Basic Governance Policy Document
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  1. Overview
    1. This sample document is NOT -- let me repeat, NOT -- a proposal to be considered. It is merely an example of the topics and the language that might be appropriate for a not-for-profit agency.
      Merely adopting such a draft without exploring the underlying issues would create the veneer of governance, and it would collapse under the first operational glitch.
    2. The "negative statement" under the Executive Limitations is awkward language, but with a compelling reason: the policies define the boundaries within which the ED is expected to exercise their judgment and experimentation in pursuit of the organization's vision and mission.
      1. If these policies were stated positively (i.e., "Do X, Y, and Z"), then the Board would be assuming control and delegating specific actions through the ED, who would no longer be accountable for the final result.
      2. By proscribing certain actions (i.e., "Never do A, B, or C"), the ED is allowed operational flexibility to meet the day-to-day challenges of running the organization. They are encouraged to experiment and adapt as their environment demands.
    1. ENDS POLICIES: Vision
      How the world is different because of the organization's existence. An outcome without specific mention of any programs or activities.
    2. ENDS POLICIES: Mission
      Toward that end, we intend to..
      (Outline the broad programmatic efforts of the organization.)
    3. ENDS POLICIES: Strategic Plan
      In pursuit of its mission, the Board has provided a three-year strategic plan. To ensure plan focuses the organization appropriately..
      1. the plan will be updated yearly;
      2. the ED will ensure that staff operational plans are an extension of the strategic plan
      3. the ED will further ensure that there is an organizational development plan in place to create the capability and capacity needed to implement their operational plans.
    The ED may not cause or allow any practice, activity, decision, or organizational circumstance that is either unlawful, imprudent, in violation of commonly accepted business and professional practices, in violation of the Boards stated policies, or likely to threaten the reputation of the organization.
    1. EXECUTIVE LIMITATION: Treatment of Members
      With respect to interactions with Members of [organization], the Executive Director may not cause or allow conditions, procedures, or decisions that are unsafe, undignified, unnecessarily intrusive, or that fail to provide appropriate confidentiality or privacy.
    2. EXECUTIVE LIMITATION: Treatment of Staff and Volunteers
      With respect to the treatment of paid and volunteer staff, the ED may not cause or allow conditions that are unfair or undignified.
      Accordingly, he/she may not:
      1. Operate without written personnel policies that clarify personnel rules for staff, provide for effective handling of grievances, and protect against wrongful conditions such as nepotism or grossly preferential treatment for personal reasons.
      2. Discriminate against any staff member for expressing ethical dissent.
      3. Prevent staff from grieving to the Board when (1) internal grievance procedures have been exhausted, (2) the target of their grievance is the Executive Director, or (3) the employee alleges either that Board policy has been violated or Board policy does not adequately protect his or her human rights.
      4. Fail to acquaint staff with their rights under this policy.
      5. Operate without at least an annual consultation with a Human Resources expert (acceptable to the Board) to audit personnel procedures for paid staff and to review practices for compliance to those procedures.
        "Reviewing practice" is meant to authorize interviews or surveys of staff.
    3. EXECUTIVE LIMITATIONS: Financial Planning and Budgeting
      Financial planning for any fiscal year or the remaining part of a year may not deviate materially from the Boards Ends priorities, risk financial jeopardy, or fail to be derived from a multi-year plan.
      Accordingly, the ED may not allow budgeting that:
      1. Contains too little information to enable credible projection of revenues and expenses, separation of capital and operational items, cash flow, and disclosure of planning assumptions.
      2. Plans the expenditure in any fiscal year of more funds than are conservatively projected be received in that period, unless the Board has authorized a specific level of deficit.
      3. Reduces the current cash assets at any time to less than one year's operating expenses.
      4. Provides less for Board prerogatives during the year than is set forth in the Cost of Governance policy.
    4. EXECUTIVE LIMITATIONS: Financial Condition and Activity
      With respect to the actual, ongoing financial condition and activities, the ED may not cause or allow the development of fiscal jeopardy or a material deviation of actual expenditures from Board priorities established in the Ends policies.
