Setting the pace: Getting started in NGO corporate governance, Page 3

  Many NGOs have their origins from charity and welfare work that was inspired by a passion to help the disadvantaged. It is for this reason that the early NGOs were known as welfare organizations. The first NGO law in Zimbabwe enacted in 1968 was known as the Welfare Organizations Act.55 A good number of NGOs were formed by religious groups because this was part of putting into practice religious teachings and beliefs. This group could be referred to as the first generation NGOs. Much of their work revolved around giving handouts and taking care of the neediest of the needy such as orphans, abandoned babies, the disabled people, homeless people and the elderly.56

  An estimation of 2000 registered organizations operating as NGOs are in Zimbabwe. These are registered under the PVO Act or the Deed of Trust or with relevant ministries of the Government of Zimbabwe. The political environment in Zimbabwe has turned and transformed NGO operations and this has led to the closing down of unvigilant ones. The environment therefore needed NGOs to operate with caution and practice good corporate governance practices in order for them to remain in operation.

  The year 2008 on pre election period, the ruling party in a bid to gain support began its campaign and denounced some NGOs as bogus. This was done in the name of the Zimbabwe government. This wave of uncertainty also stretched to the runoff to the June presidential elections. Thus there was need for NGOs to operate in a way that allows them to remain sustainable. This was also coupled with the economic down turn. Therefore some NGOs were faced with a dilemma.

  Requirements for NGO operation in Zimbabwe

  For any NGO to operate in the country it is fundamental and obligatory for it to abide by the laws of the country. In Zimbabwe, the most important piece of legislation concerned with NGOs is the Private Voluntary Organizations (PVO) Act. There are a number of requirements that NGOs should have in order for them to operate in Zimbabwe. There are laws and other pre-requisites that become provisions for them to be able to be recognized as Non Governmental Organizations.

  A Constitution must be developed by any NGO which plans to operate and register in Zimbabwe which, among other things should show ownership, structure, powers, roles and responsibilities of different organs of the organization.57The Constitution must show how elections and appointments would be made as well as how conflict would be resolved. More so, the NGO should abide with the regulations of the country and have a Registered Address, name, elected Board members and election criterion and self regulation codes.

  The responsibility of regulating the operations of private and non-governmental organizations has shifted considerably, internationally in recent years. This shift is sometimes characterized in terms of a transition from the so called stated-led “command and control” regulation to corporate self-regulation.58 More recently, the emphasis is now on co-regulation. Co-regulation arises when two or more actors or stakeholders are involved in the design and implementation of the norms and instruments that attempt to improve the operations of the organization.59

  Guiding principles for good corporate governance

  The typical corporate governance agenda is illustrated by the OECD Principles of Corporate Governance which is an internationally recognized refinement of current global best practice.

  The OECD Principles of Corporate Governance suggests that the corporate governance framework should promote transparent and efficient markets, be consistent with the rule of law and clearly articulate the division of responsibilities among different supervisory, regulatory and enforcement authorities. 60

  The OECD also emphasizes on the Rights of Shareholders and Key Ownership Functions. It reiterates that the corporate governance framework should protect and facilitate the exercise of shareholders’ rights. The corporate governance framework should ensure the equitable treatment of all shareholders, including minority and foreign shareholders. All shareholders should have the opportunity to obtain effective redress for violation of their rights. It further postulates the role of stakeholders in corporate governance. The rights of stakeholders established by law or through mutual agreements should be recognized and encourage active co-operation between corporations and stakeholders in creating wealth, jobs, and the sustainability of financially sound enterprises.

  Timely and accurate disclosure should be made on all material matters regarding the corporation, including the financial situation, performance, ownership, and governance of the company. Furthermore, the role of the board should be clear. The corporate governance framework should ensure the strategic guidance of the company, the effective monitoring of management by the board, and the board’s accountability to the company and the shareholders.

  Board and Management relationship

  The board of directors chooses the chief executive and delegates to him or her responsibility for running the Organisation. Thus begins a productive, albeit complex relationship. The board’s role in this relationship is first to understand and approve the executive officer or director’s strategies and plans and then to monitor the execution of those plans and to periodically evaluate the results.61 The board must decide whether, when and how it should intervene. How the board executes its roles is critical to the success of the relationship and the Organisation. There is a fine line between the responsibilities of the board and those of the executive and it is usually disastrous for the board to become ensnared in the details of running the business.

