How much of a conflict does it present?
Whilst I agree that staff do add immense value to boards, should they sit on boards?
There’s also a big difference between staff who are ex-officios (1); who don’t have a voting right and sit in on meetings and contribute valuable information versus those staff who are active members of the board, voted in by the membership and hold a voting right.
The answer below addresses the legalities of the question ‘Should staff sit on boards as an active member of the board in a voting capacity?’
As I travel around Australia and work across state and federal legislation, it’s important to recognise that legislation across states does differ. There are some complexities that may be specific to the legal framework of your organisation.
As an example, let’s look at NSW organisations legislated under the NSW Associations Incorporations Act 2009.
There is nothing under the current NSW Associations Incorporations Act 2009, that prohibits you from having paid staff members on a board.
The real issue here is, how much of a conflict of interest does it present, and really, how confidential is board information?
These two areas feature in the Act with some large penalties for breaches. So it’s really important that you ensure, if you do have a staff member sitting on your board: that they will be an effective member of the board, and that there won’t be any conflicts or breaches of confidentiality disrupting board business and potentially breaching the Act.
Now there is a twist… whilst it’s okay under the Associations Incorporations Act, it’s not okay under the NSW Charitable Fundraising Act 1991 (Section 48), which prohibits paying a member of your governing committee. Yes, this includes staff as well as directors.
However, there is a fix to this issue, if it’s really what you want. You can apply for approval to pay your governing committee members, modifying the standard fundraising authority. If you already hold an authority to fundraise, please check it and, if you aren’t compliant, take action to either lodge an approval request or consider changing your board and have the staff member in an ex-officio capacity or on a board sub-committee.
In the next blog post, we will discuss the question, ‘What can happen when staff sit on boards’, and explore the appropriateness of this situation.
If you would like me to answer information specific to your organisation on this, or any other governance topic, you can call me direct on 0409 814 654.
(1) Ex-officios: People who have an ex-officio role do so because they hold a particular role or title, not because they are voted in. Usually this role is filled by the CEO and in some organisations this extends to funders and/or major stakeholders. Generally, they do not have any voting rights, however some constitutions do nominate an ex-officio position as a voting member, so please check your constitution if unsure.
Resources:
Associations Incorporations Act 2009: http://www.austlii.edu.au/au/legis/nsw/consol_act/aia2009307/
Charitable Fundraising Act 1991: http://www.austlii.edu.au/au/legis/nsw/consol_act/cfa1991201/s48.html
Standard Authority to Fundraise: http://www.olgr.nsw.gov.au/pdfs/Authority_conditions_fundraising.pd
Office of Liquor, Gaming and Racing: http://www.olgr.nsw.gov.au/charitable_home.asp