Draft_CorporateGovernanceSocialEnterprises.pdf

7/31/2019 Draft_CorporateGovernanceSocialEnterprises.pdf

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Corporate Governance of Social Enterprises

WORKINGDOCUMENT

TUM School of Management

European BusinessSchool

Schwab Foundation for Social Entrepreneurship

Ann-Kristin Achleitner Andreas Heinecke Mirjam SchningJudith Mayer Abigail Noble
http://www.ebs.edu/index.php?id=5270http://www.ebs.edu/index.php?id=5270http://www.ebs.edu/index.php?id=5270


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Corporate Governance Manual Draft Version January 2012

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Table of Contents

Foreword 3

1 Introduction 4

1.1 What is governance? Why is it important for social enterprises? 4

1.2 Why create a board? 4

2 Overview: How are boards evolving over the lifespan? 6

3 Creating your board 8

3.1 Who should be on my board? 8

3.3 How do I recruit the right board members? 11

3.4 How should I appoint board members and for what term of time? 12

3.6 How to choose the right governance structure? 13

3.7 What is the right size for my board? 19

4 Managing your board for optimal performance 20

4.1 What are the rights and duties of board members? 20

4.2 What is the role of the founder within governance? 22

4.3 What are the roles and responsibilities of the board chair? 22 4.4 How to create a board culture? 24

4.5 How should management report to the board? 26

4.6 How to evaluate the work of a board? 28

5 Appendix 29

5.1 Committees 29

5.2 Template for a quarterly update 30

5.3 Example of a board self-assessment questionnaire 31

5.4 Example of impact value chain 38

5.6 Corporate governance guidelines and codes of best practice 39

5.7 Rules of procedure for boards 44

6 Task Force Members of the Schwab Foundation Community 47

7 Sources 48


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Foreword

Social enterprises, which have as core to their strategy the goal of addressing the most

pressing problems societies face, often must balance both financial responsibilities and socialimpact, coordinate among multiple stakeholder groups and consequentially navigate complextrade-offs.

Governance of a social enterprise, if incorporated well, helps safeguard the mission of thesocial enterprise while allowing the management team to meet the demands of the variety of stakeholders, including investors, employees, clients or beneficiaries, as well as to complywith public policies and regulations. Furthermore, governance is a mechanism to strengthenleadership and to empower stakeholders, which increases their motivation to contribute to the

development of an organization. Furthermore, incorporating stakeholders is a way to makedecisions that display their interests. This ensures acceptance by key external stakeholdersand thus, facilitates smooth operations and optimal impact of the social enterprise.

Yet, few social enterprises use governance as a means for their social enterprise to reach itshighest potential. Likewise, board members often feel that they have more to offer than thesocial enterprise currently engages them. The time and effort spent by management teams tocreate and maintain the right governance mechanisms for their social enterprise can savevaluable trial and error time in building and scaling their organization, extend theorganization`s fundraising capacity and expertise network most easily, and ensure that theorganization does not make costly mistakes given the regulatory, legal and financialenvironments.

This document offers social entrepreneurs an opportunity to evaluate the needs, focus and personality of their social enterprise with the goal of determining which systems, processes,mechanisms and structures of governance will help their organization to achieve its goals. Itoffers practical advice on how to design governing boards and committees, what can be donewith existing structures once set up to ensure they best serve the social enterprise, and how totransition effectively the governance structures as the needs of the social enterprise change.

The view of the authors is that no one governance mechanism fits all social enterprises; rather governance should be dynamic and adapt to the changing needs of the management team, theoperating and regulatory environment, and the larger goals and vision of the social enterpriseover its lifespan.

- For more information, contact: Abigail Noble ([email protected]), Schwab

Foundation for Social Entrepreneurship, or Judith Mayer ([email protected]),Technical University of Munich -


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1 Introduction

1.1 What is governance? Why is it important for social enterprises?

Governance is defined as systems and processes concerned with ensuring the overall

direction, effectiveness, supervision and accountability of an organization (Cornforth, 2003) .Governance mechanisms include governing boards, monitoring systems, and signalingmechanisms like reporting or codes of conduct.

The field of social impact, and specifically the tools of social performance indicators andimpact monitoring, is relatively young compared to financial and accounting metrics andmonitoring. Thus, monitoring as well as signaling possibilities are restricted and there is onlyscant external oversight of social enterprises.

Therefore, governing boards are highly relevant for social enterprises as they allow for

dynamic interaction of management and stakeholders of an organization (Ebrahim, 2003) .Furthermore, boards pursue monitoring as well as signaling functions. It is for this reason thatthe focus of this guidebook will be on boards.

Remark to legal regulations:

While some legal forms require the inclusion of a supervisory board or non-executive board members, others do not. As shown below there are several reasons to establish a board even if it is not legally obligatory. There are two types of voluntary boards: informal boardswithout any regulations and boards formally organized by documents like bylaws or rules

of procedures. All aspects within the manual should be considered as recommendations. It is important

to obtain applicable laws and make sure to comply with them.

1.2 Why create a board?

Social enterprises are often reluctant to set up a board or if they have a board, to engage their board actively in the guidance of their organization. Many social enterprises fear that boards

will limit the effectiveness of the management team. However, well-designed and well-managed boards should by no means constitute a threat for management. If board membersare chosen well and the relationship between management and board is designed correctly,

boards will be facilitators in helping social enterprises to reach its full potential. Theoverarching goal of a board should be to complement the work of the management team andto ensure that the efforts of the management team and staff have the maximum effect inreaching the social enterprises goals.

Boards provide strategic support and expertise. This can help an organization

overcome a lack of in-house competencies or expertise, and does not involve the same procurement process as pro-bono consulting opportunities.


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Boards provide access to networks. Board members open doors to external networksthat may reduce some challenges in fundraising, advocacy, and recruiting high talentto the organization.Boards signal external stakeholders (investors, lenders, prospective partner organizations or contractors) that a company is run in an appropriate and responsiblemanner. Thus, boards provide a license to operate (European Confederation of Directors Associations, 2010). Furthermore, governance helps to solve issues betweenstakeholder groups.


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2 Overview: How are boards evolving over the lifespan?

While governance is important at each stage of the development process of a social enterprise,the composition of a board as well as the tasks it takes on should evolve over the lifecycle of asocial enterprise. In the pioneer/start-up stage innovativeness is high and flexibility is needed.

There are mostly no or only few hierarchy levels and governance is often focused towards thefounder. During the scaling stage more formal governance structures are established andoutsiders are invited to serve on the board. Governance during maturity might becharacterized by a participative structure.

One of our interviewees described social entrepreneurs as people who found an organization based on having a dream (solving or alleviating a specific problem) and who pay no attentionto governance in the early stages of company development. However, lax governancestructures could put the whole model at risk, e.g. if no appropriate quality control mechanisms

are in place. Other interviewees perceived support of their boards as essential to scale their organizations as board members provide senior knowledge as well as access to networks. Inmore mature stages, boards might help to demonstrate the system change achieved by a socialenterprise. Furthermore, governance is perceived as crucial to manage organizationaltransitions.

Scaling does not take place just within a single organization. Instead, organizations could

collaborate with others and imitators appear that further scale an approach. Replication of theapproach by others is depicted in the light blue area.