      Accordingly, the ED may not:
      1. Expend more funds than have been received in the fiscal year to date, unless the debt guideline (to follow) is met.
      2. Use any long-term reserves except as authorized by the Board.
      3. Fail to settle payroll and debts in a timely manner.
      4. Allow tax payments or other government-ordered payments or filings to be overdue or inaccurately filed.
      5. Make a single purchase or commitment of greater than [$$$$].
      6. Make any single commitment that would create expenses of greater than [$$$$].
      7. Acquire, encumber, or dispose of real property.
    5. EXECUTIVE LIMITATIONS: Emergency ED Succession
      To protect the Board from sudden loss of ED services, the ED may have no fewer than one other director-level staff familiar with Board and ED issues and processes.
    6. EXECUTIVE LIMITATIONS: Asset Protection
      The ED may not allow the assets to be unprotected, inadequately maintained, or unnecessarily risked.
      Accordingly, he or she may not:
      1. Fail to secure appropriate insurance to cover the major assets of the organization.
      2. Subject plant and equipment to improper wear and tear or insufficient maintenance.
      3. Unnecessarily expose the organization, its Board, or staff to claims of liability.
      4. Fail to protect intellectual property, information, and files from loss or significant damage.
      5. Receive, process, or disburse funds under controls that are insufficient to meet the Board-approved auditor's standards.
      6. Invest or hold operating capital in insecure instruments, including uninsured checking accounts or in non-interest-bearing accounts except where necessary to facilitate ease in operational transactions.
      7. Endanger the organizations public image or credibility, particularly in ways that would hinder its accomplishment of its mission.
    7. EXECUTIVE LIMITATIONS: Compensation and Benefits
      With respect to employment, compensation, and benefits to employees, consultants, contract workers, and volunteers, the ED may not cause or allow jeopardy to fiscal integrity or public image.
      Accordingly, he or she may not:
      1. Change his or her own compensation and benefits.
      2. Promise or imply guaranteed employment.
      3. Establish current compensation and benefits that deviate materially from the geographic or professional market for the skills employed.
      4. Create compensation obligations over a longer term than revenues can be safely projected, in no event longer then one year, and in all events subject to losses in revenue.
    8. EXECUTIVE LIMITATIONS: Communication and Support to the Board
      The ED may not permit the Board to be uninformed or unsupported in its work.
      Accordingly, he or she may not:
      1. Neglect to submit monitoring data required by the Board (see policy on Monitoring ED performance) in a timely, accurate, and understandable fashion, directly addressing provisions of Board policies being monitored.
      2. Let the Board be unaware of relevant trends, anticipated adverse media coverage, material external and internal changes, particularly changes in the assumptions upon which any Board policy has previously been established.
      3. Fail to advise the Board if, in the ED's opinion, the Board is not in compliance with its policies on Governance Process and Board-ED Linkage, particularly in the case of Board behavior that is detrimental to the work relationship between the Board and the ED.
      4. Fail to marshal for the Board as many staff and external points of view, issues, and options as needed for fully informed Board choices.
      5. Present information in unnecessarily complex or lengthy form, or in a form that fails to differentiate among information of three types: monitoring, decision preparation, and other.
      6. Fail to provide a mechanism for official Board, officer, or committee communications.
      7. Fail to deal with the Board as a whole except when (a) fulfilling individual requests for information, or (b) responding to officers or committees duly charged by the Board.
      8. Fail to report in a timely manner an actual or anticipated non-compliance with any policy of the Board.
      9. Fail to supply for the consent agenda all items delegated to the ED yet required by law or contract to be Board-approved, along with the monitoring assurance pertaining thereto.
    9. EXECUTIVE LIMITATIONS: Ends Focus of Grants or Contracts
      The ED may not let, or enter into, any grant or contract arrangements that fail to emphasize primarily the achievement of the stated Ends and, secondarily, the avoidance of unacceptable means.
      Accordingly, the ED may not,
      1. Fail to prohibit grant funds from being used in imprudent, unlawful, or unethical ways.
      2. Fail to assess and consider an applicant's or the organization's capability to produce appropriately targeted, efficient results.
      3. Take on grants or contracts without planning for the long-term costs of sustaining the operation past the termination of the initial grant.
      4. Take on grants or contracts that would require expenditures greater than the guaranteed income without ensuring there would be adequate support for the additional expenses.
    The Board of [organization] shall act on behalf of the [client population] to ensure that the work of the organization achieves its stated purpose (vision, mission, plan) at an appropriate cost, and avoids any unacceptable actions or conditions.
