These organisations, unlike profit-driven firms such as private trusts, family investment offices and pension funds, are primarily driven by charitable purpose and societal betterment. They are fiduciaries in that they act in the best interests of those societal actors that they serve, with many of them reducing the burdens faced by governments as well as providing a social good. It must, however, be understood that despite their charitable nature and social good stance, they are also subject to processes and procedures of governance that are meant to guide their conduct as they pursue their charitable missions and purposes.
The philanthropic fiduciary category generally entails three types of organisations. Firstly, non-governmental organisations (NGOs) – loosely labelled ‘non-profits’ – are those entities functioning independently of the governments of the countries they exist in. Also sometimes referred to as civil society organisations, they are organised at the community level, the national and/or the international level in order to serve social objectives, including humanitarian causes and the environment. Locally the Botswana Council of Non-Governmental Organisations (BOCONGO) has done a commendable job, since its establishment, of coordinating the work of such organisations operating within various fields such as inclusive social policy, economic justice, democratic governance, sustainable environment and resource management, the arts and creative industries, as well as gender and human rights.
Foundations constitute the second regiment of the philanthropic fiduciary category. Foundations are establishments with assets provided by donors and managed by selected officials. The income sourced by these organisations is expended for socially useful purposes. By virtue of being stewards of funds provided by donors, the governance designates of such organisations must ensure that all their operations serve the intended charitable purpose for which the donors have disbursed funds. Foundations may find themselves undertaking investment activities with their pools of funds and their governance designates should not treat their investment activity in isolation or as being divorced from the mission and purpose of existence of the organisation.
Endowments, the third group within the category, are organisations that are afforded funds that are then invested to establish reliable streams of annual revenue for a charitable cause. They are considerably similar to foundations. However, they differ in the sense that endowments tend to be established for a specific purpose such as provision of scholarships whilst foundations have greater discretion with respect to the usage of their funds. This renders foundations somewhat susceptible to structures imposed by taxation agencies and other regulations relating to tax-exempt entities. The philanthropic fiduciary category in its entirety must deal with multiple dynamics that have a bearing on their governance and sustainability (especially when undertaking investment activity) such as the balance between long-termism and short-termism – related to the fiduciary duty of impartiality – as well as market integrity and material environmental and social factors. It is important for the boards and executives of these organisations to apply their minds intelligently in this regard.
Directors, trustees, and managers of philanthropic fiduciaries must ensure that their activities (including those related to investment functions) are guided by any existing statutory instruments that would ensure prudent behaviour. With regard to organisational structures and hierarchy, a broad range of aspects must be considered relating to independence of board members, procedural tenets tied to induction of members, strategy development, implementation, and review, meeting conduct, voting and proxies as well as resolutions. What governing documents exist to direct decision-making processes, staff exigencies, audit of the NGO and remuneration?
Charters and terms of reference documents must be developed based on existing guidelines, such as the King Corporate Governance Code, so as to ensure alignment with standards deemed to be global best practice. Boards of such entities must always be cognisant of the fiduciary duties of care, prudence, loyalty, investigation as well as obedience to the stated purpose.
Overall, it is crucial for governance designates of philanthropic fiduciaries and NGOs to ensure that they take an integrated approach to the management of all aspects affecting the achievement of their stated purposes by ensuring that appropriate governance frameworks are in place. This facilitates seamless operation of these organisations in pursuit of their purpose and in the generation of public benefits.
The views and opinions expressed in this article are those of the author, Dumisani F. Ntini – Governance and Strategy Practitioner. Contact Global Governance Group; firstname.lastname@example.org. Visit www.governancegroup.org.
LinkedIn: Dumisani F. Ntini