Club Yachting and its

Effective Governance

Steven ColeCole Corporate2018

• dynamic evolution of sporting codes from their community based grass-roots historical origins to becoming industry sectors in their own right

• tensions between status quo (structures, systems, cultures) and those frameworks needed for the sport’s contemporary and future needs

• challenge to traditional governance frameworks and codes that historically have served sporting codes

INTRODUCTION

YACHTING IS NO EXCEPTION TO THIS DYNAMIC EVOLUTION

• nationalisation and globalisation pressures for accreditation and control with consequential risk of intrusion upon more localised independence

• fundamental advances in information and communications technology, ease of travel and national/international connectivity

• rapid, technological development and diversification in yacht design and participation

YACHT CLUBS ARE NOT IMMUNE FROM THE CHANGING SOCIO-ECONOMIC FACTORS WHICH IMPACT OUR LIVES GENERALLY

• financial sustainability of the “club” business model

• increasing community and legal expectations as to:

- duty of care

- integrity in sport

- cultural leadership

• increasing competition for participants, patronage and funding between sporting codes

EFFECTIVE CLUB GOVERNANCE REQUIRES BUSINESS DISCIPLINE, GOOD JUDGEMENT, INTEGRITY AND CULTURAL LEADERSHIP

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OUTLINE

PART AUNDERSTANDING

PRINCIPLES OF GOVERNANCE

PART DGOOD GOVERNANCE

FRAMEWORK FOR SPORTING

ORGANISATIONS

PART B BOARD/COMMITTEE MEMBER DUTIES & RESPONSIBILITIES

PART CCONCLUSION

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Part AUnderstanding Principles of

Governancea review and commentary upon accepted governance principles and frameworks that are generally available

to yacht clubs to assist them in achieving their strategic objectives

Etymology – Latin ‘gubernare’

(to steer ship)

Systems and processes (formal and informal) designed to facilitate organisational• performance• conformance (compliance)

GOVERNANCE FRAMEWORK

Governance is an organisational construct designed to enhance organisational outcomes (UPSIDE ENHANCEMENT AND BETTER DOWNSIDE RISK MANAGEMENT)

“Effective governance addresses the processes and systems by which quality informed decisions are made and actioned in a timely manner to optimise an organisation’s performance in accordance with its stated objectives and to effectively manage its risks”

A yacht club which does not have an effective governance framework is like a competitor without a race-plan

Effective governance is about how to

deliver enhanced performance

outcomes with proper regard to

protecting the “downside” through

effective risk management and

mitigation

It is in the confluence of performance,

conformance and assurance that

effective governance is

found

CONFORMANCE/COMPLIANCE

- regulatory/legal- contractual- ethical framework

PERFORMANCE- strategic objective

accomplishment- risk management- sustainability of performance

ASSURANCE- formal systems/processes- informal culture- transparence/accountability

“EFFECTIVE GOVERNANCE”

TROIKA OF EFFECTIVE GOVERNANCE

TWO KEY ASPECTS OF EFFECTIVE GOVERNANCE

Sunlight sanitises and transparency assures quality of accountability

Accountability

• to members, regulators and broader stakeholders

• through informed and regular reporting of organisational outcomes and outlook

Transparency in accountability

• of relevant and “balanced” quality information

• which is reasonably accessible and available

LEGAL STRUCTURAL FRAMEWORK

Company Limited by Guarantee

(Corporations Act)

Unincorporated Association

(problematic)

LEGAL STRUCTURES FOR YACHT

CLUBSIncorporated Association

(State/Terr associations incorporation legislation)

GOVERNANCE DOCUMENTARY FRAMEWORK

ConstitutionLaws &

Regulations

Governance Charter

Roles of Board & Management

Responsibilities and duties of

board members, officer bearers and

key executives

Roles, remits and authority

of Committees

Policies and Procedures

Codes of Conduct and Behavioural expectations

Statements of purpose, values and principles

ORGANISATIONAL DELEGATION AND ACCOUNTABILITY FLOWS

Cash Flow Forecast/Capital Expenditure Plan

Goal

Strategic Plan

Business Plan(s)

Budget

Organisational Values

[THE PURPOSE, VALUES,PRINCIPLES AND ETHICS OF THEORGANISATION AND ITS PEOPLEIN GOING ABOUT THEORGANISATION’S BUSINESS ANDAFFAIRS]

[ULTIMATE OBJECTIVE OF THE ORGANISATION]