    1. GOVERNANCE PROCESS: Governing Style
      The Board will govern with an emphasis on (1) outward vision rather than internal preoccupation, (2) encouragement of diversity in viewpoints, (3) strategic leadership more than administrative detail, (4) clear distinction of Board and Executive Director roles, (5) collective rather than individual decisions, (6) future rather than past or present, and (7) being proactive rather than reactive.
      1. The Board will cultivate a sense of group responsibility. The Board, not the staff, will be responsible for excellence in governing. The Board will be the initiator of policy, not merely a reactor to staff initiatives or operational challenges.
      2. The Board will use the expertise of individual members to enhance the ability of the Board as a body rather than to substitute individual judgments for the Board's values. Board will allow no officer, individual, or committee of the Board to hinder or be an excuse for not fulfilling Board commitments.
      3. The Board will direct, control, and inspire the organization through the careful establishment of Board written policies reflecting the Board's values and perspectives about ends to be achieved and means to be avoided. The Board's major policy focus will on the intended long-term effects outside the organization, not on the administrative or programmatic means of attaining those effects.
      4. The Board will enforce upon itself whatever discipline is needed to govern with excellence. Discipline will apply to matters such as attendance, preparation of policy-making principles, respect of roles, respect of each other, and ensuring continuance of governance capability. Continual Board development will include orientation of new Board members in the Board's governance process and periodic Board discussion of process improvement.
      5. The Board will monitor and possibly discuss the Board's process and performance at each meeting. Self-monitoring will include comparison of Board activity and discipline to policies in the Governance Process and Board-ED Linkage categories.
      6. The Board will solicit information and opinion from the ED on Board initiatives or issues to ensure they are not too discrepant from the operational realities of the organization.
    2. GOVERNANCE PROCESS: Board Job Description
      The job of the Board is to represent [the organization] in determining and demanding appropriate organizational performance.
      1. The Board will produce the link between the organization and the moral ownership.
        The concept of "moral ownership" is essential to the notion of any not-for-profit enterprise. Society grants NFP's special status precisely because they deliver goods and services into a market that is not governed by the customers' right and ability to purchase or not. The Boards of NFP's are chartered with speaking on behalf of the audience they serve, who are considered as the moral owners of the organization.
      2. The Board will produce written governing policies that, at the broadest levels, address each category of organizational decision.
        1. Ends: Organizational products, effects, benefits, outcomes, recipients, and their relative worth (what value, which recipients, at what cost).
        2. Executive Limitations: Constraints on executive authority that establish the prudent and ethical boundaries within which all executive activity and decisions must take place.
        3. Governance Process: Specification of how the Board conceives, carries out, and monitors its own task.
        4. Board-ED Linkage: How power is delegated and its proper use monitored; the ED role, authority, and accountability.
      3. The Board will produce assurance of ED performance (against policies in Ends and Executive Limitations).
    3. GOVERNANCE PROCESS: Agenda Planning
      To accomplish its job products with a governance style consistent with Board policies, the Board will follow an annual agenda that (1) completes re-exploration of Ends policies annually and (2) continually improves Board performance through Board education and enriched input and deliberation.
      1. The Executive Committee will maintain an annual agenda so that administrative planning and budgeting can be based on accomplishing a one-year segment of the Board's most statement of long-term Ends.
      2. The agenda will be consistent with any schedule constraints from [a National Office].
      3. Throughout the year, the Board will attend to consent agenda items as expeditiously as possible.
      4. ED monitoring will be included on the agenda only if monitoring reports show policy violations or if policy criteria are to be debated.
      5. ED remuneration will be decided after a review of monitoring reports received in the last year during the month of [month].
    4. GOVERNANCE PROCESS: Chairperson's Role
      The chairperson assures the integrity of the board's process and, secondly, occasionally represents the Board to outside parties.
      1. The job result of the chairperson is that the Board behaves consistent with its own rules and those legitimately imposed upon it from outside the organization.
      2. The chairperson is empowered to chair Board meetings with all the commonly accepted power of that position (for example, ruling, recognizing).
        1. Meeting discussion content will be only those issues which, according to Board policy, clearly belong to the Board to decide, not the ED.
