Governance – what are suitable governance models for associations in the 21st century and how do they fit into the current legal/administrative framework in Europe?

Dr Marie Gemma Dequae

ESAE Peer to Peer session, Brussels 13th March 2014

agenda

Basic principles of corporate governance

Own experience in NFP’s

Corporate

governance

Owners/shar

e-holders/

members

Boards Specialised

committees Executive

committee

= a set of rules and behaviours which determine how organisations are managed and controlled (e.g. Code 2009, Code Buysse, …)

Corporate

governance

Owners /

Shareholders/

members

Boards executive

management

specialised

committees

Leadership,

entrepreneurship &

performance

Control & conformity

Clear separation

between:

Governance

and

Management

=

responsibility

of the Board

1992

1994

1995

1996

1

997

1998

1

999

2000

2

001

2002

2

00

3

2004

2

005

2

006

2007

2

008

2

009

2010

20

11

COSO report (US)

DEY report (Can.)

COCO report (Can.)

CAN / CSA Q850

Rapport Vienot (F)

Peters report (NL)

UK Combined Code,

Turnbull

KonTraG (Germany)

Groupe travail

AFEP, MEDEF (F)

US Blue Ribbon

Comm.

US Sarbanes-

Oxley Act (US)

Comm. Tabaksblat

(NL)

Code Lippens & Buysse

(B)

2012

Code 2009 (B)

Loi de Sécurité Financière

(F)

For update

corp.governance

regulations see

www.ecgi.org

Codes van deugdzaam ondernemen en standaarden

The organisation shall: 1. adopt a clear governance structure 2. have an effective and efficient board that takes decisions in

the organisation’s interest 3. have a rigorous and transparent procedure for the

appointment and evaluation of the board and its members 4. define a clear executive management structure 5. remunerate directors & executive managers fairly and

responsibly 6. enter in dialogue with owners/shareholders/members

based on a mutual understanding of objectives/mission and concerns

7. ensure adequate disclosure of its corporate governance

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Basic principles

8. All directors shall demonstrate integrity and commitment

9. The board shall set up specialised committees

STAKEHOLDERS

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Shareholders/

members

Management Board of Directors

Basic principles

Communication with shareholders to be organised: promote an effective dialogue with them good contacts between members (shareholders) and board are

important

General shareholders’ (or members’) Assembly to be organised:

• Frequency? • Information provided?

• Compulsory • Free

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Build corporate governance charter (CG charter); Duties of the Board (oversight): • governing the organization by establishing broad policies and objectives; • approving and reviewing realisation of the organisation’s strategy • monitoring and reviewing the effectiveness of the board’s committees • selecting, appointing, supporting and reviewing the performance of the chief

executive; • ensuring the availability of adequate financial resources; • approving annual budgets and follow up of financial statements; • approving and monitoring framework of internal control and risk

management • accounting to the stakeholders for the organization's performance; • setting the salaries and compensation of company management.

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Defend & Satisfy the Corporate Interest

Board members: • Integrity and commitment • Transparant nomination procedure • Professional development • Evaluation (under lead of chairman)

Max 12 years board member: 3à4 years and 2 times renewed

Harmonious composition of board: Diversity amongst board members: gender, competences, nationality,

sector, …

Corporate

governance

Owners /

Shareholders/

members

Boards executive

management

specialised

committees

Corporate

governance

Owners /

Shareholders/

members

Boards executive

management

specialised

committees

One-tier structure Two-tier structure

General Assembly General Assembly

BOARD

SUPERVISORY

BOARD

EXECUTIVE SENIOR

MANAGEMENT TEAM EXECUTIVE

COMMITTEE

Non executive executive

Corporate

governance

Owners /

Shareholders/

members

Boards executive

management

specialised

committees

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Be entrepreneurial and drive

forward the business

Exercise prudent control

Sufficiently knowledgeable to be

answerable for its actions

Able to stand and retain an

objective and holistic view

Sensitive to the pressure of short

term issues

Responsive to broader longer-term

trends

Understand local issues Be aware of international

competitive and other influences –

both potential and actual

Focussed on the commercial needs

of its business

Act responsibly towards its

employees, business partners and

society C

om

ple

x r

ole

of

the

Bo

ard

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Strategic direction Ability to contribute to vision,

mission, values and purpose;

effective resources (people &

financial)

Business judgement Ability to weigh evidence and

analyse ideas & options

Relationships Ability to build team cohesivenesss

within board and executive

colleagues whilst giving constructive

challenge

Governance Ensure the organisation is managed

with integrity and probity

B

oa

rd C

om

pe

ten

cie

s

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Makes strategic decisions rather than

operational & management decisions

Works with the executive staff to ensure

that the decisions of the Board are acted

upon

Delegates to sub committees, but doesn’t

abdicate

m

ak

ing

th

e r

igh

t d

ec

isio

ns

:

a

ST

RO

NG

BO

AR

D

The board can set up specialised committees which will provide advices to the board for approval by all board members.

