Guide One Governance

Guide One Governance

Governance in Employers’ Organizations

Designing and implementing sound governance practices

The Effective Employers’ Organization

Produced for the Bureau for Employers’ Activities of the International Labour Organizationby faculty members of the University of Geneva International Organizations MBA

InternationalLabourOrganization

A series of “hand-on” guides to building and managing

effective employers’ organizations

The Effective

Employers’ Organization

Bureau for Employers' Activities

International Labour Office

CH-1211 Geneva 22

Switzerland

Fax: (41 22) 799 8948

E-mail: [email protected]


Guide Two Strategy

Guide Three Advocacy

Guide Four Revenue Building

The package is

designed to help executives, directors and

managers in employers' organizations to build and

run their organizations more strategically and more

effectively.It is aimed primarily at those setting up, building

and managing national level employers'

organizations in less developed countries and

economies in transition.It will however provide a wealth of advice for

regional and sectoral organizations that exist to

represent the interests of employers, and to

national level employers' organizations in developed

countries. This will be the case particularly where

organizations are considering or undertaking a

strategic review of the way they currently operate.

Effective Employers' Organization

Covers_guides_EO_ultime.prnC:\LAVORI_PC\BIT\2005\1892_Guides_EO_Print\Cover EO En corrette\Covers_guides_EO.cdrmercoled 16 novembre 2005 14.29.03

o o co o e: o o ge e co sta pa te CComposita Retino predefinito


… a series of “hands-on” guides to building and managing




… designing and implementing sound governance practices

Produced for the Bureau for Employers’ Activities of the International Labour Organization

by faculty members of the University of Geneva International Organizations MBA

Copyright © International Labour Organization 2005

First published 2005

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ILO

“The Effective Employers’ Organization”

A series of “hands-on” guides to building and managing effective employers’ organizations

Geneva, International Labour Office, 2005

Guide 1. Governance: ISBN 92-2-117399-2

Guide 2. Strategy: ISBN 92-2-117400-X

Guide 3. Advocacy: ISBN 92-2-117401-8

Guide 4. Revenue Building: ISBN 92-2-117402-6

The Effective Employers’ Organization. Complete set of 4 guides: ISBN 92-2-117403-4 (print)

The Effective Employers’ Organization. Complete set of 4 guides: ISBN 92-2-117404-2 (CD-ROM)

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… designing and implementing sound governance practices

CONTENTS

SECTION ONE How to use this guide 1

SECTION TWO Employers’ organizations and governance 3

SECTION THREE Institutions of governance – the Member Assembly; the Board;the Chief Executive and management

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SECTION FOUR Tools of governance – rules; committees and project groups;transparency and communication

19

SECTION FIVE The sound governance checklist 25

SECTION SIX What the business gurus say(contributed by I. H. Dror – University of Geneva)

31

SECTION SEVEN Further reading and links on governance and employers’organizations

35

SECTION EIGHT Sample employers’ organization constitution 39

iii

GUIDE ONE

Section One

How to use this guide

Designing, and implementing sound governance

practices is the first guide in a series that make upThe Effective Employers’ Organization package.The series as a whole is designed to helpexecutives, directors and managers in employers’organizations to build and run their organizationsmore strategically and more effectively. It is aimedprimarily at those setting up, building and managingnational level employers’ organizations in lessdeveloped countries and economies in transition. Itwill, however, provide a wealth of advice forregional and sectoral organizations that exist torepresent the interests of employers, and it will beof interest to national level employers’organizations in developed countries. This will be

the case particularly where organizations areconsidering or undertaking a strategic review of theway they currently operate.

Designing, and implementing sound governance

practices is a step by step approach to ensuringsound governance principles and practices inemployers’ organizations. It contains practicaladvice and tools that will help the leaders of wellestablished employers’ organizations to reviewtheir approach to governance or to help newerorganizations build appropriate governancestructures and processes from the outset. Thetools are of three types:

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Checklists

Checklists are designed to help review where yourorganization is currently placed, to identify deficiencies ingovernance and to plan ways to design and implementbetter structures and processes;

Best practicesBest practices provide examples of how other organizationshave tackled the problems you face; and

Key quotes

Key quotes from respected writers illustrate the mostimportant points; you can use them in your own talks andwritten materials.

This guide in The Effective Employers’

Organization package has been written in responseto the increasingly frequent questions on thesubjects of employers’ organization and membergovernance. It presents in readable format, thebasic principles that are essential for thedevelopment and maintenance of soundgovernance practice in employers’ organizations.

Sound governance in an employers’ organization isgenerally achieved through:

� The establishment of democratic structures andprocedures for decision making;

� The existence of adequate checks and balanceson decision makers;

� Transparency in decision making,implementation and member communication;

� Elimination of inappropriate and undue influenceon decisions.

The guide considers each of these issues insections three and four under the headings“Institutions of governance” and “Tools ofgovernance”. Section three considers the form andfunctions of a Member Assembly; the compositionand responsibilities of the Board; and theappointment and responsibilities of the ChiefExecutive and the organization’s management.Section four examines employers’ organizationrules, the use of committees and project groupsand transparency and communication.

Section five of the guide offers a “compilationchecklist” that combines in one place the subjectspecific checklists found at the end of mostsections. In this form, the checklist becomes anextremely useful organizational review tool. Thechecklist can be used at the end of the governanceguide in order to facilitate action planning, or it canbe used at the outset as a benchmark measure ofwhere your organization stands in terms ofgovernance.

Towards the end of the guide is a short overview ofthe academic literature on governance – “what thebusiness gurus say”. This section describes in oneplace, and in an academic context, the analyticalframework used in this guide. It is a “stand-alone”section that provides the reader with a basicacademic underpinning of the subject ofgovernance and points the way to the furtherreading suggested in section seven.

The “further reading and links on governance andemployers’ organizations” identifies general ideasfor further reading or assistance and suggestsadditional sources specifically associated withemployers’ organizations and governance. Thereare relatively few specific materials available, andmany of them have been developed by the Bureaufor Employers’ Activities of the International LabourOrganization.

Finally, section eight of the guide sets out a“model” or “sample” constitution for an employers’organization. The sample constitution will be usefulto those approaching the drafting process fromscratch, to those revising an existing and outdatedconstitution or those undertaking a desk review ofcurrent constitutional arrangements to check thatthey cover the major issues effectively.

The establishment of sound rules in key areas isan essential starting point on the road to soundgovernance, but it is not the whole story. The dailypractice of good governance relies upon theattitudes and behaviours of the many individualswho make up the membership, the Board, themanagement and staff of employers’ organizations.

The scope of this guide is deliberately limited tothe specific subject of governance in employers’organizations. It draws a clear distinction betweenthe management of an employers’ organization andthe conduct of sound governance. Plainly both goodmanagement and sound governance are essentialpartners in the building of successful andsustainable employers’ organizations. Strategicmanagement of an employers’ organization,including setting priorities and goals and ensuringproper execution of action plans are importantissues in themselves, and are addressed in guidenumber two in The Effective Employers’

Organization series.

All the guides in the series are designed to bemulti-purpose tools. Although this guide ongovernance should prove to be a relativelystraightforward and interesting read, workingthrough it from cover to cover is not the only, oralways the best, way to maximize its value. Oftenorganizations will have particular interests withinthe overall field of governance. For example thecomposition and responsibilities of the Board maybe an issue for one organization whilst theappointment of a new Chief Executive will be apressing consideration for another. Mostemployers’ organizations will benefit from using thechecklists as audit tools to help identify thestrengths and weaknesses of their currentgovernance systems.

Finally, this is a short guide to a complex issue. Itdoes not claim to be either exhaustive or to containoriginal ideas. The guide has drawn heavily andunashamedly on earlier materials on the subject ofgovernance generally. It pays particular attention towork carried out with employers’ organizationsspecifically, and it draws on the experience of theauthors in observing what does and does not workin day to day practice. Every attempt is made in thetext and in the suggestions for further reading toacknowledge the wide variety of sources used.

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GOVERNANCEThe Effective Employers’ Organisation

Section Two

Employers’ organizations

and governance

KEY QUOTE

“To see what is right and not todo it is want of courage.”

Confucius

Chinese Philosopher

551 – 479BC

In recent years, it has become painfully clear thatgood governance is a major issue for companiesaround the world. Successive corporate scandalsresulting from ineffective checks and balances onexecutive behaviour have destroyed the reputationof individual companies and seriously damagedpublic confidence in business as a whole.

Employers’ organizations differ from private sectorcompanies in many ways. Nonetheless, many ofthe principles of governance that should be foundin individual companies should also be present inthe organizations that represent them. This is notleast the case because employers’ organizationsare often called upon to represent businessinterests in the debate on governance and ethics.From a more practical point of view, without goodsystems of governance, employers’ organizationsrun the risk of failing to achieve their most basicobjective – representing the best interests of theirmembers.

Put simply, good governance strengthens the

ability of employers’ organizations to represent

their members’ interests credibly and well, and

impacts positively on their ability to grow and

develop.

Importance and purpose

of good governance

Sound governance is the foundation upon whichany organization is built. This is true forgovernments, companies, trade unions, andemployers’ organizations.

Having sound governance indicates that anorganization has the necessary institutions andtools to ensure credibility, integrity and authority informing rules, making decisions, and developingprogrammes and policies reflecting members`views and needs. It is primarily through soundgovernance that an employers’ organizationmaintains the trust of its members and enhancesits reputation and influence with those it interactswith.

A failure of good governance in an employers’organization can not only damage the reputationand reduce the effectiveness of the organizationitself, but can impact negatively on the reputationof those it seeks to represent. Sound governanceis an essential element in ensuring that theorganization works in the genuine interests of itsmembership.

A focus on ensuring sound governance is notsimply an issue for employers’ organizations indeveloped economies in the wake of recentcorporate scandals. Employers’ organizations havean important role to play in emerging and transitionmarket economies. In economies in the midst ofreform and transition, it is essential thatemployers’ organizations provide examples ofsound governance practice. Governments and tradeunions require credible and transparent partnerorganizations, which represent the genuineinterests of the employer community.

Finally, national and international donors seeking toinvest in the further development of employers’organizations need to be assured that they arelegitimate, transparent and rule-based institutions.

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Definition of terms

The terminology relating to employers’organizations and their constituent parts can varyfrom country to country and industry to industry. Forpurposes of consistency this guide uses the termsbelow:

� An employers’ organization is a voluntary,membership-based group of companies oremployers’ associations.

� The most important decision making organ ofthe employers’ organization is the Member

Assembly. It is often called the GeneralAssembly, Annual General Meeting or simply theGeneral Meeting.

� The member-elected top governing body of anemployers’ organization is referred to as theBoard. Other terms often used include:executive committee, management committee,or the council. This Board is chaired by thePresident of the organization.

� The senior manager appointed by the Board isthe Chief Executive. Other terms include:Secretary General, Director General, ExecutiveDirector, Chief Executive Officer (CEO), GeneralManager and simply, director or manager.

While this guide uses certain terms, it does notimply that any one term is preferable to another:the underlying principles of governance are ofcentral importance, but the nature of titles andlabels is largely a question of preference orcustom.

The regulatory framework

In most countries, and in order to act with legalauthority, employers’ organizations are required toregister under a specific organizational formdesigned for not-for-profit membershiporganizations. Although the regulations differcountry by country, they generally containprovisions designed to protect the rights andinterests of members and third parties. To thatextent, they provide a binding general governanceframework upon which sound internal practices andprocedures can be built.

Certain national governance standards that affectbusinesses around the world are worthy ofmention. Principal among these is the UnitedStates Sarbanes-Oxley Act (2002), whichspecifically addresses governance issues related toaccounting and oversight in the wake of theEnron-type scandals of the early 2000s.

In addition there are non-binding internationalguidelines on governance in business that relate topublic stock companies, often called corporate

governance guidelines. Guidelines of this natureinclude the new OECD Principles of CorporateGovernance (2004), and, to a lesser extent, theOECD Guidelines for Multinational Enterprises.There are a number of national and internationalorganizations that exist purely to promote soundgovernance standards in business.

Whilst none of these governance standards applyto an employers’ organization specifically, they docreate a new environment of increasedexpectations in private sector governance. They areuseful starting points for those wishing to researchgovernance further, and they have been used in thepreparation of these guidelines.

The International Labour Organization has severalConventions that, while not specifically outliningthe governance of an employers’ organization, doset down some fundamental principles that relateto their governance (see Box 1), such as theprinciple of voluntary participation in an employers’organization. There are few guidelines related tothe governance of an employers’ organizationdespite their key role as the voice of business.

Employers’ organizations

and their members

An employers’ organization represents the commoninterest of groups of individual companies, orregional or sector based employers’ organizations.It works to establish and maintain an operatingenvironment in which businesses can succeed andprosper. This involves advocacy and dialogue withgovernment concerning matters of importance to itsmembership; it often entails social dialogue withtrade unions. Some employers’ organizations servetheir members (individual companies) by engagingin collective bargaining on their behalf with tradeunions.

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Beyond representing its members nationally, anemployers’ organization may also representmember interests at the international/regional level(for example in the European Union: UNICE), and invarious international organizations like the OECD(the Business and Industry Advisory Committee tothe OECD – BIAC) and at the ILO (InternationalOrganization of Employers – IOE).

Employers’ organizations increasingly provideadditional services and member benefits. Anemployers’ organization may serve its members bykeeping them informed of relevant industry events,macro-economic trends, government regulations,and social developments. Employers’ organizationsalso frequently provide a range of other memberservices like training, consultancy or legalrepresentation and advice.

Membership criteria

The specific eligibility requirements for membershipin an employers’ organization can vary from countryto country and industry to industry. However, theconstitution should explain clearly who may, andwho may not, join the organization. Typically,eligibility for membership is restricted to those

persons, companies, or other organizations thatare employers of labour and are engaged in thecommercial production or manufacture of goods orcommodities, or the commercial provision ofservices. In certain countries, the national levelemployers’ organization comprises regional orsectoral employers’ organizations that operatesimilar membership regulation. Other persons ororganizations that do not meet these descriptionsmay also be admitted to membership as“associate” or “affiliate” members if theorganization in question sees fit. Trade unions andgovernment are typically not eligible formembership in an employers’ organization. Underall circumstance membership must be strictlyvoluntary. As set out in ILO Conventions No. 87 andNo. 98, voluntary membership is a fundamental,internationally accepted principle of forming anemployers’ organization. Additionally, in accord withboth ILO and UN Conventions againstdiscrimination, membership in an employers’organization should not be based on racial, gender,religious or ethnic status.