Box 01: Lifecycle of Social Enterprises*

* Based on Heinecke & Mayer, forthcoming

Occasions that may trigger change within governance

Founder withdrawing frommanagement Expansion of shareholder baseTransition of lifecycle stage

Increasing complexity of business portfolio, environment, risk profileChanges in shareholding structureChanges in legal form


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Start-Up Scaling Maturity

Boardcomposition

Tasks and roles

Development of vision and mission Definition of value proposition,

performance indicators,benchmarks

Examination of business plan and forecasts

Development of board procedures Consultation of key stakeholders to

increase legitimacy and visibility

A d a p t i o n o

f g o v e r n a n c e s t r u c t u r e

?

Enhancement and preservation ofthe culture of a social enterprise

Resource provision, networking Extension of the talent pool Definition of quality control

mechanisms and standards Examination of license

agreements Selection of affiliates

A d a p t i o n

o f g o v e r n a n c e s t r u c t u r e

?

Succession planning of chiefexecutive and management team(jointly with current managers)

Supervision of affiliates,subsidiaries, franchisees

Scaling deep Institutionalization of the

approach

Questions todiscuss

Is there a clear social need? Is the model scalable? What are the risks? Open source approach vs.

registration of trademark?

How to make it easy for others toreplicate the approach?

How to protect the approachagainst misuse?

How to use profits?

What are further businessopportunities?

Has the social enterprise achieveda system change?

Table 1: Board composition and board roles over the lifecycle of social enterprises; own illustration

Friend'

Family'

Provides'market'access'Investor'

Provides'pro5bono'support'

Legal'expert'

Government'representa


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3 Creating your board

This chapter discusses selection criteria for board members, different types of boards andfurther aspects that are important to set up a board.

3.1 Who should be on my board?

Form should follow function; the selection of board members should follow the prioritized purpose of the board. The social entrepreneurship team should consider carefully what are the priorities in the short and medium term, and design the governance structure with those priorities in mind. Overall, criteria for selecting board members refer to expertise,representation of stakeholders, networking and reputation. Those criteria can be mapped ontothe purpose of the board.

Expertise

Expertise refers to know-how and skills of board members. The below skills grid may be auseful tool for social enterprises to determine which skills and experiences are needed on their

board. 1 Small organizations might as well include skills of their management team in theskills grid and match them with skills of their board. There are certain areas of expertiseneeded by almost all boards. Those include legal, financial and accounting expertise.

Often, a board is able to make the most robust decisions on behalf of the organization whenthe board members provide different areas of expertise. Critical to the success of a diverse

board is a culture of active listening, respect for different perspectives, productive dialogue,and the shared interest of coming to a collaborative decision (as opposed to always gettingtheir way).

1 The idea of a skills grid is taken from Hudson, 2011. The skills grid presented in the manual just gives an overview of possible skills. Eachorganization has to define the skills it requires individually.

Box 02: Purpose of board members selection criteria

Purpose of board Selection criteria

Sparring partner, strategic support Expertise

Advocacy, legitimization Reputation, representation

Monitoring, compliance Audit, financial, legal expertise

Networking, resource provision Network


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Representation of stakeholders

Stakeholders include investors, customers/beneficiaries, employees, government officials or relevant community members (e.g. people who reside in the neighborhood of the socialenterprise). Multiple stakeholder boards are often perceived to have high social capital andfacilitate the acceptance of the operations of a venture by serving as a license to operate in

front of their groups. However, they can be more difficult to manage as stakeholders may beresolute in representing or defending particular interests rather than the interests of the wholeorganization (Spear et al., 2007) .

Role of shareholders

Despite common supposition, governance is not simply about protecting shareholder rightsbut about safeguarding and balancing the interests of all stakeholders.

Board membership of target group

Including interests of the target group is especially relevant for social enterprises that are pursuing empowering approaches, like microfinance institutions.

While many social entrepreneurs report that members of the target group provide valuableinsights, they are rarely included as board members. One reason is that members of thetarget group were not perceived to possess sufficient expertise and experience for assuming board positions. An alternative is to include advocates of the interests of thetarget group within the board or to have an additional customer advisory council.

Box 03: Skills grid

John Ann Daniel Susan SUM Minimum level

Business skills 1 2 0 2 5 4

Social sector experience 2 0 0 1 3 2

Founding experience 0 1 0 1 2 2

Finance skills 0 2 0 1 3 4

Fundraising skills 0 1 0 0 1 2

Legal skills 0 1 2 0 3 2

Accounting/audit skills 0 0 2 0 2 2

Marketing/public relations 1 2 0 0 3 2

[0 = no relevant experience; 1 = some knowledge; 2 = substantial skills; Red lines: Skill gaps]


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Network and Reputation

Board members with esteemed reputations within the community can legitimate the actions of a social enterprise. Furthermore, well-regarded board members can not only facilitate externalconnections for the social enterprise but also attract similarly talented and regarded people to

join the board.

Dangers of including people with esteemed reputations on boards

In early stages of the lifecycle of a social enterprise, board members with a high reputationmight hinder organizational development, because they are reluctant to take on risks that could peril their own reputation. Furthermore, well-regarded board members might intimidate others (e.g. beneficiaries) to express their opinions.


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3.3 How do I recruit the right board members?

Social enterprises often find it hard to recruit appropriate board members and thereforecompose a board out of their network of family and friends. The consequence of this is thatthe board does not possess relevant skills, representation, network and reputation.

To attract capable board members, social enterprises can

use a wide variety of referral sources, e.g. ask investors to propose members and toactivate people from their networks

research and identify people that are interested in the cause, e.g., people who are or were affected by the issue addressed by the social enterprise,

look for companies offering pro-bono services, e.g., consultancies or legal firms,

attend networking events and ask intermediaries for their support,

invite people at the center of collaborative networks to expand their own network,invite a famous, reputable person to join the board in order to increase visibility.

Intermediaries could offer platforms for people that are interested to serve on boards of

social enterprises.

The Bridgespan Group, a non-profit advisor, offers such a service. On their platform,

www.bridgestar.org , they are hosting a career center for people looking for job or board

positions in non-profits.

Further aspects that should be considered when recruiting board members:

Reflection of double bottom line: As board members have the final say in importantmanagement decisions, it is important that they feel committed to pursue the double

bottom line and are not driven by other objectives or single minded for financial or social goals. Therefore, business members should, e.g., have a track record of beingsocially responsible to prove their commitment to social issues.Choosing the right investor: As investors often require having a board seat as a

prerequisite for their investment, they have to be selected carefully concerning their goal setting. Conflicts of interest arise if their goals contradict with the goal setting of the social enterprise. Thus, cheap capital should not be the primary or single selectioncriterion for choosing investors. Furthermore, it is important that interests of differentinvestors are aligned in order to avoid intractable conflicts.Dominant personalities: Management should be aware of dominant personalities onthe board. There have been cases where dominant personalities got very influential inday-to-day business in order to pursue their personal goals. Thereby, they have put thewhole enterprise at risk. Furthermore, powerful people could intimidate other boardmembers.
http://www.bridgestar.org/http://www.bridgestar.org/http://www.bridgestar.org/


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3.4 How should I appoint board members and for what term of time?

