MAVERICK CITIZEN: OP-ED

Philanthropy and Civil Society in SA, Part Three: We need a new Governance Blueprint

By Fatima Hassan 2 December 2019

Fatima Hassan (Photo: Open Society Foundation South Africa)

We need to clean up our act internally. Any transgression or lack of clean, ethical, rule-bound governance will be used to taint and discredit the work of the entire sector.

In Part One of a three-part series, I reflected on the need for transformation along racial, gender and sexual orientation lines in the not-for-profit sector. In Part Two I reflected on the need for an accelerated attempt to fund social justice work in the long term, using local wealth and strategies. In part three, I argue for the rapid transformation of our governance practices. The principles I set out below apply equally to both elected and non-elected structures including all the variations of not-for-profit governing structures (such as boards and trusts).

The less visible sway factors

In the funding world, one of the biggest influences on the outcome of any funding application is the ability of an organisation to show that it has due governance and independent financial oversight mechanisms; this is part of the due diligence assessment of donors and funders. Because donors and funders themselves cannot and should not be governing the organisations they fund, they look to a body that they can trust.

I cannot overemphasise that the integrity and reputation of the chairperson of a social justice organisation (along with the senior management team, though mainly the Director) is a key sway factor when donors assess applications. An organisation that runs roughshod over any governance aspect is unlikely to get any financial or strategic development support. Unlike for example an organisation that has a weak strategy, but strong oversight mechanisms (as the former can be remedied with a strategy development grant). Often, as grantmaker, I have witnessed organisations with brilliant ideas get turned down, because no serious attempt was made to get its governance in order, including not making public the names of its board members and donors and funders.

At present, adequate governance, along with effective planning for transformation, are in my view the two largest sway factors for social justice funding applications and assessments. With universities – whose governance structures are more complex – the spotlight in donors assessments or reviews will be on the relevant unit’s advisory committee / hosting school decision-making and oversight mechanisms, as university councils have very little oversight over multiple social justice units based there (though, legally, they are liable). Such units will have to spend more time reflecting on who actually carries the oversight burden, because it certainly is not the university council in practice, to give confidence to donors and funders (and the public) that someone other than a very busy dean is attending to the financial, and general governance matters related to that unit (organisation).

In my previous role heading a philanthropic foundation in South Africa and having served on other donor decision-making boards, too often we found that governance aspects were last on the list of an organisation’s priorities – it should be the first, because when a strong oversight body exists, a good strategy, a funding plan and a team transformation and succession road map will follow, all of which a board has to approve and sign off on, and defend publicly.

There are three related to governance practice and ethics in the not-for-profit sector (though these principles extend to the for-profit and state-owned enterprise sector too) that warrant further consideration. This is not only because either the law, best practice and ethical norms require it, but because civil society which works on and demands state and corporate accountability has to be the poster child of clean governance, and emulate the very standards that we expect of SoEs and listed and non-listed companies.

What we have observed thus far is that when serious challenges such as allegations of fraud, sexual harassment, spying on the part of the head of an organisation or another board member, or a serious funding deficit emerges, organisations have to rely on the relevant oversight and governing structure to provide leadership during that time, as their very existence and future will depend on its board and thus its chairperson’s ability to decisively, immediately and independently address any such allegations (meaning they need to have time on their hands too). They often have to expedite disciplinary steps and lead the way on engaging with donors or funders and the public including its regular constituencies, and decide on any other (criminal, for example) consequences.

If the board is made up of friends or family of the person accused of such behaviour or conduct, this will, of course, be extremely awkward for the rest of the board members. Irrespective, it creates a public perception of bias, or worse, which could lead to a real coverup. This is when and why donors withdraw funding and not because of the crisis, but because of the poor and weak management of the crisis by those in charge.

I have argued before that at a time of global attacks on civil society and also here in South Africa by all political parties and especially the ruling party and official opposition, any transgression or lack of clean, ethical, rule-bound governance will be used to taint and discredit the work of the entire sector.

In my view, the three critical aspects towards addressing governance is a combination of: what the law and relevant regulatory rules require, best practice, and the “King Recommendations” (King IV Report on Corporate Governance for South Africa 2016).