  A board that crosses the line by interfering or micro managing can undermine the effectiveness of the executive officer and may find it difficult to hold the executive officer accountable for poor results. On the other hand, a board that is too detached form what is happening or too passive in carrying out its responsibilities may be abdicating its role in the governance of the Organisation. Board members must strive to find the balance between these two extremes62.

  A good board should consist of an appropriate size, should have set terms of office, have clear roles and responsibilities and should exercise rigor in selecting members and there should be good balance of board membership in order to prevent domination by any one member in the decision making process.63

  NGOs hold positions of considerable community respect, and are responsible for delivering services to some of the most vulnerable members of our community. This places a significant burden of trust upon them. Ensuring that appropriate corporate governance guides a Board’s dealings and actions is one way of responding to that trust. As NGOs are private organizations, but operating for public purposes with public support, it is incumbent on the Boards to ensure that their key stakeholders (clients, government and donors) are dealt with openly, honestly and responsively.64 NGOs should be accessible to members of the community who express interest in their affairs.

  The main Board functions linked to management of ethics and communication range from the Creation of the ethical tone of the NGO by maintaining an ethical culture, setting the tone, establishing and monitoring corporate values, guarding the integrity of the NGO. In particular, the ethical approach of an NGO covers how it treats its clients with respect, professionalism and dignity.65 The board and management should manage the protection of reputation; maintain public relations and networking, acting as ambassadors for the NGO and building an appropriate relationship with stakeholders. The board should provide with reporting and feedback. They should ensure that the NGO reports to its stakeholders honestly and openly, and establishing channels that will enable direct communication, particularly with clients and major donors.

  In order to meet its responsibilities the board should take a number of actions. These actions include being transparent, maintaining a code of ethical conduct and an effective monitoring and complaint procedure; providing clients with the means to express opinions on the service provided, and in particular, a mechanism for dealing with complaints speedily, fairly and openly; establishing policies for communicating and receiving feedbacks from stakeholders. It is essential for a board to hold regular Board meetings that provide an opportunity for dis
cussion about values and communication and providing a collective memory for the NGO by ensuring that appropriate minutes and documents are kept.66

  Getting started in good corporate governance

  In a basic way, boards advance the capability of individual organizations and the NGO sector as a whole to meet the needs of transforming societies. As NGOs search for new and sustainable sources of local support, boards will play a vital role in reassuring supporters that the non profit sector is working towards larger community goals.67

  Organizations that seek to build prosperous and democratic societies need to show that good governance begins at home with engaged and responsible boards. With all the information at hand, how then can an organization approach the challenge of good governance? It is very crucial to begin with very small steps in the process of good governance rather than taking a huge leap which may prove fatal at the end. A step by step illustration of the stages the director can take with his or her board in order to implement and adapt to corporate governance are listed below. However, the steps are not the only guidelines but they provide a simple understanding of how the development can be uncomplicated and undemanding.

  Step 1: Start conversation with the board

 

  Step 2: Finding out what motivates the board

 

  Step 3: Prioritize goals

 

  Step 4: Reserve time for board consideration

  Step 5: Allow joint venture (board and management)

 

  Step 6: Get the right persons

  Step 7: Devote organizational resources to board development (time, finance etc)

  Step 8: Time factor (accept that it will take time)

  Accountability and Transparency

 

  An NGO needs to be accountable both to the donors and the community they serve. Failure to observe such canons of good corporate governance leads to poor service delivery and existence of an NGO as a mirage. There is need for any organization to be transparent to stakeholders, beneficiaries and donors at large. Transparency is of crucial importance as it gives value to the services offered. It is also a strong pillar in any situation when an organization seeks funding from donors. If the organization does not show transparency, it will be unconvincing for the donor to pump in money for any project requested even if the proposal looks astonishing. In this age where many small organizations are mushrooming, it is vital for an organization to show accountability and transparency to all the stakeholders. Inside the organization there is need for both the board and management to be accountable and transparent to each other. This enables an environment of trust and enables a condition of team work.