In membership organizations, members often maintain the right to elect board members. Inorganizations without members, current board members or management choose newmembers. Appointments are then based on skill gaps identified by the board. Sometimes, third

parties appoint board members. This structure is common when an organization belongs to alarger umbrella organization (vertical board structure). When defining appointment of boardmembers, procedures for removing a board member have to be defined as well.

In order to balance expertise and representation within board membership, members of an organization as well as current board members and management should each possessthe right to nominate a certain amount of board members.

Once, appropriate board members have been identified, they should be interviewed in order tocheck their understanding of and commitment to the mission an enterprise is serving as wellas the amount of time they are willing to commit. Questions to ask in an interview, include:

What is your understanding of the organizational mission and vision?How do you perceive the positioning of the social enterprise on the continuum

between non- and for-profit?Where do you see the organization within the next 5-10 years?How much time can you devote to attending board meetings?Which skills or other benefits (like networks) can you provide to our enterprise?

Three to four years are typical terms of office of board members. Often there is a limit of twoor three terms for board membership.

Boards should have a rotation plan that ensures retention of valuable skills whilecontinuously introducing persons with new ideas, expertise and perspectives.


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3.6 How to choose the right governance structure?

There is no one size that fits all governance models of social enterprises. Specificorganizational factors like size, complexity or maturity of an organization influence theoptimal governance structure.

The following table can help social entrepreneurs to identify unique aspects of their socialenterprise and to use them considerations in creating their governance structure.

How to use this chart: Social entrepreneurs should consider all statements and then combine the proposed approaches. If none of the statements below applies, social enterprises should consider Option 1 and keep it

simple.

Fact Consequence Advice

1)The organization operatesacross several countries or

regions .

Governance could serve asa mean to include local

knowledge .

Option 2: Several boards;refer to box 04; best

practice case of Lumni

2)Several boards exist

within one organization.

The work of the several boards needs to be well

coordinated .

Option 2: Several boards;refer to box 04; best

practice case of Lumni

3)The board is facing a highworkload or tasks withinhighly specialized areas .

The capacity of thecurrent board is not

sufficient to fulfill thetasks.

Option 3: Board committees and

taskforces; refer toappendix 5.1

4)

The organization cannot offer insurance against lawsuits for their board

members.

People might be reluctant to join the board.

Option 4: Advisory council in addition to legally

binding board; refer tobox 05

5)The target group should

be represented on theboard.

Sometimes, the target group does not have theability to assume legal

liabilities .

Option 4: Advisory council in addition to legally

binding board; refer tobox 05

6)

The organization has ahybrid legal structure of

non- and for-profit entities.

Governance needs to bewell coordinated in order to safeguard the mission .

Option 5: Hybrid organizational structures;

refer to box 06; best practice cases of

Homeless World Cup and

CIES Project Table 2: Choosing the right board structure; own illustration


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Option 1: Keep it simple

The simplest structure refers to having a single governing board in addition to management.The country of origin of an organization determines the basic structure of division of management and oversight. Countries like Germany or the Netherlands have a two-tier system meaning that the management board and the supervisory board are two separateentities. In countries with a one-tier structure (like the US or the UK) all directors (executivesas well as non-executives) form a single board, called the board of directors. 2

Option 2: Organizations with several boards

Some organizations have several boards. An organization that operates in several countriesmight have a board in each country. Local boards help the organization include localknowledge and support. Furthermore, several boards have the benefit that all business unitsare tightly controlled and promote the independence of the units. On the downside, several

boards increase management overhead.

There are two possibilities to structure the relations among several boards. Either all boardshave equal rights (horizontal structure), or there is a hierarchical/vertical structure. While a

vertical structure puts more effort in ensuring adherence to the overall mission by all businessunits, it restrains the independence of the business units and requires more managementefforts. A horizontal structure is more democratic than a vertical one. However, there is thedanger that single boards loose track of the overall mission and steer towards differentdirections. If there is a reputational damage within one unit, it often damages the reputation of the whole organization.

2 For reasons of simplification we will mainly be talking about boards and board members in the manual, referring to supervisory boards,advisory boards or non-executive board members.

Box 04: Two-Tier vs. One-Tier Structure


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Include considerations on governance within scaling strategy

Additional boards are often set up during the scaling process. Often, social enterprises prioritize speed over deliberation when scaling, seizing opportunities when they seemconvenient, paying only little attention to governance structures. To prevent or remedy this, social enterprises can include a plan on how governance will evolve in their scalingstrategy. A strategic approach towards governance during scaling could promote thedissemination of an approach. Governance is, for instance, an effective mechanism tocollaborate with local partners.

Box 05: Several boards

Horizontal structure

Vertical structure: Best practice case Lumni

Lumni designs and manages social investment funds that invest in the education of diversified pools of students. In exchange, students commit to pay a fixed percentage of

their income for 120 months after graduation.

Lumni has a separate board for each regional unit. A member of each regional board is represented in the board of the head office of Lumni.By having representatives on the global level, units get the possibility to exchangeexperiences and a positive pressure is created when performance is compared among units.


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Option 3: Board committees and taskforces

Some organizations establish committees within their board to delegate ongoing functions andto leverage each board members capabilities at best. Examples are:

Audit and finance committee that is i.a. scrutinizing major capital expenditures andoverseeing the accuracy of financial statements.Human resource committee concerned i.a. with nominations and compensation.

Committees serve to increase board effectiveness by streamlining the work process. However,committee structures are often complex and increase management efforts. Thus, it isrecommended to add committees only when they are clearly needed. Instead of standingcommittees, social enterprises could establish taskforces for specific topics out of their boardand external experts, when necessary. Please see Appendix 5.1 for potential committees,

purposes and proposed membership.

Option 4: Advisory council in addition to legally binding board

Board members of social enterprises might be held liable before the law if they have not performed their duties diligently. Some of the favored board members, e.g. members of thetarget group, might not possess sufficient expertise for assuming legal liabilities. Furthermore,

board members are rarely insured in cases of lawsuits or other disasters. Therefore, it is oftenhard to recruit board members. To overcome this shortcoming, social enterprises might set up

an advisory council in addition to a legally binding board.3

Some organizations choose to establish an advisory board without any legal obligations or formal decision-making authority as an interim step before creating a more formal board(European Confederation of Directors Associations, 2010) .

3 See Community Interest Companies, 2005 for Shadow Directors

Box 06: Division of legally-binding and non-legally binding board members


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Status of serving on legally binding boards

Some people might be reluctant to join an advisory council without formal decision-making power. They rather choose to assume legal liability in order to be more powerful and express a higher status. Social enterprises may want to keep in mind the importance of status and influence in this respect.

Option 5: Hybrid organizational structures

Social enterprises sometimes combine non- and for-profit legal entities within their organization. An additional legal entity is often created out of necessity, e.g. investor requirements. It is important that the governance of both entities is well coordinated and that

both are steering towards the same mission.

Box 07: Hybrid organizational models (1/2)

Best practice case Homeless World Cup

The Homeless World Cup is an international football tournament where homeless players from over 70 countries participate. Football is used as a mechanism to end homelessness. The organization provides support to partner organizations worldwide.


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How to ensure that all board are steering towards the same mission?

