*Unit 7: Board Leadership and Policy-Driven Governance

Question 1

Critique the differences between the agency approach to governance and a values-driven approach. Include the rationale supporting your analysis.

Answer 1

Agency theory describes a relationship of trust between a principal and agent whereby the agent avoids conflict of interest and acts in the best interest of the principal. This approach can introduce a principal-agent problem when the interests of the agent and principal conflict, and when the agent has information the principal does not have access to nor the ability to monitor associated actions of the agent. This approach seems to be built on the blind trust of the principal in the agent.
To avoid problems associated with agency theory, a values-driven approach can be taken whereby shared values are established and expressed so that all parties have a mutual understanding and a mutual interest in the outcomes. This implies transparency, consultation, and collaboration within the relationships from the board down to front-line staff which differs greatly from the blind trust which adds distance between these tiers of governance.
Establishing and solidifying shared values can ensure consistency in values-based policy language and the practical application of those policies down the line. This is meaningful trust rather than blind trust.

Question 2

What role does a board play in this new paradigm beyond the belief that it is merely an extension of management?

Answer 2

In the modern paradigm of leadership previous misconceptions of boards of directors are dissolved into an understanding of meaningful policy governance. As collaboration, consultation, and transformation become explicit values in organizational cultures, the role of the board as a representative of stakeholders is clearer. Their duty is to the public or the community in which they serve and thus their composition and perspectives considered in decision-making processes should be as diverse as the population they serve or could serve.

Question 3

Critique three of the twelve principles of governance as outlined in The Source with a view to supporting a values-based culture.

Answer 3

1. Constructive partnership—working effectively with the chief executive
   — This principle requires that shared values be established between the board and the ED and a clear understanding of roles and responsibilities be made. In the absence of Terms of Reference, lines are blurred between these roles and a governance board may take on a more administrative role. Mutual trust and collaborative learning must be present as well. Here is where Agency Theory can come into play with the ED being the agent and the Board playing the role of the Principle. Without shared values there can be conflicts here when the Agent (ED) has information that the Principle does not have, for example.
2. Mission driven—ensure congruence between values and decisions
3. Strategic thinking—align goals with strategic priorities
4. Culture of inquiry—mutual respect and constructive debate
5. Independent minded—no conflict of interest
   — Conflict of interest can occur in any board situation particularly with board members who have family members employed or acting as donors for an organization. In a child care board, most board members are also parents and guardians of children attending the programs of the org. and so are placed in a potential conflict of interest when voting on policies that affect their own enrollment. Two ways to avoid conflicts of interest from occurring are the have a clear policy or statement within the terms of reference on CoI and steps to take upon its occurrence. Finally CoI can be easily handled alongside the development and solidification of shared values and the inclusion of diverse perspectives which guide ethical decision making.
6. Ethos of transparency—internally (within the board) and externally
7. Compliance with integrity—oversight to ensure ethical behaviour
8. Sustaining resources—link budget to strategic planning
9. Results-oriented—measure and evaluate performance of programs
10. Intentional board practices—structures and practices align with priorities
11. Continuous learning—embed learning opportunities in governance work
12. Revitalization—thoughtful succession planning aims at diversity (BoardSource, 2005)
    — Succession planning for boards sometimes is ineffective, particularly in a volunteer NFP board, because there are few candidates willing to take on executive positions. Often board members stay on because they feel they are the only ones who are able to do the job. This limits diversity of opinion and innovation. Another reason is the lack of learning and understanding of new board members on boards with high turnover. Work which would provide consistency such as clear terms of reference, policies in place for succession planning, etc. may be incomplete leaving new boards scrambling and starting over each time. This makes it difficult to intentionally plan for the recruitment and retention of diverse board members.

Question 4

Describe three barriers to the participation of women on boards.

Answer 4

1. Lack of recognition that there are barriers. Once awareness is sharpened then action can be taken. If there is no recognition that there is an issue, there is no motivation for changing the board composition to incorporate more gender diversity.
2. Policies to choose the most experienced candidate. Opportunity for women on boards is lower due to educational, employment, child care, etc. factors. The low number of women on boards contributes to the low number of experienced women to be chosen for board membership. It’s a vicious cycle.
3. A board already homogenous may not have access to qualified candidates in a diverse pool. They may also have a narrow perspective of what “qualified” means to them.