[LONG TERM PLAN AS TO HOW TO ACHIEVE KEY MILESTONESTOWARDS THE ORGANISATION’S ULTIMATE OBJECTIVE ORGOAL]

[MEDIUM TERM PLANNING OF THE DEPLOYMENT OF HUMAN,FINANCIAL, PHYSICAL AND INTANGIBLE CAPITAL TO ACHIEVETHE ORGANISATION’S STRATEGIC OUTCOMES]

[SHORT TERM PLAN OF REVENUE AND EXPENSES AS WELL ASOPERATING CAPITAL DEPLOYMENT, TO ACHIEVE THEORGANISATION’S BUSINESS PLANS]

[SHORT +/OR MEDIUM TERM FORECAST OF CASH RECEIPTSAND OUTGOINGS TO GIVE GUIDANCE AS TO THEAVAILABILITY OF FINANCIAL CAPITAL TO ENABLE BUSINESSPLAN(S) AND TO MAINTAIN ORGANISATIONAL SOLVENCY]

• setting the strategic direction and plan;

• approving

- performance objectives; and

- appetite for risk

• overseeing management’s:

- implementation of that plan and management risks;

- delivery of those performance objectives

• setting the structural, systematic and cultural governance framework, with the assistance of management, including its purpose for existence and the “values” which guide its people;

• engaging with the CEO/general manager and management personnel;

• determining appropriate governance related policies, codes and protocols to better assure the Club’s performance outcomes, management of organisational risks and adherence to its ethical framework.

Governance is the domain of the board of the club

A2. ROLE OF THE BOARD/MANAGEMENT/COMMITTEE

• implementing the strategic plan

• managing and mitigating risks

• delivery of strategic objectives

• ensuring compliance with the structural, systematic and cultural governance frameworks

• implementing and ensuring adherence to organisation’s policies and procedures

• regulatory and legal compliance

• operational performance and integrity

Management has a key role in keeping the board appropriately informed of material issues

A3. ROLE OF MANAGEMENT

The governance framework of a sporting organisation needs to be fit for purpose having regard to:

• its PURPOSE for existence (ie. its WHY)

• its MISSION (ie. WHAT it does)

• its STRATEGIC OBJECTIVES (ie. HOW it does it)

• its AVAILABLE RESOURCES (ie. $$, people and assets)

• its SIZE and SPAN of operations

• its GOVERNANCE MATURITY

No one framework/model is necessarily appropriate for all purposes, for all yacht clubs

A4. FITNESS FOR PURPOSE

If governance is to be ‘effective’ it must be and remain ‘fit for purpose’ in the context of the Club’s evolving and changing needs

A5. GOVERNANCE FRAMEWORK

Governance systems and processes must be developed and:• periodically evaluated to determine their

continuing effectiveness• periodically reviewed to determine their

continuing relevance

Accountability for such evaluation and reviews should be ‘built in’ to the organisation’s governance framework

(a) Development, Evaluation and review

(b) Building and Maintaining the Framework

The Build

• right structure(GOVERNANCE FRAMEWORK)

• right players(SKILLS, EXPERIENCE, ATTRIBUTES)

• right teamwork(CULTURAL DYNAMICS)

• right game-plan(STRATEGIC AND RISK MANAGEMENT FOCUS)

• right execution(PERFORMANCE OUTCOMES)

The Maintenance

• maintaining active involvement(RELEVANT ENGAGEMENT)

• maintaining relevant skill set(FITNESS FOR PURPOSE)

• building trust and respect(TEAM BONDING)

• ongoing performance assessment(EVALUATION)

• team sustainability(SUCCESSION PLANNING)

No point in buying or building a boat if you are not prepared to maintain it

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Part BBoard/Committee

Member Duties and Responsibilities

a review of the legal duties and responsibilities of officers of yacht

clubs

• community assets and member funds = high accountability

• relatively limited executive resources

• no exculpation of liability as a “volunteer” at board level

• risk of underdeveloped governance processes

• assuring relevant skills/experience at board/committee level

• financial security and going concern risks

• heightened risk of media attention

Club office bearers face some special challenges even if they have given their time voluntarily

B1. SPECIAL CHALLENGES FOR OFFICE BEARERS OF COMMUNITY BASED ASSOCIATIONS

(a) legal/regulatory control of clubs/associations largely focuses on the acts and omissions of the board members and officer bearers

• civil liability risks (lower burden of proof)

- breach of fiduciary style responsibilities

- trading while insolvent

• criminal liability risks (higher burden of proof)

