Many Not-for-Profit (NFP) boards have representatives of other entities either as directors or members, frequently in an ex-officio capacity. These “grey directors” are not executive directors, or members, but nor are they strictly independent. Perhaps they could be viewed as a type of “institutional investor” who, while having a very strong interest in the operations and decisions, does not technically have a controlling interest in the entity.
The Governance Institute of Australia, in conjunction with Sandy Easterbrook, has recently published an exposure draft on improving the engagement between ASX-listed entities and their institutional investors. In light of the preceding these guidelines may provide some guidance also for NFP boards and their ex-officio institutional representatives. Such guidelines could significantly reduce the risk of miscommunication, unwanted “surprises” in voting, and differing expectations of each party.
Broadly speaking, the guidelines can be divided into three areas:
1. For the Institutional Representative
- Know the entity well enough to make informed voting decisions;
- Explain to the entity beforehand how you will vote;
- If your vote is to be against that recommended by the entity, provide clear expectations why;
- Ensure the entities management clearly understands how you intend to engage with them:
- At member and board level,
- What issues you would typically engage in
- Clarify with the entity who you would like to be kept abreast of information concerning the entity;
- Determine who in your organisation will be responsible for the above.
2. For the Entity Concerned:
- Take responsibility to proactively engage with your institutional representative(s) regarding all of the above;
- Ensure it is clear who in your entity is responsible for engaging with the institutional representative, and at what level of engagement;
- Develop a regular engagement program so information is received by all institutional representatives directly, and not “third-hand”.
3. Communication:
- Consider having a discrete protected section on your website dedicated to institutional representatives, which may include a secure document repository;
- Agree on the best use of technology for communicating, like Skype, teleconferencing, recorded webinars, podcasts, etc.
In addition to all of the above, it is important that whenever there is a change in relevant personnel at either the entity or institutional representative level, that these processes are viewed and discussed.
The ley to good relations is regular and quality communication and the above guidelines can provide you with a framework to begin developing a strategy for your entity and its institutional investors.
The Avondale Business School can advise your organisation on being effective in these areas – find out how by contacting Warrick Long at the Avondale Business School.
P: 02 4980 2168