They are:

  1. Competent and Independent Appointments
  2. Term Limits and Rotation / Succession Plans
  3. Conflict of Interest Acknowledgement and Management Process

Competent and Independent Appointments

In part 1, I wrote about the “founding men syndrome” and its consequences for transformation planning. Similarly, in the governance realm, we have seen many organisations grant almost life-long board membership or governing authority to its founding member or its inaugural director. This is unhealthy, and while well-intentioned, it creates unnecessary and mostly negative dynamics on a board, and against the very principle of independent oversight, especially if there is no cooling-off period. Simply put, you can’t be leading a team in one week, and then in the following week, provide oversight.

In a similar vein to what we would hope SoE appointments prioritise in our country, qualifications and transformation matter. Competent appointments would rely on a skills matrix and forward planning, and while this is not complex, it could be time-consuming. For example, the Chairperson and Treasurer each must have very different skills, competencies and qualities. The remaining board members have to bring different expertise, because in the NFP sector, boards are expected to play an active role in shaping the strategic pillars of the organisation, help to raise funds and support the senior leadership team navigate complex political challenges.

Their own expertise and networks can drive the organisation’s success. Competency also means being familiar with the work of the rest of civil society, and a general understanding of legal requirements of operating here, and significantly, a deep understanding of the politics of the country. While it is tempting to appoint family members and friends because of familiarity and trust, this is not appropriate, and it is instead imperative to appoint individuals who will ensure a level of independence that befits the important work of the organisation.

Also, dual roles even for interim periods are not positive. When Eskom asked its chairperson to also serve simultaneously as its acting CEO, we all baulked. We need to ensure that this practice stops in the not-for-profit sector too, even if it is difficult to not do so.

Term Limits Matter

There is no magic formula to term limits, but generally, it is accepted practice that two consecutive terms, of not more than nine years in total, is appropriate.

Having worked in civil society for a long time, I have often seen leading and prominent social justice organisations defend lifelong board appointments, especially to benefit founders who may or may not be a public figure, with no fixed terms or probation periods, and without a proper rotation system and succession plan. Very few organisations have a transformation and succession plan for its governing structure. For university-based units, they rarely have any influence on who exercises oversight over them.

In addition, only a handful of organisations include staff in the nomination and interview process. In some cases, I found that high-profile organisations working on accountability had board members appointed more than 15 years ago. More worryingly, given the amount of funding and donor grant agreements a not-for-profit social justice civil society organisation is expected to manage, organisations place very little attention on finding the right treasurer; or worse, in some cases, appoint a “token treasurer”, someone having the title, but unfamiliar with the duties and role of a treasurer, and without a financial and accounting background. This places the organisation at great risk.

Assuming a competent and independent appointment is made, then what should the ideal term limit be? It may well vary from organisation to organisation, depending on its size and budget and strategic focus areas, but there are recommended maximum limits irrespective. King IV recommends a maximum of nine years (split into three-year term intervals, subject to review after each term is served).

If we are to follow what we campaign for in respect of defined presidential term limits, governing structure appointments should not in my view be longer than a maximum of eight years, in total. What I have witnessed over the last two decades is that, in this current climate of multiple challenges to the work and functioning of civil society, a heightened level of constant and independent oversight that is very demanding and not remunerated is not practically manageable even beyond six years. Experts appointed to boards also have minimal spare free time, especially if they serve on multiple not-for-profit governing structures (which we should cap too) and have their own full-time job.

A further practice that needs probing is term extension due to lack of succession planning and rotation. Without a proper and detailed rotation plan, one individual may be asked to perform different roles on the same board (for example ordinary board member for four years, then treasurer for four years, then chairperson for four years).

Even among SoEs, we expect that term limits should apply from the date of appointment, irrespective of the various roles an individual may be asked to play, in other words, a single cumulative term. Often, term extensions are also used to keep someone on a board that is “well-liked and appreciated”, so as not to offend them by asking them to step down. It never occurs to such a board member to observe best practice and resign, voluntarily, after a certain period. Here, Strategy Advisory Committees which exercise no governance role may be a better way to harness the advice and important institutional memory of such individuals, including founding executive and non-executive directors.

The chairperson and deputy chairperson roles are significant in any organisation, and a true succession plan and road map would identify their replacements at the beginning of their term, not the end, to avoid pressured “crunch” appointments.

A slightly different way of expanding the pool of appointees could be to introduce a public, organisational partner client (in the public interest legal sector), staff and board nomination and interview processes, so that appointments suit the organisation, not the executive director, chairperson, deputy chairperson or senior management team alone. This is a variation of the elected governance structure that social movements and membership-based organisations use and rely upon.

