Dear reader,

Welcome to the June 2017 edition of The Director’s Dilemma.

To read this email in your browser, go to www.mclellan.com.au/newsletter.html and click on 'read the latest issue'.

Contact me if you would like to arrange for a case study-based board workshop or conference presentation for your organisation. Attend the Director's Dilemma Masterclass in Sydney and join a group of peers to test your board judgment.

Our case study this month considers the difficulties facing a not-for-profit board whose members now know something that could be dangerous to have known should anything go awry in future. I hope you can enjoy, sympathise and learn from this dilemma.

Pandora is a new NED on a peak sporting body board. She loves the sport and is thrilled to contribute. However, she is a bit worried about the risks of a recent board conversation.

Her sport has physical risks and is very dangerous if proper precautions are not taken; these include the use of personal protective equipment. At her most recent board meeting the directors discussed the revised sports safety guidelines which mandate the wearing of personal protective equipment during competitions. One of the directors mentioned that a large local club routinely participates in competitions with players who are clearly not wearing safety gear. Another director stated that the club had objected to the draft guidelines on the basis that, in some circumstances, the safety equipment might hamper players' movements and create other risks. The safety manager, who was presenting to the board, clarified that the club had, indeed, made that claim but that it was, in her opinion, spurious.

The board then discussed the issues associated with banning the non-compliant club from competitions. This was considered a difficult action because the club is very successful and their absence would upset fans. Also, the club is in a high socio economic demographic and contributes funds and political connections to the sport.

Pandora is worried because the discussion was minuted and the decision was to write to the club and remind them of the need to wear safety equipment but not to threaten expulsion from the competition. Is her board now at risk and has she let down the whole sport by being a party to this conversation and failing to persuade her board colleagues to take firmer action?

What can Pandora do?

Danny's Answer

Pandora's role; as a NED, is to contribute to the organisation she is representing; and ensure the Board acts for the benefit of the organisation. Her love of the sport must be tempered; in this instance, by her NED role, she should act in the Board's interests. The Board has made recommendations which, for the players' safety, need to be adhered to. If not, eventually all stakeholders, including Directors, could be held liable; and Pandora, as a new NED, must recognise this.

As a local club has been in breach of safety responsibilities, banning the club has been discussed. The minuted opinion of the safety officer is just that; and Pandora feels isolated in not seeking to enforce more punitive action.  Pandora would be well placed to review sporting safety governance independently. With an informed view, both in governance and safety, she can crystallise safety responsibilities.

This may mean liason with safety experts (including medical personnel) and broadcasting these learnings to the Board. Having been seen to take these steps ('transparency'); and confirming that minimum safety standards (like personal protective equipment) must be in place; this could, in turn, be disseminated to all stakeholders, including, in this case, the recalcitrant local club.

This confirms Pandora's reflection and subsequent action; to be in the spirit of the sports' safety.

The Board, after satisfying themselves, that stakeholders had received and understood this directive; could then, if necessary, advise of the subsequent notification, initially of a fine, then subsequent disqualification; for safety non-compliance.

The above action sees Pandora discharging her Directors responsibilities thoughtfully and judiciously and ensures stakeholder obligation awareness.

Ultimately this leads to greater player safety; a win/win conclusion.

Dr Danny Beran is a Health Care Sector Entrepreneur and Adjunct Senior Lecturer at University of Notre Dame School of Medicine and a Director of University House at ANU in Canberra. He is based in Sydney, Australia.

Julie’s Answer

As a director in Australia Pandora has a potential personal liability under the workplace health and safety legislation. She should seek qualified legal advice about the application of the legislation in this circumstance, the risks, and potential consequences for individual directors and the sporting organisations. Pandora's relationship with her chair is crucial; she should seek his or her support in gaining legal advice and in having the potential liability tabled for discussion on the next board agenda.

If the sports safety guidelines mandate the use of personal protective equipment in competitions then the national peak sporting body should comply with the mandate. Insurance is unlikely to cover either the organisation or its directors if the guidelines have been contravened and this fact was known. When standard practices change there will always be participants who hanker for continuance of the 'old ways'.

Sports have rules and competitors must be required to compete within them. Pandora's board needs to consider how best to communicate this requirement to all clubs. Tried and tested strategies include newsletters demonstrating the correct equipment and its use, posters, provision of loaned equipment for competitors who do not supply their own, and a practice of 'gear checks' before competitors can start.

Pandora needs to be realistic about the extent of her board's mandate. They control certain competitions and can set protective gear requirements for those. They do not control club level or independent competitions; they can only lead by example and hope to influence safer practices in those. Pandora must encourage her board to work within the institutional framework to enhance her sport.

Julie Garland McLellan is a practising non-executive director and board consultant based in Sydney, Australia.

Glen's Answer

This is an interesting problem that many sports face. Sport is a game played by people in their discretionary time using their disposable income, and that context needs to be taken into account. In many sports there are risks, but often they are not only inherent but quite obvious. Pandora must remain cognisant that people want to play the game, risks and all.

My first thought is that when a sport sets out safety regulations, the sport must be clear as to whether these are guidelines, or mandatory, as I don't believe they can be both. I recommend that Pandora bring this to her Board's attention and propose that the position on the safety equipment in question be confirmed as one or the other. If mandatory, then Pandora must establish through dialogue with the Board what her delegated authorities are, which in sport are often unclear. She may be able to act on the issue directly.