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BOX 1

ILO CONVENTIONS RELATED TO EMPLOYERS’ ORGANIZATION GOVERNANCE

� Convention No. 87 on Freedom of Association and Protection of the Right to Organize (1948)

� Article 2: …Employers …shall have the right to establish and …to join organizations of their own

choosing without previous authorization.

� Article 3: …Employers’ Organizations shall have the right to draw up their constitutions and rules,

to elect their representatives in full freedom, to organize their administration and activities and to

formulate their programmes.

� Article 4: …Employers’ Organizations shall not be liable to be dissolved or suspended by

administrative authority.

� Convention No. 144 on Tripartite Consultations to Promote the Implementation of the ILS (1976)

� Article 3: The representatives of employers… shall be freely chosen by their representative

organizations, where such organizations exist.

Section Three

Institutions of governance –

the Member Assembly; the Board;

the Chief Executive and management

KEY QUOTE

“Comradeship and trust willemerge naturally when disciplineand high standards are enforced.”

Tao Zhu Gong

Assistant to the Emperor of Yu

c500BC

The Member Assembly

The members of an employers’ organization shouldbe the ultimate beneficiaries of the organization’sactivities as well as the ultimate authority in itsgovernance. The authority and legitimacy of Boardmembers and management stem directly from thesupport of the members. The credibility of theemployers’ organization is based on its being trulyrepresentative of member interests. Members areusually represented through a Member Assembly,which acts as a key institution of governance.

Formation of the Member Assembly

Exactly how members participate in the governanceof the organization can vary depending on the size(number of members) and complexity (number ofindustries and geographical regions) of theorganization and should be clearly established inthe constitution. In a small or medium-sizedemployers’ organization, each member companycan submit a representative to the MemberAssembly, which in turn elects or approves Boardmembers and approves other Board decisions.

In larger and more complex employers’organizations, there may be a need for indirect orlayered representation. If layering is appropriate,employers’ organizations should take measures to

ensure that their organization represents allmembers, and all geographical and industrialsectors that are constituents of the organization.

Clearly, larger employers should have a prominentvoice in employers’ organization matters, but not tothe point of excluding the proper participation ofother members.

The rules of the employers’ organization shouldclearly indicate measures to provide a fair andbalanced representation of all members. This mayinclude, for example, a target or percentageallocation on the number of representatives fromfirms of a particular size, from a particular region,or from a particular industry, commensurate withthe percentage of members that match that profile.

The principle is very clear: within the limitations

of size and complexity members should have as

much direct say in decision making as possible.

Functions of the Member Assembly

Employers’ organization members have severalrights and responsibilities. Members have the rightto appoint the Board and to dismiss individualBoard members. Members should also have theright to nominate their own candidates for Boardmembership or other work in the organization (e.g.for special committee work).

In order to establish these rights, the rules of anyemployers’ organization should clearly indicate theprocess by which the Member Assembly elects orapproves the Board. Equally important, the rulesshould indicate the procedure by which the MemberAssembly may vote for the removal of individualmembers of the Board. There should be clear andobjective procedures detailing the percentage ofvotes required for a quorum and the percentage ofvotes required for passing a measure.

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Other important duties of the Member Assemblytypically include approval of the budget andamendments to the constitution.

Payment of dues

Employers’ organizations rely on fees or dues frommembers to support their daily operations. Therules of the organization should clearly establishthe mechanism by which membership fees aredetermined, including the mechanism for periodicchanges in the fee structure and any extra chargesfor individual members requiring special services.

It is clear that non-payment of dues is grounds forcancelling membership. The rules of the employers’organization should address the issue ofnon-payment of membership dues, clearly outliningthe procedure for notifying members that they arein arrears, and the procedure for expellingnon-paying members from the organization. Therules should also indicate the status ofmembership rights for any member in arrears; forexample, members in arrears may lose voting rightsin the Member Assembly, the right to services, theright to have representatives holding office, or theright to participate in industrial relations activitiesundertaken by the organization.

Frequently employers’ organizations have a class ofmembership that pay dues on a different scale ofcontributions; these could be, for example,“affiliate” members. Such cases should be clearlyoutlined in the constitution, along with details ofthe rights of reduced-rate members. Frequently, forexample, affiliate members do not enjoy votingrights or the right to hold office (service-onlymembers).

Other responsibilities

Members have a responsibility to activelyparticipate in their organization. The bestgovernance structures in the world cannotcompensate for the lack of member participation.There is little an employers’ organization can do toforce its members to participate, but it can adoptmeasures to actively encourage memberparticipation. Excellent, and creative, managementof member communication is the most effectivemeans of improving understanding of the role andpriorities of the organization and of maximizingmember participation in its affairs.

In order for an employers’ organization to conductits affairs effectively it may also be necessary tocollect certain data from its members, e.g. datarelating to the remuneration and terms andconditions of employment of members’ employees,or information about sales trends. Furthermore,when a member company is in direct negotiationwith labour representatives of its firm, it may benecessary to consult with the employers’organization if such negotiations could affectindustrial relations at other member companies.Therefore, it is an integral responsibility ofmembership to share some specific informationwith the management of the employers’organization.

The rules of the employers’ organization shouldclearly indicate which data should be shared, underwhat conditions, and the safeguards to be taken toensure confidentiality.

Joining and leaving the organization

The rules of an employers’ organization should setout clear and objective membership criteria. If acompany meets those criteria, agrees to be boundby the rules and objectives of the employers’organization, and is willing to pay the membershipfees, then that company should be entitled tomembership. As noted above, internationalstandards (e.g. ILO Conventions Nos. 87 & 98)require all membership to be of a voluntary nature:a company must freely choose whether or not tojoin an employers’ organization. Employers’organizations themselves should promote theprinciples of voluntary membership andindependence of action where practical or legalobstacles to their application exist.

Equally, membership criteria should not be basedon racial, gender, religious or ethnic discrimination.

Companies may freely choose to leave anemployers’ organization at any time. The MemberAssembly may decide to cancel the membership ofany company that fails to maintain the membershipcriteria (e.g. fails to pay member fees). Theemployers’ organization may decide not to refundfees for a member that withdraws frommembership; this and other conditions surroundingthe leaving of the organization should be clearlypresented in the employers’ organization rules.

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The Board – composition

and responsibilities

KEY QUOTE

“Society’s demands for moralauthority and character increaseas the importance of the positionincreases.”

John Adams

Second President of the US

1735-1826

The Board serves members by overseeingmanagement activities; facilitating the decisions ofmembers; maintaining open communicationchannels with and between members andmanagement; and ensuring the observance ofconstitutional processes within the employers’organization.

The Board has a crucial role in ensuring both thegood governance of the organization and itslong-term sustainability.

Composition and structure

The Board should be made up of executives whoare considered by the members to be generallyrepresentative of the membership of theorganization. The Board may be structured in sucha way as to reserve seats for particular industriesor regions, or other subgroups within itsmembership. The reservation of seats for individualcompanies should, however, be restricted to adefined minority of seats. The organization rulesshould establish clear measures to prevent theBoard from being dominated by any particulargroup, industry, region or faction e.g. by largermembers to the exclusion of the interests of theother members.

The rules of some employers’ organizations alsoforesee the possibility of co-opting additional Boardmembers (with limited rights) in order to strengthen

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THE MEMBER ASSEMBLY CHECKLIST

� The rules clearly indicate measures designed to provide a fair and balanced representation ofall members of the employers’ organization in the Member Assembly.

� The rules clearly indicate who may and who may not be a member of the employers’organization.

� The rules clearly indicate the process by which the Member Assembly elects or approves theBoard of Directors.

� The rules clearly indicate the process by which the Member Assembly may remove members ofthe Board.

� The rules clearly establish the mechanism by which membership fees are determined.

� The rules clearly address the issue of non-payment of membership dues, including theprocedure for expelling non-paying members and the status of membership rights for anymember in arrears.

� The rules clearly indicate other member responsibilities, for instance the type of informationmembers are expected to share with the employers’ organization.

� The rules clearly define objective membership criteria.

� The rules clearly indicate that membership is voluntary.

the competence and expertise of the Board incertain respects e.g. strategic planning ormarketing.

The size of the Board can vary according to theorganization; a large organization will tend to needa larger Board; likewise a smaller organization canfunction well with a smaller Board. In absolutenumbers, Board size generally ranges from six to24 members. While there is no correct size for aBoard, it is advisable to keep Board size to theminimum necessary for adequate representation ofmembers. This will keep decision making relativelysimple. Employers’ organizations with larger Boardsoften delegate authority to committees on certainmatters.

Eligibility of potential nominees

Where there is direct company membership, theBoard should be composed of actively servingsenior managers in member companies. It ispreferable that all Board members be thePresident/CEO/managing director of the firm theyrepresent, but whether this should be a minimumqualification may be decided by each organizationdepending on its circumstances. Wheremembership is via regional or sectoral bodies,equivalent controls on seniority should apply.

In order to avoid conflicts of interest and tosafeguard the independence of the Board, certainoccupations should make a person ineligible formembership of the Board. A currently servingmember of Parliament, for example, should beprohibited from serving on the Board of anemployers’ organization. In some cases, anorganization may reserve certain seats on theBoard for specific companies, or types ofcompanies, in which case the eligibility of potentialnominees must correspond to the seat in question.

It is important that employers’ organization rulesclearly document the eligibility criteria(qualifications, incompatibilities) of members of theBoard.

Election of Board members

The organization rules should clearly indicate theprocess by which Board members are nominatedand elected. There are multiple ways of doing thisthat are more or less equally adequate, and anemployers’ organization should choose the methodthat best suits its circumstances. Board members

may, for example, be proposed by individualmembers or a special committee set up for thispurpose and elected by the Member Assembly.Whatever the procedure, the principle ofgovernance to be maintained is that the means ofnominating and electing members of the Boardshould be transparent and open. Nomination andelection should not take place behind closed doorsby a single person (e.g. the President) or a group.

The rules of the organization should normally limitthe number of consecutive terms of office that aBoard member may stand for election.

Termination of office

In extraordinary circumstances, members may wishto end the term of office of individual members ofthe Board, or the entire Board. This could resultfrom broad dissatisfaction of the members with theentire Board or with an individual Board member.

The employers’ organization rules should clearlyestablish a mechanism by which members or theirrepresentatives can remove individuals on theBoard, or the entire Board. Typically this shouldinvolve a majority vote of the Member Assembly ata regularly scheduled meeting, or a special meetingcalled for this purpose. Just as management isultimately answerable to the Board, so must theBoard be ultimately answerable to the generalmembership.

Responsibilities of the Board

The Board is responsible for maintaining the basicdirection of the employers’ organization. Thisresponsibility manifests itself in several specificfunctions, including:

� Approving the annual business plan and budgetprior to its recommendation to the MemberAssembly;

� Reviewing the performance and termination ofoffice of the Chief Executive and appointment ofa new Chief Executive as required;

� Electing the President of the Board (and aDeputy President);

� Setting strategic direction for the organization(as opposed to day to day business);

� Making changes to the constitution of theemployers’ organization prior to recommendingsuch changes to the Member Assembly;

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� Approving new members, prior to makingrecommendations to the Member Assembly, andother housekeeping issues;

� Appointing the external auditors and receivingthe external audit report.

Through these functions, the Board plays a key rolein the governance of the organization by providing acheck and balance system which preventsmanagement from running the organization withoutany safeguards or constraints. The Board must,however, resist the temptation to “micro-manage”the organization. All these functions should beclearly documented in the rules of the organizationand are further discussed below.

Business plan and budget

The Board should be responsible for recommendingthat the Member Assembly approve the businessplan and budget of the organization as presentedto it by management. This process should occurannually. The business plan should clearly indicatethe priorities and objectives of the organization forthe upcoming year. The budget should indicate theforecasted revenues and expenses. The Boardshould make alterations to the business planwhere they feel it does not adequately reflect thepriorities and objectives of the organization and theinterests of members.

Performance review

Another key oversight role is the review ofmanagement performance and theappointment/termination of the Chief Executive ofthe organization. In practice this function typicallycentres on a review of the performance of the ChiefExecutive in implementing the decisions of theBoard and the Member Assembly. The setting ofthe remuneration of the Chief Executive is also afocus of the review. In the case of a vacancy for theposition, the Board should be responsible forselecting and approving a qualified candidate. Incases of poor performance or serious misconducton the part of the Chief Executive, the Board shouldhave the responsibility and authority to terminatethe employment. All the procedures for thesefunctions should be documented in detail in therules of the organization. The competence of theBoard to terminate the employment of the ChiefExecutive is an important feature in the governanceof an employers’ organization. Without this feature,poor management could continue unchecked to thedetriment of the organization and its members.

Election of the President

In addition to its oversight role, the Board hasfunctions related to its own operation, in particularthe election of a President. The Board isresponsible for electing a qualified candidate to bePresident of the Board. The role of the President isdetailed below, but here it is important to note thatthe employers’ organization rules should have clearprocedures on how the Board elects its Presidente.g. by majority vote of the Board members.

Setting strategic direction

The Board should take decisions, as circumstanceswarrant, concerning the overall long-term directionof the organization. Such major decisions mightinclude, for example, the merger of the organizationwith another business association, or theredefining/restructuring of the organization inresponse to changes in industry or other majorshifts in the working environment. Theorganization’s rules should indicate clearly whattypes of decision come under the authority of theBoard and to what extent approval of decisions bythe Member Assembly is required.

The Board should not be involved in the dailymanagement of the organization and a cleardistinction should be made between the types ofdecision that fall under the responsibility of theBoard, and those that are the responsibility ofmanagement. In practice, decisions made by theBoard should pertain to the development of basicpolicy positions and to long term or fundamentalshifts in the operation and direction of theorganization.

Changes to the constitution

A separate category of fundamental decision makingthat should be assigned to the Board concernschanges to the constitution of the employers’organization. Constitutions must be flexibledocuments that grow and change with theorganization as it develops. Every constitutionshould contain a clear procedure by which it can beamended or changed. While any member should beable to put forward an amendment to theconstitution, the responsibility for recommendingchange and outlining the available options willnormally be given to the Board. Any change shouldrequire ratification by the Member Assembly.

