Trade associations have no formal status and this means that there has been no overall review of their governance arrangements. However, trade associations do have their own special characteristics. They are not public companies, although many of their own members may be so and they are not quangos, but are similar in nature. Governance for either one of these is relevant to trade associations and should be taken into account.
Each trade association should have an effective governing body which should lead and control its activities. There are two key personnel – the Chief Executive and the Chair – which should take responsibility for running the governing body and the organisation’s business. There should be a clear division of responsibilities for each. In addition:-
- The governing body should include a balance of executive and non-executive directors so that no individual or small group is dominant in the decision making process.
- The governing body should be supplied with information in good time for each meeting and have a sufficient quality of information to enable it to discharge its duties effectively.
- Appointments to this body should be transparent and formal.
- Appointments should be subject to re-election at regular intervals normally outlined in the constitutional documentation.
Each member of the governing body should conduct themselves with a number of qualities in mind:-
Selflessness – decisions should be taken solely in terms of the interest of the industry or trade association.
Integrity – those in office should not place themselves under any financial or other obligation to outside individuals or organisation which may influence them in the performance of their official duties.
Objectivity – in carrying out business, for example when awarding contracts or recommending individuals for rewards, those in office must make choices on merit.
Accountability – each member of the governing body must be accountable for their decisions and actions and should submit themselves to appropriate scrutiny.
Openness – each member of a governing body should be as open as possible about the decisions and actions that they take, giving reasons for their decisions and only restricting information when association interests demands this.
Honesty – There is a duty to declare any private interests relating to their duties and take steps to resolve any conflicts arising in a way that protects the association’s interest.
Composition of a Governing Body
It is necessary for an association to have a good quality governing body which comprises those who are recognised both inside and outside the industry as leaders. A trade association whose governing body consists of third tier managers or semi-retired people will not have a great deal of credibility.
The problem for most trade associations is to balance representativeness with efficiency. A governing body with more than 15 would normally be regarded as too large in the commercial world but for a trade association, it can be worth paying the price of a loss of efficiency to ensure that all members are fairly represented. An association should regularly review the size of its governing body and ensure that rules are imposed to ensure that only sufficiently senior personnel qualify for membership of the governing body and also to ensure that they leave the governing body when they retire from active involvement in the industry or change jobs. The following rules may be used depending upon the nature of the association:-
- Governing body members must be in full time senior management positions in member companies (could be further restricted to Chief Executives or equivalent).
- Governing body members automatically stand down if they cease to hold the above position. Where the governing body feels that a person losing his or her place under this rule is needed, they could remain using co-option.
- An absolute restriction on the period for which elected members may remain on the governing body, for example a two year term.
Depending upon the nature of the association, it may be sensible to have a specific number of places reserved for certain categories of members. This is least appropriate when an association has a small number of members similar in nature and most appropriate when there are many members neatly falling into different categories.
When there are genuine voting procedures in place for election onto a governing body, the question of voting rights arises. In an association with lots of smaller members, one member, one vote on a national/regional/size/category basis makes a great deal of sense. However, some larger members often expect more votes. A simple way around this is to allocate a member one vote for each £x of subscription income. Alternatively, some sort of voting scale could be devised. Having said that, voting can be irrelevant in today’s association since the problem is more one of persuading people to stand in the first place!
There is often debate about whether association executives should be included on a governing body. The normal practice is that they are not, with the exception of the Chief Executive. It is right and proper that a governing body should be comprised of member representatives.
Many trade associations provide for co-options onto their governing body. These should be used sparingly and definitely not for keeping elder statesmen involved! Co-opted members should automatically stand down when necessary but can be eligible for re-election. Any personnel having a particular contribution to make should be invited to governing body meetings as necessary.
The Role of the Governing Body
The role of the governing body largely falls into four main categories:-
Setting the Framework
A trade association operates best within a framework which has been agreed by the governing body and communicated effectively to the staff and members. This framework should be reviewed as part of the planning process.
Most trade associations have some formal responsibilities which are taken from their constitutional documents. These may include, but are not limited to, duties with regard to membership criteria and admission and some basic housekeeping functions such as expenditure authorisation limits and cheque signing, signing off the annual report and authority in respect of some staff matters.
There are a number of major annual reviews to be undertaken by a governing body:-
- Agree an operational plan and budget for each year and set the subscription scale;
- Review of the market position of the association;
- Governance of the association and the constitutional documents (a note of caution – these can be difficult to change, the processing of which may possibly result in wider issues being raised at an inappropriate time);
- Performance management of the Chief Executive.