Coordinating the work of several boards is not an easy job. Means that can beimplemented to facilitate coordination include the following:

Creation of a uniform reporting template used by all entitiesFacilitation of exchange and communication among entities by introducing key

peopleInviting a representative of each board to a yearly meetingComparison of performance among the entities in order to create a sense of

positive pressure

Box 07: Hybrid organizational models (2/2)

Best practice case CIES Project

CIES delivers medical care to communities in need in Brazil by using mobile medical

centers. It provides a self-sufficient business model


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3.7 What is the right size for my board?

The optimal size of a board depends on the needs of an organization. In the context of socialenterprises, large boards are defined as boards with more than 12 members. Large boardsusually imply high administrative efforts due to coordination among board members.

Box 08: Size of boards

While research on board effectiveness suggests that smaller boards positively influenceorganizational performance, social enterprises often tend to have large boards. Largeboards are appropriate if primarily used for resource acquisition like fundraising or expanding the human capital pool.

Decision making in large boards:Organizations that have a large board should define a core-working-group and set thequorum for board decisions accordingly.

There are some alternatives to overcome the shortcoming of insufficient experience and representation on small boards:

Invite external experts to present on board meetingsSet up working groups for specific topics for a specific amount of time

Ask well-regarded people for testimonials on your webpage


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4 Managing your board for optimal performance

Managing a board can demand significant time and efforts. However, a well-run board can lifta significant burden off of the management team in the short-term and ensure the long-term

success of the social enterprise.This chapter discusses tasks and responsibilities of board members as well as evaluation of

board work and reporting procedures.

4.1 What are the rights and duties of board members?

There needs to be a clear delineation between the roles of governance and management.Governance is about ensuring and guiding, whilst management is about doing. Boards take

the long-term perspective and avoid becoming involved in day-to-day operational matters.Management has to ensure that the boards decisions are implemented.

There are two major categories to group board responsibilities: support and supervision. Intheory, these areas are often perceived as mutually exclusive. However, they should rather beseen as complementary. Optimal board behavior refers to the upper right square in thefollowing box.

Box 09: Board roles (1/2)

[Please see Kreutzer & Jacobs, 2011 for the figure on board roles as well as a description of the types]


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Support

Support refers to three areas. First, boards constitute sparring partners that provide strategicguidance and challenge management. Second, boards help with sourcing. They are providing

access to their networks to foster business relations of the social enterprise, e.g. by helpingwith fundraising. Third, boards serve as ambassadors for the mission of a social enterpriseand thus, provide advocacy and legitimization.

Supervision

Supervision primarily refers to safeguarding the mission of a social enterprise. Boards aremonitoring performance of management against benchmarks that reflect the double bottomline. Thus, monitoring concerns social as well as financial performance. While financial

indicators are easy to measure and compare, social performance is often hardly seizable. Inorder to avoid an inordinate focus on financial performance, social enterprises should payattention to defining performance indicators for the social mission.

Supervision also includes compliance. It is the duty of the board to ensure that managementcomplies with its own governing document as well as with legal requirements. Ideally, boardsshould have a list of compliance requirements and check periodically if they are being met.

Approval of management decisions

A task in between support and supervision is the approval of certain management decisions.Board approval should serve to guarantee conformance with the overall mission. Furthermore,

Box 09: Board roles (2/2)

An apathetic board fulfills neither the support nor the supervision function and thus, ishighly ineffective in performing its tasks.

The inspector mainly performs controlling functions like overseeing management and budgeting or reviewing the chief executive. The collaboration of management and theinspector is low. The inspector mostly determines next steps without consulting themanagement team.

The consultant is primarily supporting or coaching an organization and its management by introducing management to their own networks, by establishing a workingrelationship between board and staff or by representing the organization on publicevents. The consultant is discussing challenges as well as solutions together with themanagement team.

A board in the upper right square combines characteristics of inspector and consultant.Depending on the circumstances, it defines whether and inspector or a consultant isnecessary.

[Please see Kreutzer & Jacobs, 2011 for the figure on board roles as well as a description of the types]


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board approval constitutes a form of legitimization to communicate certain decisions in frontof the team. Topics that require board approval include the following.

Annual budgetDecisions on financing and changes in ownership structureSuccession and remuneration of chief executive and its management teamDecisions about overall strategy

There should be defined levels upon which board approval is necessary in order to spare board capacities. For example, board approval is only needed for investments above a certainthreshold.

4.2 What is the role of the founder within governance?

Social entrepreneurs are unique individuals. They possess the passion to pursue their missionrelentlessly and without regard to resources currently at hand (Dees, 2001) . This can come ata cost, sometimes to the detriment of the employees work/life balance and other times to thedetriment of the well-meaning board members.

Governance processes are essential, especially when the organizational structures become toocomplex to handle for a single person. Further along in the lifecycle of the social enterprise,governance ensures that the founder`s vision and legacy are maintained. By including andempowering others in the guidance of an organization, governance mechanisms both ensure

continuity of the founders vision, and success beyond the efforts of one person.

4.3 What are the roles and responsibilities of the board chair?

The roles of chief executive and chairman are fundamentally different: While theresponsibilities of the chief executive refer to running the organizations business, the boardchair is responsible for running the board. Duties of the chair include determination of meeting dates, addressing conflicts among members, representation of the organization on

public events as well as boundary spanning between board and management.

While boards need experts for specific topics (e.g. finance experts), the chairperson should possess knowledge in several areas as well as broad experience of serving on boards.

In one-tier or voluntary boards, a single person often exercises the roles of chairman and chief executive. Such a structure erodes the system of checks and balances and constrains theindependence between board and management. However, a joint leadership structure providesa unified focus and communicates strong leadership to the external community, whilesplitting these two functions bears costs and administrative efforts. Thus, organizations have

to trade off between effective monitoring (separation of the two functions) and strongleadership.


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While& small& enterprises& might& not& have& sufficient& resources& to& appoint& a& separate&chairman,&larger&organizations&should&split&those&roles.

If a single person holds both positions, the board should appoint another board member tolead on any issue that requires separation of duties such as reviewing the compensation of thechief executive. Furthermore, if a new chief executive is appointed it is advisable to pair thenew chief executive with a chairman who is more seasoned.

Box-10:-Governance-vs.-Management--

-

--


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4.4 How to create a board culture?

In order to increase commitment of board members, induction of board members as well asactive board management is crucial.

Onboarding the Board

New board members should be given an introduction about the organizations work, currentstrategies and plans. An extensive introduction is important because board members andsocial entrepreneurs often have different backgrounds, which might lead to a clash of culturesif their understandings of the mission as well as the business model of the social enterprise arenot aligned. During the first weeks, new members should be given a mentor that providesadvice and answers to open questions. Furthermore, new board members should beintroduced to the team in order to increase familiarity. An atmosphere of familiarity makes it

easier for the board to voice criticism.

In order to get a deeper insight into the operations of an organization, board membersshould actively seek to get in touch with the staff and not just with the management team.

Recognize the board, and value their commitments appropriately

While board members of social enterprises are rarely incentivized by a monetaryremuneration, some social enterprises recognize and reward board members emotionally for

their time and commitment. Beyond sending thank you notes, some social enterprises invite board members site visits to the field or to join work outings. Compensating for expensesincurred out of pocket, depending on financial situation, may be a reasonable gesture.