“The 2015 Annual Report of the CBDC indicates that half of the respondents (current board directors) to its report survey do not believe that board diversity is an issue. However, the report does identify barriers to improving diversity. These are:
a. The board has a policy to always choose the most experienced candidate
b. There is difficulty identifying a diverse candidate pool
c. There are insufficient numbers of qualified diverse candidates to fill positions on the board
d. The board is actively seeking diverse candidates, but is unable to find any diverse directors with the skills and experiences needed
e. There is no interest among directors in changing the current board composition for a diverse candidate (CBDC, 2015, p. 7)
All of these barriers are self-reinforcing.”

Question 5

Provide an evidence-based perspective on gender equality on boards.

Answer 5

Despite the evidence that a gender diverse board improves decision-making and increases stock value where applicable, there is still a large gender gap on boards. According to Stats Canada, as of 2024 in Canada less than one quarter of executive positions were held by women.

Question 6

Terms of Reference

Answer 6

1. Describes the purpose and operating structure of a board of directors. It provides structure for board operations and a framework for decision-making. It includes items such as roles and responsibilities, conflict of interest, and purpose (can be for the whole board or for each committee as well).
2. As the modern paradigm of leadership and governance solidifies the boards role as a representative of stakeholders/society/the community served, these terms of reference are particularly important in outlining the assurance of board diversity and broad perspectives for effective decision-making processes.
3. Without clear terms of reference, many boards are still blurring lines between acting as management, watch dogs, and/or handing over all responsibility to executives.

Question 7

Policy framework

Answer 7

1. “Policy frameworks are tools that can guide decision making, set future direction, identify important connections, and support the alignment of policies and practices both inside and outside an organization. In short, policy frameworks are blueprints for something we want to build or roadmaps for where we want to go” (Alberta Gov’t, 2013).
2. A policy framework is akin to an alignment of shared values. It outlines the overall vision, goals, desired outcomes, and roles and responsibilities to guide the policies of individual departments/groups/agencies so that the broader vision, goals, and desired outcomes can be achieved collaboratively. It may also outline the way policies are developed with respect for intentional inclusion of diverse perspectives through collaboration and consultation.
   3.

Question 8

Policies and procedures

Answer 8

1. Policies and procedures are the enactment of values and principles. They are a tangible representation which should be most relevant to stakeholders.
2. Policy development is shifting in the modern paradigm of leadership and governance.
3. In the absence of policies and procedures, or presence of disconnected ones that do not align with the values of the organization, the connection between leadership and the front lines is lost.

“A simple illustration would classify the mission, vision, values, and goals under the category of “what” the organization is all about, while policies and procedures is the “how” to achieve the “what”” (course content).

Question 9

Chair of the board

Answer 9

1. The chair of a board is the lead representative of the board whose voice and actions must represent the interests of all members and who must work with members to guide decision-making processes.
3. A board chair who understands and leads through shared values is more likely to encourage diverse perspectives when directing and managing board decision-making processes.

Question 10

Corporate governance

Answer 10

1. The system of rules and practices by which a company is managed
2. Corporations have increasing social, economic, and environmental impacts world-wide and their governance practices dictate the scale of this. More and more corporations are considering CSR in their governance
3. There is still much of business that is unchanging, homogenous, and continuing to negatively impact global issues (climate, famine, war, etc.)

Question 11

Communities of practice

Answer 11

groups working in collaboration and consultation with each other through the establishment of shared values for the purpose of professional and policy development ?

Question 12

Boards of directors

Answer 12

1. Boards in all sectors provide oversight and governance. They are accountable to government and stakeholders and represent stakeholder/public interests.
2. The composition of boards impacts its effectiveness and an understanding of what makes a good/effective board of directors is important for the sustainability and overall impact of an entity.
3. Despite evidence that diverse boards are more effective, there is still a problem with homogeneity on boards which consist primarily of men from limited socio-economic and cultural backgrounds.

Question 13

Agency theory

Answer 13

1. The principal - agent relationship is where one legally appoints the other to act on its behalf. Fiduciary relationship which means the agent must act in the best interests of the principal. The agent must avoid conflicts between their interests and the principal’s interest - AKA principal-agent problem.
2. 3.