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Admission of new members

A further area of responsibility for the Boardconcerns admitting new members to theorganization. As explained above, the admission ofnew members should be based on clear andobjective criteria. The Board’s role in this processshould be largely confined to ensuring that theapplicants for membership actually meet thedefined criteria. Boards should not be given solediscretion for admitting members: this procedurelends itself to abuse and can potentially lead theorganization into conflicts of competition. Ratherthe Board should approve the admittance of newmembers based on the defined criteria, subject toacceptance by the Member Assembly.

Housekeeping issues

The employers’ organization rules may assign otherresponsibilities to the Board concerning suchhousekeeping issues as the authority to open bankaccounts in the name of the organization. Theseare relatively minor issues and they can remainminor issues by being clearly documented in therules; failure to assign authority for some of thesematters can lead to confusion which in turn canlead to conflicts that needlessly become majorissues.

Appointment of external auditors

Finally, the Board should be responsible for theappointment of external auditors, at least annually,to review the finances of the organization (see alsosection four below).

The role of the President of the Board

The role of the President is to lead and manage theBoard, seeking to uphold the principles and goalsof the organization through the most efficient useof the Board’s time and energies. In practicalterms, the President is required to manage periodicBoard meetings, approving the agenda andensuring that constitutional formalities areobserved. The President is also often expected tochair the periodic (usually annual) meeting of theMember Assembly. In addition the President can beexpected to perform “diplomatic” functions, suchas holding meetings with government dignitariesand attending other events (e.g. press conferencesor other important activities of the organization).

The rules of an employers’ organization mustclearly establish the process by which the Presidentis to be elected. Typically the President is alreadyserving on the Board, but this does not have to bethe case.

The organization rules should include a roledescription for the President, outlining the dutiesand authority of the office. The rules should payspecial attention to differentiating the role ofPresident from the role of Chief Executive. Clearlydocumenting the duties and authority of thePresident (and later the Chief Executive) will avoidconfusion and conflict within the organization.Since the Board will be responsible for reviewingthe performance of the Chief Executive, it isimportant to clearly establish the role of thePresident in this review process. In practice, thePresident of the Board typically takes the lead inreviewing the Chief Executive’s performance on anannual basis and (together with the treasurer)approving the Chief Executive’s remuneration.

The role description should also indicate somebasic qualifications for the position of President. Aminimum requirement might be that the candidateis the senior manager of a current membercompany or organization. An employers’organization with a special industry or geographicalfocus may have other minimum requirements for itsPresident.

Related to the job description is a clear indicationin the rules of the term of office and term limits. Inpractice it is common for a President to serve from1 to 3 year terms. There is no universal correctterm length. Term limits may also vary according tothe tradition of the particular organization, thoughsome limit to re-election and the number ofconsecutive terms should be indicated in the rules.

The President of the Board must also observe theprinciple of impartiality when carrying out duties forthe organization. This relates to separating the roleof President from the role of senior manager in amember company. The President should never usethe position to promote his or her firm, or to restrictthe voice of member companies which arecompetitors. In this regard the President should notonly be fair, but also always maintain theappearance of fairness, in all activities related tothe organization.

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Communication between

Board and members

A key responsibility of the Board is to maintain andfacilitate communication with the members of theemployers’ organization. While management has tokeep members informed of day to day businessissues, the Board should keep members informedof the results of periodic meetings of the Board,including any debates taking place within thosemeetings. Furthermore, it is the Board’sresponsibility to produce an annual report tomembers detailing the activities of theorganization.

While in practice the production of this report maylargely be delegated to the management of theorganization, the Board has a unique responsibilityto guarantee the accuracy of managementreporting.

Since the Board plays a facilitating role betweenmembers and management, it is especiallyimportant that the Board pay attention to propercommunication. The exact duties of the Board inthis regard should be detailed in the rules of theorganization.

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THE BOARD CHECKLIST

� The employers’ organization rules establish clear measures to prevent the Board from beingdominated by larger members or regional/sectoral groups to the exclusion of the interests ofother members.

� The employers’ organization rules, as appropriate, establish a specific number of seats for theBoard (not so many as to lose direction/control).

� The rules clearly document the eligibility criteria for Board members and describe the functionof the Board.

� The rules clearly indicate the process by which Board members are nominated and elected.

� The procedure for electing members of the Board is transparent and open to the entire body ofmember companies, or their representatives. The nomination and appointment do not takeplace behind closed doors by a single person or group (e.g. the President or Chief Executive).

� The rules define criteria that disqualify certain categories of people from Board membershipe.g. currently serving members of government.

� The rules clearly establish a mechanism by which members may remove individual members ofthe Board or the entire Board.

� The rules clearly document the responsibilities of the Board. These responsibilities include theapproval of the business plan and budget and the review of the performance of the ChiefExecutive.

� The rules give the Board authority to appoint or remove the Chief Executive.

� The rules establish clear procedures for the nomination and election of the President of theBoard.

� The rules detail the types, or categories, of decision that come under the remit of the Board,and draw a clear distinction between decisions that are the responsibility of the Board anddecisions that are the responsibility of the Chief Executive.

The Chief Executive and

management – appointment

and responsibilities

KEY QUOTE

“Management is doing thingsright; leadership is doing the rightthings.”

Peter Drucker

Author and Management Guru

As is the case throughout the guide, standard orgeneric titles are used to describe particularfunctions. In this case, the title Chief Executivedescribes the senior manager appointed by theBoard. Other terms synonymous with this includeDirector General, Secretary General, ExecutiveDirector or CEO.

The Chief Executive of the organization has acentral position in its daily management, but alsohas important governance responsibilities. TheChief Executive is typically the highest level of fulltime management in the employers’ organization(Board members usually meet periodically), andtherefore the Chief Executive’s adherence to goodprinciples of governance is crucial for theorganization.

Role and responsibilities

of the Chief Executive

The primary role of the Chief Executive is the day today management of the employers’ organizationand its staff, and the implementation of long termstrategies and action plans. The performance ofthe Chief Executive in this regard will largely dictatethe overall success of the organization in itsactivities. This guide, however, will restrict itself tothe responsibilities of the Chief Executiveconcerning matters of governance.

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THE BOARD CHECKLIST (cont.)

� The constitution contains within itself a procedure by which the constitution can be amended orchanged, involving final approval by the Member Assembly.

� The rules establish clear objective criteria for the Board’s decision on admitting new membersto the organization, involving final approval by the Member Assembly.

� The rules assign clear authority to the Board for miscellaneous housekeeping issues, such asopening bank accounts in the name of the organization.

� The rules provide a role description for the President of the Board including the basicqualifications for the job as well as detailed reference to the President’s responsibility toreview the performance of the Chief Executive.

� The rules establish the term of office for the President (and the Board members), and limit thenumber of consecutive terms that can be served by the same person(s).

� The rules clearly establish the principle of impartiality as this applies to the President’sactivities on behalf of the EO. The EO does not serve as a platform for the President topromote his or her company to the detriment or exclusion of other member companies.

� The rules assign specific reporting responsibilities to the Board, including the appointment ofan external auditor to review the finances of the employers’ organization.

In the area of governance, the Chief Executive isresponsible for the general administration of theorganization; this means ensuring that legalrequirements and the employers’ organization ownrules are observed. The Chief Executive mustpromote formal meetings related to governancematters (such as meetings of the Board or theMember Assembly), and facilitate goodcommunication between management and theBoard and management and the membership. Morespecific governance responsibilities are notedbelow.

The Chief Executive of an employers’ organizationtypically has responsibility for hiring and managingthe staff of the organization. This staff may includea treasurer or finance director, as well as othersenior managers such as specialists in industrialrelations, labour law, HRD, marketing, publicrelations, etc. While the employers’ organizationrules should normally leave the Chief Executive withdecision making authority over the filling ofmanagement positions, the remuneration for seniorpositions may be subject to Board or Presidentialapproval. It is important that the Chief Executive beable to choose his or her own management teamand that this management team see the ChiefExecutive as their principal employer.

As noted in the section on Boards above, it is alsoimportant that the organization’s rules clearlydistinguish between the responsibilities andauthority of the President of the Board and those ofthe Chief Executive. Normally, the Chief Executiveshould have, within the budget, complete authorityover the day to day management of theorganization and any staffing issues, including theremuneration of “non-senior” staff. The authority ofthe President should be limited to such matters as,for example, removing the Chief Executive for poorperformance or serious misconduct. This providesa sufficient check on the Chief Executive’s powers,without undermining the authority of the positionand the ability to manage the day to day affairs ofthe organization.

The Chief Executive’s formal authority ingovernance matters is not limited to staffing andmanagement issues. Many of the Board decisions,for example on a merger of the organization withanother business association, will often stem fromthe recommendations of the Chief Executive.Additionally, while the Board has the authority toapprove the annual business plan and budget, it istypically the Chief Executive who produces theseitems for the Board’s approval. The rules of theemployers’ organization should clearly explain all

the governance responsibilities of the ChiefExecutive and they should be reflected in the jobdescription for the position.

Eligibility of potential candidates

Unlike Board members, there is no need for theChief Executive of an employers’ organization to bea senior manager in a member company. Indeedsince the position of Chief Executive is often fulltime, it is impossible to hold another job. In a smallorganization this may be possible, and the exacteligibility of candidates for Chief Executive will needto vary from organization to organization.

Where the position of Chief Executive is not fulltime, particular attention must be given to avoidingpotential conflicts of interest. In such a case, thejob description of the Chief Executive should clearlyindicate the separation of duties between theorganization and the outside position. This shouldinclude proportion of time spent on employers’organization functions, the confidentiality oforganizational information, other roles that may beaccepted by the Chief Executive and the proportionof remuneration that may come from otheremployment (more on this in the section onremuneration below).

Generally the position of Chief Executive should beavailable to whoever the members of theemployers’ organization, through their Board, findmost appropriate to manage the affairs of theorganization. From a good governance point of view,it would only be necessary to preclude, in line withnational law and practice, any candidates with poorrecords in the area of governance matters, such asany “unspent” criminal or civil penalties forcorporate malpractice.

Appointment of the Chief Executive

The appointment of the Chief Executive is afunction of the Board and/or the President of theBoard. In practice the Board may use a committeeor a professional recruitment agency to search foreligible candidates. The authority to appoint theChief Executive should, however, remain with theBoard or President. Since the Chief Executive playsan influential role in the day to day affairs of theorganization, it is good practice to have awell-documented appointment procedure to avoidany potential confusion or conflicts.

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Termination of engagement

While the rules of the employers’ organizationshould provide the Chief Executive with soleauthority over the staff of the organization, thereshould nevertheless be a grievance procedureconcerning the Chief Executive. If staff membershave grievances about other staff members, thenthese should be settled at the level of the ChiefExecutive with no interference by the Board orPresident. If, however, staff members havegrievances about the Chief Executive, then theseshould be addressed to the President or otherdesignated member of the Board. Minor grievancescan be noted during the annual performance review

of the Chief Executive, while major grievances canbe addressed more immediately. If circumstanceswarrant, the President, with the Board’s approval,should have the authority to terminate theemployment of the Chief Executive. The exactprocedure for this step should be documented inthe contract of employment of the Chief Executive.Clear documentation not only allows theorganization to react quickly in the event of seriousmisconduct or poor performance on the part of theChief Executive; it can also preclude any wrongfuldismissal litigation on the part of the ChiefExecutive, or challenges to the Board’s authority inthis matter.

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CHIEF EXECUTIVE AND MANAGEMENT CHECKLIST

� The Chief Executive is responsible for the general administration of the organization, andensures that constitutional requirements are observed.

� The employers’ organization rules provide the Chief Executive with full responsibility for hiringand managing the staff necessary to the day to day operation of the organization.

� The rules clearly distinguish between the responsibilities and authority of the President of theBoard and those of the Chief Executive. The Chief Executive has authority over the dailymanagement of the organization. The President has the authority to terminate the employmentof the Chief Executive in cases of serious misconduct and poor performance.

� The Chief Executive is responsible for matters related to governance such as the preparation ofa budget, even though decisions on these matters remain with the Board. The rules detail theresponsibilities of the Chief Executive in a job description.

� In line with national law and practice, the rules preclude any candidate for Chief Executive whohas a record of criminal or civil liability for corporate malpractice.

� The appointment of a Chief Executive is a function of the Board and/or the President of theBoard. The process of selecting and appointing a Chief Executive is well documented.

� The rules provide a grievance procedure for staff relating to the Chief Executive. Thesegrievances are reported to the President or a designated other Board member.

� The exact procedure for terminating the employment of the Chief Executive is documented inthe contract of employment of the Chief Executive.

� The remuneration of the Chief Executive is set by the President with the Board’s approval.

� Outside activities and remuneration of the Chief Executive, other than that from the employers’organization, must be approved by the Board and must not present a conflict of interest for theChief Executive.

Remuneration and benefits

The remuneration and benefits of the ChiefExecutive should be set by the President, with theBoard’s approval. In practice the President mayform a special committee to review the matter anddecide upon appropriate compensation. Finalauthority in the matter, however, should rest withthe Board.

The job description of the Chief Executive shouldalso include limits, or an approval procedure, forother remuneration received for work done outsidethe role as Chief Executive of the organization. Thisis most likely to be applicable to a smallemployers’ organization where the position of ChiefExecutive is not full time. Even for largeorganizations, however, the Chief Executive may bein a position to receive remuneration from otherparties for consultancies or other services. There isnothing in principle wrong with engagement inoutside activities, so long as the Board of theorganization sets specific limits or approvalmechanisms for such engagement, whetherremunerated or not. The Board may, for exampleestablish a mechanism whereby all external workapproved by the President or the Board isallowable. In any case, the underlying principle ofgovernance to be addressed is the avoidance ofconflict of interest on the part of the ChiefExecutive.

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Section Four

Tools of governance – rules;

committees and project groups;

transparency and communication

KEY QUOTE

“As soon as you ignore ethics,everything else becomes easy.”