Frequency and use of meetings

Board meetings should be held at least four times a year to keep board members closely ontrack with the development of an organization and to maintain familiarity among board

members as well as between board and management. Meetings can take place over the phone.However, there should be at least one face-to-face meeting per year. Once per year, thereshould be a skull session to discuss strategic issues and a roadmap for the next 3-5 years.

Box 11 : Dos and Donts for working with a board*

Define success jointly with board Let boards create their own agendasDirect questions to specific membersPlan annual meeting cycleFocus on shaping the futureInvite external experts

Spend time on the trivial Short term and reactive biasOverly involve the board Overloaded meetings with details

Just review the past Let executives control the board


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Board decisions require a quorum, or minimum number of board members present for officialdecisions. In order to diminish administrative efforts during board meetings, voting

procedures as well as required majorities should be determined previously.

Box 12 : Make meeting s meaningful Information about past months as well as an agenda should be sent in advance of board meetings allowing board members sufficient time to add topics and prepare. If themanagement wants to propose substantial changes, e.g. amendments to theconstitution or strategy of an organization, the proposals should as well be sent inadvance.

1) Agenda

There should be a moderator in order to stay on track with the agenda.

Topic Duration Administrative issues 5 minutesWrap-up of past months, short discussion of open questions 30 minutesMatters for approval: group to approve en bloc 30 minutesDiscussion of strategic issues, e.g.:

Financial situation and annual budget,Human resourcesScaling

2 hours

Development of concrete action plan 40 minutesEvaluation of meeting 15 minutes

2) Action Plan

Boards should agree upon an action plan that contains concrete milestones. Progressshould be evaluated against that action plan. Action plans serve to increase thecommitment to decisions made during board meetings.

Aim Concrete Steps Due till Responsibility Status

Development of amarketing strategy

Identify core target groups Nov 2012 [Name]Identify and contact multipliers Jan 2013 [Name]

Increase of number of beneficiaries to5.000

Increase partnerships with

local organizations Jul 2013 [Name]Promote model on fairs or exhibitions Ongoing [Name]

Develop best practice guideto explain the concept Mar 2013 [Name]

3) Follow-up

The minutes of a board meeting should contain place, day and time of meeting, participants, decision making process, deliberations, voting results and manner how

resolutions were passed. Minutes should address the key factors that influenced major board decisions but not be a stenographic record of the meeting.


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4.5 How should management report to the board?

Reporting increases transparency and serves to legitimate the existence of an organization.Regular updates about an organizations development keep board members involved andserve to maintain trust.

Management should report on a monthly basis or at least quarterly to their board members,informing them about the current situation of their organization. Reports in the course of theyear should contain the following 4:

cash flows, comparison of budget and actual financials,social performance compared to benchmarks,management comments about important incidents, development of externalfactors, etc. (max 2 pages).

A more detailed report containing balance sheet as well as profit and loss statement isrequired at the end of a year.

First of all, social enterprises have to set up an appropriate reporting system. For this purpose,management and board need a clear and common understanding of the value proposition of the enterprise. The value proposition contains social as well as financial components. Whilethe social element should always be primary, financial aims reach from earned incomestrategies to financial sustainability to generation of profits. Measures of financial success can

be adopted from the corporate world. Social entrepreneurs that are not familiar with financial

reporting should consult their board members and benefit from their expertise. A common understanding regarding distribution of profits is necessary in order tominimize the risk of conflicts e.g. with investors that have decision-making power on theboard.

Predefined measures of social impact are often not available and social entrepreneursthemselves are often not aware of their impact value chain. Please refer to the SocialInvestment Manual (Achleitner et al., 2011) and to appendix 5.4 for a description as well asan example of the impact value chain. Once social enterprises have defined their impact-valuechain, performance indicators have to be determined and monitoring programs should beestablished.

4 Please refer to appendix 5.2 for a template of a quarterly update.


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Box 13: Reporting Cycle*

*own illustration


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4.6 How to evaluate the work of a board?

Board members join boards because they want support guidance of the social enterprise andwant their time and effort to be helpful. Social enterprises should communicate regularly withtheir board members about what is working well on the board, and what is not working well.Likewise, boards should take this feedback as an opportunity to make a stronger impact:Instead of assuming that good intentions and goodwill lead to effective governance, boardsshould as well pay attention to evaluating their own performance.

At the end of each meeting: Review

Boards reflect on their own performance at the end of a meeting. A good question to ask themselves at the final meeting of a year is: What would have happened if we wouldnt have

met last year?

Between meetings: Informal conversations

The management team should reach out to the board to surface any issues or to ask for guidance. The board members should communicate with each other about any outstandingissues or conflicts that are preventing effectiveness or affecting the culture of the board.

Every few years: Board self assessment questionnaires

Boards should evaluate their effectiveness and identify development potentials. Appendix 5.3contains a generic questionnaire that can help with this process. Social enterprises shouldfurther tailor this questionnaire depending on their current situation. Such questionnairesrequire significant time and should only be conducted every couple of years. An independent

person should analyze them in order to encourage board members to be open and honest.

Box 14: Areas for self-evaluation (See Appendix 5.4)

Board roles Policy making practices Planning practices Fiscal management practices Fund raising practices

Board structure & practices Board committees Board meetings Board membership and orientation Board-executive relationship


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5 Appendix

5.1 Committees 5

Task/Purpose Proposed Members

Audit and finance committee

Finance: Help with preparation of annual budget; review performance against budget; scrutinize major capital expenditures

Finance experts

Investment: Appoint and oversee investment advisors;advise on investment strategy

Experts with investment and valuation know-how

Audit : Oversee annual audit; review adequacy of internal control systems; oversee risk management; oversee theaccuracy of financial statements and reports

Audit experts

Compliance: Ensure compliance with agreed structuresand law; deal with breaches

Legal experts

Fundraising: Oversee fundraising strategy; contributeideas and contacts; provide governance oversight of

fundraising activities*

Board members with a widenetwork and fundraisingskills

Human resource/nomination/remuneration committee

Compensation: Advise board on remuneration of CEO;advise on overall remuneration policy

Senior board members;independent board members

Nomination: Plan board and committee succession;

manage search and selection process; oversee election process and induction of new board members

Independent board members

Human resources: Oversee employment policy and procedures; hear disciplinary appeals and complaints

Well connected board members

Service and research committee

Provide advice on issues regarding main services and support research and development of new concepts

Members with specific know-how and background in theorganizations industry

* It is not common to have fundraising committees in the corporate world. However, when boards should helpwith fundraising such a committee might be relevant.

Table 3: Board committees: Purposes and membership; own illustration

5 If necessary, the proposed committees could as well be split up in several committees based on a division of tasks.


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5.2 Template for a quarterly update 6

QUARTERLY UPDATE

Company: [] Quarter: [] Date: []

Key figures:Quarter ended Next quarter forecasts

Sales [] []

Costs [] []

Available liquidity [] []

Activity development over the period:Operation:

- [e.g. organizational developments, events, ]

Production:- [e.g. set up of new subsidiaries, development of further business opportunities,

additional income streams, ]

Research & Development:- [e.g. impact measurement, external validation, ]

Main strengths over the period:- [e.g. cooperation, use of resources, ]

Main weaknesses over the period:- [e.g. excessive expenditures, pending payments, .]