        2. Deliberation will be fair, open, and thorough but also timely, orderly, and kept to the point.
      3. The authority of the chairperson consists in making decisions that fall within topics covered by Board policies on Governance Process and Board-ED Linkage, except where the Board specifically delegates portions of this authority to others. The chairperson is authorized to use any reasonable interpretation of the provisions in these policies.
        1. The chairperson has no authority to make decisions about policies created by the Board within Ends and Executive Limitations policy areas. Therefore, the chairperson has no authority to supervise or direct the ED.
        2. The chairperson may delegate this authority but remains accountable for its use. Such delegation should be visible to the entire Board.
      4. The chairperson may represent the Board to outside parties in announcing board-stated positions, and in stating chair decisions and interpretations within the area delegated to him or her.
    5. GOVERNANCE PROCESS: Board Members Code of Conduct
      The Board commits itself and its members to ethical, responsible, professional, and lawful conduct including proper use of authority and appropriate decorum when acting as Board members.
      1. Members must represent unconflicted loyalty to the interests of the ownership. This accountability supersedes any conflicting loyalty such as that to advocacy or interest groups and membership on other boards or staffs. The responsibilities of Board membership supersedes the rights of any Board member either as a customer, as a volunteer, or as a staff.
      2. Members must avoid conflict of interest with respect to their fiduciary responsibility.
      3. When the Board is to decide upon an issue about which a member has an unavoidable conflict of interest, that member shall absent herself or himself without comment from not only the vote but also from the deliberation.
      4. Board members may not attempt to exercise individual authority over the organization except as explicitly set forth in Board policies.
        1. Members interaction with the ED or with staff must recognize the lack of authority vested in individuals except when explicitly board-authorized.
        2. Members interactions with public, press, or other entities must recognize the same limitation and the inability of any Board member to speak for the Board except to repeat explicitly stated Board decisions.
        3. Members will give no consequence or voice to individual judgments of ED or staff performance.
    6. GOVERNANCE PROCESS: Board Committee Principles
      Board committees, when used, will be assigned so as to reinforce the wholeness of the Board's job and so as never to interfere with the delegation from Board to ED.
      1. Board committees are to help the Board do its job, never to help or advise the staff. Committees ordinarily will assist the Board by preparing policy alternatives and implications for Board deliberation. In keeping with the board's broader focus, Board will normally not have dealings with current staff operations.
      2. Board committees may not speak or act for the Board except when formally given such authority for specific and time-limited purposes. Expectations and authority will be carefully stated in order not to conflict with authority delegated to the ED.
      3. Board committees cannot exercise authority over staff. Because the ED works for the full Board, he or she will not be required to obtain approval of a Board committee before an executive action.
      4. Board committees are to avoid over-identification with organizational parts rather than the whole. Therefore a Board committee that has helped the Board create policy on some topic will not be used to monitor organizational performance on that same topic.
      5. Committees will be used sparingly and ordinarily in an ad hoc capacity.
      6. This policy applies to any group that is formed by Board action, whether or not it is called a committee and regardless whether the group includes Board members.
      7. This policy does not apply to committees formed under the authority of the ED, in which Board members may freely participate as volunteer experts, but not as representatives of the Board.
    7. GOVERNANCE PROCESS: Cost of Governance
      Because poor governance costs more than learning to govern well, the Board will invest in its governance capacity.
      1. Board skills, methods, and supports will be sufficient to assure governing with excellence.
        1. Training and retraining will be used liberally to orient new members and candidates for membership as well as to maintain and increase existing member skills and understandings.
        2. Outside monitoring assistance will be arranged so that the Board can exercise confident control over organizational performance. This includes but is not limited to fiscal audit.
        3. Outreach mechanisms will be used as needed to ensure the Board's ability to listen to owner viewpoints and values.
      2. Costs will be prudently incurred, though not at the expense of endangering the development and maintenance of superior capability.
        1. Up to [$$$$] per year for training, including attendance at conferences and workshops.
        2. Up to [$$$$] per year for audit and other third-party monitoring of organizational performance.
        3. Up to [$$$$] per year for surveys, focus groups, opinion analyses, and meeting costs.
        4. Up to [$$$$] per year for consultants.
    The board's sole official connection to the operational organization, its achievements, and conduct will be through an Executive Director.
    1. BOARD-ED LINKAGE: Unity of Control
      Only decisions of the Board acting as a body are binding on the ED.
