What is ‘good governance’?
This is a question I am often asked and one which is difficult to answer succinctly. But, in my view, at its most basic, it is when an association operates in a proper manner.
Good governance is crucial when looking at one of the main requirements of a board; the ability to make decisions. A board that cannot make decisions cannot offer direction to the management team on how a housing association should deliver its services to its tenants and the wider community. Some decisions are easy to make, but some are difficult. When faced with complex, unpopular or far-reaching decisions, the board needs to be confident that it has taken the right approach to its decision-making.
How can the right-approach to decision-making be achieved?
Board members should ask themselves the following:
- Is the decision consistent with the association’s objectives and powers as set out in the associations rules?
To act outside the scope of the association’s rules risks decisions made being invalid.
- Are we acting in good faith i.e. honestly and in the best interest of the association?
Board members need to put their own interests to one side and ensure that decisions are made which solely have the interest of the association at its heart.
- Do we have reliable and comprehensive information presented in order to enable decisions to be made?
Board members need to be properly informed to be able to make good decisions. However, the Board also needs to ensure that information is provided in a timely manner as well as allocating sufficient time to consider the information presented. The assumption is that the more complex the decision, the more time needed to be allocated to allow sufficient debate and scrutiny.
- Have we taken into account all relevant factors, including what is in the best interest of the association?
Board members need to ignore irrelevant factors, such as personal views or interests, which could affect the board member’s judgement.
- Have we managed any conflicts of interests?
Conflict of interests, whether actual or perceived, need to be identified and prevented from affecting any decision-making, or managed appropriately, whilst also being recorded properly. It is vital that the Board handles any conflict in accordance with the association’s conflict of interest policy to ensure that any decisions made are valid.
- Are we confident that any decisions we make can be justified as being a reasonable decision to have made at that time?
Procedural issues which the Board needs to follow
However, there are also procedural issues which the Board needs to follow.
- Making sure that decisions are made in accordance with the procedures set out in the rules. This includes ensuring that sufficient notice is provided, that meetings are quorate and that sufficient majority is reached.
- Making sure that all board members have an opportunity to participate in the decision (unless there is a conflict of interest issue).
- Ensuring that decisions taken outside of a meeting are made in accordance with the rules.
- Ensuring that decisions delegated to staff or sub-committees are done so in accordance with robust terms of reference or delegated authority.
- Recording decisions properly, with sufficient detail of the discussion had, so that the board can clearly evidence what was decided and the rationale behind that decision.
Board members facing tough decisions may be nervous as to whether they have made the ‘right’ decision. However, whether a decision is ‘right’ may only be known with the benefit of hindsight. Bearing in mind the above, boards will make the best decision they can; if they rely on the information they know or should reasonably have known at the time of making the decision, if they put aside sufficient time for constructive discussion and make decisions which have the best interest of the association at their heart.