Walking Our Talk
June 26, 2012For several years, the Alliance has been emphasizing the need for its member societies to modernize their governance – the process by which the organization makes decisions. The antiquated model of requiring members to vote on every issue facing the organization – from the selection of its CEO, to the salaries paid to its staff, to changes in its insurance products and benefits – no longer works in the increasingly complex regulatory environment and rapidly changing marketplace in which modern financial services providers compete. Through in-person education programs like the Board Institute, electronic programs like the board Boot Camp DVDs, and products like the Board Self-Assessment Questionnaire and the Fraternal Governance Survey, the Alliance is helping members understand not only the need for change, but also how to successfully implement such changes – no easy task in a system that is notoriously resistant to new ideas. I’ve often said that the three most significant problems facing fraternals are profitability, relevance, and governance – and that societies can’t effectively fix profitability and relevance without first addressing governance. The most compelling link between poor governance and poor performance was spelled out recently by a long-time state regulator who now serves as a senior executive of an Alliance member society: “In my 38 years as a regulator,” she said, “I never had to put a fraternal into rehabilitation because of its financial condition. That was only a symptom of the underlying problem. The reason regulators step in and take over organizations is because they make bad decisions, which result in poor financial performance. And they make bad decisions because of a governance structure that makes it almost impossible to make good decisions.” Game, set, match… Over the past few months, the Alliance Board of Directors has been taking a look at the organization’s Constitution and the Board determined that the Alliance was suffering from the same malady as many of its members – an overly detailed governance structure that blurred the lines of demarcation between the authority of the membership, the Board, and the chief executive officer, and made the decision-making process unnecessarily complex. In short, the Alliance Board thought it would be a good idea to “walk its talk” when it came to modernizing its governance. The first clue that the Constitution needed an overhaul was found in the last section of the document, which notes that amendments have been approved by the membership at each of the past 10 Annual Meetings. If we needed to change the Constitution that frequently, perhaps it was time we took a more in-depth look at the governance structure of the organization, compared it to other trade associations, and determine if more sweeping changes were needed to bring the Alliance into the 21st Century. The Board appointed a three-person Governance Enhancement Task Force composed of former Board Chairs Terry Rasmussen (Thrivent Financial for Lutherans) and Kate Rounthwaite (Foresters), and current Board member Darcy Callas (Modern Woodmen of America). The Alliance’s retained general counsel Todd Martin was enlisted to support the Task Force. And through a series of meetings and teleconferences, the Task Force developed its recommendations to streamline the Alliance’s Constitution and clearly define the authority of the membership, the Board, and the CEO. The key changes recommended by the Task Force include:
- One member, one vote – The Task Force suggests that we eliminate the confusing formula for determining the number of voting delegates for each society, which was based on assets, and provided larger societies a greater number of delegates. Instead, the Task Force created a “one member, one vote” standard. Moreover, the amended proposal would provide societies that write business only in Canada to have full member voting rights. Many societies should take a cue from these Task Force members who are proposing amendments which reduce their voting power.
- Board discretion – The current Constitution spells out in gruesome detail all the factors that go into determining membership dues; it also specifies what committees the Board is authorized to appoint. The Task Force proposal provides the Board with the authority to establish dues and appoint the committees, task forces, and working groups it deems necessary to complete the work of the Alliance.
- Expanded Board – The Task Force proposal would add two “permanent” positions on the Board: one for the fourth largest member society, and one for a representative of Canadian societies. The eight other available seats on the Board would be open to representatives of all other societies.