      1. Decisions or instructions of individual Board members, officers, or committees are not binding on the ED except in rare instances when the Board has specifically authorized such exercise of authority.
      2. In the case of Board members or committees requesting information or assistance without Board authorization, the ED can refuse such requests that require, in the ED's opinion, a material amount of staff time or funds, or are disruptive.
    2. BOARD-ED LINKAGE: Accountability of the ED
      The ED is the board's only link to operational achievement and conduct, so that all authority and accountability of staff, as far as the Board is concerned, is considered the authority and accountability of the ED.
      1. The Board will never give instructions to persons who report directly or indirectly to the ED.
      2. The Board will refrain from evaluating, either formally or informally, any staff other than the ED. The ED may, at his/her discretion, seek input on staff who have extensive interaction with the Board.
      3. The Board will view ED performance as identical to organizational performance, so that organizational accomplishment of board-stated Ends and avoidance of board-proscribed means will be viewed as successful ED performance.
      4. Board members may offer their time and expertise in support of staff operations only at the discretion of the ED; they do so without the authority of the Board and shall be careful that their presence does not undermine the scope and authority of the ED's position.
    3. BOARD-ED LINKAGE: Delegation to the ED
      The Board will instruct the ED through written policies that prescribe the organizational Ends to be achieved and describe organizational situations and actions to be avoided, allowing the ED to use any reasonable interpretation of these policies.
      1. The Board will develop policies instructing the ED to achieve certain results, for certain recipients, at a specified cost. These policies will be developed systematically from the broadest, most general level to more defined levels, and will be called Ends Policies.
      2. The Board will develop policies that limit the latitude the ED may exercise in choosing the organizational means. These policies will be developed systematically from the broadest, general level to more defined levels, and they will be called Executive Limitations Policies.
      3. As long as the ED uses any reasonable interpretation of the Board's Ends and Executive Limitations policies, the ED is authorized to establish all further sub-policies, make all decisions, take all actions, establish all practices, and develop all activities.
      4. The Board may change its Ends and Executive Limitations policies, thereby shifting the boundary between Board and ED domains. By doing so, the Board changes the latitude of choice given to the ED. But as long as any particular delegation is in place, the Board will respect and support the ED's choices.
    4. BOARD-ED LINKAGE: Monitoring ED Performance
      Systematic and rigorous monitoring of ED job performance will be solely against the only expected ED job outputs: organizational accomplishment of Board policies on Ends and organizational operation within the boundaries established in Board policies on Executive Limitations.
      1. Monitoring is to determine the degree to which Board policies are being met and may be used to determine the EDs compensation. Data that do not do this will not be considered as monitoring data.
      2. The monitoring of Ends policies will focus on the achievement of the outcome and not the methods used.
      3. The monitoring of Executive Limitations policies will focus on whether limits have been exceeded and not on general activities within that domain.
      4. The Board will acquire monitoring data by one or more of three methods: (a) by internal report, in which the ED discloses compliance information to the Board, (b) by external report, in which an external, disinterested third party selected by the Board assesses compliance with Board policies, and/or (c) by direct Board inspection, in which a designated member or members of the Board assess compliance with the appropriate policy criteria.
      5. In every case, the standard for compliance shall be any reasonable ED interpretation of the Board policy being monitored.
      6. All policies that instruct the ED will be monitored at a frequency and by a method chosen by the Board. The Board can monitor any policy at any time by any method, but will ordinarily depend on a routine schedule.
      7. If indicators fall outside an acceptable range, the Board will focus any inquiry on (a) exploring the scope and severity of the variance, (b) checking that the ED has an acceptable correction plan in place, and (c) negotiating if, how, and when the Board might be involved in that correction plan.
  6. Actual Indicators:
    1. Ends Policies:
      [List of the specific metrics that would be used to track success in achieving the stated objectives of the organization.]
    2. Executive Limitations Policies:
      [List of the specific metrics that would reflect any violation of the executive limitations.]
    3. It is important not to shy away from measures that are difficult to collect. If the organization looks only at the readily available measures, it may miss the most important features of the organization's operation.
      For example, employee morale is not an easily defined concept, but there may well be a short list of questions that would provide a good measure. A brief employee survey distributed once a year would tell the Board whether staff feel respected, happy to work at the organization, or other components of morale.
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