised annually by Mothers Against Drunk Driving went to pay professional fundraisers. Less than 20 cents on the dollar was spent on MADD’s mandate of combating impaired driving, making volunteers and donors furious.

Penny Collenette, a University of Ottawa law professor and executive in residence in its management school, said it’s about time the non-profit groups got the same attention as the private sector.

“We’ve never really paid attention to governance in the volunteer sector,” she told the OBJ. “When we give our money to companies, there’s a risk, but it’s an investment. When we give our money to government, there’s a risk, but we’re taxpayers and that’s part of the deal.

“But when people give money to the non-profit sector, they’re doing it out of the goodness of their hearts.”

Which is why Ms. Collenette, recently nominated as the federal Liberal candidate for Ottawa-Centre, is glad she’s a lecturer at a two-day course on ethical governance in the not-for-profit sector, sponsored by Telus.

While similar courses for non-profit board members and executive directors have been available for some time at Canadian business schools, not many volunteer-sector organizations could justify spending thousands of dollars to attend them. However, with Telus footing half the bill and some local non-profit executive directors singing its praises, more people may be attending the second round this coming June.

“It was an excellent course. I actually felt quite privileged to be part of it,” said Brian Tardif, currently the executive director of Citizen Advocacy, a group he’s been involved with for 22 years.

“The content was leading edge in many ways, bringing the corporate perspective into the non-profit sector,” he continued. “Also, it brought in lessons from some of the big disasters, whether Enron or other crises, and how they can be translated into the non-profit sector.”

Not-for-profit boards and administrators face many challenges, said Ms. Collenette, and one of the most frequent she’s seen are chronic clashes between a non-profit’s volunteer board and its administrators.

Ms. Collenette uses a U.S. executive’s phrase to describe the ideal board-executive director relationship: “nose in, fingers out.”

“The minute I say that in the class, the lights go on, they understand,” she said.

While executive directors often feel their volunteer boards are meddling, boards, she explained, have a fiduciary responsibility to be aware of the goings on at their non-profit.

“There’s the responsibility for members of boards to familiarize themselves with the (group’s) operations, its activities, and to be prepared for meetings, to participate, and to ask questions,” agreed Mr. Tardif. “People come on board, and sometimes they don’t take the time to learn what are their legal obligations, what they have a right to know. These are all things that people who sit on a board should spend time learning about.”

Despite the fundraising hubbub at MADD, Ms. Collenette said that in many ways, non profits are already scrutinized more than other sectors.

As a result, she is unsure whether more laws are needed to govern a very diversified and wide-ranging industry. More awareness may be enough.

“You would hope the debate on governance would raise the awareness of the issue,” she said.

“I think Canadians are doing pretty well at this. We’re getting it. We haven’t had massive scandals break out in the not-for-profit world,” she said, adding, however, that the MADD situation was “a real shocker.”

Having said that, she added it’s an area where it can’t hurt to shed more light.

“Your brand, reputation and image is really, really important,” she continued. “In a sense, the bar is higher for not for profits. If people start to be concerned that their $10 or their $100, which they are giving voluntarily, is not being used wisely, they won’t give it.”

However, as board members are increasingly expected to devote more time to their roles, new challenges are rising for the sector, Ms. Collenette said. Finding enough volunteers who are competent to take on the job, she said, is becoming more difficult.

“There’s a real need for experienced and competent directors on not-for- profit boards,” she said. “The pool is shrinking ... People used to think of boards as trophies - the more you have, the better. That’s kind of stupid. Now, you want people to pay attention to the boards (they sit on).

“However, with the new director education programs, more and more people are appearing on the horizon,” she added.

The two-day course at the University of Ottawa with Ms. Collenette lecturing starts June 24.

As well, Carleton University is putting on a week-long non-profit and voluntary sector governance and management course July 9 to 13. 

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