Five agenda items for NPO Boards

The King IV Report on Corporate Governance for South Africa (King IV) was published on 1 November 2016 and includes a sector supplement for non-profit organisations. One implication is that the corporate governance environment in South Africa has changed. NPO boards should consider whether this development necessitates any changes to their existing governance practices. This brief article recommends five governance practices, underscored by King IV, that should be added to agenda items for NPO board meetings.

Although King IV is not law, it comments that ‘a corporate governance code that applies on a voluntary basis may also trigger legal consequences’. King IV further provides that; “The more widely certain recommended practices in codes of governance are adopted, the more likely it is that a court would regard conduct that conforms to these practices as meeting the required standard of care.”

King IV recommends several items, expressly or impliedly, that should feature on the board’s agenda, including:

1. Board Development: One of the recommended practices under Principle 1 is that board members should ‘take steps to ensure that they have sufficient working knowledge of the organisation … as well as of the key laws, rules, codes and standards applicable to the organisation.” The board should therefore continuously monitor the regulatory environment.
   
   
2.  Technology Governance: King IV states that technology is now part of the corporate DNA. It recommends that: “Technology governance and security should become another recurring item on the governing body’s agenda.”
   
   
3. Conflicts of Interest: King IV recommends that; “At the beginning of each meeting of the governing body or its committees, all members should be required to declare whether any of them has any conflict of interest in respect of a matter on the agenda.” Every board meeting should accordingly have an agenda item (and a conflict of interest register) to provide board members with an opportunity to declare any conflicting interests.
   
   
4. Risk Management: Risk management has arguably become an industry norm for corporate governance. Principle 11 of King IV provides that: “The governing body should govern risk in a way that supports the organisation insetting and achieving its strategic objectives”. King IV’s second recommended practice under this principle is that: “The governing should treat risks as integral to the way it makes decisions and executes its duties”.
   
   
5. Stakeholder Relationships: In its Foreword, King IV states that: “Stakeholder relationships should be a recurring item on the governing body’s agenda so that the board can be kept apprised of the current state of the relationships between the organisation and its stakeholders. ”

Source:  Ricardo Wyngaard Attorneys - The NPO Lawyer, NPO Legal Issues, Volume 41, November/December 2017

Important Note: The information contained in this newsletter is general in nature and should not beinterpreted or relied upon as legal advice. The information may not be applicable to specificcircumstances. Professional assistance should be obtained before acting on any of the information