Encouraging good corporate governance

An ancient Greek temple at Segesta in Sicily

The eleventh in a series of essays reflecting on the Rimbaud and Verlaine Foundation’s experiences in the arts

Over the last 20 years I have helped to establish and then worked closely as CEO with the boards of both the arts organisations which I have founded (the Rimbaud and Verlaine Foundation and Poet in the City). I have also been a trustee myself on the boards of several other arts organisations including Poet in the City, Modern Poetry in Translation, the Museum of Army Music and the Decadence Research Centre. In 2015 I was also fortunate enough to participate in the Oxford Cultural Leadership programme, something that provided me with a great opportunity to think about corporate governance, and to share my experiences with other arts leaders. In this essay I shall reflect on my own experience of arts boards and what I regard as the key elements of good corporate governance.

A professionalised board

Probably because of my own background as a solicitor I have always taken a rather distinctive approach to board recruitment. I have described this as a belief in a ‘professionalised board’ by which I mean that recruitment has less to do with the passion of the individual for the arts organisation or art form and more to do with the specific professional skills and experience they have brought to the board table. As well as the obvious benefits of having an accountant and a lawyer as trustees I have also sought out bankers, fund-raisers, educators, business entrepreneurs, academic experts and individuals working with young people. For me a board is all about the range of skills it contains. This has allowed me, as a CEO, to draw on a huge range of relevant knowledge and experience. This may seem like a rather obvious point except that many arts organisations appear unable or unwilling to follow this approach.

Most SME arts organisations in particular cannot afford to pay their trustees and are reliant on the goodwill of individuals volunteering their time and effort for free. As a result of this some arts boards feel under pressure to accept individuals largely on the basis of their own wish to be involved. The danger is that the board ends up including trustees who are there for the wrong reason, whether to enhance their own status or because they have a pronounced personal agenda in relation to the arts organisation and its work. This is a difficult one. No one wants to seem ungrateful to the sometimes very distinguished individuals who are willing to volunteer their support. However, my own experience is that if board recruitment is not firmly focused on skills and experience the board is more likely to be either difficult to work with or divided against itself. Sometimes this can become a nightmare, with the CEO devoting a significant amount of time to either placating the board or protecting the organisation from toxic and divisive disagreements at board level, some of which strike at the heart of what the organisation does. Fortunately all of the boards which I have been associated with have been happy ones, but there are plenty of horror stories out there in the arts.  

The professionalised board is not necessarily going to recruit an individual just because they are a distinguished person in the world of poetry or Decadent studies. It is their personal suitability as a board member that is key. Occasionally an individual supporter of one of my organisations has become very cross with me or with my trustees for not recommending or appointing them as a board member. But being a board member is not the only (or necessarily the best) way in which an individual can support an arts organisation. I have worked very successfully with individual supporters outside of the board, both drawing on and recognising their unique contribution.

Board recruitment and management

It follows that an arts organisation (even a small one) needs to have a robust process for recruiting suitable board members, a range of procedures designed to get the most out of its trustees, and a clear policy for removing board members who are difficult, disruptive, or who have simply been around for too long. It is good practice to confirm the appointment of an individual trustee every three years and for their membership of the board to be terminated after 9 years, regardless of their contribution, other than in exceptional circumstances. Even a brilliant trustee should eventually move on, if only to enable the renovation of the board.

The recruitment of a board member should be based on an interview conducted by the Chair and at least 2 other current trustees, and should follow a set format. In my case most applicants have been approved for appointment but this is partly because nearly all have been identified and approached by me, as CEO, because of what I regard as their suitability, skills and experience. This active approach to finding new board members has distinct advantages. In some cases it has allowed me to approach individuals who have little or no experience of the arts and persuade them to become involved. People such as a pharmaceutical entrepreneur, a former financier and a retail business entrepreneur. In all these cases the appointment has been of great benefit to the board concerned, greatly expanding its field of reference, its problem-solving capabilities and its ability to give advice. A board member often brings their own extensive networks too. This kind of targeted recruitment of board members is, of course, dependent on eclectic networking by the CEO, and a bold and dynamic concept of the arts organisation and its mission. I have written at greater length about networking elsewhere. It goes without saying that a board needs to meet regularly. The more active the organisation the more meetings are likely to be required, but my experience suggests that it is necessary to hold at least 6 full board meetings in every calendar year. Where a distinctive area of responsibility can be safely devolved to a small group of trustees (responsible for fund-raising, finance or whatever) this can be helpful although it is essential that this sub-committee itself reports to the full board at a board meeting. Which also serves to emphasise the importance of good communications with board members and the careful taking of self-explanatory minutes after every meeting.