Handling One-Off Events
Major one-off events general stem from one the subjects of an annual review. These may include issues such as a major budgetary problem, a governance crisis, dismissal or appointment of a Chief Executive of a major policy issue.
Governing Body Management
Trade association members governing body members are often given little or no induction and are expected to work out for themselves how the governing body works. A few simple procedures can be invaluable in helping new governing body members become effective and improve the efficiency of the governing body generally.
Issue a Standard Information Pack
On appointment governing body members should be given information. This information should be updated regularly and re-issued to all serving members of the governing body on an annual basis. The pack should include items such as:-
- A full list of governing body members, including their positions in their companies, the category of representation in which they fit, and their full contact details.
- Details of the senior and other relevant association staff, their positions, their responsibilities and their contact information.
- The association’s constitutional documents.
- The most recent annual report, a list of members and any standard promotional information about the association.
- A list of the dates and times for all governing body meetings and other events which governing body members are expected to attend.
- Any key governing body papers including the most recent reviews of governance and market position.
- A description of how the governing body operates.
- The association’s mission statement and association objectives together with the current strategic and operational plans.
- The annual budget
- The committee structure.
New Member Induction
Good practice for the aforementioned information pack to be sent by the Chief Executive with a covering letter welcoming the new governing body member. If possible, the Chief Executive should meet a new member prior to his or her first meeting to discuss the role of the governing body and other relevant issues. A personal letter from the Chair can help new governing body members feel particularly welcome. It is usual for the Chair to welcome new members at their first meeting and encourage them to contribute at the earliest possible opportunity.
Number of Meetings
The number of meetings varies between associations, but the average is four per annum.
Conduct of Meetings
Good practice for meetings is to ensure that Agendas and supporting papers to be distributed at least a week before the meeting and for the minutes to be distributed within a week of the meeting being held. The structure and content of papers for the governing body can be one of the key determinants of the effectiveness of the governing body and the association. Often, there are no clear instructions on the papers what the governing body is supposed to do with them. Committees tend to discuss what is put in front of them. If the papers deal with micro-management issues and include many operational reports, then the governing body will be encouraged to try to micro-manage. If papers deal with major strategic and policy issues, then the governing body will be more inclined to focus on its proper role. Deciding what should and should not be included on the agenda is a key function of the Chief Executive, in consultation with the Chair.
It is good practice to try to limit papers to two or three pages with supporting documents included in Appendices which should also be limited in length. Papers should have a standard format and always stand alone. They should always state the author, the subject of the paper and any recommendations or requests to the governing body. There should be no need for a well written paper to have an ‘introduction’ at the meeting, still less need to be ‘spoken to’. governing body meetings are for discussion of key issues only. The Chief Executive should contribute to these discussions as an equal of the governing body members and senior staff should also be expected to contribute.
There are two types of governing body minutes:-
- Brief minutes that simply record decisions made. Ideally these minutes should stand alone and not require cross-referring to papers. A good Chief Executive should be able to turn an agenda into a set of minutes of this nature very quickly.
- A longer set of minutes that summarises the papers and set out who said what at the meeting. This is useful for governing body members who may have missed the meeting. However, such minutes should always end with exactly the same resolutions as the brief minutes.
The governing body should decide what type of minutes are required and review this annually as part of the review of its governance.
Outside of Meetings
A good member of the governing body will want something more than to turn up and contribute at meetings. They should feel that they occupy a very special position and the Chief Executive should utilise them accordingly.
Annual Review of Governing Body Performance
The governing body should review its own performance on an annual basis. Items for inclusion in this review may include (but is certainly not limited to):-
- Understanding and reviewing the associations mission, objectives and method of working
- Working relationships with other governing body members
Review of the associations major programmes and services
- Raise any concerns on issues
- Review the representational nature of the governing body
- Consider time commitments required for association business
- Evaluation of overall governing body meetings
- Usefulness and relevance of agenda and paper content
- Put forward any suggestions for improvements
Governing body effectiveness surveys could certainly be undertaken by an outside organisation to ensure complete confidentiality, honesty and transparency to help with this.
The following publications have been utilised and referenced in the production of this guidance note:-
Trade Association Governance, by Mark Boleat
Managing Trade Associations, by Mark Boleat