Comments and additional information on the social impacts:- [e.g. increase in number of beneficiaries, generation of employment opportunities, ]

Key aims for the next quarter:- [e.g. opening new subsidiaries, development of best-practice guides, in house training,

]

6 We would like to thank Andreas Heinecke, founder of Dialogue Social Enterprise, as well as PhiTrust for the kind provision of their reporting template.


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5.3 Example of a board self-assessment questionnaire 7

Corporate Fund

Nonprofit BoardSelf-Assessment Questionaire

This questionnaire will assist you and your colleagues in assessing your boards managementof its role on behalf of the organization you serve. After everyones response are tallied,members will have the opportunity to discuss the outcomes and to decide on any steps thatmight strengthen the boards performance.

It is important that you not see this questionnaire as any kind of the test, but rather as ahelpful tool for increasing board effectiveness.The questionnaire is divided into 12 sections dealing with important areas of nonprofit boardoperations. For the statement in each section, you will be asked to choose from among thefollowing responses:

1 = Strongly Agree with the statement.2 = Agree with the statement.3 = Disagree with the statement.4 = Strongly Disagree with the statement.DK = Dont Know (just dont have enough information)

NA = Not Applicable to your board or organization

Please be forthright in your responses. Only straightforward answers can be of real help toyour boards self-assessment.Circle the response that most closely reflects your opinion on each of the statements in thisquestionnaire.

7 Taken from: The Corporate Fund: http://www.nhnonprofits.org/boardselfassessment.cfm ; we would like to thank Edward Tomey, thedeveloper of the questionnaire, for his kind permission to include the questionnaire within the manual. The NH Center for Nonprofitsoversees the online administration of the questionnaire.

(organization) (month/year)
http://www.nhnonprofits.org/boardselfassessment.cfmhttp://www.nhnonprofits.org/boardselfassessment.cfmhttp://www.nhnonprofits.org/boardselfassessment.cfmhttp://www.nhnonprofits.org/boardselfassessment.cfm


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Section 1: Board-RolesAgree Disagree Dont

KnowNot

Applicable

1. The Roles and responsibilities of our board are clearly defined and separatefrom those of the staff.

1 2 3 4 DK NA

2. Our board takes the primaryresponsibility for setting theorganizations policies.

1 2 3 4 DK NA

3. Board members seldom assume rolesand responsibilities that belong tostaff.

1 2 3 4 DK NA

4. The board delegates to theorganizations chief executivesufficient authority to lead the staff and carry out the organizationsmission.

1 2 3 4 DK NA

5. When a problem or conflict arises between board and staff, we movequickly and effectively to resolve it.

1 2 3 4 DK NA

Section 2: Policy Making Practices

1. If a new policy is needed for the boardor the organization as a whole, theissue is clearly presented to anddiscussed by the board.

1 2 3 4 DK NA

2. The full board approves all neworganizational policies before they areimplemented.

1 2 3 4 DK NA

3. Policies exist for key areas such asfinance, personnel, safety, and ethics,and all functions unique to our organizations work.

1 2 3 4 DK NA

4. Our organizations policies areeffectively communicated to all boardmembers.

1 2 3 4 DK NA


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Agree Disagree Dont Know

NotApplicable

5. The board reviews policies at least

annually, and updates them as needed.1 2 3 4 DK NA

Section 3: Planning Practices

1. Our organizations mission and purpose are clearly understood andaccepted by our board.

1 2 3 4 DK NA

2. The members of the board havereached consensus on a vision thatindicates where the organization will

be headed over the next 3-5 years.

1 2 3 4 DK NA

3. The full board collaboratively reviewsand updates the organizationsstrategic plan at least every two years.

1 2 3 4 DK NA

4. Staff develops and carries out annual

plans based on our boards approvedstrategic plan.

1 2 3 4 DK NA

5. The board is well-briefed by the staff on annual plans developed by staff.

1 2 3 4 DK NA

Section 4: Fiscal Management Practices

1. The organizations annual budget isfully discussed by the board prior to its approval.

1 2 3 4 DK NA

2. The fiscal status of our organizations is regularly reviewedand needed board actions are takenthoughtfully but quickly.

1 2 3 4 DK NA

3. Board leadership takes steps to

ensure that fiscal reports arethoroughly understood by boardmembers.

1 2 3 4 DK NA


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NotApplicable

4. The annual report of our

organizations independent auditorsis reviewed and needed actions aretaken in a timely way.

1 2 3 4 DK NA

5. Board members are well-aware of their legal responsibilities for theorganizations fiscal management.

1 2 3 4 DK NA

Section 5: Fund Raising Practices

1. Our organizations fund raisingneeds and strategies are understood

by the board.

1 2 3 4 DK NA

2. The board has a clear policy on theindividual board membersresponsibility to raise funds.

1 2 3 4 DK NA

3. Board members play an active role

in the organizations fund raising efforts.

1 2 3 4 DK NA

4. The board periodically engages inlong-range fiscal planning to ensurean adequate flow of resources to theorganization over time.

1 2 3 4 DK NA

5. Capital fund raising needs arereviewed regularly by our board

and action is taken as necessary.

1 2 3 4 DK NA

Section 6: Board Structure & Practices

1. Our boards structure allows us toget our work done well and in atimely way.

1 2 3 4 DK NA

2. The boards standing committeesstreamline our work process andincrease board effectiveness.

1 2 3 4 DK NA


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NotApplicable

3. Our boards size is about right. 1 2 3 4 DK NA

4. Our members terms on the boardare about the right length.

1 2 3 4 DK NA

5. We consciously select and prepareour board officers for their leadership responsibilities.

1 2 3 4 DK NA

6. Board members have a workingknowledge of the organizations

by-laws.1 2 3 4 DK NA

Section 7: Board Committees

1. Task and standing committeesassignments generally reflect theinterests and expertise if individual

board members.

1 2 3 4 DK NA

2. I serve on at least one standing board committee.

1 2 3 4 DK NA

3. Any standing committee I serve oncompletes its tasks in an effectiveand timely way.

1 2 3 4 DK NA

4. Most board members actively participate in standing committeeactivities.

1 2 3 4 DK NA

5. Any standing committee I serve onreports to the board at leastquarterly.

1 2 3 4 DK NA

6. Each standing committeeestablishes its goals and plans at the

beginning of the fiscal year.

1 2 3 4 DK NA


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Section 8: Board MeetingsAgree Disagree Dont

KnowNot

Applicable

1. Our boards meeting schedule hasthe right number and length of meetings.

1 2 3 4 DK NA

2. The agendas of our board meetingsand supporting written material areusually given out in advance of meetings

1 2 3 4 DK NA

3. Board leaders and standingcommittee members contributeitems to meeting agendas.

1 2 3 4 DK NA

4. Board meetings are generally well-run and make good use of members time.

1 2 3 4 DK NA

5. Our board tends to brainstorm andidentify creative approaches to

problems.

