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How does your garden grow?

Know your role: some directors of Bermuda charities are not fully aware of their responsibilities

One of things that can be said about Bermuda, is that we are a charitable country. For better or worse, we have a large amount of charities on this small island of ours, all of whom are striving for one good cause or the other.

With the implementation of the Charities Act 2014, the boards of these charities are required to look at themselves and implement policies to ensure that good corporate governance is taking place as required under the Act. But do the boards and their directors understand their role in this process? I say this as my experience dealing with the boards of some charities shows me that some of the directors do not understand what it means to be on the board.

Let’s be honest, this is Bermuda. A lot of boards for small charities have been chosen mainly because those on them are related or are in the same social groups. It could also be said that some directors have been chosen due to the size of their chequebook, as they are looked to become active donors to the charity.

If you were to read The Directors Handbook, compiled by Pinsent Masons LLP and the Institute of Directors, you would find a section about the duty to exercise independent judgment where it says: “A director is on a board to act in the best interests of the company as a whole, not to represent the interests of just one shareholder or even a group of like-minded investors. That rule applies irrespective of the circumstances in which the director has been appointed.”

This rule can be directly carried over to directors of charities, as they are responsible for the best interests of a charity which must be for the greater good of the community.

As an active senior director of a local charity, I too have struggled to bring about this concept of independent thinking. It is not easy to break through decades (in some cases) of entrenched thinking about the make-up of the board, and how the charity should be run.

Too often I find that the board members become effectively staff members where they are involved in duties that should be responsibility of those actively running the organisation. The same can be said where I see executive directors making decisions that are the board members purview, such as actively recruiting for their replacement or making changes to policies.

This is why I ask that boards think about their director recruitment and education programmes as key parts to be developed. Like a good gardener (ie board chairmain) must do, they must think ahead about what plants they wish to grow at certain times, and if it is a new plant, they must educate themselves on the proper nutrients needed to keep their plants healthy and in balance with the others in the garden.

When recruiting new directors, it would be a best practice initiative to form an independent committee to review what the requirements of the board are, and then put together a candidate FAQ that communicates all of the important facts in a simple, one-page Q&A format. Some examples of questions that might be included are:

• What is the charity’s mission?

• What is the charity’s history?

• What are the board members’ responsibilities?

• How long does a board member serve on the board?

• Are there any legal issues that board members should worry about?

This must be provided to all potential candidates when they are interviewed for the potential role. The committee should ensure that the mix of candidates is sufficiently diverse to fill the roles absent. In the case of directors retirements, new candidates should be viewed to help fill the roles of the committees being vacated, or where gaps in expertise have been identified by the chairman.

Education of the board is critical, as the role of director cannot be learnt overnight. One cannot simply be “qualified by experience” anymore, as the new legal requirements around boards and the directors make them culpable for not only their actions, but of all others on the board.

The implementation of the Charities Act in Bermuda has not been without its difficulties, and there will be a certain period where some grace will be given, but that period is rapidly dwindling.

This is why I am advocating that all boards should ensure that regular education of their members is provided.

Having one member attend “The Role of the Director” session provided by the Institute of Directors, Bermuda branch would allow that member to then pass along this knowledge to their fellow directors.

There are so many other things that a director of a charity must be aware of, and there are numerous articles regarding this that would fill up the whole of The Royal Gazette.

My point is to get people thinking about why they are a member of the charity. One cannot simply sit back, nod their head sagely as others speak, and then walk away thinking you have performed your duty.

I ask that you challenge the status quo, think differently and not always see eye-to-eye with your fellow board members. You just might see that garden grow something totally unexpected.

James E. Davis is IoD Bermuda Branch Membership Sub-Committee chairman