- direct culpable breach of statutory provisions

- dishonest intent associated with civil liability risks

- accessorial involvement in organisational criminality

- imputed or deemed liability for organisational criminality (by virtue of office held)

Constant rebalancing of the benefits to society of the incorporation model against controlling the agency and moral hazard risks of limited liability

B2. NATURE OF OBLIGATIONS AND LIABILITY FOR CLUB OFFICERS

(c) Fiduciary duties

• reasonable care and diligence

• good faith and proper purpose

• best interests of the club as a whole

• confidentiality

• not misuse information or office

• avoid conflicts of interest

What a reasonable person holding the office would do in like circumstances

B2. NATURE OF OBLIGATIONS AND LIABILITY FOR CLUB OFFICERS

(c) Organisational regulatory failings (with potential personal liability risks arising by reason of office held as a board member/officer)

• payment of taxes withheld

• payment of superannuation deductions withheld

• environmental pollution risks (*)

• privacy law breaches (*)

• bribery and corruption matters (*)

• harassment and discrimination laws (*)

• HR/employment matters (*)

(*) “Due diligence” safe harbour defences may apply in certain circumstances if relevant good governance policies and practices are in place

B2. NATURE OF OBLIGATIONS AND LIABILITY FOR CLUB OFFICERS

(1) SAFE HARBOURS

• business judgement rule

• appropriate reliance on consultants/experts/others

• appropriate delegation of authority

• just and equitable relief

• “new” solvency workout defence

• ? ”due diligence”/good governance practice reliance

(2) PENALTIES

• financial compensation/damages/penalties/fines

• reputational loss including banning orders

• incarceration risks (criminal offences)Safe harbours are often illusory in practice with prosecution and enforcement

risks and costs (financial and reputational) profound and personally burdensome

B3. SAFE HARBOURS AND PENALTIES

• Reflections on the evolving and increasing standards and expectations of the scope of directors and officers responsibilities

- Marquis of Butte (1800’s)

- Lord Boothby (1960’s)

- James Hardie/Centro case (2010)

- Storm Financial/AWB-Flugge cases (2016/2017)

• What a “reasonable” person holding the office would do in like circumstances

• Class-actions and enhanced regulatory enforcement potentially are contemporary material game-changers

The law is responsive to the shifting sands of society’s evolving mores

B4. EVOLVING STANDARDS AND EXPECTATIONS

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Part CConclusion

DELIVERY OF ASSURED, SUSTAINABLE AND VALUED OUTCOMES TO THEIR STAKEHOLDERS (PRESENT, EMERGING AND FUTURE)

Future successful yacht clubs will be those which:

• best promote their “product” to gain community acceptance and profile

• secure strong participation, community engagement and respect

• maintain financial sustainability with a forward looking viable business model

• maintain integrity, reputation and social relevance

C1. DRIVERS OF SUCCESS

Governance Framework

Failure to identify and manage risk

Ineffective and/or inexperienced board/committee members and/or executive

Unmanaged conflicts of interestNon-sustainable business model

and strategic planning

Poor cultural and behavioural issues

Inadequate internal financial and business systems reporting and controls

C2. COMMON CAUSES OF INEFFECTIVE GOVERNANCE

Good governance can offer a number of important benefits to yacht clubs:

• better organisational strategies and plans and likelihood of achievement of objectives

• improved operational effectiveness and efficiency

• more prudent regulatory compliance, financial, duty of care, integrity and risk management

• improved alignment of cultural and behavioural outcomes

• improved member and stakeholder engagement and communication flow

C3. BENEFITS OF A STRONG GOVERNANCE FRAMEWORK

observations / commentsexperiences to shareimplications

C5. Q & A

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Part DGood Governance

Framework for Sporting Organisations

sporting organisations are recommended to adopt a descriptive set of “good governance principles for sporting organisations” to guide them in their governance journey, recognising and respecting the varying strategic objectives of different sporting codes, associations and clubs, and those of the relevant government agencies that provide funding or infrastructure

support for them

• modelled on ASX Corporate Governance Council Principles and Recommendations- Principles- Recommendations (in support of Principle)- Commentary (to better explain)

• Principles:1. Clarity of objects, purpose and strategy.2. Build and manage organisational capacity and capability to deliver outcomes.3. Lay solid foundations to assure governance and management of the organisation.4. Structure, populate and manage the board to add value.5. Promote ethical and responsible decision making and cultural behaviours.6. Respect the rights of members and engage and communicate effectively with stakeholders.7. Meet regulatory compliance and reporting requirements.8. Safeguard the organisation’s financial standing and integrity.9. Recognise and manage risk.10. Whole of sport behavioural alignment.

