Model members and apt accountability

The national housing federation's draft revised code of governance comes at the same time as some high-profile problems. On the face of it, these could have some significant lessons for us all, and they have caused many in the sector to think long and hard about governance.

We must work out the ideal model for shareholding members' roles, in the case of housing associations that are industrial and provident societies or the guarantors of a company limited by guarantee.

A favourite model for housing organisations is to have the shareholding membership reflect the board membership. Many traditional registered social landlords have barely distinguished between the two roles, while the common model in large-scale voluntary transfer local housing companies is to reflect the board constituencies with similar classes of shareholding membership.

In terms of the democratic accountability of board members, the latter is infinitely preferable to the former because it means there are interests outside the board that, constitutionally, can hold the board to account. It is this that, it seems to me, is the true role of the shareholding member.

Direct accountability
A key part of governance is accountability. Boards must be accountable, in a direct and fully functioning way, to the shareholding members. This is what the law intends and assumes. If it is not happening, as much in the voluntary as in the plc sector, there is a problem that must be addressed.

It is worth comparing housing with other voluntary sectors. In the retail co-operative sector there is a good tradition of an active shareholding membership that can and does hold boards and executives to account.

Meanwhile, the NHS foundation trusts for hospitals have taken governance as a key theme. They have been given a clear mandate by government to ensure that they are accountable to the communities they serve and have identified the creation of an active and informed membership as one of the keys to their future success.

The housing sector is getting to grips with this in the form of the community gateway model in England and the community housing mutual in Wales, but this isn't just an issue for stock transfer. It is fundamental for the whole sector if it is to meet the government's agenda for locally based and community-focused organisations delivering solutions that work for the whole community.

If a voluntary board member has been functioning well for 11 years, it may be wise to keep them on

The nine-year limit
One suggestion in the revised code that has received particular attention is the suggestion of a maximum nine-year limit on an individual's membership of a board. The key reason for a similar restriction for non-executive directors on plc boards is to prevent a too cosy relationship developing between the non-executives and the executives on a board.

The role of plc non-executives is seen as being similar to that of housing association board members. Although this may change over time, I think the current role of voluntary board members of housing associations is different. This stems partly from the fact that the motivation behind joining a housing association board is also very different from that for joining a plc board. It also arises because of the executive nature of plc boards, which is not mirrored by the role of the housing association board.

This is not to advocate, necessarily, long terms for board membership, merely to set a context within which to argue that a nine-year limit will not necessarily be right for RSLs and that there is no particular legitimacy to following plc practice.

If it ain't broke …
On the contrary, good voluntary board members are not easy to find, so if someone who has been on a board for 11 years is functioning properly in their role, it may be wiser to keep them on if the voting membership is content to do so. The danger would be that a slavish adherence to the nine-year rule, backed up by regulatory influence, may result in weakened rather than strengthened boards.

It would be better to develop a clear and comprehensive board appraisal process against which the performance of individual board members and the board as a whole could be continuously assessed. This would allow non-performing board members to be identified and, if improvement is not achieved, for ineligibility for re-election. This should generate a culture of training and continuous improvement among boards.

There needs to be a champion for good governance within each housing association. The key to this could be a separate and enhanced role for the company secretary, in monitoring compliance with, and advising the board on, the code and compliance issues generally. This could be combined with a role in advising shareholding members.