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?
‘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: [email protected]
www.ferma.eu