boards / Chairperon / corporate governance / director / non-profit

The importance of the Board Chairperson in non-profits

The recent coverage of the Irish Athletic Boxing Association management crisis raises many governance questions (RTE 2017).  Part of the crisis concerns a dispute as to who is the valid chairperson with two potential candidates.  So how important is this issue, that is how important is the chairperson? And does it matter who is chairperson of the board?

The role of board chairperson is clearly stated in the UK Corporate Governance Code as “leadership of the board and ensuring its effectiveness on all aspects of its role”   (FRC 2016, sec.A.3).   Company law recognises the role of the chairperson but is not specific about responsibilities; however, legislation gives additional power to the Chairperson by providing her with a second or casting vote where there is equality of votes at a board meeting (Companies Act 2014, sec.160).    Specific duties as outlined by the code include: setting the agenda, ensuring sufficient time for discussion, facilitating contributions by non-executive directors, ensuring directors get accurate, timely and clear information, ensuring effective communication with shareholders and other stakeholders, and leading board evaluations and implementing results  (FRC 2016, sec.A.3).  The UK Charity Commission has produced guidance on the Chairs role which is similar to this for-profit role (Charity Commission for England and Wales 2015, p.37).

The importance of the Chairperson in non-profits was emphasised in UK research in the healthcare sector which found that Chairs of “low performing‟ healthcare organisations dedicated approximately a third of the time dedicated by Chairs of “high performers‟ outside board meetings (Kane et al. 2009). This may reflect the importance of communication channels in all organisations, but especially non-profits with multiple stakeholders and competing interests, with more positive perceptions of chairs correlating with a chairs higher frequency of interactions (Harrison et al. 2013).  The Chair and the long-service directors perform better and have a higher level of commitment (Stephens et al. 2004).

The role of managing information puts the Chairperson in direct contact with the CEO and management on an ongoing basis, and there may not be agreement on the necessary information.  Thus the board is vulnerable where there is a weak chair as management may provide only selective information in the absence of a strong chairperson (Collier et al. 2005).  US and UK research also highlighted the importance of leadership skills for chairperson effectiveness (Harrison et al. 2013). This study also supported previous research that an effective chair is a team player who “works with” rather than “over” or “under” others (Harrison & Murray 2012; Harrison et al. 2013).

In summary, an effective non-profit chair will have leadership abilities and engage frequently with board members and stakeholders, outside of board meetings, resulting in a significant time commitment to the role and organisation.  Given these demands and the voluntary nature of the role it is unsurprising that research finds high–impact chairs are rare (Harrison & Murray 2012).  Thus an organisation takes a risk having an ineffective chairperson that could place the board and the organisation in a vulnerable position open to excessive influence by management or powerful stakeholders.

References

Charity Commission for England and Wales, 2015. The Essential Trustee: What you need to know, UK.

Collier, P.M., 2005. Governance and the quasi-public organization: a case study of social housing. Critical Perspectives on Accounting, 16(7), pp.929–949.

Companies Act, 2014.

Financial Reporting Council, 2016. The UK Corporate Governance Code (April 2016). , (April), pp.1–37.

Harrison, Y., Murray, V. & Cornforth, C., 2013. Perceptions of Board Chair Leadership Effectiveness in Nonprofit and Voluntary Sector Organizations. Voluntas, 24(3).

Harrison, Y.D. & Murray, V., 2012. Perspectives on the leadership of chairs of nonprofit organization boards of directors: A grounded theory mixed-method study. Nonprofit Management and Leadership, 22(4), pp.411–437.

Kane, N.M., Clark, J.R. & Rivenson, H.L., 2009. The internal processes and behavioral dynamics of hospital boards: An exploration of differences between high-and low-performing hospitals. Health Care Management Review, 34(1), pp.80–91.

RTE (2017, June 7) Sport Ireland issues funding cut ultimatum to IABA.  Retrieved June 30, 2017 from https://www.rte.ie/sport/boxing/2017/0607/880883-sport-ireland-issue-funding-ultimatum-to-iaba/

Stephens, R.D., Dawley, D.D. & Stephens, D.B., 2004. Commitment on the Board : A Model of Volunteer Directors Levels of Organizational Commitment and Self-Reported Performance. Journal of Managerial Issues, 16(4), pp.483–504.

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