Why corporate boards need a charity perspective
Thursday, 5th December 2019 at 8:31 am
What if one position on every corporate board had to be designated as a “community interest board director” position, asks Community Council for Australia CEO David Crosbie.
Charities are repeatedly told they lack business skills. Apparently, all charities would benefit from having people with strong business skills on their boards. This may be true in some cases, but what is even more apparent is that corporate Australia needs more charitable skills, including on their boards. Perhaps it is time we insisted that all publicly listed companies must have a designated community position on their board to be filled by a current or former charity manager or CEO?
The governance structure adopted by most charities in Australia is derived from the corporate board model where owners, including shareholders, are represented by board directors who promote owner interests, protect their capital investments, and enforce accountability through the CEO across the organisation. In most corporate board rooms, the metrics are informed by bottom-line economics. A company that is increasing profits and the dividends paid to owners is seen as performing well. Compliance with regulations, protecting the environment, contributing back to the community, creating a workplace that values diversity, all these issues are adopted by many businesses primarily because they have been shown to be good for business, good for profitability, good for owners.
“The assertion that all charity boards need business skills, accountancy skills, legal skills seems ill-founded.”
The corporate board model has been accepted within most charities, even though it is not exactly fit for purpose. As Martin Laverty and others who have studied the structures of both corporate and charitable boards have pointed out, the corporate board model is about ensuring the interests of owners inform business practices and organisational behaviour.
A charities board is not about protecting the interests of owners and investors, or even just the interests of existing clients. It is about delivering a public benefit through better meeting the needs of current and potential clients, supporting and encouraging staff and other stakeholders, developing capacity while maintaining very tight budget disciplines, and contributing to building flourishing communities.
The assertion that all charity boards need business skills, accountancy skills, legal skills seems ill-founded. These skills might be nice to have in some discussions, but on their own, they do not guarantee that appropriate or effective organisational governance will be in place. Charities now are talking more about the need for media / communication / marketing skills, or research / evaluation/ impact measurement skills.
What really matters is not the professional qualifications of the board. Board directors are not the staff and most professional skills that are needed by an organisation can and will be bought in as consultants or employees or even skilled volunteers. If a charity needs a gardener, an accountant, an IT person, they do not need to put them on the board. What really matters is the board’s collective commitment to delivering a public benefit and fulfilling the charitable purpose of the organisation.
In recent weeks, the ethics and accountability of corporate boards has rightly been an issue in the media. How is it that very highly paid bank board directors effectively turned a blind eye to non-compliance, despite being aware of the risks?
Regardless of how you look at it, some corporate boards are behaving inappropriately. They appear to have no sense of responsibility for the impact of their company’s behaviour on communities.
Charities have as their primary purpose the role of serving others. Good charities do it well. They have the skills, the strategies to ensure what they are doing not only makes a difference for the people they serve, but also contributes to stronger communities.
If we expect our for-profit companies to display some of this broader community awareness or responsibility, why not insert that thinking into their board decision-making processes? Why not put someone on their board that is not there to serve the interests of owners, but to serve the interests of the communities the company operates in?
What if one position on every corporate board had to be designated as a “community interest board director” position? This director would have to demonstrate the skills required to understand the value the company was contributing back to their community and how that value might be leveraged into even stronger communities. Ideally this director would have senior experience running a charity and be able to demonstrate they had delivered a community benefit.
While some in corporate Australia may suggest this is a slightly absurd idea, most corporate leaders know very little about the complexity of running a successful charity. It involves much more than just profitability. One of the more common characteristics of successful CEOs in the charity sector is that they tend to be incredibly well rounded with a diverse set of skills. Not the least in this skill set is the capacity to run very tight budgets and still deliver quality services.
Charity CEOs also tend to have great communication and marketing skills, a very good understanding of contracts and legal documents, and know how to lead and motivate staff and stakeholders. Many have significant business skills. I would suggest the applied business skills of the current CCA board (all CEOs of successful charities) are far superior to most MBA graduates.
“Next time someone suggests that charities need more business skills, perhaps the response should be to ask whether charities would be more effective in delivering on their mission if they had a senior banking executive on their board?”
Most importantly charity CEOs are less motivated by greed and more by the desire to serve others, make a difference, strengthen communities, and build trust between people.
Next time someone suggests that charities need more business skills, perhaps the response should be to ask whether charities would be more effective in delivering on their mission if they had a senior banking executive on their board? Would the charity and the communities they serve benefit by having the corporate aptitude for pursuing profit at all costs applied to their decision-making?
Of course, there are business leaders who take their responsibilities to communities very seriously. They are to be commended. It is also important to acknowledge there are some charity leaders who are greedy or who pursue profit as the primary goal. But generally, charities are about making a difference in communities, corporates are about profit.
In too many areas of Australian society, the ends justify the means seems to be the predominant idea. The examples keep coming: CommInsure, Westpac, Bupa Aged Care, Crown, Robodebt, indefinite detention of innocent people, etc. The moral compass is missing.
Thankfully, the charities sector is grounded in values, not greed.
The Australia I want to live in values relationships over money, prefers Giving Tuesday to Black Friday, and sees success as being about an inclusive society rather than budget surpluses and bigger dividends to investors. If we are to build the kind of Australia we all want to live in, maybe it is time for charities to play a much greater role in working with corporate Australia?
About the author: David Crosbie is CEO of the Community Council for Australia. He has spent more than 20 years as CEO of significant charities including five years in his current role, four years as CEO of the Mental Health Council of Australia, seven years as CEO of the Alcohol and other Drugs Council of Australia, and seven years as CEO of Odyssey House Victoria.
David Crosbie writes exclusively for Pro Bono News on a fortnightly basis, covering issues of importance to the broader not-for-profit sector.