Larry Hagman

American Actor & Personality

1931 to date

Employers’ organization rules

Throughout the guide and checklists, mention hasbeen made of employers’ organization rules, that isthe constitution or statutes, by-laws and codes ofconduct or behaviour. These documents lay out thepowers held by various individuals and groups, andthe manner in which important decisions must bemade. Section eight of the guide contains a sampleemployers’ organization constitution for yourreference.

It is clear that the governance rules of anemployers’ organization have to be in line with thelaw and practice of the country which is the legalenvironment for their operation. While theorganization rules provide a sound basis forgovernance of the organization, it is even moreimportant that they are applied in a spirit ofmember orientation. It is necessary to haveappropriate procedures to promote and, if need be,enforce the rules. The rules should, as far aspossible, be clear and simple. Overregulationshould be avoided.

Rule-making bodies can be all of the abovementioned institutions, that is, the MemberAssembly, the Board and the Chief Executive.

The core document is the employers’ organizationconstitution, often called the statutes, that setsout the fundamental structure and rules of theorganization. The constitution lays down the most

fundamental operating principles and should onlybe changed by a majority (and typically by morethan a two-thirds majority) of the MemberAssembly.

Other forms of employers’ organization rulesinclude by-laws, codes of practice and codes ofbehaviour. These rules are generally subject tomore frequent amendment and tend to deal withissues of detail. These documents can normally bechanged by decision of the Board.

It is recommended that where specific details arenot necessary, the constitution should stick tofundamental issues of principle and procedure.This will ensure sound governance in the context ofa more flexible constitution that does not requireregular revision. An inflexible and bureaucraticconstitution may in fact engender a culture ofdisrespect for what is the key instrument of soundgovernance.

Subjects normally considered to be within thescope of the constitution are;

� The name and aims of the organization;

� Definitions, rights and responsibilities ofmembers;

� The operation of the Member Assembly;

� Board membership, tasks and duties anddecision making procedures;

� The preparation and presentation of accounts;

� The appointment of an independent auditor;

� The process of amending the constitution;

� Merger and or dissolution of the organization.

Details of the questions above, as well as themany other issues that need to be documented forthe effective running of the organization should beincluded, as appropriate, in by-laws, codes ofconduct or codes of good practice.

Codes of conduct could, for instance, guide theconduct of Board members.

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Committees

It is common practice in employers’ organizationsto have several standing committees to whichprojects/issues are referred as necessary.Especially in a large organization, there may be asubstantial network of standing committees andsub-committees. Increasingly, many employers’organizations also make use of time-limitedcommittees with specific goals; once the goals areachieved or the time limit expires, the committeedisbands.

Since the Board only meets periodically throughoutthe year to make key decisions, much of thebackground and detail work of the Board is donethrough committees and project groups. Thepresent section will look at this importantfunctional area of employers’ organizations withrespect to the governance implications ofcommittee and project group work.

It is important to clearly define the role of acommittee within the governance structure of anemployers’ organization, in order to avoid confusionand/or conflicts between the Board, management,and the various committees that may exist withinthe organization.

The general function of committees

Committees primarily exist to serve the Board incarrying out its responsibilities. This concerns, firstof all, the development of policypositions/decisions on issues of relevance to theorganization. Committees are a means to make fulluse of the experience and expertise of members in

preparing such decisions/positions, to settlepossible divergences of opinion at a very earlystage and thus make the policypositions/decisions more adequately reflectmembers’ views.

The Board has several other formal responsibilitiesthat require substantial support in terms ofresearch and analysis. These responsibilitiesinclude strategic issues such as the merger of theorganization with another business association, orissues of remuneration, succession and audit.

Committees or project groups may also be set upto support management functions where specialexpertise is required (e.g. addressing technologicalissues facing the industry) or in-depth memberparticipation is required.

In any case, it should be clear that committees aresupport structures meant to facilitate decisions bythe Board/management, not to take decisionsthemselves.

Key committees

Apart from committees for the development ofpolicy positions, common committees found inmany employers’ organizations include those forremuneration and auditing. Given the importance ofthese committees, it is recommended that theirfunctions, authority and composition be detailed inthe rules of the employers’ organization.

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RULES CHECKLIST

� A system of employers’ organization (EO) rules, consisting of a constitution/statutes, by-lawsand, as need be, codes of conduct is in place.

� EO rules are in line with the national legal framework.

� EO rules define clear competences and provide for adequate controls.

� The EO constitution contains basic provisions on the name and purpose of the EO, rights andresponsibilities of members, as well as the functioning of its organs.

� By-laws contain more detailed regulation on procedures, sub-organs and special issues. Theremay be codes for the conduct of EO organs and members.

The remuneration committee

The remuneration committee helps to define theappropriate level of remuneration and benefits forsenior figures in the organization and to agreeremuneration policy for the organization as a whole.Normally the committee will concern itself with theremuneration of the Chief Executive. However incases where Board members or the President arepaid for their services, this will also fall within theremuneration committee remit.

Concerning the remuneration of the ChiefExecutive, the committee should report directly tothe Board or President. Concerning anyremuneration paid to the Board, the committee maybe established under different scenarios: underone scenario the committee contains no membersof the Board and is authorized to determine theappropriate level of remuneration for Boardmembers. Another possible scenario has thecommittee reporting to the Board, but only settingthe remuneration for all future Board members,such that an outgoing Board and President set theremuneration for an incoming Board and President.In some organizations, the recommendations of theremuneration committee may be approved by avote of the Member Assembly at an annualmeeting.

In any event, the general principle is that thosedirectly receiving the remuneration decided by thecommittee should not be in a position of authorityover the committee.

The audit committee

KEY QUOTE

“Earnings can be as pliable asputty when a charlatan heads thecompany reporting them.”

Warren Buffett

US Investment entrepreneur

on the ENRON and

associated corporate scandals

1931 to date

One of the single most important responsibilities ofthe Board is ensuring that the income andexpenses of the EO are properly accounted for. Inpractice this requires the Board to establish anauditing committee whose responsibility is toappoint an external accountant/auditor to reviewthe financial records of the organization. Theauditor should report directly to the audit

committee or the President of the Board. It is notrecommended to have the auditors or the auditcommittee reporting to the Chief Executive or anyother member of management. Although in practicethe auditors will be working with managers,especially the treasurer, it is important that theauditors report to the Board.

Appointment

Committees may in practice be appointed by theBoard, the President of the Board, or the ChiefExecutive, depending on their nature and function.The rules of an employers’ organization shouldclearly indicate the types of committee that can beappointed by the Board and the Chief Executive.Generally, the right to appoint certain types ofcommittee should correspond to the formalresponsibilities of the Board and the ChiefExecutive. The Board should appoint committeesrelated to its areas of responsibility, such as thedevelopment of policy positions, remuneration, andauditing. The Chief Executive will appointcommittees related to projects on the dailymanagement of the organization. In either case,the appointment of the committee should include aclear job description of the committee membersand a clear description of the expected kind ofoutput.

In smaller organizations, it might be advantageousfor the rules to mandate the use of time-limitedcommittees that automatically dissolve on a certaindate, or on the accomplishment of a specific task,whichever comes first. This avoids the creation ofnumerous and perhaps unnecessary standingcommittees.

Dissolution

Dissolving a committee should be the responsibilityof the authority that created it, so that Boardcommittees are dissolved by the Board, andmanagement committees by the management. Itshould be clear that management has no authorityover a Board committee and the Board has noauthority over a management committee. A clearseparation of authority helps to keep the roles ofthe Board and the management separate. Thisavoids a Board that interferes in the day to dayoperation of the organization, and a managementthat interferes with the organization’s basicgovernance and long term strategic direction.

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Accountability

In order to avoid committees accruing too muchpower or authority and disrupting the governance ofthe organization, it is important that the rules ofthe employers’ organization clearly establish theauthority of the Board or management in relation totheir respective committees. In all casescommittees must remain answerable to the Board

or management. Boards and management shouldbe careful about delegating too much decisionmaking authority to committees. Additionally, asummary of the work of all committees, includingthose set up by management, should beperiodically and transparently reported to theBoard. This periodic reporting allows the Board toensure that each committee is operating within theframework of the rules.

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COMMITTEE CHECKLIST

� The rules clearly indicate the exact functions, authority and composition of key committeessuch as policy development, remuneration and auditing.

� Those directly receiving the remuneration decided by the remuneration committee are not in aposition of authority over the committee.

� The audit committee reports to the Board or President, and not to the Chief Executive.

� The rules clearly indicate the types of committee that can be appointed by the Board and theChief Executive. The authority to appoint certain types of committee corresponds to the formalresponsibilities of the Board and the Chief Executive.

� The appointment of committees includes a clear job description of the committee membersand a clear output.

� Committees can be dissolved by the authority (Board or management) that created them. It isclear that management has no authority over a Board appointed committee and the Board hasno authority over a management appointed committee.

� The rules clearly establish the authority of the Board or management in relation to theircommittees. The committees are always accountable to the authority that created them.

� A summary of the work of each committee within the organization is presented periodically (atleast annually) to the Board.

Transparency and communication

Transparency and member communication arecrucially important for an employers’ organization.Such an organization serves an important functionas a trusted advocate for its members. Malpracticein the performance of its operations undermines theinterests of its members and casts a negative imageover them. In order to maintain the trust of membersand others with which it relates, and to ensure theproper governance and functioning of theorganization itself, concrete steps should be takento promote transparency and to ensure timely andaccurate communication with members, with otherorganizations and with the general public.

As noted in the sections on Board responsibilitiesand committees above, external auditors should becommissioned by the Board, at least annually, toreview the finances of the organization. This reviewshould ensure that all income and expenses areproperly accounted for.

The rules of the employers’ organization shouldestablish the criteria for external auditors. Theyshould be appropriately qualified and be membersof a reputable firm with no direct connection to themanagement of the organization.

Preferably the auditors should not be members ofthe organization, though in some cases this may beunavoidable.

The auditors should be directly appointed by theMember Assembly, the Board, or a special auditcommittee appointed by the Board for thatpurpose. The auditors should report to the Board orits audit committee.

The external auditors have a responsibility toexamine the finances of the organization and certifythat the records kept by management accuratelyreflect its income, expenses and other financialcircumstances. The exact role of the auditors canbe briefly described in the rules of the employers’organization.

Avoiding corruption and

conflict of interest

Avoiding corruption and conflict of interest is crucialto sound governance in any organization. The rulesof an employers’ organization can take activemeasures to preclude malpractice in its operations.The rules may require the Board to draft a code ofconduct for the organization, which would be usedto guide management behaviour, and to evaluatetheir performance.

Another way to avoid corruption and conflict ofinterest is to develop internal checks and balances.Many of the recommendations in this guide arebased on the need to develop a balance ofauthority and oversight between the various coreinstitutions of governance in an employers’organization. General principles, such as the “foureye” principle (which requires an activity such asapproving invoices for payment and signingcheques, to have the approval of at least twopeople) can be basic but effective means ofbuilding checks and balances into an organization.

Especially large employers’ organizations may alsoconsider including an internal audit function, whichis responsible for ensuring the accuracy of internalreporting and compliance with management rules.The internal audit function can report directly to theChief Executive, with the authority to report to theBoard in cases involving serious misconductassociated with the Chief Executive or any otherstaff. The internal auditors should seek to uncoverand rectify any lapses in proper accounting orprocedure before such lapses are uncovered byexternal auditors or third party investigators (e.g.government authorities).

Given the core function of an employers’organization, it is important that it retainsindependence from other social partners and thegovernment. Therefore, it is considered goodpractice to avoid giving or receiving contributionsfrom political parties. Especially in light of recentinternational efforts against the bribery of publicofficials (e.g. the 1997 OECD Convention and the2004 UN Convention), an employers’ organizationshould avoid any political contributions that mayappear to be intended to improperly influencecandidates for, or holders of, public office.

While an employers’ organization should declineany contributions from political parties, it isacceptable and normal for it to receive funds froman authorized public official as part of anauthorized and clearly documented commercialcontract.

Another form of conflict of interest can arise whenBoard members or top managers become undulyinfluenced by parties external to the organization orvested interest groups within it. This can occur, forexample, when external parties or internal specialinterests seek to curry favour with Board membersor management through a valuable offer. The offercan consist of promises of future employment,elaborate gifts, additional income or benefits.Board or management capture can also occurwhere Board members or management haveinformal ties to particular groups, internal orexternal, which interfere with their responsibilitiesand obligations to the organization as a whole.

The potential problem of capture can be especiallypronounced in an employers’ organization with aminority of large firms that may seek to undulyinfluence its policy. Even within an organization ofrelatively similar sized firms, there is the possibilitythat a specific industry may try to unduly influenceparticular policy positions of the organization, tothe detriment of other members.

To avoid such dangers, the Board of the employers’organization should clearly establish limits on giftgiving and receiving, and the record of Boardmembers and management on this matter shouldbe periodically reviewed by the President. Informalties that lead to conflicts of interest should becontrolled by the existing checks and balanceswithin the organization: the President shouldoversee the Chief Executive, the Board shouldoversee the President, and the Member Assemblymust oversee the Board. Establishing clearguidelines at the earliest possible moment,however, can do much to avoid any potentialconflicts in the future.

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Communication

An employers’ organization sits in the middle of alarge interconnected web of organizations. Its mostimmediate stakeholders are its members who relyon it to conduct advocacy and social dialogue intheir name. Beyond these immediate stakeholders,an employers’ organization has a relationship withgovernment and inter-governmental agencies, tradeunions and the general public. It is important thatfor each of these groups the organization maintainsappropriate communications. At a basic level,these obligations to communicate should beexplained in the rules of the employers’organization. Communication with certainorganizations can be assigned to specificrepresentatives of the organization, such as theChief Executive, and inserted into the jobdescription of those representatives. It should benoted that advances in communication technology,principally internet related communications, providethe opportunity for employers’ organizations to offerincreased transparency to their members and otherorganizations and groups.

The principal stakeholders of any employers’organization are the members. One of the mostsignificant institutions for communication withmembers is the Member Assembly. The MemberAssembly is central to the governance of theorganization because it provides the opportunity tocommunicate with members, as well as theopportunity for members to communicate with theBoard and management. It is at the MemberAssembly that members or their representativeshave the opportunity to voice any formal concernsthey may have about the organization and itsmanagement.