Most important committees are:

• audit committee (only NED) & risk committee • nomination & remuneration committee • strategy committee • finance committee • …

• At least 3 members per committee and • external professional advice can be interesting

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

Board appoints the CEO, indicating executive management’s responsibilities, duties, powers, composition and operation (in CG charter)

Nomination committee assists the board. Duties of executive management: The executive management should at least: - be entrusted with the running of the organisation; - put internal controls in place (i.e. systems to identify, assess, manage and

monitor financial and other risks) without prejudice to the board's monitoring role, based on the framework approved by the board;

- present to the board a complete, timely, reliable and accurate preparation of the company's financial statements, in accordance with the applicable accounting standards and policies of the company;

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

- prepare the company's required disclosure of the financial

statements and other material financial and non-financial information;

- present the board with a balanced and understandable assessment of the company's financial situation;

- provide the board in due time with all information necessary for the board to carry out its duties;

- be responsible and accountable to the board for the discharge of its responsibilities.

Corporate

governance

Owners /

Shareholders/

members

boards executive

management

specialised

committees

My experience in NFP:

• BELRIM: president 1994-2005

• FERMA: president 2005-2009

Many thanks for your attention!

Questions?

Mariegemma.dequae@gmail.com

‘Governance – what are suitable governance models for associations in the 21st century and

how do they fit into the current legal/administrative framework in Europe?”

Florence Bindelle ,Executive Director, FERMA

ESAE Peer to Peer session, 13th March 2014

Opening remarks • Evolution from private sector, to the public sector and recently not for

profit where words « transparency », « performence », « responsibility » are more and more used

• Can we transfer the governance models of companies centered on the creation of economic value to the associations? What about management tools? Is performance also transferrable?

• Companies evolve towards « social responsibility » whist association evolution towards reinforcing « governance models » and « management tools »

• There is a main differenciation on the focus which is not the internal activity but the values and objectives that need to be adapted to fit in the managerial analysis scope and therefore the concept of performance be linked to the accomplishement of the mission

• What are the limits? The risks? • Could associations have their own model of organisation?

Agenda

1. What is FERMA?

2. How is « association » governance applied?

3. What is the challenge?

Part 1: What is FERMA?

Some facts and figures…

• National Associations of Insurance and Risk Management appeared in Europe in the early 70’s

• In 1974, six of them decided to create a European Federation called AEAI

• In 1986, AEAI became FERMA with 10 associations

• Today FERMA gathers 22 Associations in 20 countries and is still growing

– Representing over 4500 risk and insurance managers

– Cross Sectors (80% Private and 20% Public)

Countries (20) Members (22)

Belgium BELRIM

Czech Republic ASPAR CZ

Denmark DARIM

Finland FinnRima

France AMRAE

Germany BfV & DVS

Italy ANRA

Luxembourg ALRIM

Malta MARM

Norway NORIMA

The Netherlands NARIM

Poland POLRISK

Portugal APOGERIS

Russia RUSRISK

Slovenia SI.RISK

Spain AGERS & IGREA

Sweden SWERMA

Switzerland SIRM

Turkey ERMA

UK AIRMIC

Our Mission & Objectives The Federation of European Risk Management Associations (FERMA) exists to lead and enhance the effective practice of risk management, risk financing and insurance.

1. To be a significant stakeholder in the decision making process at the European level on Risk Management , Insurance and Risk financing issues

Strategic actions:

To monitor new regulations and standards

To detect early issues that can impact our profession

To propose and co-ordinate positions with member associations on relevant issues

To issue guidance and position papers

To maintain interest representation with the European institutions

To establish technical alliances and ad hoc coalitions with other stakeholders

2. To coordinate, promote and support the development and use of risk management, insurance and risk financing in Europe

Strategic actions:

To set and promote professional practices and standards

To organize conference, seminars, forums

To maintain a two way communication with national associations on development and application of risk management

To set up surveys and benchmarks to identify and share current practices

To facilitate the development of new associations in European countries

Structure & Governance

Structure

General Assembly

• Meets once a year, in June in Brussels

• One representative of each association member

Board of Directors

• Risk and Insurance Managers only

• Composed of minimum 7 members and maximum 12 members,

• Elected for a 3 years period by the General Assembly

Executive Board

• President, Vice Presidents, Executive Director, General Secretary , Treasurer

Management team

• Executive Director, Project Coordinator, Project & Administrative Assistant, European affairs, Press Coordinator, Webmaster

Governance

Bylaws

• Articles of the statutes

• Under Belgian Law, non-profit association

Governance and Administrative procedure

• Internal rules and governance of the association

Board meetings

• One hour conference call per month

• 3 face-to-face meetings a year

Presidents meetings

• One hour conference call per month

• President summit in October

Finance

• 20% membership fee and 80% self financed

What is the value for our members ?

• Promoter

• Advocate

• Network

• Catalyst

• Advisor

• Knowledge center

• European Presence

Part 2: How is « Association » Governance

applied?

Implementing Governance « Governance is the process by which decisions are made and implemented »

Today

•By laws (light) are reviewed every 5 years

•Governance and administrative procedure (inclusive and simple) is reviewed every year

•These documents govern the role and power of the governing bodies and the decision making processes of the Federation.

