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InternetNZ Membership Consultation Paper

Society Governance, "What sort of Society do we want?"

"Effective governance by a non-profit Board of Directors is a rare and unnatural act. Only the most uncommon of nonprofit boards functions as it should by harnessing the collective efforts of accomplished individuals to advance the institution's mission and long-term welfare." So wrote Barbara Taylor and her colleagues in the Harvard Business Review (1996). Against the backdrop of such a perspective, we need to remember that governance is an art, for which there is no research literature or specific recipe that has ever proven to be inviolate or permanent.

Taylor argues that the key to improving performance is discovering and doing the new work of the Board - new work which Taylor and her colleagues see as having four basic characteristics:

  • New work concerns itself with crucial issues central to the organisation's success;
  • New work is driven by results that are linked to defined timetables;
  • New work has clear measures of success;
  • New work requires the engagement of the organisation's internal and external constituencies.

Importantly, this new work of the Board demands broad participation and widespread support. [...] and that without such diversity, organisations are susceptible to [...] increasingly fragile structures drawing on a diminishing pool of resources."

Quoted from a Working paper - Innovations in Governance - Sustainability through Diversity March 2001- by Bryan Hayday.

Now that the management of .nz has settled down into a relatively autonomous self-contained structure with specialised management the Society has moved substantially into other areas of work. Quite a bit of this work is initiative/project based, with the anti-spam project being a good example. This direction has opened up a debate on how such projects are managed which in turn has generated a number of issues, around governance, that need clear decisions to enable the Society to move ahead.

Governance in not-for-profit (NFP) organisations has a broad continuum and no one particular model is necessarily the 'right' one.

At the start (and the original model for this Society) the volunteer governing body undertakes all the activities of the Society, frequently because there are no staff, because the organisation is too small or poor.

This tends to evolve into the purist, or Carver, model which states that the volunteer governing body members (Councillors) do not participate in any activities of the Society. This would preclude leading activities such as the anti-spam initiative or being involved in putting together the Annual report. These would be handled exclusively by the administration. This is also described as the old-work model.

The positive features of this model when it is working effectively are:

  • There is increased clarity of roles and responsibilities, vision and accountability.
  • The leadership role of the board can be satisfying for Council members.
  • This model liberates, empowers and supports the Executive Director.
  • The Council engages in systems activities by scanning the environment, becoming familiar with "big picture" issues as well as major internal trends and entering into partnerships with other stakeholders.
  • The Council takes on the responsibility of ensuring adequate resources are available to accomplish the mission.

In addition this model meets external legal requirements and has become a familiar and comfortable framework for many NFP organisations over the years. The downsides are becoming more evident as organisations are experimenting with this model:

  • Council and staff relations are vulnerable and disconnected because of the emphasis on separate and distinct roles. This can interfere with developing a productive Council/staff partnership.
  • The Council often feels disconnected from programmes and operations. Operational information is less relevant in this model.
  • Staff often mistrust the Council's ability to govern because of a perception that the Council does not understand the organisation's operations. Links between policies, operations and outcomes are often tenuous.
  • This model can be self-limiting in its ability to embrace evolution and change because it assumes one vision (to be articulated and achieved) and it solidifies/perpetuates the status quo through its policy framework.

At the opposite extreme on the continuum would be a corporate model and often referred to as the business model of governance. Within this framework, there is a particular emphasis on efficiency and effectiveness measures which focus the organisation to achieve a 'maximum return' on its investments. In this model, there is an explicit recognition of stakeholder self-interest. All activity tends to remunerated at the current market-rate for the job.

The positive features of this model when it is working effectively are:

  • Participants' efforts are clearly focused on the "business" of the organisation.
  • The organisational culture explicitly emphasises efficient and effective work processes.
  • Leadership and resources are allocated to recognise and readily adopt best practices.

The downsides of this model, particularly for NFP organisations, are not yet fully known but are thought to be:

  • A disproportionate focus on bottom-line returns to the organisation which does not ensure focused attention on common marketplace interests or changing social conditions.
  • The consideration and quality of inter-organisational partnerships are measured by returns to specific investors and not to the collective benefit generated for consumers.
  • Broad-based societal needs are often discounted.
  • Systemic social and community changes do not lend themselves to short time horizons for organisational business plans.
  • There is no particular incentive for innovation on behalf of public gain.

There are a variety of theoretical models between these two extremes and thinking today is moving towards a hybrid new work model of joint and several partnership between governance and management. This model tends to require that the governance body has a broad skill set to enable proper professional quality of work can be achieved. This is the model that most closely resembles the reality of the work of Council and Staff in the Society today.