As internet facilitates continuous communicationwith members, and feedback from members, therole of the Member Assembly may change overtime. Nonetheless, the rules of the employers’organization must clearly allow for two-waycommunication between the members and theBoard and management. The purpose of theemployers’ organization is to serve the members;ensuring that their voice is heard is a centralunderlying principle of good governance.

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TRANSPARENCY & COMMUNICATION CHECKLIST

� External auditors are commissioned by the Board at least annually to review the finances of theorganization.

� The auditors report to the Board.

� The rules of the employers’ organization establish the criteria for external auditors and, if needbe, describe their exact role or function.

� The rules require the Board to draft a code of ethics that applies to all Board members andmanagement.

� A code of ethics (or similar) specifies the acceptable limits of gift giving and receiving formembers of the Board and management.

� The President periodically reviews the performance of the Chief Executive to ensure that theChief Executive is not being unduly influenced (or “captured”) by an external party or an internalspecial interest.

� The rules oblige the management and the Board to maintain regular communication with themembership.

� The rules clearly provide mechanisms for two-way communication between the members of theorganization and the Board and management.

Section Five

The sound governance checklist

The compilation checklist

This section of the guide consists of a compilationof the checklists that appeared at the end ofsections two to four.

The compilation checklist is perhaps most usefulas a tool to audit existing arrangements so as toidentify areas where improvements can be made. Itwill also indicate how to make improvements. Youcan use the compilation in two ways.

First, having read through the guide, you might liketo measure how your own organization shapes upwith respect to sound governance. If you marked upthe checklists as you read through the guide, youcan now check how you fared overall. Second, youcan use the compilation checklist as aquestionnaire for senior managers in yourorganization to help them assess your currentapproach to sound governance.

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THE MEMBER ASSEMBLY CHECKLIST

� The rules clearly indicate measures designed to provide a fair and balanced representation ofall members of the employers’ organization in the Member Assembly.

� The rules clearly indicate who may and who may not be a member of the employers’organization.

� The rules clearly indicate the process by which the Member Assembly elects or approves theBoard of Directors.

� The rules clearly indicate the process by which the Member Assembly may remove members ofthe Board.

� The rules clearly establish the mechanism by which membership fees are determined.

� The rules clearly address the issue of non-payment of membership dues, including theprocedure for expelling non-paying members and the status of membership rights for anymember in arrears.

� The rules clearly indicate other member responsibilities, for instance the type of informationmembers are expected to share with the employers’ organization.

� The rules clearly define objective membership criteria.

� The rules clearly indicate that membership is voluntary.

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THE BOARD CHECKLIST

� The employers’ organization rules establish clear measures to prevent the Board from beingdominated by larger members or regional/sectoral groups to the exclusion of the interests ofother members.

� The employers’ organization rules, as appropriate, establish a specific number of seats for theBoard (not so many as to lose direction/control).

� The rules clearly document the eligibility criteria for Board members and describe the functionof the Board.

� The rules clearly indicate the process by which Board members are nominated and elected.

� The procedure for electing members of the Board is transparent and open to the entire body ofmember companies, or their representatives. The nomination and appointment do not takeplace behind closed doors by a single person or group (e.g. the President or Chief Executive).

� The rules define criteria that disqualify certain categories of people from Board membershipe.g. currently serving members of government.

� The rules clearly establish a mechanism by which members may remove individual members ofthe Board or the entire Board.

� The rules clearly document the responsibilities of the Board. These responsibilities include theapproval of the business plan and budget and the review of the performance of the ChiefExecutive.

� The rules give the Board authority to appoint or remove the Chief Executive.

� The rules establish clear procedures for the nomination and election of the President of theBoard.

� The rules detail the types, or categories, of decision that come under the remit of the Board,and draw a clear distinction between decisions that are the responsibility of the Board anddecisions that are the responsibility of the Chief Executive.

� The constitution contains within itself a procedure by which the constitution can be amended orchanged, involving final approval by the Member Assembly.

� The rules establish clear objective criteria for the Board’s decision on admitting new membersto the organization, involving final approval by the Member Assembly.

� The rules assign clear authority to the Board for miscellaneous housekeeping issues, such asopening bank accounts in the name of the organization.

� The rules provide a role description for the President of the Board including the basicqualifications for the job as well as detailed reference to the President’s responsibility toreview the performance of the Chief Executive.

� The rules establish the term of office for the President (and the Board members), and limit thenumber of consecutive terms that can be served by the same person(s).

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� The rules clearly establish the principle of impartiality as this applies to the President’sactivities on behalf of the EO. The EO does not serve as a platform for the President topromote his or her company to the detriment or exclusion of other member companies.

� The rules assign specific reporting responsibilities to the Board, including the appointment ofan external auditor to review the finances of the employers’ organization.

CHIEF EXECUTIVE AND MANAGEMENT CHECKLIST

� The Chief Executive is responsible for the general administration of the organization, andensures that constitutional requirements are observed.

� The employers’ organization rules provide the Chief Executive with full responsibility for hiringand managing the staff necessary to the day to day operation of the organization.

� The rules clearly distinguish between the responsibilities and authority of the President of theBoard and those of the Chief Executive. The Chief Executive has authority over the dailymanagement of the organization. The President has the authority to terminate the employmentof the Chief Executive in cases of serious misconduct and poor performance.

� The Chief Executive is responsible for matters related to governance such as the preparation ofa budget, even though decisions on these matters remain with the Board. The rules detail theresponsibilities of the Chief Executive in a job description.

� In line with national law and practice, the rules preclude any candidate for Chief Executive whohas a record of criminal or civil liability for corporate malpractice.

� The appointment of a Chief Executive is a function of the Board and/or the President of theBoard. The process of selecting and appointing a Chief Executive is well documented.

� The rules provide a grievance procedure for staff relating to the Chief Executive. Thesegrievances are reported to the President or a designated other Board member.

� The exact procedure for terminating the employment of the Chief Executive is documented inthe contract of employment of the Chief Executive.

� The remuneration of the Chief Executive is set by the President with the Board’s approval.

� Outside activities and remuneration of the Chief Executive, other than that from the employers’organization, must be approved by the Board and must not present a conflict of interest for theChief Executive.

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RULES CHECKLIST

� A system of employers’ organization (EO) rules, consisting of a constitution/statutes, by-lawsand, as need be, codes of conduct is in place.

� EO rules are in line with the national legal framework.

� EO rules define clear competences and provide for adequate controls.

� The EO constitution contains basic provisions on the name and purpose of the EO, rights andresponsibilities of members, as well as the functioning of its organs.

� By-laws contain more detailed regulation on procedures, sub-organs and special issues. Theremay be codes for the conduct of EO organs and members.

COMMITTEE CHECKLIST

� The rules clearly indicate the exact functions, authority and composition of key committeessuch as policy development, remuneration and auditing.

� Those directly receiving the remuneration decided by the remuneration committee are not in aposition of authority over the committee.

� The audit committee reports to the Board or President, and not to the Chief Executive.

� The rules clearly indicate the types of committee that can be appointed by the Board and theChief Executive. The authority to appoint certain types of committee corresponds to the formalresponsibilities of the Board and the Chief Executive.

� The appointment of committees includes a clear job description of the committee membersand a clear output.

� Committees can be dissolved by the authority (Board or management) that created them. It isclear that Management has no authority over a Board appointed committee and the Board hasno authority over a Management appointed committee.

� The rules clearly establish the authority of the Board or management in relation to theircommittees. The committees are always accountable to the authority that created them.

� A summary of the work of each committee within the organization is presented periodically (atleast annually) to the Board.

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� External auditors are commissioned by the Board at least annually to review the finances of theorganization.

� The auditors report to the Board.

� The rules of the employers’ organization establish the criteria for external auditors and, if needbe, describe their exact role or function.

� The rules require the Board to draft a code of ethics that applies to all Board members andmanagement.

� A code of ethics (or similar) specifies the acceptable limits of gift giving and receiving formembers of the Board and management.

� The President periodically reviews the performance of the Chief Executive to ensure that theChief Executive is not being unduly influenced (or “captured”) by an external party or an internalspecial interest.

� The rules oblige the management and the Board to maintain regular communications with themembership.

� The rules clearly provide mechanisms for two-way communication between the members of theorganization and the Board and management.

Section Six

What the business gurus say

There is very little academic literature relating togovernance in employers’ organizations, or in otherorganizations that represent business in itsdealings with governments, trade unions andNGOs. However, as companies are organizations ofowners/investors, while employers’ organizationsare organizations of members, corporategovernance rules and best practices can also berelevant to them. This section will therefore reviewsome of the current and historical trends oncorporate governance.

Corporate governance is typically perceived in theacademic literature as dealing with what the OECDPrinciples of Corporate Governance defines as“problems that result from the separation ofownership and control”. In the employers’organization this manifests itself in distancebetween the management or the Board of theorganization and the body of members. From thisperspective, corporate governance would focus on:the internal structure and rules of the Board ofdirectors; the creation of independent auditcommittees; rules for disclosure of information toshareholders and creditors; and control ofmanagement. Hence the governance guide focusesprimarily on management and Board structures andresponsibilities, organizational statutes and rules,auditing and member communication. Corporategovernance today, however, is generally perceivedto encompass a wider set of relationships betweena company’s management, its Board, itsshareholders and its stakeholders. Employers’organizations which often represent business inpolicy discussions on governance regulations needto grasp these issues even if they are not directlyrelevant to their own organization’s structure.

Much of the recent corporate governance debatehas been dominated by the wave of corporatescandals of Enron, WorldCom, Tyco Internationaland the like, which did a lot to undermine investorconfidence and prompted regulators to taketougher stands on corporate misconduct. It is truethat these scandals were on a colossal scale.When Enron collapsed on December 2, 2001 theDow Jones Index lost 2,000 points and $60 billionwas wiped off the value of US stocks. This said,corporate governance is an interdisciplinary subjectof interest to historians, economists and lawyers,and it dates back much longer than Enron.

As Robert E. Wright points out, in the eighteenthand nineteenth centuries, Americans and Britonslooked askance at most forms of governmentregulation of business. In 1889, for instance, arailroad investor by the name of John Locke arguedthat while “governmental regulation sounds well” itwas not a good idea to give power over privatebusinesses to “a bare majority of unexpert andunconscientious politicians.” Conversely,nineteenth-century investment gurus regularlyextolled the importance of good corporategovernance. For example, Robert Ward, in his 1865Notes on Joint-Stock Companies, described thecharacteristics of a good investment. The issuingcompany, he argued, should have “a good scheme,brought before the public at a seasonabletime…enough capital…and it must be managedwell.” Ward urged investors not to be lulled intocomplacence due to the size or previous successof a company.

Many argue that the systemic problems atcompanies such as Enron, WorldCom, and TycoInternational arose because of an imbalance ofpower in favour of top management in corporateorganizations. This can be traced back to the1960s and 1970s when classical economists, ledby Nobel Prize laureate Milton Friedman, arguedthat the purpose of business is to earn maximumprofit – almost regardless of how it went aboutdoing it – as long as it stayed within theparameters of the law. In the wake of real andalleged corporate scandals, it is not surprising tofind that Friedman’s notions have been replaced bya complex web of laws and regulations andinitiatives (including voluntary codes) that shapethe way business is governed.

Voluntary codes are usually traced back to the1992 “Cadbury Code”, the unofficial name for thepioneering Code of Best Practice on corporategovernance, which became the model for corporategovernance reform in Europe, Commonwealthcountries and elsewhere.

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The Cadbury Code was a response to a series ofscandals and corporate failures among UK listedcompanies in the early 1990s. It aimed to helpprevent similar scandals and to rebuild the trust ofthe public and investors by prodding companies toimprove their governance practices. The codes thathave followed in its wake around the world embodysimilar goals.

The stated objective of the Cadbury Committee,was “to help raise the standards of corporategovernance and the level of confidence in financialreporting and auditing by setting out clearly what itsees as the respective responsibilities of thoseinvolved and what it believes is expected of them.”

The Cadbury Code of Best Practices had 19recommendations in the nature of guidelinesrelating to the Board of directors, non-executivedirectors and executive directors, as well as onreporting and control. Whilst the recommendationsthemselves were not mandatory, the companieslisted on the London Stock Exchange were requiredto clearly state in their accounts whether or not thecode had been followed. The companies who didnot comply were required to explain the reasons forthat decision. Indeed, this mandatory disclosureprinciple, a practice known as “comply or explain”,has made corporate governance practices muchmore transparent and forced companies to thinkabout them carefully, since any departure from thecode must be publicly justified.

Corporate governance codes have proliferated inthe 13 years since the Cadbury Code of BestPractice came into effect in the United Kingdom. Inthe past five years alone, new codes have emergedin every G-7 country except Japan, and today morethan 50 countries have their own. The codes vary inscope and detail, but most tackle five fundamentalissues:

� fairness to all shareholders;

� clear accountability by the Board andmanagement;

� transparency;

� responsibility for the interests of minorityshareholders and other stakeholders; and

� adherence to the letter and spirit of the law.

Today, perhaps the leading international initiative isthe OECD Principles of Corporate Governance,which set out a framework for good practice whichhas been agreed by the governments of all 30countries that are members of the OECD. TheOECD principles are designed to assistgovernments and regulatory bodies in OECDcountries and elsewhere in drawing up and

enforcing effective rules, regulations and codes ofcorporate governance. In parallel, they provideguidance for stock exchanges, investors,companies and others that have a role indeveloping good corporate governance. Since theoriginal OECD Principles were issued in 1999 (andupdated in 2004), they have become a generallyaccepted standard in this area. They have beenembraced by the World Bank in its work andendorsed by the Financial Stability Forum as one ofits twelve key standards for financial stability.

The OECD Principles of Corporate Governance coversix main areas. They call on governments to havein place an effective institutional and legalframework to support good corporate governancepractices (Chapter I). They call for a corporategovernance framework that protects and facilitatesthe exercise of shareholders’ rights (Chapter II).They also support the equal treatment of allshareholders, including minority and foreignshareholders (Chapter III). They recognize theimportance of stakeholders in corporategovernance (Chapter IV), and consider timely,accurate and transparent disclosure mechanisms(Chapter V). Finally, they deal with Boardstructures, responsibilities and procedures(Chapter VI).