1 2 3 4 DK NA

6. Our board thoroughly examines the pros and cons of all major decisions.

1 2 3 4 DK NA

Section 9: Board: Membership & Orientation

1. The areas of expertise, skills, andother factors we need to be aneffective board for this organizationare adequately represented amongcurrent board members.

1 2 3 4 DK NA

2. Our board successfully identifiesthe expertise, skills, and other contributions we need from

potential new board members tomaintain or increase our effectiveness.

1 2 3 4 DK NA


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NotApplicable

3. We actively recruit new boardmembers based on identified needs.

1 2 3 4 DK NA

4. When seeking members for the board, we use a wide variety of referral sources within thecommunities we serve.

1 2 3 4 DK NA

5. Our board and staff inform new board members aboutresponsibilities and importantorganizational information througha structural new member orientation program.

1 2 3 4 DK NA

Section 10: Board-Executive Relationship

1. Our board uses a structured and

participative process to recruit andhire our organizations chief executive.

1 2 3 4 DK NA

2. The board has approved a written job description that clearly spellsout the chief executivesresponsibilities and authority.

1 2 3 4 DK NA

3. The chief executives performanceis formally assessed at least

annually based on objectivesestablished at the beginning of thefiscal year.

1 2 3 4 DK NA

4. The chief executive receivesongoing feedback regarding job

performance in addition to anyformal assessments.

1 2 3 4 DK NA

5. Board members provide thenecessary support that allows thechief executive to carry out the rolesuccessfully.

1 2 3 4 DK NA


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5.4 Example of impact value chain 8

Figure 1: Impact Value Chain taken from Mair & Sharma, forthcoming; based on Clark et al., 2004

8 We would like to thank Johanna Mair for the kind provision of the chart.


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5.6 Corporate governance guidelines and codes of best practice

Country/Region Code/Guideline Main content Mandatory for Available at

Australia

Corporate GovernancePrinciples andRecommendations

Structure and diversity of board; disclosureand risk management Listed entities

http://www.asx.com.au/governance/corporate-governance.htm

Austria Austrian Code of Corporate

Governance

Transparency, disclosure, competencies and

qualifications of boardListed entities

http://www.corporate-governance.at/

Belgium

The 2009 Belgian Code onCorporate Governance

Governance structure; board efficiency andevaluation; committees Listed entities

http://www.corporategovernancecommittee.be/en/2009_code/default.as

px

Code Buysse: Corporategovernance for non-listedenterprises

Composition, function, appointment,evaluation and compensation of board -

http://www.codebuysse.be/en/default.aspx

Brazil Code of Best Practice of Corporate Governance

Mission, composition, background andassessment of board; relationship withrelated parties

-http://www.ibgc.org.br/CodeBestPr actices.aspx

Canada

Corporate Governance: Guideto Good Disclosure

Composition, independence, tasks andcompensation of board

Specifieddisclosurerequirements

http://www.tmx.com/en/listings/tsx _issuer_resources/corporate_governance.html

Building on Strength:Improving Governance andAccountability in Canada'sVoluntary Sector

Role, transparency, structure and successionof board -

http://www.vsi-isbc.org/eng/products/reports.cfm

Denmark Recommendations onCorporate GovernanceTransparency, responsibilities, compositionand remuneration of board Listed entities

http://www.corporategovernance.dk /sw58113.asp
http://www.asx.com.au/governance/corporate-governance.htmhttp://www.asx.com.au/governance/corporate-governance.htmhttp://www.corporate-governance.at/http://www.corporate-governance.at/http://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.codebuysse.be/en/default.aspxhttp://www.codebuysse.be/en/default.aspxhttp://www.ibgc.org.br/CodeBestPractices.aspxhttp://www.ibgc.org.br/CodeBestPractices.aspxhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.vsi-isbc.org/eng/products/reports.cfmhttp://www.vsi-isbc.org/eng/products/reports.cfmhttp://www.corporategovernance.dk/sw58113.asphttp://www.corporategovernance.dk/sw58113.asphttp://www.corporategovernance.dk/sw58113.asphttp://www.corporategovernance.dk/sw58113.asphttp://www.vsi-isbc.org/eng/products/reports.cfmhttp://www.vsi-isbc.org/eng/products/reports.cfmhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.tmx.com/en/listings/tsx_issuer_resources/corporate_governance.htmlhttp://www.ibgc.org.br/CodeBestPractices.aspxhttp://www.ibgc.org.br/CodeBestPractices.aspxhttp://www.codebuysse.be/en/default.aspxhttp://www.codebuysse.be/en/default.aspxhttp://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.corporategovernancecommittee.be/en/2009_code/default.aspxhttp://www.corporate-governance.at/http://www.corporate-governance.at/http://www.asx.com.au/governance/corporate-governance.htmhttp://www.asx.com.au/governance/corporate-governance.htm


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Europe

Green paper on the EUcorporate governanceframework

Composition, evaluation and remunerationof board; risk management -

http://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htm

Corporate GovernanceGuidance and Principles for Unlisted Companies in Europe

Composition, remuneration and efficiency of board; collaboration with management -

http://www.ecoda.org/Publications.html

Finland Finnish Corporate GovernanceCode 2010Composition, appointment, charter andevaluation of board

Listed entities http://www.cgfinland.fi/content/view/16/63/lang,en/

France Recommendations on corporategovernancePrinciples, independence, organization andtransparency of board Listed entities

http://www.afg.asso.fr/index.php?o ption=com_content&view=article&id=98&Itemid=87&lang=en

Germany German Corporate GovernanceCode

Cooperation with management; tasks,composition, compensation and transparencyof board; reporting

Listed entitieshttp://www.corporate-governance-code.de/eng/kodex/index.html

Greece SEV Corporate GovernanceCode For Listed CompaniesRole, composition and evaluation of board;internal controls Listed entities

http://www.sev.org.gr/online/index.aspx?mid=694&lang=en

Hungary Corporate GovernanceRecommendationsRole, independence, remuneration andevaluation of board; risk management -

http://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20gover nance
http://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htmhttp://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htmhttp://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htmhttp://www.ecoda.org/Publications.htmlhttp://www.ecoda.org/Publications.htmlhttp://www.cgfinland.fi/content/view/16/63/lang,en/http://www.cgfinland.fi/content/view/16/63/lang,en/http://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.corporate-governance-code.de/eng/kodex/index.htmlhttp://www.corporate-governance-code.de/eng/kodex/index.htmlhttp://www.sev.org.gr/online/index.aspx?mid=694&lang=enhttp://www.sev.org.gr/online/index.aspx?mid=694&lang=enhttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.bse.hu/topmenu/issuers/corporategovernance/cgr.html?pagenum=2&query=corporate%20governancehttp://www.sev.org.gr/online/index.aspx?mid=694&lang=enhttp://www.sev.org.gr/online/index.aspx?mid=694&lang=enhttp://www.corporate-governance-code.de/eng/kodex/index.htmlhttp://www.corporate-governance-code.de/eng/kodex/index.htmlhttp://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.afg.asso.fr/index.php?option=com_content&view=article&id=98&Itemid=87&lang=enhttp://www.cgfinland.fi/content/view/16/63/lang,en/http://www.cgfinland.fi/content/view/16/63/lang,en/http://www.ecoda.org/Publications.htmlhttp://www.ecoda.org/Publications.htmlhttp://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htmhttp://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htmhttp://ec.europa.eu/internal_market/consultations/2011/corporate-governance-framework_en.htm


