Church Institutions as a Good Corporate Citizen

If you have lived long enough, you have witnessed mismanagement in churches, leadership crises in churches, and church divisions, all these matrices can be linked to governance crises. Church governance, sounds bizarre right? In Namibia legally-established churches are incorporated as a company limited by guarantee within the provision of section 21 of the Companies Act (Act 28/2004). Institutions irrespective of their natures are to be governed properly by complying with regulations and adopting best practices such as developing strategy, endorsing succession plan, and monitoring performance, to this church institutions, are however not excluded. 

“This article is aimed to shed more light on how corporate governance relates to an associations established not for profit (Church)”

Church leaders owe their organizations and each other a range of special obligations. Some of these obligations are morally related, but some also have a legal character. Surely high ethical conduct may be much expected from these associations because of obvious reasons, but that may be unfair because ethics is not spontaneous. It seems ethical values of our people are fading at an alarming rate even in institutions where it is less expected. Religious intuitions are by nature supposed to be a flamboyant and pool of Leaders who may be headhunted to rescue corporate entities.

As applicable to other organizational setups, one of the requirements for maintaining a nonprofit association (church) status is to have an oversight board. Among other responsibilities of boards is to ensure that the ministry is financially viable and that it fulfills its core mission. 

Often, a question of profit and business in religious intuitions comes up. Nothing precludes churches from selling products or making profits provided that making a profit is not its primary objective and the proceeds are used to advance the religious mission. Most religious institutions are by law companies with no shares; the distribution of dividends is not applicable. From the governance corner, any church that fails to gather funds for its religious activities is said to be performing poorly which is contrary to outcomes of good governance.

It is absurd to expect an association as a church not to generate money while it helps the majority of people who need spiritual guidance and ensures that good news reaches the needy. Youth are educated by churches the importance of living a holy life. 

Sunday school, and various youth groups, cells and Bible studies are all creations of the church; new generations are taught not to kill, steal, and fight. If these churches shut down probably due to lack of funds, our societies will be prone to all these vices. By extension, non-profit associations including churches have the powers of a juristic person to do major investments in diverse portfolios.

Church directors or councils as commonly denoted owe fiduciary duties to the organization. A fiduciary duty is an obligation owed by a person in a leadership or management role within an organization to the organization itself and its members. A director or officer who breaches their fiduciary duties can face personal liability to the organization and others for damages caused by the breach. Although the term often comes up in the context of for-profit businesses, it also applies in the nonprofit and religious sectors. Fiduciary obligations arise regardless of whether an individual is paid for their work or not.

Fiduciary duties are vital in any model, including the duties of care, loyalty, and obedience. A duty of care involves the engagement of the individual and the functioning of members that is prudent and avoids negligence. Loyalty involves serving with devotion to protecting the church rather than any conflicted or personal interests. Obedience involves serving within the scope of responsibilities outlined in church charters or governing documents, or both, to be sure that the legal and operational precedents are faithfully followed, this may mean the submission of returns, financial statements, and a notice of change in directors is required.

Utmost churches rely on the donations of its members to fund its mission, hence a need for transparency and accountability in their dealings. Considering that, members enjoy a tax deduction for these donations that are freely given to churches, and this calls for proper records to be maintained as required by corporate laws. A church can’t be well governed unless it carries its mission ethically. Additionally a church has to be a responsible corporate citizen by extending a helping hand community where it operates through social responsibility given the nature of the entity. Most importantly a responsible institution will be mindful of undue sound that may not be good for inhabits especially during school assessments.

Churches should be governed effectively to earn trust from their stakeholders, and in doing so, it ensures institutional sustainability. It should maintain its financial statement and fulfill all relevant laws.  Board of directors as the overseer of an institution should be independent and perform their duties with due diligence, skill, and care.

By:

Onesmus K Joseph - MBA, ACIS, BAP, CFIP, PPL

MPHIL Candidate - KNUST (Kumasi; Ghana) 

Governance Professional

josephonesmus@yahoo.com

Collective decision but Individual liability

Directors are the mind, heart, and soul of an enterprise. They are the Lords of the boardroom and the entity’s sustainability is in their hands. Together, directors form a board, and collectively make decisions on behalf of an incapacitated juristic person (corporation). A board of directors will not always find themselves in agreement and it is often the case that through frank and thorough dialogue that directors can agree upon what action to take, although it is not unusual for one or more directors to remain opposed to a decision that the rest of the directors' support.     

This article explores the legal rights and responsibilities of a dissenting director in practical terms;

It goes without saying that board directors should perform on their fiduciary duty through board discussions and debates. As a Common law practice, a company director has a fiduciary duty to act; in good faith and for a proper purpose, in the best interest of the company and with the degree of care, skill and diligence that may reasonably be expected of a person carrying out the same function about the company as carried out by that of the director, and having general knowledge, skill and experience of that director. To discharge their role efficiently and to prevent liability, a director needs to familiarize him/herself with fiduciary duty as well as other responsibilities associated with the role of the director's post. 

Generally, a governing body takes decisions collectively as a board and not as an individual. Probably, this is where the fallacy emanated, that as it may; directors individually should perform their fiduciary as an individual. A governing body cannot owe a fiduciary duty to an organization because it lacks legal capacity; this was validated by the court in a better known AVID case. This is to say that directors can be personally held liable for breaching the fiduciary duty that they each owe to a corporate.  Group thinking should be avoided at all cost and it is the chief weakness on many boards today; directors should think independently and only accede to decisions upon exercising due diligent and professional care.

Nobody likes to be different or unpopular, but board directors are supposed to set that aside in the service of protecting the best interest of the shareholders and the company.  Any director may dissent by expressing an opinion at variance with those commonly or officially held. By its very nature, this has a negative connotation and represents an element of serious disagreement. In the best of situations, dissenting opinions should be expected and accepted and the dissenting board directors should feel free to air their opinions respectfully and give supporting reasons.

In board rooms, a dissent by a director can be a double-edged sword, one side used as a deterrent to prevent a potential misadventure and the other as a diabolical obstructionist mechanism that can reject even genuine proposals. When a board director disagrees with the consensus; there should be an acceptable process to the effect. It is however interesting to note that, a mere abstaining from voting does not constitute dissent, hence a proper process should be complete. Well-kept corporate minutes and directors` resolutions serve as a record of corporate decisions and reflect directors` dissent where appropriate.

Dissenting can be part of a checks and balances in such a way that; it pushes directors to state their misgivings with the hope that their dissent will guide their corporation toward better business practices, avoid damaging third parties, and most importantly it reduces the number of lawsuits. So, individual directors should utilize dissenting in the best practical way because it keeps the dissenting director out of being liable for any legal problems arising from the vote. 

On the other hand, dissention may cause a rethink of a questionable action by other directors, and above all; shareholders who examine the voting record may notice a potential problem, thus directors must stay abreast of the board's activities and should be prepared to dissent to actions that may implicate them personally.

By:

Onesmus K Joseph - MBA, ACIS, BAP, CFIP, PPL

MPHIL Candidate - KNUST (Kumasi; Ghana) 

Governance Professional

josephonesmus@yahoo.com