Codes of Good Conduct For NPOs
Governance codes of good practice and their relevance – the value based approach
The Harper Collins dictionary states that – “A code of practice is a set of written rules which explains how people working in a particular profession should behave.”
When visiting an organisation, how often do we experience and observe the beautifully framed ‘Code of Good Practice’ positioned in the reception area or boardroom? It’s quite impressive when you read the powerful statements espoused in the Code, and signed by the board of that organisation. Yet, when you actually engage with the organisation, nothing could be further that truth.
“A good practice is a technique or methodology that, through experience and research, has proven to reliably lead to a desired result. A commitment to using the good practices in any field is a commitment to using all the knowledge and technology at one’s disposal to ensure success.”
Boards and Good Governance
NPOs need strong, active and committed boards as they perform the following crucial functions:
- Boards have a critical role to ensure financial sustainability and accountability to internal and external stakeholders.
- Good governance protects the organisation from losing its focus and protects the organisation’s values and resources.
To avoid confusion and mismanagement, there should be clear role demarcation between CEO and board. To perform at their best, board members require training – a lack of skills and leadership leads to inconsistency in applying good governance principles. Good governance can be achieved through better utilisation of resources. Furthermore, Founder’s Syndrome which implies a conflict of interest, where the organisation’s founder unilaterally takes actions, selects staff, dictates strategy, without consulting with the board, or selects board members that “rubberstamp‟ the founder’s proposals – must be avoided.
The application of good governance principles should be visible in the values of the organisation and in the way it utilises its resources. Although the code of good practice neither supersedes company and Common Law, nor any other legislation, it is more than just a set of guidelines and rules. These are primarily to enhance organisation performance through knowledge and skills at governing body level, and draw attention to duties, responsibilities, legal obligations and liabilities.
Contrary to most people’s belief, there is excellent guidance and resources for good governance of non-profit organisations in South Africa.
- SANGOCO’s Code of Ethics for Non-profit Organisations (1997);
- Department of Social Development’s Code of Good Practice for South African Non-profit Organisations (2001);
- Inyathelo Independent Code of Good Practice (2012)
- KING IV Code of Good Practice – NPO Supplement (2017) – (KING I was launched 1994).
Any individual tasked with the company secretary role should be aware of these codes, amongst other international codes. Common and best practice is that all board rooms should have a copy available for review.
The code can be applied as a tool by NPOs with four core areas of focus:
- Assess governance processes against best practice standards;
- Assess potential risk;
- Develop strategies to build organisational resilience; and
- Provide assurance to funders that governance principles have been considered and implemented, where appropriate.
The following successes can be achieved when a code of good governance objectives are met in the following important ways:
- It will promote transparency of use of donor funds by non-profit organisations (NPOs) and in so doing encourage further funding by donors.
- It will assist NPOs to become more accountable to their stakeholders (including those who fund them and the local communities whom they serve)
- It will raise the standing of NPOs and civil society in general.
- It will give NPOs guidelines for self-regulation, where the public sector lacks the resources to enforce existing legislative requirements.
- It will promote and encourage dialogue and cooperation among Southern African NPOs.
Questions NPOs need to ask themselves in applying good governance principles
- How do we ensure there is consistency in what we do and what we say we do?
- Is there a clear understanding of our organisation’s value system?
- What is the result and impact of our work as NPOs?
- Fiduciary responsibilities – how are these handled?
- Ensuring better stakeholder participation – how can we account to beneficiaries, peers and donors through better governance systems?
Codes of Conduct in Practice
A Code of Conduct can be an important step in establishing an inclusive culture, but it is not a comprehensive solution on its own. An ethical culture is created by the organisation’s leaders who manifest their ethics in their attitudes and behavior. Studies of codes of conduct in the private sector show that their effective implementation must be part of a learning process that requires training, consistent enforcement, and continuous measurement/improvement.
Simply requiring members to read the code is not enough to ensure that they fully understand it, will remember its contents and adhere to it dutifully. The proof of effectiveness is when employees/members feel comfortable enough to voice concerns and believe the organisation will respond with appropriate action.
So, having noticed the ‘code of good practice’ displayed in the reception or boardroom, we should reasonably expect our interaction with that organisation to be a seriously memorable experience. If that is not the case, we should hold them accountable to their ‘Code of Good Practice’ statement.
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