Despite an apparent lack of teeth, codesundoubtedly improve corporate governance. Theyfocus attention and often influence broader policydebates about the regulation of business. Theyhelp educate companies, often by collecting andclarifying best practices. And codes drafted bypowerful institutional investors have had a directimpact on corporate governance by stating whatthese investors expect from the companies inwhich they invest.

However, while voluntary initiatives will probablycontinue to play a big role in the governance ofbusiness, one cannot deny that legally bindingnational regulation often has the greatest impact.While it is not possible here to provide acomprehensive review of all the regulatoryframeworks in all countries, it may be of interest tohighlight the Sarbanes-Oxley Act, which is theleading regulation today.

Passed by the U.S. Congress and signed into law inJuly 2002, the Sarbanes-Oxley Act (SOX)

represents a sweeping reform for publicly-heldcompanies. At its core, Sarbanes-Oxley is aboutestablishing consistent financial and corporategovernance processes to ensure corporate integrityand accountability.

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It was designed to protect investors by improvingthe accuracy and reliability of company financialdisclosures. Consequently, the SOX imposed majorchanges in corporate governance, financialreporting and auditing practices, while creating newfinancial oversight functions. Regardless of levelsof security, the failure to implement best practice inevery aspect of governance would result innon-compliance.

While it is true that the SOX targets all large U.S.public companies, it also impacts small andmid-sized businesses, including those that areprivately owned. For instance, smaller companiesare affected by the law’s provisions regardingdocument retention, criminal fraud and theEmployee Retirement Income Security Act (ERISA).Furthermore, the SOX requirements will concernany private company seeking venture capitalfunding, applying for commercial loans, planning anIPO (initial public offering), anticipating acquisitionand/or doing business with a public company.

Although not required by law, smaller companiescould benefit substantially from the implementationof SOX best practices. Following a best practice

template such as the one below suggested byAmadeus International Inc. can help navigate themaze of possible solutions. While this examplefocuses on the SOX and thus the U.S., theconcepts can be modified and applied by largecompanies around the world according to their ownregulatory environment.

Today students look back in wonder at the 1920’swhen business leaders of the day questioned theneed for regulations governing the publication ofannual reports and accounts. It is generally agreedthat both “hard” and “soft” legal reportingrequirements for company activities, includingcorporate governance, are here to stay.

Whilst none of the governance standards discussedin this section directly applies to an employers’organization, they do create a new environment ofincreased expectations in private sectorgovernance, which are useful starting points forthose wishing to research governance further. If youwant to know more about the ideas presentedabove or research other writers, the referencesbelow will act as a guide.

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AMADEUS INTERNATIONAL 6 STEPS TO SOX BEST PRACTICE

1. View SOX compliance as a strategic initiative – not a “one-off” compliance project. SOX regulationsinvolve multiple business units and require a comprehensive approach to ensure compliance.Current best practice is to address SOX as an integrated project.

2. Become familiar with SOX regulations. The first step in understanding the regulations is tofamiliarize yourself with requirements beyond general marketing hype. It is important to understandwhat each of the sections says to apply them to your organization. It is recommended best practiceto leverage the skills of compliance experts both internally and externally to accelerate your learningcurve.

3. Develop a SOX roadmap for compliance. Prior to deployment of any new technology, it is importantto conduct a risk assessment to determine your organization’s maturity level with respect to SOX.Some controls may already be in place facilitated through existing technology, processes, andprocedures. It is best practice to develop a SOX roadmap for compliance.

4. Establish an electronic records management system. Electronic records management is essentialto ensure SOX compliance. It is recommended best practice to establish an effective recordsmanagement and retention program to ensure the authenticity and integrity of all corporate records.

5. Assess the ability of your company’s existing technology systems to support SOX policies and

processes. Most of the technology required for SOX exists within your organization. However, thereare some technologies such as electronic records management and compliance process control thatcould help accelerate and fulfil requirements stipulated by the rule. It is good practice to assess theexisting technology and begin filling in technology gaps as appropriate to your goals.

6. Establish effective training programs. It is recommended best practice to implement ongoingtraining and competency management to ensure all relevant staff are informed about SOX processand reporting requirements and technology.

Section Seven

Further reading and links on governance

and employers’ organizations

Business books and articles on governance

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Bhide, A., (1994) “Deficient Governance”, Harvard Business Review, November-December 1994, pp.129-139

Blair, M.M, (1995) “Rethinking Assumptions Behind Corporate Governance”, Challenge, Volume 38, pp 12

Brancato, C.K., and Plath, C.A., (2003), Corporate governance best practises: a blueprint for the post-Enron era. NewYork, Conference Board Inc.

Cadbury, A., (2002), Corporate governance and chairmanship: a personal view,Oxford University Press

Coombes, P., and Wong, S.C.Y. (2004), “Why codes of governance work”, McKinsey Quarterly, Issue 2

Davies, A. (1999). A strategic approach to corporate governance. London: Gower Publishing Limited.

Economist Intelligence Unit (2005) The importance of corporate responsibility –http://graphics.eiu.com/files/ad_pdfs/eiuOracle_CorporateResponsibility_WP.pdf

Gugler, K., (ed.), (2001). Corporate Governance and Economic Performance. Oxford: Oxford University Press,

Hertner, P., (1998), “Corporate Governance and Multinational Enterprise in Historical Perspective”, in: Comparative

Corporate Governance – The State of the Art and Emerging Research 41 (Klaus J. Hopt et al. eds., Oxford UniversityPress)

Kearns, K.P., (1996), Managing for accountability : preserving the public trust in public and nonprofit organizations.

San Francisco, CA : Jossey-Bass Inc.

Kim, H.J., (2001), “Taking International Soft Law Seriously: Its Implications for Global Convergence in CorporateGovernance”, Journal of Korean Law

Lagace, M, (2004) “Enron’s Lessons for Managers”, Harvard Business School Working Knowledge

Monks, R. A. & Minow, N., (2001) Corporate Governance (2nd ed.), Blackwell Business

Organization for Economic Co-operation and Development. (2004). OECD Principles of Corporate Governance. Paris:OECD.

Organization for Economic Co-operation and Development. (2004), “The OECD Principles of Corporate Governanceexplained”, OECD Observer, August, pp.1-8

Pavlicevic, B., (1998) Good Governance: Challenge to Non-Profit Boards. Johannesburg: The Liberty Life Foundation.

Radin, T.J, (2004). “The effectiveness of global codes of conduct: role models that make sense”, Business and

Society Review, 109 (4), pp 415-447.

Spear, R., (2004), “Governance in Democratic Member-Based Organizations”, Annals of Public and Cooperative

Economics 7

The Committee on the Financial Aspects of Corporate Governance; Gee and Co. Ltd., (1992) The financial aspects of

corporate governance (Cadbury code)

http://graphics.eiu.com/files/ad_pdfs/eiuOracle_CorporateResponsibility_WP.pdf

Governance books and guides related to employers’

(and similar) organizations

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Boleat, M. Good Practice in Trade Association Governance (London, Plaza)

De SilvaEmployers’ organizations in Asia in the 21

st

century (Geneva: ILO Bureau for Employers’Activities, 1996)

De SilvaManaging an employers’ organization and its changing role (Geneva: ILO Bureau forEmployers’ Activities, 1992)

Gonzalez MarroquinGuide to management of entrepreneurial organizations (San Jose, Costa Rica: ILOBureau for Employers’ Activities, 1997)

ParkerDesigning and developing more effective organizations (Geneva: ILO Bureau forEmployers’ Activities, 2001)

Standaert, J.M.Governance of Employers’ Organizations – practical guidelines (Budapest: ILO Bureaufor Employers’ Activities, 2004)

Strohmeyer, Pilgrim,

Luetticken, Meier,

Waesch and Arias

Building the capacity of business membership organizations (Washington: World BankSmall and Medium Enterprise Department) n.d.

Tipgos, M.A., and Keefe, T.J. (2004), “A Comprehensive Structure of Corporate Governance in Post-Enron CorporateAmerica”, CPA Journal

World Business Council for Sustainable Development. (2004). Issue Management Tool: Strategic challenges for

business in the use of codes, standards and frameworks, WBCSD

World Bank & OECD, (1999) Corporate Governance: A Framework for Implementation

Overview available at http://www.worldbank.org/privatesector/cg/docs/overview.pdf

Wright, R.E. (Ed) (2004) History of Corporate Governance: The Importance of Stakeholder Activism, Pickering & ChattoPublishers, London.

http://www.worldbank.org/privatesector/cg/docs/overview.pdf

Useful organizations and websites

The Bureau for Employers’ Activities at

the International Labour Organization

(ACTEMP)

www.ilo.org/actemp

ACTEMP – The ILO Bureau for Employers’ Activitiesmaintains close contacts with employers’organizations in all the member states of the ILO.The Bureau operates from ILO headquarters inGeneva and through a network of employers’organization specialists in the ILO’s technicalteams around the world. Its tasks are to make theresources of the ILO available to employers’organizations, and to keep the ILO constantly awareof their views, concerns and priorities. It promotesinternational cooperation amongst employers’organizations, and runs a programme of activitiesaround the world.

The Bureau is available, through nationalemployers’ organizations, as a gateway throughwhich employers can gain access to some of thebest information available on human resourcesdevelopment, industrial relations and a host ofother employment and labour market-relatedsubjects.

The Bureau also runs a programme of technicalcooperation which provides developmentassistance to employers’ organizations indeveloping countries and countries in transition toa market economy. This work is mostly donethrough projects financed by the overseasdevelopment assistance funds of donor countries.

The ACTEMP website contains links to the nationalemployers’ organization in every member country ofthe ILO.

The International Organization

of Employers (IOE)

www.ioe-emp.org

Since its creation in 1920 the InternationalOrganization of Employers (IOE) has beenrecognized as the only organization at theinternational level that represents the interests ofbusiness in the labour and social policy fields.Today, it consists of 139 national employerorganizations from 134 countries all over the world.

The mission of the IOE is to promote and defendthe interests of employers in international fora,particularly in the International Labour Organization(ILO), and to this end it works to ensure thatinternational labour and social policy promotes the

viability of enterprises and creates an environmentfavourable to enterprise development and jobcreation. At the same time it acts as theSecretariat to the Employers’ Group at the ILOInternational Labour Conference, the ILO GoverningBody and all other ILO-related meetings.

In order to ensure that the voice of business isheard at the international and national level, theIOE is actively engaged in the creation and capacitybuilding of representative organizations ofemployers, particularly in the developing world andin countries in transition to a market economy.

The Center for International

Private Enterprise (CIPE)

www.cipe.org

The Center for International Private Enterprise(CIPE) provides a wealth of materials on capacitydevelopment in business associations.

Whatcom Council of Nonprofits (WCN)

www.wcnwebsite.org/practices/board

Site devoted to building organizational relationshipsand capacity in order to strengthen nonprofit sectororganizations.

International Corporate Governance

Network (ICGN)

www.icgn.org/index.php

European Corporate Governance

Institute (ECGI)

www.ecgi.org

The ECGI is an international scientific non-profitassociation. It provides a forum for debate anddialogue between academics, legislators andpractitioners, focusing on major corporategovernance issues and thereby promoting bestpractice.

The World Bank

www.worldbank.org/Themes/CorporateGovernance

Database on governance and governance links.

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http://www.ilo.org/actemp

http://www.ioe-emp.org

http://www.cipe.org

http://www.wcnwebsite.org/practices/board

http://www.icgn.org/index.php

http://www.ecgi.org

http://www.worldbank.org/Themes/CorporateGovernance

Section Eight

A sample employers’

organization constitution

Throughout the text the role of the employers’organization constitution is referred to. TheConstitution lays down all the important rules andregulations relating to governance of theorganization. There is no single format for anemployers’ organization constitution, and indeedthe prescribed form may vary according to thenational law under which the organization isestablished. The following pages present acomprehensive model that will help those settingup a constitution from scratch, those revising anexisting and outdated constitution or simplyundertaking a desk review of current constitutionalarrangements to check that they cover the majorissues required effectively.

It should be noted that the provisions of thesample constitution do not respond exactly to allthe points made in the body of this guide. Anemployers’ organization needs to tailor itsconstitution to its own particular circumstances,which means that no single model text can serveall organizations. The sample provided here isintended to be used for study rather thanreplication.

BEST PRACTICES

CONSTITUTION AND RULES OF THE

EMPLOYERS AND MANUFACTURERS

ASSOCIATION XYZ INCORPORATED

The following shall be the Rules of theEmployers and Manufacturers AssociationXYZ Incorporated. These Rules, which areadopted from 01 April 1989 repeal allformer Rules of the ABC EmployersAssociation Inc.

1. NAME

The name of the Association shall be theEmployers and Manufacturers Association XYZ Inc.It will represent itself to members under the XYZbrand without a geographic qualifier when workingcooperatively with other regional associations.

2. REGISTERED OFFICE

The registered office of the Association shall besituated in XYZ-Town or at such other place as theCouncil shall determine.

3. OBJECTS

The objects for which the Association isestablished are:

(a) To provide an organization to assist allenterprises in the fields of employmentrelations and related matters, manufacturing,business enhancement and economicdevelopment.

(b) To represent and promote the interests ofemployers in all matters relating toemployment and to endeavour to improverelations between employers and employees.

(c) To assist, advise, represent and provideservices to employers and to coordinate theactions of employers in all matters affectingemployment relations.

(d) To represent and promote the interests ofmanufacturers and to assist, advise, representand provide services to manufacturers onmatters relating to manufacturing.

(e) To promote, advance and strengthen theorganization of employers, manufacturers andbusiness and to develop a common approachamong employers, employers’ organizations,manufacturers and business in all mattersaffecting employment relations,manufacturing and business.

(f) To ensure that the broader and nationalinterests of employers, manufacturers andbusiness are adequately promoted andrepresented, and to advance and promote theobjects of the national representativeorganizations of employers and/ormanufacturers.

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(g) To educate public opinion and promoteunderstanding of employers’, manufacturers‘and business points of view.

(h) To offer the widest range of services tomembers relevant to all aspects ofemployment relations, operating efficiencyand any other associated needs.

(i) To provide to members quality services suitedto their intended purpose.

(j) To enhance the economic and employmentenvironment in which members operate, tofacilitate their growth and general well-being.

(k) To do all such acts and things as are or maybe incidental to the attainment of all or any ofthe objects for which the Association isestablished.

