CORPORATE GOVERNANCE In Nonprofit Organizations George Beyrouti 15 April 2014 USEK

CORPORATE GOVERNANCE | 2 ROLE OF NONPROFIT ORGANIZATIONS Nonprofit organizations – as part of civil society - have become major players complementing businesses and governments in the current world order. The welfare and well-being of society largely depends on their efforts and contributions. Nonprofit organizations, in particular the large international ones, are governed, more and more, like large corporations. They have a board of directors, a president, a vision, a mission, a strategic plan, and guiding principles to ensure stewardship and accountability.

CORPORATE GOVERNANCE | 3 ROTARY CODE OF ETHICS AS A ROTARIAN, I will 1. EXEMPLIFY the core value of integrity in all behaviors and activities 2. USE my vocational experience and talents to serve in Rotary 3. CONDUCT all of my personal, business, and professional affairs ethically, encouraging and fostering high ethical standards as an example to others

CORPORATE GOVERNANCE | 4 ROTARY CODE OF ETHICS AS A ROTARIAN, I will 4. BE FAIR in all dealings with others and treat them with the respect due to them as fellow human beings 5. PROMOTE recognition and respect for al occupations which are useful to society 6. OFFER my vocational talents : to provide opportunities for young people, to work for the relief of the special needs of others, and to improve the quality of life in my community

CORPORATE GOVERNANCE | 5 ROTARY CODE OF ETHICS AS A ROTARIAN, I will 7. HONOR the trust that Rotary and fellow Rotarians provide and not do anything that will bring disfavor or reflect adversely on Rotary or fellow Rotarians 8. NOT SEEK from a fellow Rotarian a privilege or advantage not normally accorded others in a business or professional relationship

CORPORATE GOVERNANCE | 6 THE 4-WAY TEST Of the things we think, say or do: 1.Is it the TRUTH? 2.Is it FAIR to all concerned? 3.Will it build GOODWILL and BETTER FRIENDSHIP? 4.Will it be BENEFICIAL to all concerned?

CORPORATE GOVERNANCE | 7 CORPORATE GOVERNANCE We tend to think of corporate governance only when some outrage occurs such as:  The economy collapse in 2008  A big scandal occurs  A CEO is vastly overpaid What can we do about that?  No magic cure  Our best bet is educating our new generation of leaders on good moral values and effective corporate governance.

CORPORATE GOVERNANCE | 8 CONCEPT OF CORPORATE GOVERNANCE Corporate Governance is the systems and processes put in place by which the owner controls and monitors the use of corporate assets. The governing body includes a board of directors, a CEO, and a number of executives. The CEO is the link between the board and the executives. He needs to keep both of them satisfied and happy. Corporate governance is especially important in large corporations with diversified ownership.

CORPORATE GOVERNANCE | 9 CONCEPT OF CORPORATE GOVERNANCE OWNER BOARD OF DIRECTORS CEO EXECUTIVES EMPLOYEES

CORPORATE GOVERNANCE | 10 GOVERNANCE IN A GLOBAL ENVIRONMENT There are two approaches to corporate governance, the contractarian and the communitarian theories of the corporation. The communitarian theory views the corporation as a separate entity, with social responsibilities not only to the shareholders but to the firm’s other stakeholders and society at large. On the other hand, the contractarian approach considers the firm’s shareholders as the primary constituency to whom management is accountable. Voluntary contracting and market forces align the interests of management and shareholders.

CORPORATE GOVERNANCE | 11 CORPORATE GOVERNANCE BEST PRACTICES Nonprofit’s play an important role in serving the social and environment needs of society – to reinforce their recognition and to establish credibility and trustworthiness with business, government, and the general public, they need to have an effective governance system in place. A list of best practices has been compiled from a wide variety of sources. Still there is no “one size fits all” good practice solution. The guidelines we present here after needs to be customized to every organization to improve their ability to attract charitable contributions and grants.

CORPORATE GOVERNANCE | 12 CORPORATE GOVERNANCE BEST PRACTICES 1. Board Composition 2. Committee Structure 3.Board Performance and Effectiveness 4. Consistency with Charitable Mission and Vision 5. Financial Accountability and Transparency 6. Culture and Ethics 7. Executive Compensation 8. Governance / Nominating Committee 9. Diversity and Inclusion 10. Advocacy Work

CORPORATE GOVERNANCE | 13 THANK YOU FOR YOUR ATTENTION