As an Indigenous Corporation incorporated under the CATSI Act, or even if you chose to incorporate under the Corporations Act or remain as an Association, you will have a Board with serious responsibilities and an important role in the governance of your corporation.
From time to time, your Board members will change, or new ones are admitted.
How do you handle their induction, if at all?
Inducting an employee is an accepted process, and you probably have written procedures and some process to nominate a mentor to take them through their job responsibilities and introduce them to colleagues and so on. Yet, when it comes to Board members, many corporations leave it to the new inductee to learn about how it's done all by themselves!
You are doing well if you have a Directors' Board file with copies of the Rulebook or Constitution and previous Minutes, and welcome the new member with an informal coffee before you hand over a pile of reading. But we are all busier than ever today and often a new Board member may not be fully exposed to what the Board does.
It is important to properly orientate a new Board member by following a formal induction process.
Properly inducted Board members are better able to contribute from the first meeting. They will have come aware of their roles, responsibilities and duties and thus able to add to discussion and decision-making without second-guessing themselves.
If your new Board members are poorly inducted, they may have no background about the corporate culture and the operations of your corporation, nor of what it is trying to achieve. Thus poorly equipped they may, in fact, be making poor decisions. They may not even realise that the way the Board makes decisions is up for discussion and not laid down in law!
So if your induction process is all about a welcoming cup of coffee and a pile of self-reading, you should think again.
I usually suggest the following items that should be in an induction process: -
- Welcome and introductions
- Assist them in a due diligence of the corporation;
- Provide a mandatory session on the legal roles and responsibilities of being a Director;
- Provide a Board Manual;
- Introduction to Executive Management; and
- A feedback session.
Let's take each of these in turn.
1. Welcome and introductions
Introduce the new Director to every other Board member, providing contact details, and relevant personal information.
Prepare a written document describing the history of the corporation and a brief introduction to the work that it does. Speak (formally) to this document so that the new member does not have to "take it home and read it" themselves. Include copies of any media or brochures, which they can take home to read as supplementary information.
In the written document, make sure you place the corporation in the context of what it does - if a Native Title Prescribed Body Corporate, describe any other related operational corporations and why these are separate.
2. Assist them in a due diligence of the corporation
Ensure the new Director knows that in accepting the role, they take on personal risk and thus must make sure that they are diligent in their decision-making.
A good start is to point out that they should conduct due diligence on the corporation they are joining. Provide them with the last 2 to 3 years' worth of audited financial statements (and more if they ask for it) and have your accountant take them through the financial statements and explain their structure, anomalies, and the audit report.
Provide them with your latest strategic risk management plan so that they understand the strategic risks the corporation has identified.
If they wish, let them meet and interview your frontline staff - this is as much for them to understand the nature of your work as it is for them to understand the risks inherent in the work.
3. Provide a mandatory session on the legal roles and responsibilities of being a Director
Some corporations outsource this to consultants or enrol the new Director in an ORIC or Institute of Company Directors' course.
I usually suggest that this be mandatory since many new Indigenous Directors may not have had, or have had insufficient immersion in the role of a Director, the separation of powers from management, and the legal and personal risks they face.
4. Provide a Board Manual
The Board Manual should be up to date and should contain at least: -
- A copy of the Constitution or Rulebook;
- A register of Directors and Officers;
- A list of current members;
- A list of sub-committees and their members, objectives and roles;
- Copies of the last 3 years' Annual General Meeting minutes;
- Copies of the last 12 months' Board minutes;
- The Board Calendar;
- An organisation chart showing the corporation's branches or project units and management;
- A Board Charter including a Code of Conduct; and
- Various Board Policies and Procedures dealing with matters such as conflict of interest, dispute resolution, decision-making, confidentiality, delegations, and so on.
Someone should be prepared to take the new member through the Board Manual, content by content - again, do not leave it for them to "read at home". It would be helpful if someone permanent were to be given this task, and they are assisted by the preparation of a "script" in advance.
Incidentally the Board Manual "should be up to date" which means that you need a process to update every Board member's Board Manual as changes take place.
At the end of this stage, the new member should be asked to sign a copy of the Board Charter and Code of Conduct as evidence that they agree to abide by these internal rules.
5. Introduction to Executive Management
Once the new member is better equipped to understand "how we do it here" they are introduced to the CEO and other Executive management such as the Chief Operating Officer and/or the Chief Financial Officer.
This allows them to better understand how the staff "do it here."
6. Feedback session
I always recommend that at the end of an induction process, corporations hold a feedback session with the inducted member.
This has a multitude of objectives. Firstly you can check for understanding as they ask questions and provide you with feedback about what they learned.
Secondly, their feedback can go into the continuous improvement loop and you can make changes to the process as necessary - it is a great opportunity to see the corporation through new eyes.
As well, this allows them to see that the governance process is transparent and that you encourage critical inquiry and independent thinking.
At the end of this session, I recommend that the induction process is documented and that the new member signs this documentation to show that they have been through a thorough and formal process. This not only signifies the high standard that you expect of them, it also helps to protect them in any case where their exercise of care and diligence is challenged.
The best way to establish and conduct your induction process is to have a pre-determined set of procedures and templates for the various documents - and speeches - that you will present to them. In these documents, nominate the person who will carry out the induction stages, and where the Chairperson also fits in.
When you start the right way, you build good governance. In order for Directors to contribute to good decisions and good governance, they need to be briefed and understand what the corporation does, how you follow certain processes, and their independent thinking should be encouraged.
A formal induction process ticks all the boxes - so, not just a cup of coffee!
If you want some help to introduce a formal induction process for your Board, or if you would like help in preparing Board Manuals and other key documents, get over to our website at https://otsmanagement.com.au and click on the Contact Us tab.