However when working with Boards, I think it is important to take them on the journey so that they remain involved at an appropriate level and aware of the issues as they develop, even if there is a clear delegated authority to the Safety Manager. Pandora's role in this matter is to look out for the safety interests of the participants, and make sure the game can still be enjoyed. This is a very delicate balance to find, and not a place to go without taking the Board. The outcome could be to cede to the club's will, censure the club, or negotiate a mutually satisfactory compromise. I suspect in this case a negotiated outcome is the only realistic likelihood. But no matter the outcome it should be evidence based and be able to withstand scrutiny from an external party. This means the Board should rely on evidence from Pandora and the club to make a well informed decision.

Whilst it may be ideal to have these issues all handled in writing, particularly Pandora's role and what authorities are delegated to her, this is often impolitic or impractical with volunteer Boards in sport. I would certainly recommend that Pandora keep thorough records and look for a minuted decision, or in the least diarise the outcome and direction.

Glen Stanaway is Head of Sport Services at Australian Sailing. He is based in Sydney, Australia.

Book review - Technology for Company Directors by Nigel Phair

Reviewed by Julie McLellan.

"A governance framework, with structures in place for the lines of reporting, decision-making and staff participation, will largely determine how effectively an organisation can manage its information and technology assets." Few directors would disagree with this statement but most of us would struggle to implement such a framework.

This book is a rapid high level overview of the different aspects of technology that directors must master to discharge their governance duties. It will familiarise even the most conservative director with the terminology, frameworks and tools to assess and implement good technology governance.

As an added benefit it also provides an overview of modern management paradigms (such as 'agile') which I found very useful and something I shall refer back to in the future.

Available at Amazon.com in paperback and kindle editions.

What's new - May was a great and busy month. I really enjoyed delivering a workshop based on real-life case studies for an advocacy board, travelling to beautiful Tamworth for a board strategy and risk facilitation, a trip to Dubai for my 'Supporting the Board' course, delivering director education for elected local government councillors and religious organisations (the intersection of Canon Law and Corporations Law is really quite exciting), attending my own board meetings and developing a public masterclass using my trademark Director's Dilemma case study methodology.

If you would like a confidential director mentor or to discuss your board's needs for training and/or strategy facilitation please contact me at julie@mclellan.com.au. It is always a delight to work with new boards and organisations delivering practical governance education in a way that engages and extends participants' own expertise.

Inspirational quote for June - This month my favourite quote is:

"Be silent, or let your words be worth more than silence."

~ Pythagoras ~

As an enthusiastic extrovert I need to remember this advice! For our protagonist and her board the potential danger of having discussed a safety issue and not taken action is possibly worse than that of not having known about the issue at all (although knowing and deliberately not discussing or minuting would be unethical).

Let's meet - I love the opportunity to meet readers (and anyone who is interested in governance) so it would be great to see you at one of my upcoming events that are open to the public:

  • IPWEA Roads and Transport Congress - Risk Forum on 6 June in Sydney. Details available from IPWEA NSW.
  • Achieving Board Effectiveness course in Bangkok on 15 & 16 June. Details from GreenForest.
  • Directors Dilemma Masterclass in Sydney on 21 June. Details available from Directors Dilemma Masterclass.
  • Adding Value as a Director Masterclass in Melbourne on 24 July. Details from Konnect Learning.
  • Adding Value as a Director Masterclass in Sydney on 25 July. Details from Konnect Learning.
  • Adding Value as a Director Masterclass in Perth on 28 July. Details from Konnect Learning.
  • Better Boards Conference 2017 in Brisbane on 28 to 30 July where I will be helping boards prepare for governing the unpredictable. Details available from Better Boards.
  • Adding Value as a Director Masterclass in Brisbane on 31 July. Details from Konnect Learning.

A note on names - A few readers have asked me where I find the names for the protagonists in each case study. I can only say that I 'borrow' them from people I meet or things that I read. Pandora is a name that stems from Greek mythology and means 'gifted'. Our protagonist may well be gifted in her chosen sporting field but she has also stumbled upon a potentially threatening situation that will require the gifts of tact and tenacity to bring to a satisfactory resolution.

This newsletter - If you have any ideas for improving the newsletter please let me know. If you are reading a forwarded copy please visit my website and sign up for your own subscription.

Suggestions for dilemmas - Thank you to all the readers who have suggested dilemmas. I will answer them all eventually. I could not write this newsletter without your help and without the generous help of all the experts who respond each month to the case studies.

Be a contributor - if you would like to attempt a response to the dilemmas for publication you will be most welcome. Simply reply to this email and let me know.

Farewell until the next issue (due 1 July 2017). I look forward to greeting you again then. In the interim I hope you will enjoy health, happiness and hard work.

Enjoy governing your corporations; we are privileged to do what we do!

Best regards,

Julie

 

Disclaimer

The opinions expressed above are general in nature and are designed to help you to develop your judgement as a director. They are not a definitive legal ruling. Names and some circumstances in the case study have been changed to ensure anonymity. Contributors to this newsletter comment in the context of their own jurisdiction; readers should check their local laws and regulations as they may be very different.