Friday, March 1, 2013

Built on Trust

Good governance is vitally important for both the for-profit corporate and non-profit sectors. Why? The most simple answer is trust.

By Martin Tirado, CAE
Let me guess, when you see an article about corporate governance you read it immediately, clearly prior to the compelling sports stories of the day or what the showing times are for the blockbuster movie that just opened over the weekend. You don’t? I didn’t think so, and neither do I, as it just isn’t a ‘must-read’ news item. How about an article about excessive corporate compensation or buyout packages prior to bankruptcy filings (think Enron)? A bit more interesting for sure. When some of these scandalous stories receive media attention, it does lead to more questions, and questions certainly related to why good governance matters. Good governance is vitally important for both the for-profit corporate and non-profit sectors. Why? The simple answer is trust.

Trust is about the importance of these concepts: accountability, ethics, financial oversight, compliance with the law. All are key concepts that, as pieces of good governance, are clearly defined and actively practiced. To cover several more of these critical areas of good governance, take a quick look at these sites:

As for SIMA, as the only 501(c)(6) nonprofit trade association in our industry, we are accountable to our members and need their trust to continue to enhance professionalism in the snow and ice industry. Good governance is paramount to what we do. SIMA’s board of directors underwent a comprehensive update to our board governance policies in 2012 and now practice the Policy Governance® model. Our governance policies can be read on SIMA’s website and we also practice several other forms of good governance that enhance our accountability to members. These are such things as conducting a full, independent financial audit annually by a CPA firm, disclosing conflict of interest situations, a clearly defined investment policy of the association’s assets, anti-trust protection, whistleblower policy, and disclosure of annually filed tax returns to the public.  Most non-profit organizations, including SIMA, have their annual tax returns available for free public viewing at That’s an issue of transparency, we don’t have anything to hide that we can’t disclose to our members or even the general public. 

Anti-trust issues for trade associations are particularly sensitive, as there have been many cases of industry members engaging in collusion to limit competition or fix prices, and they have been prosecuted as such. Anti-trust law has its roots in the Sherman Act (USA) and the Competition Act (Canada), and SIMA actively follows its guidelines. Both for in-person meetings and in online discussions, we have statements read that prevent discussions on pricing and price setting, boycotting, exclusivity arrangements and other possibilities that would violate anti-trust law. Short term, it may feel nice to have snow and ice contractors raising their prices across the board. But we wouldn't want our consumers or suppliers to do the same. That’s the quandary, and why there are good, relevant laws to maintain a free and open marketplace for all.

Good governance also deals with conflict of interest and conflict resolution. Policies should be in place to have directors and officers of the board and senior staff disclose conflicts of interest and specify what actions are taken when conflicts do occur. Board of directors have legal duties to abide by, namely duty of care, loyalty and obedience. When a diverse group meets regularly to discuss strategy and company issues, disagreements can arise. How these disagreements are dealt with and resolved are important, with awareness given to what’s in the best interest of the company, not what is in one person’s own best interest.

SIMA’s governance structure is continually being evaluated and developed, with appropriate training provided for our board of directors and professional staff. Our newly adopted bylaws and governance policies are not the end, they are part of a journey to be a part of best practices for non-profit, trade associations.

There are many companies and associations that are doing good work, meeting and even exceeding the needs of their customers. Unfortunately, there are also some Enron’s. In your business decisions, I ask that you take a moment and evaluate a business on many criteria, and don’t exclude how they practice good governance. It’s a matter of trust.

*Source: Associations Matter: Associations By the Numbers, ASAE report 2012

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