2008

•After a long process, role of General Assembly and Board were distinguished and number of Board members reduced (22 to 7-12)

•Need to redefine the role of the Board « identity and role »: an administrative procedure including the commandments was adopted

•Move from a non active board to an active board

•Shift from a national minded representative to a european minded representative

•It worked!

1999

•FERMA opened an office in Brussels

•Board and General assembly meetings were two separate meetings with the same attendees and same topics discussed leading to a confusion of roles and responsibilities

•From 1999 to 2008 FERMA Board/General Assembly increased from 9 to 22

•Need for a more manageable size and structure representing carrying FERMA/ European voice rather than a national voice

1974

• In 1974, FERMA was created

•9 members

• One general assembly and 2 board meetings a year

•No permanent office

•Governed by by-laws only

By-Laws 1. Membership

Membership categories

Membership fees

Admission of new members

Members governance

2. General Assemblies

Composition, voting rights, powers

Functioning (when and who?)

Voting rights

Amendments to by-laws

Association register

Members Board Committees Executive

Management

Governance and administration procedure

1. GA : Organisation and attendance

Location

Observers

Nb of Proxies & template

2. Votes

Counting

Secret or not

Renunciation

Several members in one country

The General Assembly appoves the accounts, reviews the strategy and discharges the Board of Directors.

By-Laws

1. Composition & Functioning Nb of members 7 to 12 Duration of Mandate/Term period Remuneration: free of charge Revocability by GA Independance : Represent the interest of FERMA Voting rights and pesence quorums

2. Responsibilities

Elects the President, VP, SG, Treasurer Term Two years renewable once Settle interpretation of articles Delegation of powers and binding deeds Role of SG and Treasurer Appoint the Audit and Finance Committee

Members Board Committees Executive

Management

Governance and administration procedure

1. Election of board members Requirements to apply Decision making process to be elected Rules if the member no longer meets the

requirements Serve FERMA’s intererest Board meetings attendance, frequence,

quorums for decision making

2. Responsibilities

One or more tasks Performance assessed by the president Executive committee Handover of presidency

The Board of directors defines the strategy by setting the objectives, empowers the executive management, sets up and leads committees, admits new members, defines the

financial procedure.

Members Board Committees Executive

Management

Committees (Audit and finance & Working) are appointed by the board to support its strategy and action plan.

The audit and finance committee

• Established by the by-laws within the Board & defined in the Governance procedure

• By –laws: Supervision of the accounting procedures, cash management and investment policy of the FERMA funds

• Reports to the Board twice a year

• Governance procedure : financial matters such as bank payments, credit cards, bookkeeping, external auditor, budget, financial investments, travel and reimbursement policy, expense reimbursement procedure

Working committees

• Task force working on industry issues

• Assigned to a board member by the governance procedure and executed by the executive staff including senior advisors

• Committees represent, involve, and serve the federation ‘s interest and its members, and are an effective work force to support the effective implementation of the strategic actions

Executive Director presents the outcome as FERMA is based on the model of a 2 tier structure.

The supervisory board listen to the results and takes a decision.

The Board acts on the strategy and is not in the dailymanagement to concentrate on real topics.

The Executive director

Supports the Board to present the strategy and monitors the evolution.

The executive staff implements the decisions.

The president of the board reports monthly the progress to the members.

The Executive Committee

Established by the By- Laws & defined in the Governance procedure.

Composed by the President, Vice presidents, Secretary General, Treasurer, Executive Director

Prepares the strategic plan, monitors its evolution and aligns actions with the budget

Members Board Committees Executive

Management

The Executive Management implements the strategy, monitors of the actions and reports progress to the Board.

The governance procedure governs the legal and administrative matters:

Authority for contracts signature

procurement rules

the organisation of conference calls

press releases procedure& approval of positions papers

participation of board members to outside conferences

non compliance with by-laws

The annexes of the governance procedure include:

the proxy template

the application template

the comandments

The renunciation template

the expense report template

the distribution list

Members Board Committees Executive

Management

The Executive Management implements the strategy, monitors of the actions and reports progress to the Board.

Part 3: What is the challenge?

Conclusion

• Governance should be constantly adapted to the life of the association (not too rigid – board members are busy)

• Governance should establish the working environment with a framework and processes in place which are clear, known and recognized by all (members, staff, board)

• Governance should be compliant with the culture and the regulation of the country

• Governance is about managing the risks of the organisation

• Governance is a tool to move the organisation forward in a timely manner and to implement decisions taken

A few points of discussion…

• Are structures and processes defined and clear for Members, Board members and Staff?

• Are members engaged in the decision making process?

• Are risks properly evaluated?

• Do we know our risk and opportunities?

• Are mandates / role and responsibilities clearly defined?

• Is there a financial plan?

• Are the reserves sufficient?

• Are major expenses in line?

• How do we compare with our peers?

• Have we paid our taxes?

• Are we insured appropriately?

• Do we have appropriate accounting policies and procedure?

Thank you for your attention !

Questions?

FERMA Phone: +32 2 761 94 32

Email: florence.bindelle@ferma.eu

www.ferma.eu