(l) To do all such other acts as the Council ofthe Association deems appropriate.

4. DEFINITIONS

4.1 In these Rules, unless the context otherwiserequires, the following expressions shall have thefollowing meanings:

� “Advisory Group” means any Advisory Group

formed pursuant to these Rules to represent a

sectoral interest within the Association.

� “Annual General Meeting” means an Annual

General Meeting of the Association held in

accordance with Rule 7.1.

� “Board of Management Member” means a

member of the Board of Management

constituted in accordance with Rule 9.

� “Board of Management” means the Board of

Management of the Association constituted in

accordance with Rule 9.

� “Branch Committee” means the Committee

elected in accordance with Rule 6.3 to oversee

the operation of the Branch.

� “Branch Member” means a General Member

who trades in the geographical area covered by

the Branch.

� “Branch” means a Branch of the Association

established in accordance with Rule 6.1.

� “Chief Executive” means the Chief Executive

Officer of the Association appointed in


� “Council Member” means a member of the

Council constituted in accordance with Rule

8.1.

� “Council” means the governing body of the

Association constituted in accordance with

Rule 8.

� “General Meeting” means both an Annual

General Meeting and a Special General

Meeting.

� “General Member” means a member of the

Association who meets the criteria set out in

Rule 5.1.

� “Group Member” means a member of the


Rule 5.5.

� “Immediate Past President” means the

President who held such office immediately

prior to the current holder of such office in

accordance with Rule 8.3(b).

� “Life Member” means a member of the


Rule 5.4 and shall also mean the life members

of the ABC Employers Association Inc. and the

ABC Manufacturers Association Inc. at the date

of the first annual general meeting of the XYZ

Employers and Manufacturers Association Inc.

� “Manufacturer” and “Manufacturing” means

and includes any employer engaged in the

commercial production and making of goods

and products from raw materials by machine

and industrial process.

� “Member” means General Member, Group

Member and Life Member.

� “National Representative Organization”

means the organization(s) established to

collectively represent the national interests of

employers and/or manufacturers.

� “Old Rules” means the Rules of the ABC

Employers Association Inc.

� “President” means the President of the

Association elected in accordance with Rule

8.3.

� “Register of Members” means the register of

members of the Association to be kept in


� “Representative of member” means a director,

or employee of a General Member.

� “Special General Meeting” means a General

Meeting of the Association held in accordance

with Rule 7.2.

� “The Association” means the Employers and

Manufacturers Association XYZ Inc.

� “Vice President” means the Vice President of

the Association appointed in accordance with

Rule 8.1.

� “ABC Manufacturers Association Inc.” means

the Association as constituted pursuant to the

Incorporated Societies Act 1927 and known as

the ABC Manufacturers Association Inc.

� “ABC Employers Association Inc.” means the

Association as constituted pursuant to the

Incorporated Societies Act 1927 under the

name ABC Employers Association Inc.

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5. MEMBERSHIP

5.1 General Membership:

(a) General Membership is open to anyorganization being an employer, businessproprietor or manufacturer.

(b) An applicant shall be admitted as a GeneralMember who:

(i) Has completed a written application tothe Association providing suchinformation as the Council may require;

(ii) Agrees to conform with the Rules of theAssociation;

(iii) Agrees to pay the annual subscriptionand any entrance fee as determinedunder Rule 5.6 and other chargesincurred for services or products.

(c) Each General Member shall be liable for thefees, and all subscriptions and specialsubscriptions as may be determined in Rule5.6.

(d) In each year on a date determined by theCouncil, each General Member shall provideto the Association such information as theCouncil may decide is necessary for thecalculation of subscriptions due.

(e) Where a General Member fails to provide theinformation necessary to calculate theirsubscription the subscription shall beassessed using the information provided bythat General Member in a previous year.

(f) All members of the ABC ManufacturersAssociation Inc. at the date on which theseRules are adopted are deemed, from the dateof adoption of the Rules, to be GeneralMembers and entitled to participate in all ofthe activities of the Association, including thefirst Annual General Meeting held pursuant toRule 7.1, as if they had been admitted tomembership of the Association pursuant toRule 5.1.

5.2 Resignations:

(a) Any member who wishes to withdraw frommembership of the Association shall deliverto the Chief Executive a written notice ofresignation signed personally or by a dulyauthorized agent.

(b) No resignation shall be effective until theresigning member has paid all annualsubscriptions, fees, special subscriptions andany other charges due.

(c) Any member who has failed to pay allsubscriptions or levies due within 12 monthsafter the date on which the same becamedue shall be deemed to be unfinancial andmembership may be terminated by resolutionof the Council.

(d) Resigning or defaulting members shall haveno interest in or claim whatsoever upon thefunds of the Association.

5.3 Limitation of Liability:

General Members, Life Members and GroupMembers are not partners and are therefore not inany way jointly or severally liable for each othernotwithstanding any Rules or Regulations.

5.4 Life Membership:

(a) Life Membership may be conferred on anyindividual person in recognition of specialservices and contributions to the Association.

(b) Life members shall be recommended by theCouncil and such members shall be electedat any General Meeting of the Association.

(c) Such conferment shall be made by a vote ofnot less than three-fourths of the memberspresent at any General Meeting of theAssociation.

(d) There shall be no more than two LifeMembership conferments in any one year.

(e) Life members shall be entitled to all theprivileges of the Association (including theright to vote at any meeting in the election ofofficers) or in any other matter but shall notbe liable for any subscriptions.

5.5 Group Membership:

(a) Group Membership may be granted to tradeand professional associations or other groupsof employers/manufacturers where such anarrangement is deemed by the Council to beof mutual benefit to the Association and theGroup.

(b) Group Membership shall entitle the Group toreceive advice and information pertinent totheir members.

(c) The conditions, subscriptions and fees foreach Group Membership shall be set annuallyby the Council taking into account the type oforganization, and their membershipcomposition and the level of services to beprovided.

(d) Group Membership does not entitle theGroup’s individual members to have accessto the Association’s services other than inaccordance with the Group arrangement.

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5.6 Subscriptions, Fees and Other Charges:

(a) The Council shall by resolution determine anyentrance fees and annual subscriptions to bepaid by each General Member or GroupMember. All annual subscriptions shall bedue and payable on the first day of thefinancial year or such other date as may bedetermined by the Council.

(b) The Association may at any time make a callupon its members for a special subscriptionto meet any special financial needs of theAssociation. The resolution approving such acall shall be passed by a three-fourthsmajority vote of the members present at aSpecial General Meeting. The total amount ofthe special subscription payable by eachmember shall not in any one financial yearexceed the amount payable by such memberas the annual subscription for the same year.

(c) Where a member has branches or subsidiarycompanies which require to be servicedthrough another member of the NationalRepresentative Organization, the Council mayarrange for such services to be provided andmay collect from the member subscriptionsand fees on behalf of other NationalRepresentative Organization members.

(d) The Council may delegate to the ChiefExecutive the authority to determinesubscriptions, and fees or charges forservices and products not covered by annualsubscriptions.

5.7 Arrears of Subscriptions, Fees and Charges:

(a) Failure to pay any subscription or fee or othercharges within three months of the due datemay result in the Association suspending allservices to the member concerned, includingthe right to vote at any General Meeting. Suchsuspension shall not release the memberfrom liability of any fees, subscriptions orspecial subscriptions and other charges due.If payments due to the Association are madebefore the end of the financial year thesuspension shall be lifted and the servicesresumed following the date of payment.

(b) The Council may authorize legal action torecover any amount due to the Associationwhich remains unpaid for three months fromthe date the payment was due or the chargeincurred.

6. BRANCHES

6.1 The Council may establish a Branch in any city ortown or designated geographical area if in theopinion of the Council there is sufficientcommunity of interest amongst General Membersto provide for the effective operation of such aBranch.

6.2 The Council shall provide the Branch with by-lawsand regulations defining the role, operation andgeographical area of the Branch.

6.3 The Branch shall from its members elect acommittee in accordance with the by-laws of theBranch.

6.4 Each Branch shall be entitled to elect onerepresentative to the Council.

6.5 The Council may dissolve the operation of anyBranch if the Council considers that:

(a) The effective operation of the Branch hasdiminished; or

(b) The Branch has been engaging in activitiesdetrimental to the Association; or

(c) It is desirable in the interest of theAssociation.

Prior to the dissolution of any Branch, 28 days’notice shall be given to all Branch members.

7. GENERAL MEETINGS

7.1 Annual General Meeting:

(a) Subject to Rule 7.1(d) the Annual GeneralMeeting shall be held within six months afterthe end of each financial year. The AnnualGeneral Meeting shall be held at such timeand place as shall be determined by theCouncil.

(b) The business of the Annual General Meetingother than the first Annual General Meetingheld pursuant to Rule 7.1(d) shall be toconsider the Annual Report and FinancialStatements, to elect the incoming Council, toappoint an auditor for the ensuing year and toconduct such other special business as shallbe specified by the Council in the noticecalling the Annual General Meeting.

(c) The Annual General Meeting shall elect up to19 Council members.

(d) The first Annual General Meeting pursuant tothese Rules shall be held on the date onwhich the ABC Employers Association Inc.resolves at its Annual General Meeting calledpursuant to Rule 18 of the Old Rules torepeal the Old Rules and adopt these Rules.

(e) The business of the first Annual GeneralMeeting held pursuant to Rule 7.1(d) shall beto elect the incoming Council duly appointeduntil the next Annual General Meeting.

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(f) Sufficient notice of the first Annual GeneralMeeting shall have been given if the noticerequirements of the Rules of the ABCEmployers Association Inc. have beencomplied with, provided that there shall be nonotice requirements for the members of theABC Manufacturers Association Inc. deemedGeneral Members of the Association pursuantto Rule 5.1(f).

7.2 Special General Meeting:

(a) All General meetings other than the AnnualGeneral Meeting shall be known as SpecialGeneral Meetings.

(b) The Chief Executive, or, in the case ofdefault, the President, shall have the powerto convene a Special General Meeting in thefollowing situations:

(i) Where the Council thinks it necessary todiscuss any matter of interest to theAssociation; or

(ii) At the written requisition of any onehundred (100) General Members of theAssociation.

(c) If the Chief Executive or the President fails orneglects to convene the requisitionedmeeting within a 28 day period after receivingnotice of requisition, one hundred (100)General Members may convene such meetingand all costs of such meeting shall be paidfrom the funds of the Association.

7.3 Notices:

(a) With the exception of a special GeneralMeeting convened by requisition under Rule7.2(c), at least 14 days’ written notice ofevery Annual General Meeting and SpecialGeneral Meeting shall be given to allmembers, specifying the time, place andbusiness of the meeting.

(b) Every notice required to be given to membersshall be deemed to be duly delivered ifposted in a prepaid letter addressed to suchmembers at their postal address or sentsuccessfully by e-mail to their e-mail addressas recorded in the database of Members.

7.4 Quorum:

Thirty (30) members represented in person at anyGeneral Meeting of the Association shallconstitute a quorum.

7.5 Voting Rights:

(a) Each General Member and Life Member shallbe entitled to vote at all General Meetings ifpresent.

(b) On a show of hands each General Memberand Life Member represented shall beentitled to one vote each.

(c) Where voting is by ballot:

(i) Each General Member shall be entitledto one vote;

(ii) Each Life Member shall be entitled toone vote.

(d) At all General Meetings, voting shall bedetermined by a majority of the memberspresent by a show of hands unless a majorityof members present at the meeting demanda ballot.

(e) No proxies shall be permitted.

(f) Any General Member three months or more inarrears in payment of the annual subscriptionat the date of notice of any General Meetingshall be disqualified from voting or taking partin the General Meeting.

(g) Only one representative of a General Membermay vote at any General Meeting.

8. COUNCIL1

8.1 Membership of the Council:

(a) The Council shall consist of not less than ten(10) or more than nineteen (19) electedGeneral Members or Life Members of theAssociation plus branch representativeselected in accordance with Rule 6.4.

(b) The President and two (2) Vice Presidentsshall be elected by the Council.

(c) The immediate Past President shall be an exofficio member of the Council.

(d) The Chief Executive shall be entitled to attendmeetings of the Council.

(e) The Council shall have the power to co-optindividuals to membership of the Council as itconsiders appropriate.

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The functions of the Council may be carried out by the Board, as described in section three.

8.2 Election:

(a) Every candidate for election to the Councilshall be a representative of a GeneralMember or Life Member nominated in writingby at least two (2) General Members. Norepresentative of a General Member shallstand for election until that General Memberhas paid all subscriptions and fees due to theAssociation.

(b) Nominations for election to the Council shallbe lodged with the Chief Executive no laterthan seven (7) days before the day of theAnnual General Meeting.

(c) Nominations for the Council shall be on theprescribed form and shall include the fullname of the candidate, the General Memberthe nominee represents, the industry in whichthe nominee is engaged, and the designationof the nominee within the organization orbusiness.

(d) Council Members shall be elected by show ofhands unless a majority of members presentat the meeting demand a ballot.

(e) Each Council Member shall hold office for aterm of one year, commencing from the dateof the Annual General Meeting at which theywere elected.

(f) Each Council Member shall be deemed toretire at the date of the next Annual GeneralMeeting. Any retiring Council members shallbe eligible for re-election and if re-elected willbegin a new term of office.

8.3 President:

(a) A President shall be elected by the membersof the Council and shall hold office for oneyear and shall be eligible for re-election.

(b) The President on retiring from office shalloccupy the office of Immediate Past Presidentfor one year provided that the GeneralMember they represent remains a GeneralMember of the Association.

(c) The President shall:

(i) Preside at all General Meetings, CouncilMeetings and other Associationmeetings when present;

(ii) Sign minutes of the meetings;

(iii) Generally conduct the meetings;

(iv) In the case of an equality of votes, havea casting vote.

(d) In the absence of the President, a VicePresident shall possess and may exercise inall respects the power of the President. In theevent that the President and both VicePresidents are absent, a chairperson shall bechosen from the Council members presentwho shall while so acting exercise all thepowers of the President.

8.4 Vacancy:

(a) Where a Council Member resigns or dies or aCouncil position becomes otherwise vacantduring a Member’s term, a casual vacancyshall be deemed to have arisen. Unlessadvised otherwise a letter of resignation froma council member will take effect 30 daysafter the date of the letter.