GOOD GOVERNANCE PRINCIPLES FOR SPORTING ORGANISATIONS

TEN PRINCIPLES THAT PROMOTE GOOD GOVERNANCE

RecommendationsRecommendation 1.1: The organisation’s objects and purpose are clear and are set out in the organisation’s constitution or

other binding charter of existence.Recommendation 1.2: The organisation takes steps to ensure its objects and purpose are communicated amongst its

stakeholders including on the organisation’s web-site.Recommendation 1.3: The board accepts responsibility for the manner in which the organisation is to achieve its objects and

purpose in the form of a cohesive strategic plan.Recommendation 1.4: The board works with the organisation’s management to ensure there is mutual ownership of the

organisation’s strategy.Recommendation 1.5: The strategic plan is easily understood and able to be used as a base for tactical planning by the

organisation and implementation of the plan by the organisation’s management.Recommendation 1.6: Management regularly reports to the board on the progress of implementing the strategic plan.Recommendation 1.7: The organisation’s strategy is periodically reviewed by the board to assure its continuing relevance and

effectiveness.

Principle 1 - Clarity of objects, purpose and strategyOrganisations should have clearly articulated objects and purpose, with a complementary strategy which has been endorsed by its board, to deliver outcomes consistent with the organisation’s objects and purpose

RecommendationsRecommendation 2.1: The organisation identifies and periodically reviews the resources needed by the organisation to achieve

its objects and goals and meet its strategic objectives.Recommendation 2.2: The board in conjunction with management develop plans as to how the organisation will access

resources to build organisational capacity and capability.Recommendation 2.3: Management, under the oversight of the board, prudentially manages the organisation’s resources to

ensure their availability for the organisation’s needs.Recommendation 2.4: Management regularly reports to the board as to progress with respect to resource planning and

management for the organisation.

Principle 2 - Build and manage organisational capacity and capability to achieve objects and goalsOrganisations should identify the resources (human, financial, physical and intellectual/intangible) they need to achieve their objects and goals and meet their strategic objectives, and to plan as to how those resources will be made available to and best managed by the organisation

RecommendationsRecommendation 3.1: The respective roles and responsibilities of individual directors, the board and management of the

organisation are clearly set out in the organisation’s constitution and/or governance charter.Recommendation 3.2: Management ensures the organisation’s constitution and/or governance charter are available, are

communicated and are adhered to throughout the organisation.Recommendation 3.3: The board monitors and reviews the organisation’s constitution and/or governance charter to assure

their continuing relevance, as well as overseeing the adherence by the organisation and its people to their terms.

Principle 3 - Lay solid foundations to assure governance and management of the organisationOrganisations should establish and disclose their governance and management structures including the respective roles and responsibilities of their boards and management

RecommendationsRecommendation 4.1: The board is of sufficient size to perform its functions without compromising efficiency and effectiveness.Recommendation 4.2: The chair of the board is non-executive and independent.Recommendation 4.3: The board is comprised of a majority of non-executive independent directors.Recommendation 4.4: To assist the board in the performance of its role, as appropriate, the board may appoint discrete

committees, which report to the board on matters within the scope of their remit (e.g. finance/audit, risk, governance etc).

Recommendation 4.5: The board comprises directors with:- appropriate skills, capability and capacity; - sufficient diversity of relevant experience and perspective,having regard to the organisation, its strategies, its operations and its needs.

Recommendation 4.6: Through induction practices and continuing professional development relevant to the organisation’s needs, the board seeks to enhance the relevant skills and knowledge of board members and key management personnel.

Recommendation 4.7: The board periodically evaluates and reviews the performance of its board members, the board itself, the board’s committees and the organisation’s key management personnel.

Recommendation 4.8: The board manages and recommends prudential succession planning of its board members, with skills and experience relevant to the organisation and its strategic needs, for determination by the organisation’s members.

Principle 4 - Structure, populate and manage the board to add valueAs the principal decision making and oversight body of the organisation, boards should be of appropriate size, structure, composition, capability and capacity to properly perform their functions and add value to the organisation

RecommendationsRecommendation 5.1: The board has established a set of values and supporting principles as well as a code of conduct or

ethical behaviour against which decisions of the organisation and the behaviour of its personnel are held accountable.

Recommendation 5.2: The code, or a summary of it, is published and communicated throughout the organisation by management under the authority of the board.

