NFP Survey 2017: Governance

By admin - August 31, 2017

Substantial change in the NFP sector continues to drive changes to board governance. Mergers within the sector result in boards that must manage large, complex, diverse NFP operations across larger regions.

Access the full NFP Benchmark Survey Report 2017 here

This shows up in our research as increased meeting and committee workloads, increased size of senior management, and an increased compliance burden.

Board size Our research shows that for NFPs, the average board size remains steady at nine board members. This typically strikes an acceptable balance between a breadth of skills and diversity of viewpoints, whilst being collegiate and agile, and allowing for succession.

Anecdotally, NFPs changing their board governance are all reducing their board sizes. It can take several years to phase in these reductions, so we expect to gradually see a reduction in the average board size.

The most common method for recruiting board members continues to be personal referrals (used by 77% of respondents). Word of mouth continues to be a powerful recruiting tool for NFP organisations, and the recruitment pool needs to be broadened to attract specialised and skilled talent. There has been a slight increase over the past three years of CEOs having a position on the board, with 64% having a role up from 53% three years ago. Contrary to best practice governance, 24% of these CEOs have voting rights.

We remain concerned at the number of NFPs with larger boards. Such boards can be unwieldy in terms of scheduling meetings, continuity of debate, ability for board members to contribute, and resourcing/remuneration. Every board member has a personal responsibility to exercise independent judgement, and not simply follow his or her fellow board members on a large board.

Being a statutory authority, there is significant process and hurdles to overcome to be financially sustainable.

What this means for you

  • Critically assess the size of your board. Think about whether there is a good justification for your board to be larger than the ASX200 average of 7.5 directors
  • Make sure new board members join regularly to facilitate board succession
  • Review and report regularly to stakeholders on your board members’ attendance and committee contributions
  • Regularly evaluate whole board and individual board members’ performance. Think about what you do with these findings

Access the full NFP Benchmark Survey Report 2017 here

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