(b) Any Council Member shall be deemed to haveresigned from the Council without furthernotice where that Council Member;

(i) Ceases to be a representative of theGeneral Member he or she representsor;

(ii) Is a representative of a General memberwho has resigned or has beensuspended under Rule 16.3, or expelledfrom the Association or;

(iii) Fails to attend three consecutive Councilmeetings without having leave ofabsence or reason considered adequateby the Council.

(c) The Council may, having regard to thegeographical distribution of membership andrepresentation of any occupations, trades, orsections of such occupations or tradescomprised within the Association, appoint arepresentative of a General Member to fill thevacancy for the remainder of the unexpiredterm.

8.5 Quorum:

The quorum for a Council meeting shall be greaterthan 50% of the current membership of theCouncil as at the date of each meeting.

8.6 Powers of the Council:

The Council shall have the power to manage andcontrol the Association and to perform thefunctions conferred by these Rules including thepower to:

(a) Determine the policies of the Association;

(b) Establish and disestablish branches underRule 6;

(c) Control the funds of the Association for thefurtherance of objects set out in Rule 3;

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(d) Invest money in real or personal property,invest or borrow money by way of mortgages,debentures or otherwise on the security ofany property of the Association;

(e) Receive, consider, accept or declineapplications for General Membership inaccordance with Rule 5.1(b) or GroupMembership in accordance with Rule 5.5.

(f) Discipline members under Rule 16;

(g) Form subsidiary limited liability companies,partnerships or joint ventures, wholly or partlyowned by the Association to carry out suchactivities which the Council considers wouldbest be conducted by separate entities;

(h) At its discretion offer special servicearrangements to individuals or groups ofemployers, manufacturers or businessesincluding overseas businesses.

(i) Set up or dissolve a Special Committee ordelegate or withdraw delegation of any of itsfunctions to a Special Committee, inaccordance with Rule 12.

(j) Join or cease membership of a NationalRepresentative Organization under Rule 15 ona three-fourths majority vote of the Council.

(k) Appoint members of the Association to anyAdvisory Group according to the Rulesgoverning membership of that Advisory Group.

The Council may carry out, transact or performsuch other acts, matters or things as may benecessary or expedient in the opinion of theCouncil to advance the interests or policies of theAssociation, provided that in no circumstancesshall any of the funds or assets of the Associationbe distributed to any member or members.

9. BOARD OF MANAGEMENT

(a) The Council shall appoint a Board ofManagement comprising the President, VicePresidents, Chief Executive and four othermembers of the Council.

(b) The Council shall delegate such of its powersrelating to budgetary, financial andadministrative matters including theappointment of the Chief Executive as it mayconsider appropriate to the Board ofManagement.

(c) The Board of Management shall have thepower to co-opt individuals to membership ofthe Board as it considers appropriate.

(d) Four (4) Board of Management members(excluding the Chief Executive) shall form aquorum, provided always that they include thePresident, or a Vice President.

10. ADVISORY GROUPS

(a) The Association may, at any General Meetingby a three-fourths majority vote by themembers represented, establish AdvisoryGroups. In deciding to establish an AdvisoryGroup the Association will state:

(i) the objects for which such a Group isestablished, and

(ii) the membership of the Advisory Group.

(b) Any Advisory Group established under thisRule shall comply with the Rules and Objectsof the Association.

(c) If the Association votes to establish anAdvisory Group under this Rule, the Rulesshall be deemed to be amended pursuant toRule 18 to provide for the establishment ofthe Advisory Group, such amendment toinclude the objects and membership of theGroup.

(d) Any Advisory Group established under theseRules (including the Manufacturing ActionGroup established pursuant to Rule 11) mayby a three-fourths majority vote of theAdvisory Group decide that the Advisory Groupis wound up, and the Association shall bebound by such a decision of the AdvisoryGroup, and the Rules of the Association shallbe amended accordingly.

(e) Every advisory group established under theseRules (including the Manufacturing ActionGroup established pursuant to Rule 11) shallin consultation with the Council, draw up anAdvisory Group Strategy which shall containthe policy framework under which the AdvisoryGroup shall operate.

The Advisory Group Strategy shall be consistentwith the policy of the Association determined bythe Council pursuant to Rule 8.6(a).

11. MANUFACTURING ACTION GROUP

11.1 Within the Association there shall be aManufacturing Action Group which shall:

(a) be an Advisory Group for the purposes ofthese Rules, and

(b) be formed for the purpose of representing theinterests of manufacturers who are membersof the Association.

11.2 The Manufacturing Action Group shall comprise:

(a) those members of the Council who aremanufacturers, (“Council manufacturers”);and

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(b) such other members of the Association whoare manufacturers and who have beennominated by Council manufacturers andappointed to the Manufacturers Action Groupby a majority decision of the Council; and

(c) the President, Vice Presidents and the ChiefExecutive of the Association.

11.3 The President, Vice Presidents and the ChiefExecutive of the Association are members of theManufacturing Action Group in an ex officiocapacity.

11.4 The objects of the Manufacturing Action Groupshall be:

(a) to promote, aid, foster, encourage, developand protect local and national manufacturingindustries;

(b) to develop policy and initiate appropriateactivities on all issues of specific interest tothe manufacturing sector;

(c) to represent the manufacturing sector onissues of specific interest for manufacturing,providing an identity and public voice;

(d) to do all such other things as may appearnecessary or desirable or incidental orconducive to the attainment of all the aboveobjects or any of them.

11.5 In pursuing the objects in Rule 11.4, theManufacturing Action Group shall ensure that itcomplies with the Rules and Objects of theAssociation.

11.6 The Manufacturing Action Group may, subject tothese Rules, regulate its own procedure.

12. SPECIAL COMMITTEES

(a) Special Committees may be set up anddissolved by the Council, for the purpose ofinvestigating, and/or taking action on anymatters relating to the objects or business ofthe Association.

(b) The Council may appoint Special Committeesto deal with any matters relating to theobjects of the Association.

(c) The President, Vice Presidents and the ChiefExecutive Officer shall be entitled to sit as exofficio members on such SpecialCommittees.

(d) Special Committees may not incurexpenditure without prior approval of theCouncil.

13. CHIEF EXECUTIVE OFFICER

(a) The Council shall on the recommendation ofthe Management Board appoint a ChiefExecutive Officer with such designation andon such salary and conditions of service asmay be determined from time to time.

(b) The Chief Executive shall also act asSecretary and Treasurer to the Associationand shall be responsible to the Council in allrespects.

(c) The Chief Executive shall appoint such otherstaff as may be required for the efficientconduct of the affairs of the Association.

14. MANAGEMENT

14.1 Finances:

(a) The financial year of the Association shall bedetermined from time to time by the Council.

(b) All sums paid by way of annual subscriptions,fees or other charges or otherwise, shall bereceived by the Chief Executive who shallplace the sum forthwith in such bank as maybe from time to time nominated by theCouncil. Account titles shall include the wordsthe “Employers and ManufacturersAssociation XYZ Inc”. Such funds are to beabsolutely at the disposal of the Council tofurther the objects of the Association or meetthe contractual obligations for which thefunds were provided.

(c) The Council shall empower the ChiefExecutive or such other person as may beauthorized by the Council to draw and executecheques on the said accounts or sumspayable by the Association and authorized tobe paid, but such cheques shall be signed orendorsed in such manner as the Council shallfrom time to time direct.

(d) The financial and related records of theAssociation shall be kept by the ChiefExecutive under the supervision of the Council.

(e) Once each year the accounts of theAssociation shall be audited by the Auditor ofthe Association who shall be appointed fromyear to year at the Annual General Meeting ofthe Association. Any member of the Instituteof Chartered Accountants in public practicewho is not a member of the Council shall beeligible for appointment as Auditor. Shouldthe position of Auditor become vacant duringthe year by reason of death, resignation orotherwise the vacancy shall be filled by theCouncil and the Auditor so appointed shallhold office for the balance of the term of theAuditor whose place has been filled. TheAuditor shall be paid such fees as may benegotiated with them by the Council.

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14.2 Seal:

(a) There shall be a seal of the Association whichshall contain the words “The Common Seal ofthe Employers and Manufacturers AssociationXYZ Incorporated”.

(b) The seal of the Association shall be in thecustody of the Chief Executive and shall beaffixed to all necessary documents in thepresence of at least one member of theBoard of Management and the ChiefExecutive, or alternatively by two members ofthe Board of Management.

(c) The seal may be altered or renewed at anyGeneral Meeting of the Association by a voteof not less than three-fourths of the memberspresent.

(d) The Chief Executive shall maintain a registerrecording the use of the seal and shall reportthe use of the seal to meetings of the Boardof Management.

14.3 Database of Members:

The Association shall keep a database ofMembers showing their names and last knownpostal and/or e-mail addresses and shall keepsuch database up to date.

15. NATIONAL REPRESENTATIVE ORGANIZATIONS

15.1 The Association shall hold full membership of theNational Representative Organization of Employerssubject to Rule 8.6(j).

15.2 The Association shall hold full membership of theNational Representative Organization ofManufacturers subject to Rule 8.6(j).

16. DISCIPLINARY POWERS

16.1 The Council shall have the power to discipline anyof the Members of the Association.

16.2 The disciplinary powers shall be exercisable in thecase of any Member who;

(a) Has contravened any Rule, regulation orby-law of the Association;

(b) Has brought discredit or disrepute to theAssociation;

(c) Is guilty of conduct unbecoming to a Memberof the Association;

(d) Is engaged in a business activity which maylead to a conflict of interest with the objectsof the Association.

16.3 Disciplinary Penalties:

The penalties or order which may be imposedpursuant to Rule 16 are:

(a) Reprimand;

(b) Interim suspension order pending the hearingof any charges;

(c) Suspension;

(d) Expulsion.

16.4 Disciplinary Procedure:

(a) The Council shall give the Member not lessthan twenty-eight (28) days notice of thehearing of any complaint or complaintsagainst the Member under Rule 16.2.

(b) The Member may answer the complaint orcomplaints either in writing or in appearancebefore the Council. If the Member wishes toappear to answer they shall, not less thanthree days before the hearing, give writtennotice of their intention to do so together withbrief details of the matters at issue.

(c) The Council shall conduct the hearinginformally but so as to give each party fairopportunity to be heard.

(d) The Council shall not be bound by any rulesof evidence.

(e) The decision of the Council shall be carried bya vote of a majority of the Council presentand the vote thereon shall be final in allrespects.

16.5 Interim Suspension:

The Council may, before or during any hearing of acomplaint, make an order for interim suspensionwhen the Council is of the opinion that thecomplaint is sufficiently serious for that order tobe made or is otherwise in the interests of theAssociation or its members.

16.6 Suspension:

(a) Upon the imposition of a penalty ofsuspension under Rule 16.3(b) and (c), theMember (while remaining on the Register ofMembers), shall not be entitled to exerciseany of the rights and privileges ofmembership during the period of suspensionexcept those contained in Rule 19.

(b) Upon the expiry of the period of suspensionthe Member shall revert to and be entitled toexercise any rights and privileges ofmembership.

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16.7 Expulsion:

(a) Upon expulsion the Member shall pay anymonies, subscriptions and other charges dueto the Association.

(b) Upon expulsion a Member shall be removedfrom the Register of Members and shall notbe entitled to exercise any rights or privilegesof membership including those in Rule 19.

(c) Any Member expelled may re-apply formembership after the expiry of twelve (12)months from the date on which the expulsionbecame effective. The Council may grant orrefuse the application and upon such termsand conditions as it shall think fit.

17. RULES OF THE ASSOCIATION

Every Member shall be entitled to a copy of theRules of the Association.

18. AMENDMENT OF RULES

The Rules of the Association may be revised,repealed or amended at any General Meeting by athree-fourths majority vote by the Membersrepresented.

19. INTERPRETATION OF RULES

If any doubt shall arise as to the correctinterpretation of these Rules, the decision of theCouncil shall be final and conclusive provided suchdecision is recorded in the Minute Book of theAssociation.

20. LIQUIDATION OR DISSOLUTION

20.1 The Association may be put into liquidation byresolutions passed by a three-fourths majority ofthe members attending General Meetings calledpursuant to Section 31 of the IncorporatedSocieties Act 1927.

20.2 The vote shall be by ballot.

20.3 If at any time the Association shall be put intoliquidation or dissolved by the Registrar ofIncorporated Societies, the person or personsappointed as liquidator shall hold the net proceedsarising from the sale and realization of theproperty of the Association after payment of thedebts, liabilities and engagements of theAssociation and of the Council and all costs,charges and expenses connected with suchrealization, liquidation, or dissolution upon trust todispose of the same among current Members insuch shares as the Member’s subscription relatesto the total subscription income in the previousfinancial year to that in which the dispositionoccurs.

Such distribution to Members shall be subject tothe deduction from each individual Member’sshare of any debt due to the Association for anyunpaid charges or subscriptions.

48




Designing and implementing sound governance practices


Produced for the Bureau for Employers’ Activities of the International Labour Organizationby faculty members of the University of Geneva International Organizations MBA

InternationalLabourOrganization

A series of “hand-on” guides to building and managing


The Effective

Employers’ Organization

Bureau for Employers' Activities

International Labour Office

CH-1211 Geneva 22

Switzerland

Fax: (41 22) 799 8948

E-mail: [email protected]


Guide Two Strategy

Guide Three Advocacy

Guide Four Revenue Building

The package is

designed to help executives, directors and

managers in employers' organizations to build and

run their organizations more strategically and more

effectively.It is aimed primarily at those setting up, building

and managing national level employers'

organizations in less developed countries and

economies in transition.It will however provide a wealth of advice for

regional and sectoral organizations that exist to

represent the interests of employers, and to

national level employers' organizations in developed

countries. This will be the case particularly where

organizations are considering or undertaking a

strategic review of the way they currently operate.

Effective Employers' Organization

Covers_guides_EO_ultime.prnC:\LAVORI_PC\BIT\2005\1892_Guides_EO_Print\Cover EO En corrette\Covers_guides_EO.cdrmercoled 16 novembre 2005 14.29.03

o o co o e: o o ge e co sta pa te CComposita Retino predefinito


Documents

Guide One Governance