Recommendation 5.3: As part of its oversight responsibilities, the board holds both itself and management accountable for compliance with the code and setting the cultural standard for the organisation and its people.

Recommendation 5.4: The code and the organisation’s culture should have regard to concepts of integrity, accountability and transparency at organisational, administration and player levels.

Principle 5 - Promote ethical and responsible decision making and cultural behavioursOrganisations should actively promote and set the standards for ethical and responsible decision making and cultural behaviours

RecommendationsRecommendation 6.1: The board has developed policies and practices for the organisation to:

- effectively engage with members and stakeholders;- transparently communicate with members and stakeholders;- facilitate the exercise by members of their member rights;- encourage member participation and voting at member meetings.

Recommendation 6.2: The board, in conjunction with management, has developed policies and practices to assure accountability to members including through the provision of sufficient, timely and relevant information.

Principle 6 - Respect the rights of members and engage and communicate effectively with stakeholdersOrganisations should respect the rights of members and engage and communicate effectively with stakeholders

RecommendationsRecommendation 7.1: Management, in conjunction with the board, has adopted for the organisation policies and developed

systems, practices and processes designed to inform and educate the organisation’s personnel of, and to assure compliance with, all applicable laws, regulations, constitutional and legal requirements relevant to the organisation.

Recommendation 7.2: As part of its oversight responsibilities, the board holds both itself and management accountable for the organisation’s regulatory compliance and reporting obligations.

Principle 7 - Meet regulatory compliance and reporting requirementsOrganisations should develop policies and practices to ensure compliance by the organisation and its people with all relevant laws, regulations, and constitutional and legal requirements

RecommendationsRecommendation 8.1: The board accepts responsibility for overseeing the integrity and assurance of the organisation’s financial

position, performance and reporting.Recommendation 8.2: The board requires management to develop and adopt systems, practices and processes which are

suitable to the nature, scale and scope of operation of the organisation, which are designed to assure the integrity and assurance of the organisation’s:- financial position, performance and reporting; and- fundraising and investment policy, strategy and practices (as applicable).

Recommendation 8.3: The board has established a committee of the board to assist in overseeing the organisation’s financial position and performance, and its reporting and assurance systems and processes (with the remit of that committee perhaps also extending to risk recognition and management - refer to Principle 9).

Recommendation 8.4: That board committee:- has a formal charter and terms of reference;- formally consists only of a majority of independent non-executive directors;- is chaired by a person with financial/accounting experience who is not the chair of the board of the

organisation;- engages with the organisation’s financial/accounting personnel and the organisation’s accountants or

auditors (as applicable);- reports to the board.

Principle 8 - Safeguard the organisation’s financial standing and integrityOrganisations should seek to ensure that their financial standing is sound and that their systems of financial reporting and assurance have integrity

RecommendationsRecommendation 9.1: The board, in conjunction with management, has established policies for the oversight, recognition, management,

treatment and control of material risks relevant to the organisation, its strategies and its operations.Recommendation 9.2: Management has designed and implemented systems and practices to give effect to those policies and to

periodically report to the board on whether, and the extent to which, those risks are effectively being managed.Recommendation 9.3: The board has determined the “appetite” of the organisation for risk (ie. with respect to each material risk

identified, the extent to which the organisation should apply resources towards risk management/mitigation/transfer strategies to reduce the risk to a level which is tolerable for the organisation).

Recommendation 9.4: The board has established a committee of the board to assist the board in overseeing the organisation’s riskrecognition, management, treatment and control or has extended the remit of the committee the subject of Recommendation 8.3 to include risk related matters.

Principle 9 - Recognise and manage riskOrganisations should establish a sound system of risk oversight, recognition, management, treatment and control

RecommendationsRecommendation 10.1: The organisation liaises with the peak body for its sporting code to discover, develop and assist in the adoption

of best practice behaviours for the sporting code and those constituents and stakeholders of the organisation engaged in that sporting code.

Recommendation 10.2: Through its policies, procedures and approved practices the organisation promotes and reinforces those bestpractice behaviours amongst its constituents and stakeholders including with respect to:- player protection and welfare- dealing with children- unsportsman-like behaviour- natural justice- bribery and corruption- drugs and alcohol- gaming and wagering- conflicts of interest- transparency- accountability.

Principle 10 - Whole of sport behavioural alignmentThrough their policies, strategies and enforced practices organisations should seek to align the behaviours of their constituents and stakeholders consistent with best practices of the sporting code generally