R&V has a rather large board, with about a dozen members, but this is also determined by governance requirements. From experience we have found this to be the necessary strength in order to ensure that every board meeting is quorate (which in R&V’s case means at least 4 trustees are present). The scrupulous administration of meeting reminders, agenda and minutes, together with the circulation in advance of any board papers, are also essential if the board is to function smoothly and efficiently. Even when everything is done properly it can be challenging to retain the interest and therefore the commitment of volunteer board members. For me the latter is typically achieved by means of regular on-to-one conversations with individual board members in relation to an area about which they are particularly knowledgeable, or with which they are already closely engaged. For instance, I have significant direct communication with the lawyer on the board in relation to legal and contractual questions. And I have detailed one-to-one conversations with another of my trustees who has a close involvement with event programming. In both cases they are the natural first port of call for a question in one of these two areas.

Again, it is important not to embark on any ambitious initiatives without formally consulting the full board. But these preliminary conversations can ensure that any proposals to the full board are well thought through and have been reviewed by one or more trustees in advance. The point is not to preclude debate or disagreement but to anticipate any arguments and help the board to reach a clear and firm decision. It has been said that a good board meeting is one at which all the key discussions have already taken place and where trustees can proceed to a decision by consensus. Where there is a tough decision to be made these detailed prior discussions are even more important in facilitating participation by all trustees in the decision-making process.  Openness and transparency as between the CEO and individual board members means that they are all feel informed and involved.

Board diversity

Nearly all arts organisations are concerned to ensure that their board membership is diverse. This is incredibly important, leading to better decision making which reflects the world as it is, and reaching out more efficiently to potential audiences. It is an essential part of best practice. My only concern is the way in which some arts organisations go about it. There are so many talented individuals out there from diverse backgrounds that it is very uncomfortable to sometimes see appointments being made by arts boards almost solely on the basis of race, gender or sexual identity. This may follow the letter of the law, but it certainly does not follow its spirit. Again, my approach has been very much more targeted. I have actively sought out individuals who have both the required skills and experience and bring other forms of diversity to the board table. There is nothing preventing an SME arts organisation from engaging in some positive action to identify and recruit board members from more diverse backgrounds. Positive and diverse recruitment on the basis of merit, being mindful of subconscious biases, results in much more effective board leadership. The result has been boards which are notably diverse in their make-up and also free of any embarrassing tokenism. Diversity is, after all, not a luxury but a necessity, and an important component in a professionally run arts board.

As well as diversity in terms of race, gender and sexual identity, R&V has taken steps to ensure diversity in other ways too. For instance, it got involved early on with an initiative designed to get younger professionals on to arts boards (one of its current trustees came to R&V via this route), and R&V’s special interest in providing arts education and opportunities for younger people to work in the arts led it to recruit board members working in secondary education and the university sector respectively. The scope of diversity should not start and end with the so-called protected categories. The more relevant skills and experience a board has the better placed it will be to agree a bold and effective strategy for the organisation.

Setting strategy and overseeing operations

Many arts organisations struggle to find an effective way of dividing responsibilities between the board and the management or executive function of the organisation.  This becomes manifest either in an unhelpful level of interventionism or micromanagement by the board or (at the other extreme) an executive function which effectively operates without proper board scrutiny (I once overheard a CEO saying that ‘the board will do what they are told to’). For R&V the answer to this has always lain in a clear distinction between the board’s role in setting the strategy, and the executive’s role in implementing the strategy. This has worked so well that R&V’s mission statement and key objectives have remained almost unchanged throughout its existence. But this level of consensus requires some work to be up front. Right at the start the board and the CEO of a new arts organisation need to work closely together to agree on a strategy for the organisation.

In practice this has been achieved by a series of strategy days, held on a Saturday once or twice a year, and designed to create a space in which the broad direction of the organisation is set. The strategy day process is supported by detailed ideas papers, but importantly also involves ‘ice-breaker’ exercises, the brainstorming of new ideas, and teambuilding activities. These exercises provide an opportunity for board members to work together and are often the most productive part of the day, allowing trustees to be unconstrained in their ideas. R&V has used a series of such sessions to create a robust strategy for the organisation and then to review and refine it at regular intervals. As a result the strategy of the organisation is owned and understood by board members, avoiding the need for constant discussion and debate at regular board meetings. The latter can now focus strictly on factual matters and on finding solutions to practical problems. This has also helped to keep regular board meetings shorter, with most being wrapped up in under 90 minutes. This focus on the practical not only makes the meetings more efficient, but also more enjoyable for the trustees. A sense of shared purpose and a clear distinction between setting strategy and facilitating implementation can create a system of corporate governance that is positive and productive. This becomes incredibly important when an organisation faces a genuine crisis. It means that a professionalised board can snap into action, focus on problem-solving, draw on its skills and experience, and proceed with a clear idea of what the organisation needs to achieve.