This Society has a few unique features. The volunteer governance body tends to include a good many of the top specialists in our specific field, a not exhaustive list would include anti- spam, Ipv6 and multicast, NGI/broadband and Interop, ISP issues and so on. In order to function effectively within our sphere it is always going to require Councillors to understand, and usually have experience in, the matters that surround Internet technologies and policies. The issues that have most recently been thrown into relief by the Society's work is the work-load on volunteers by participation in project based initiatives.

Consequences that need to be examined are:

  • the exploitation of volunteers and voluntary commitment
  • the time commitment involved
  • the risk of replacing paid persons by volunteer workers
  • the risk that work might not be undertaken at all

The Governance and Constitutional Committee was asked to examine the problem and in particular if there is a place for some form of additional remuneration, in the form of honoraria, that could be applied to substantially increased work-load. A variety of mechanisms could be used to calculate acceptable levels if it is determined that this route can be travelled. The remuneration would be attached to the project and take account of a substantial voluntary component to the work.

The paper is working on the basis of elected Councillors but the question of whether Members of the Society in general should also be constrained by the issues was raised. Do we apply any rules of limitation of rights only to Councillors or do we include the paid up Membership? An additional caveat was expressed that if it is decided to exclude (not elected) Members from any limitations and that no project-based remuneration should be paid, an elected Councillor cannot resign from Council in order to undertake a paid project role.

The Committee is in fairly close agreement on much of the parameters but in discussion it became apparent that there is not a consensus in this Committee as to appropriate actions to take (see in conclusion, below). As a consequence the Committee determined that we need to bring the issues to the Membership of the Society under the banner "What sort of Society we want?"

The two main sides of the debate revolve around what level of participation should be permitted and how much of this participation can/should be expected of Councillors in a purely voluntary capacity. On the other hand recognising that there are very special, possibly unique skills among Councillors how to harness those skills in an ethical way.

There are those that argue: Councillors should only be allowed to act in purely governance (policy defining) role and not undertake any activities for the Society to avoid 'conflicts of interest' or 'self-dealing'.

No matter what skill set is available there is always someone else outside of the organisation that can be expected to undertake a reasonably satisfactory job, that should be employed to carry out the work. This would be somewhat mitigated by accepting that small activities could be acceptably carried out by volunteer Councillors. If this argument prevails, 'small' will need defining.

On the other side the argument is: The Society should not be put at a disadvantage of utilising the best skills available just because the person concerned accepted responsibility to take on the additional obligations of undertaking the potentially onerous task of governance. It is also a substantial argument that the Society as whole benefits from lower direct costs associated with projects, made possible by the voluntary component of the work.

Many persons are prepared to commit not inconsiderable quantities of time to help the Society to function effectively and should not be personally penalised by exclusion from potential participation because of this commitment.

In Conclusion

The Committee recognised that the two views are not fully "silos" in that it is quite possible to include some aspects of one view into another. It is also recognised, in fact explicitly stated, that neither view is intended to be a "pure" form of itself. In the extreme "pure" governance model Councillors would be excluded from all activities for the Society including undertaking voluntary activity. In the "hand-on" model it is not being proposed that all activity will be remunerated at current commercial rates, but that the Society would be able to offer financial recognition for exceptional additional work undertaken that is outside the normal workload for the position and taking account of a voluntary contribution.

Governance only


Everything Paid
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Comparison Table

Hands-Off Model

Hands-On Model

Councillors cannot take on paid work for the Society. Paid work = direct employment, personal contract or company receiving a contract where a Councillor has significant interest. Councillors can take on remunerated work for the Society, but ...
... Councillors cannot participate in discussion or vote on awarding of the project in which they might be involved
... Awarding of projects including a remuneration must be approved by Council
... Councillors can only be considered for remunerated project work where they offer a significant advantage.
  1. Clear roles, easy to understand division between governance and operations
  2. Reduces the risk of conflict of interest.
  3. Simple for ethical decision making
  4. Low risk legally
  5. Possibly enhances Society's reputation, sets a good example.
  1. Includes Councillors in talent pool - increase small talent pool with real talent
  2. May reduce outcome costs
  3. Greater flexibility and ability to achieve the Society's goals
  4. Doesn't unduly restrict Council's actions.
  1. Excludes Councillors from available talent pool.
  2. May increase costs.

  3. Then, depending on the level of "purity" of the model:
  4. A very pure model may deter people from standing for Council (no participation)
  5. Possibly put pressure on Councillors to do too much voluntary work
  6. Risk of volunteers being used to replace paid persons
  7. Some things might not get done at all if the role is too large and Council not prepared to commit sufficient funds for external persons
  1. "Jobs for the boys" perception
  2. Harder to make ethical decisions
  3. Possibly blurs the division between operation and governance.

Governance and Constitutional Committee
August 2004

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