Managing conflicts of interest and doing away with nepotism

When the President appointed his brother-in-law to yet another senior government post and placed his close associates/friends in presidential advisory roles, we were all shocked. Sadly, in our sector, this too is not uncommon. While there are certain conflicts of interest that cannot ever be managed, there are some that can be acknowledged and dealt with appropriately. For example, on the former, I have had to inform organisations working on high-level accountability cases that it is humanly impossible for a romantic and life-long partner of a director of any organisation to be and to appear to be independent in the role of a board member, and that donors would not continue funding with such a major conflict of interest.

Similarly, close friends of executive directors and senior managers are often appointed to boards in the not-for-profit sector, not because this is part of some sly sinister plot, but because it is easier to work with an individual they trust. But this goes against the principles we want the government to emulate, and honestly, in my experience, it is impossible to provide oversight over a close friend, and even if it were humanly possible, it still creates a perception of bias.

In addition, for the independent media sector, it goes without saying that funders and seed “investors” should not serve on any governing or oversight structures, and critically, have no editorial influence whatsoever (includes content and appointment matters). This retains independence and also serves to show the sector and the general public that the publication is truly independent, but critically then, differentiates it from state and commercial media houses that regrettably remain driven by shareholder interests.

Given the unprecedented pressure on the not-for-profit sector and truly independent media houses that focus on social justice work in the current political climate, my view is that the sector must stop appointing family members and/or close friends to provide governance oversight (which also carries legal liability).

I believe that going forward, adequate conflict of interest management will be the litmus test of the not-for-profit sector, not only in terms of board appointments, but also in terms of the perception of “jobs for pals”, or consultancies for pals. In some organisations, I discovered that board members were being briefed by the very organisation whose board they serve/d on, for legal appearances and cases embarked upon through a resolution of that very board. And even though some were not remunerated for such appearances, it made the work of governing that much difficult, because the rest of the board were expected to assess the performance of one of its own. Similarly, at other organisations, close friends of senior managers were making remuneration decisions and hearing disciplinary matters for / related to those managers.

In my view, the following should apply as a Code of Best Practice for the NFP sector:

  • If you want to act for the organisation in a legal case as its attorney or advocate of record, you cannot also be on the board / similar structure exercising a fiduciary role.
  • If you are close friends or family of the director or member of the senior management team that would make being objective even slightly difficult or awkward, you cannot benefit from paid consultancies or serve on the governing structure, nor make remuneration decisions for staff.
  • If you are the founding director of an organisation, you cannot, on stepping down, be rewarded with a board appointment immediately (cooling-off period is warranted), nor should you be asked to serve as its chairperson, ever.
  • If you are in a business relationship with the executive director/head of an organisation or a member of the senior management team, you cannot serve on the board.
  • If you serve on the board of a regulatory body or private company where you exercise a fiduciary duty, whose work is in regular conflict with the work of the applicable not-for-profit organisation, then you cannot serve on both, as competing fiduciary duties will be at play and are impossible to manage or separate.

Way forward

We need a new blueprint for governance, one that recognises the intersectionality of our sector and one that acknowledges that nepotism exists, and including a better and improved way of managing major and minor conflict of interests that will allow for proper and effective, but independent, oversight of the work and functioning of the not-for-profit social justice sector. Critically, one that does not permit founders and / or seed donors to have a life-long grip on the operational or strategic running of an organisation.

Worryingly, the right-wing critics of human rights work globally are using poor or inadequate governance among human rights organisations, and the lack of transformation and legitimacy, to discredit and devalue this important work to stop private and crucially, government funding. Therefore, we need to raise the bar higher. A lot is at stake otherwise, because donors, funders and the public are also rightly probing the practices and conduct of social justice organisations. DM

Fatima Hassan is a human rights lawyer and social justice activist. She is currently on sabbatical after serving six years as the Head of Open Society Foundation South Africa (OSF-SA) – a position she held until end June 2019.

Hosted by the Global Health Justice Program at Yale University, she worked on a series of opinion pieces on Civil Society in SA, which Daily Maverick has been publishing.

This is the final part of a three-part series. The author would like to thank Gregg Gonsalves and Shaamela Cassiem for their substantive feedback and advice on the entire series.

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