The Chair and the Finance Trustee

The most important relationship in the successful functioning of an arts board is that between the Chair and the CEO. This needs to be close, strong and supportive. I have personally been extremely fortunate with my Chairs, all of whom have been generous with their time and wise in their advice. If a CEO is to be reined in, or if his or her views are to be challenged, it is best if this comes in the first instance from the Chair. It follows that the Chair needs to have full authority over the CEO and the board, and that he or she is closely aligned with the vision and values of the organisation. The Chair and the CEO really do need to operate as a team. A good Chair also plays a crucial role in hosting board meetings and overseeing corporate governance functions, such as the recruitment or reappointment of trustees. The converse is also true. Many problems at board level come from poor chairing, or from a Chair who is in a confrontational or unsupportive relationship with the CEO or executive team. Ideally the CEO should have a similar relationship of trust with the Finance trustee, such that the operation management accounts and the fulfilment of annual reporting requirements are overseen smoothly and consistently. Careful budgeting and money management is no rocket science. Nor does an SME arts organisation require the full battery of accountancy techniques deployed on behalf of large commercial companies. Indeed simple clear accounts are a valuable tool in facilitating not only proper money management but also effective scrutiny of the finances by the board as a whole.

Fundraising and the board

Inevitably the board of an arts organisation is asked to play a part in fundraising for the organisation. In the US it is not unusual for arts organisations to operate a ‘give or get off’ principle, insisting that all board members donate money every year or quit their role. For a variety of reasons this full-blooded approach to board donations is not practical in the UK. The main obstacle is cultural. Volunteer board members in the UK tend to think that they are already giving to the organisation in the form of time and effort, and that they should not be expected to donate money as well. As a CEO my view has always been a compromise between the US and British approaches. I think that trustees should consider making annual donations to the arts organisation, if they are in a position to do so. On the other hand, I would be loath to lose the advice and support of board members who are unable to make such donations. In any event, it is unlikely that an SME arts organisation in the UK will be able to rely on board donations as a major source of its funding. In the case of R&V, board members have made occasional donations, usually so that the organisation can ‘seed fund’ a specific project for which it would otherwise lack the resources. In one case an R&V board member has made a rather larger annual donation with a view to funding a concert or concerts.

In general, I believe that it is sensible to distinguish clearly between the corporate governance functions of a board and the activation of a fundraising campaign on behalf of the organisation. Fundraising is a rather specialist business, requiring an individual with some specific knowledge and skills, and generally relies on the support of a particular kind of high-net-worth donor (‘HNWs’). It rarely makes sense to undertake it on a piecemeal or do-it-yourself basis. If an arts organisation is fortunate enough to have some HNW donors on its board I think that the best approach is to establish a special fund-raising committee with the specific aim of reaching out to philanthropists and major donors. In fact, it is not even necessary for this body to be associated with corporate governance. It may be better for it to operate as an independent fund-raising panel, involving individuals passionate enough about the arts organisation and what it does to both make donations themselves and facilitate a wider campaign designed to attract other donations. Once again it is not essential for individuals to be on the board to provide material support to the organisation. R&V has certainly tried to create such a panel but has not been able to create the necessary critical mass of donors. It is far from alone amongst SME arts organisations in having to adopt a much more ad hoc and individual approach to its donors.

Keepers of the sacred flame

After all the practical matters, the really important aspect of good corporate governance to me is the ability for me as CEO to share problems with my board members early, and to discuss them sensibly, long before they become serious or a risk to the organisation. This mandates an open and amicable partnership with my trustees such that I am able to pick up the telephone and discuss things without stress or negativity. Problems identified and addressed early in this way are often avoided completely. At the very least board members are forewarned of the issues and are able to consider them in a calm and timely manner. Not all arts boards function in this way, and I know of situations where CEOs try very hard to keep problems from coming to the attention of their board, at least until this is impossible to avoid, by which time a crisis has already unfolded. In other cases a board is confronted by a fait accompli and is merely expected to rubber stamp a decision or course of action already taken by the executive team. Neither situation is acceptable. The board should not get unpleasant surprises if this can possibly be avoided. They should be informed at the first sign of trouble. Nor should they be bypassed on any substantive decisions. If things are especially urgent then the answer is to call an emergency board meeting. The effective operation of corporate governance in a crisis depends on the culture and ethos of the board and on the relationship of trust and confidence that it already enjoys with the CEO. If this is strong and supportive then the organisation will function well in a crisis. If the relationships are not positive and clearly defined a crisis is likely to reveal all of the existing tensions and flaws. The existence of a supportive board, operating in a collegiate way, has been completely essential to the successful operation of R&V and has been the basis of all the successes it has achieved since 2014. Board members function as a kind of temple priesthood. Whilst the CEO or executive team is involved in the daily grind of activities and administration, the trustees are the keepers of the sacred flame. They understand and embody the vision and values of the organisation and are a reliable source of wisdom and perspective for the CEO. On them, and their commons sense, a bold and ambitious arts strategy depends.

Graham Henderson