  Some NGOs are not accountable even in the narrowest sense of the term, i.e. they are not sanctioned if they fail to use their budgets for the purposes that their financiers intend. Further, insofar as money is given to NGOs for the purposes of advocacy, it is intended to change the way in which public business is done. Every widely accepted concept of good governance requires some kind of public accountability of organizations that use public money and/or are intended to influence public business.68 The widespread perception of weak or absent accountability becomes a problem for NGOs and their funders in many countries. Many national governments that have an authoritarian streak view NGOs as a threat. They use the non-accountability of NGOs or accountability to no one except wealthy foreign organizations as an excuse to harass and control them.

  Accountability and transparency is important on donor management. Donor management is concerned with building good relationships with all the current and potential resources providers. A critical component of this process is to build and sustain mutual trust. Ideally, one should seek to create “win-win” situations. This means that the NGO must ensure that it is addressing its needs and in the same process it should also serve the interests of the donor without compromising its principles and values.69 These relationships can be more than merely matching needs with opportunities.

  NGOs in Zimbabwe receive most of their funding from donors. There is need to prioritize the development and maintenance of proper financial management strategies of such funds. The fund and resources must be managed properly and accounted for to members and donors. NGOs must comply with accounting and auditing standards of the country, the sector and the donor.70

  There arises a situation in many cases where the interests of a portion of individuals are served in an organization. Such cases are noticed in situations where there are economic crises in a country. Directors and senior managers tended to misuse the funds by quoting items from other countries in this instance it was from either South Africa or Botswana and in many cases they were biased towards attainment of some profits on the part of the directors and the managers.

  Conclusion

  To this end, it is necessary for an organization to follow certain steps and guidelines in order to be able to adopt corporate governance principles and as time passes, taking small steps at a time, the organization will finally be able to adapt to good corporate governance practices. During the process of adoption and later adaptation, NGOs may face a number of challenges, which in many cases will be fuelled by fear of change on the part of the board, management and staff. This kind of phobia results in late take offs and late realizations that corporate governance is crucial. In many cases, small NGOs suffer this corporate governance phobic due to little knowledge among its members.

  Chapter three

  Major Key findings of the assessment

  The greatest of the governance issues is the clarification of the roles of the management and the board. Most members who consist of the board are derived from relatives and some are even church or congregation members. In many cases the board meetings were surprisingly attended by the staff members and miserably one board member. Others were given apologies in many cases. The terms of office for board members for the organizations differed. Many local organisations consisted most of board members who had close ties with the founder member. Therefore there were no clear terms of office for these board members. This is not in conformity with the stipulated principles of corporate governance. In this case, the board should have a set term of office. More so, the board members should have been selected through the criterion that gives preference to those who have CVs which are healthy. But for these organizations family members and relatives dominated the boards.

  The operational nature of the organizations has led to all organizations to realize the need to partner with other stakeholders and this is in conformity with the guiding principles of corporate governance. However, there is more partnership in program implementation than on governance. The organizations need to carry out stakeholders’ needs assessment. Stakeholders should also be involved in planning processes as well as attending annual general meetings in order to address issues of corporate governance and address matters such as accountability and transparency. It is essential to value stakeholders as it is also a pillar to good corporate governance.

  There is a tendency of some senior employees at higher levels of not following proper administrative procedures which in many cases lead to mistrust. Purchasing procedures that is production of receipts and cheque requisition procedures are not properly followed. This kind of practice fully manifested itself during the time when the political situation in Zimbabwe was not permissive which led to shortage of basic commodities. As a result, senior level employees took this momentum to purchase goods and services on the “no receipt” concept. According to the guiding principles of good corporate governance, there is need to have proper administrative policies that are followed and frequently referred to.

  There is need to involve the staff in budgeting and planning. If there are no
qualified personnel, it is vital to hire a consultant. There is also greater need for the organizations to consider cost recovery strategies to promote program sustainability. Financial sustainability is one major aspect that has driven a number of committees to be set up to establish the rules that guide corporate governance. The organizations` missions do not incorporate issues if corporate governance such as accountability, and transparency. Because their missions are not articulated to incorporate key issues and principles of corporate governance, this has led to conflicts and non existence of separation of powers between the board and the management.

  The education gap between the semi skilled and the university graduates in many cases has been leading to conflicts. The “veteran” less educated staff that had been at the organization since its inception feels that their careers is on the line. Most cases, decisions that are made by newly recruited university graduates are not taken seriously or addressed to the directors if the senior program coordinator is less educated than the graduate. Therefore there are always conflicts and this is one major area which needs to be addressed if the organizations need to move to good corporate governance practices.