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India Corporate GovernanceVoluntary GuidelinesAppointment, responsibilities, independenceand remuneration of board -

http://www.nfcgindia.org/home.html

International

ICGN: Global CorporateGovernance Principles

Responsibilities, independence,appointment, composition and evaluation of

board; risk management; remuneration-

http://www.icgn.org/best- practice.php

OECD Principles of CorporateGovernance

Disclosure; transparency; responsibilities of board -

http://www.oecd.org/document/49/

0,3343,en_2649_34813_31530865_ 1_1_1_1,00.html

Italy Corporate Governance CodeRole, composition, independence,committees, remuneration and appointmentof board

-

http://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htm

Japan

Principles of CorporateGovernance for ListedCompanies Transparency; responsibility of board Listed entities

http://www.tse.or.jp/english/rules/cg/

Luxembourg

The Ten Principles of Corporate Governance of theLuxembourg Stock Exchange Duties, composition, independence,evaluation and remuneration of board Listed entities

http://www.bourse.lu/application?_f lowId=PageStatiqueFlow&content=services/CorporateGovernance.jsp

NorwayThe Norwegian Code of Practice for CorporateGovernance

Tasks and remuneration of board; risk management Listed entities

http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/
http://www.nfcgindia.org/home.htmlhttp://www.nfcgindia.org/home.htmlhttp://www.icgn.org/best-practice.phphttp://www.icgn.org/best-practice.phphttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.tse.or.jp/english/rules/cg/http://www.tse.or.jp/english/rules/cg/http://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.nues.no/English/The_Norwegian_Code_of_Practice_for_Corporate_Governance/http://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.bourse.lu/application?_flowId=PageStatiqueFlow&content=services/CorporateGovernance.jsphttp://www.tse.or.jp/english/rules/cg/http://www.tse.or.jp/english/rules/cg/http://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.borsaitaliana.it/borsaitaliana/regolamenti/corporategovernance/corporategovernance.en.htmhttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.oecd.org/document/49/0,3343,en_2649_34813_31530865_1_1_1_1,00.htmlhttp://www.icgn.org/best-practice.phphttp://www.icgn.org/best-practice.phphttp://www.nfcgindia.org/home.htmlhttp://www.nfcgindia.org/home.html


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Poland Code of Best Practice for WSEListed CompaniesTransparency; remuneration; tasks of management and supervisory board -

http://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdf

Portugal CMVM Corporate GovernanceCodeManagement and supervisory board; generalmeetings and transparency Listed entities

http://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbm

m.pdf

South Africa

King Code of Governance for South Africa Responsible leadership; boardresponsibilities; composition and

collaboration; ethical foundation;transparency; risk management

Listed entitieshttp://african.ipapercms.dk/IOD/KI

NGIII/kingiiicode/

Spain Unified Good GovernanceCode of Listed companiesShareholder assembly; bylaw restrictions;

board of directors Listed entities

http://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unif icado_Ing_04en.pdf

Sweden Swedish Corporate GovernanceCodeShareholder meetings; remuneration, tasksand composition of board Listed entities

http://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdf

Switzerland Swiss Code of Best Practice for Corporate Governance Shareholders; function and composition of board; transparency -

http://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap

_swiss-code_corp-govern_20080221_en.pdf

TheNetherlands

Dutch Corporate GovernanceCode

Tasks, competencies and remuneration of management board; transparency; conflictsof interest; composition, tasks andindependence of supervisory board;shareholder meetings

Listed entities,largecorporations

http://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdf
http://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://african.ipapercms.dk/IOD/KINGIII/kingiiicode/http://african.ipapercms.dk/IOD/KINGIII/kingiiicode/http://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.commissiecorporategovernance.nl/page/downloads/DEC_2008_UK_Code_DEF__uk_.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.economiesuisse.ch/de/PDF%20Download%20Files/pospap_swiss-code_corp-govern_20080221_en.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.corporategovernanceboard.se/media/45322/svenskkodbolagsstyrn_2010_eng_korrigerad20110321.pdfhttp://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://www.cnmv.es/DocPortal/Publicaciones/CodigoGov/Codigo_unificado_Ing_04en.pdfhttp://african.ipapercms.dk/IOD/KINGIII/kingiiicode/http://african.ipapercms.dk/IOD/KINGIII/kingiiicode/http://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.cmvm.pt/EN/Recomendacao/Recomendacoes/Documents/2010consol.Corporate%20Governance%20Recommendations.2010.bbmm.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdfhttp://www.corp-gov.gpw.pl/assets/library/english/regulacje/bestpractices%2019_10_2011_en.pdf


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UnitedKingdom

The UK Corporate GovernanceCode

Leadership; effectiveness; accountability;remuneration and relation with shareholders

Listed entitieshttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdf

USA NYSE Corporate GovernanceRulesIndependency, remuneration and tasks of directors; transparency Listed entities

http://www.nyse.com/pdfs/finalcorpgovrules.pdf
http://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.nyse.com/pdfs/finalcorpgovrules.pdfhttp://www.nyse.com/pdfs/finalcorpgovrules.pdfhttp://www.nyse.com/pdfs/finalcorpgovrules.pdfhttp://www.nyse.com/pdfs/finalcorpgovrules.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdfhttp://www.frc.org.uk/images/uploaded/documents/UK%20Corp%20Gov%20Code%20June%2020102.pdf


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5.7 Rules of procedure for boards 9

Rules of Procedure for the

Advisory Board

of

[Name of Social Enterprise]

1. General

1.1 The Advisory Board of the Company shall perform its duties in accordance withapplicable law, the Articles of Association of the Company, these rules of procedure(Rules of Procedure ) and the resolutions of the Shareholders Meeting.

1.2 The Advisory Board shall cooperate closely with the other bodies of the Company, inparticular with the Shareholders Meeting and the Management Board.

1.3 The members of the Advisory Board are appointed and removed by the shareholdersmeeting. The term of the members of the Advisory Board is 5 years (the Term ).

1.4 The members of the Advisory Board shall not receive any remuneration for their work.They shall be reimbursed by the Company for any reasonable expenses, which theyincur in connection with their service as members of the Advisory Board.

2. Role of the Advisory Board

2.1 The Advisory Board advises the Management Board of the Company upon its re-

quest. He does not have the role of a supervisory board.2.2 The Advisory Board authorizes (or refuses his authorization for) any matters which

require the consent of the Advisory Board according to the Rules of Procedure for theManagement Board or for which the managing directors seek the approval of the

Advisory Board.

2.3 The Advisory Board may also retroactively approve the implementation of anymatters, which require the consent of the Advisory Board.

2.4 The Advisory Board decides in particular about the approval of the annual businessplan, in particular the budget plan, which the Management Board prepares for theupcoming business year.

2.5 The Advisory Board shall also receive the monthly overview of the financial situationof the Company, which the Management Board prepares.

2.6 The approval of the Advisory Board is not required if the respective transaction isincluded in the adopted annual budget.

2.7 The Advisory Board may, if deemed appropriate, also grant its approval for certainmatters in advance.

3. Convocation of the Advisory Board

3.1 The Chairman of