Intro to third sector, non-profit organization, look at the assignemnt and you will understand - Essay Example

? Governance in Non Profit Organizations (NPOs) of the of the Table of Contents Introduction 3 Review of the item 4 Personal Reflection 5 Summary 7 References 8 Introduction Handley-Schachler, Juleff & Paton (2007) stated that corporate governance can be described as a robust system by means of which companies are controlled and directed. Corporate governance framework involves a layout specifying the structures and the way responsibilities should be allocated within companies. The study of corporate governance gives an in depth knowledge about the relations prevailing between directors and managers of the corporation and other parties. These scholars also explained that the framework emphasizes on the way corporations are governed and it also evaluates the relationship between the management of an organization and its shareholders. The corporate governance in an organization provides a framework by means of which objectives are set and the necessities for achieving those objectives and monitoring performance are determined. According to Rossouw (2009), the centre of control in corporate governance can be classified into internal corporate governance, which refers to the way board and the management of a company exerts control over its performance and external corporate governance refers to the regulations followed external to the organization which are followed in case of activities associated with regulatory institutions, societal norms or the market itself. The following sections will involve the analysis of governance framework present in Non profitable organization. An in depth idea of the framework will be demonstrated and henceforth my understanding of the framework will be included in the essay. In addition to that a brief summary will be provided which will be the basis for an extended research. Review of the item According to Verschuere & Beddeleem (2013), governance in NPOs is a field which has witnessed an unprecedented amount of research done by scholars. This owes to the fact that the nonprofit sector has undergone through a rapid development phase in the modern day world. Their development comes in accordance with the contribution that they make towards the society in general. Thus, in order to ensure that their performance is in complete alignment with the needs of the society, there is a need for an effective and transparent governance framework in organizations. This need for effective governance in NPOs gave rise to a new and rigid concept termed as ‘social governance’ which caters to not only ensure the legitimacy of the organization but also takes into consideration the expectations of shareholders as well as emphasizes on reducing he conflict between the stakeholders in order to enhance the decision making process thereby forming a good management – board relationship. Several definitions of governance have been explained by modern day researchers. Some define it as the characteristic of the board, the management and the relationship between them. Whereas others explained that, it is a system by means of which organizations are controlled and directed (Anheier, 2005). According to Cornforth (2010), governance can be defined as the framework which ensures a definite direction towards objective, proper control and accountability of an organization. It influences the performance of an organization which is very closely interlinked with the idea of stewardship. In light of these definitions, a NPOs governance framework can be explained in a way, where the locus of the governance is the board, and that of the management is the chief executive officer (Anheier, 2005). In a NPO, the board holds the key responsibility for governing the fact that the organization performs staying true to the mission thereby ensuring overall welfare of the organization itself. It is responsible for generating important sources of support in terms of finance thereby playing a boundary spanning role in the open system aligning the nonprofit to its community and constituencies. The nonprofit manager such as the CEO is responsible for understanding the responsibilities of the governing board and how the governance framework works. Nonprofit organization such as medical institutions, educational institutions, and cultural institutions use different names to designate the governing board such as board of trustees, board of governors, governing council so on and so forth (Worth, 2013). A robust governance framework defines the best-practice rules regarding the board of directors’ behavior, thereby addressing the missing links in corporate governance due to the principal-agent relationship. Its primary aim is to align the interests of the shareholders (principals) and the CEO (agents) in order to maximize the shareholder’s value thereby reducing the possibilities of conflict of interest arising between them. In an NPO, the governance framework outlines certain codes of practices which ensures authentic auditing, transparency (proper information disclosure) and fair selection and dismissal of managers. The primary concerns of corporate governance in an NPO are: Ensuring that the directors and manager act in the best interest of the organization, stockholders as well as its workers. Ensuring that strict rules exist by means of which managers can be held accountable to stockholders and employees for the use of assets (Barros & Nunes, 2007). Personal Reflection Having explored well researched sources like Verschuere & Beddeleem (2013), Anheier (2005), Cornforth (2010), Worth (2013) and Barros & Nunes (2007), covering the topic of discussion, it can be concluded that my personal reflection is in complete alignment with the issues covered in the literature. As has been explained by Barros and Nunnes (2007), effective governance is an essential factor which contributes significantly to the performance of the nonprofit sector. Several variables attribute to the performance of a CEO of a nonprofit organization such as the organization performance variables, individual variables as well as the board composition variables. The presence of a robust governance framework will ensure that the organization is not being dominated by a single personality thereby preventing any issues of conflict of interests between the stakeholders. The author also concluded that a CEO pay and incentives also affect the performance of the organization. Having worked for a nonprofit organization (educational sector) for 2 years, I can say that robust governance framework is of utmost importance to the performance of the organization. The governing board and the management should have a clear understanding of the intricacies outlined under the governance framework in an NPO in order to ensure a smooth performance thereby satisfying the needs of both the organization and stakeholders. The governing board should cater to reduce any probability of conflict of interest between its stakeholders as it might prove to be an obstruction in the path of the organization’s progress. In addition to that, institutional governance being a traditional form of governance role in an NPO is a key factor ensuring proper decisions on polices and strategies, proper performance evaluation, management and accountability (Campbell & Hushagen, 2002). Therefore efforts should be made to form an effective framework of institutional governance. Verschuere & Beddeleem (2013) pointed out that the relationship between management and the board is one of the fundamental elements of social governance and also stressed the importance of shaping the relationship between them in order to ensure a smooth flow of operations, within an NPO, which should be in complete alignment with social needs. Summary Governance in an organization is a vast field that has been explored by various researchers in the recent years. The journals which have been included in the literature have identical conclusions. Two sources can be considered to be of significant contribution towards this field research; Verschuere & Beddeleem (2013) and Barros and Nunnes (2007) who explained that, governance in an organization is a very essential element that ensures the board and management operations are completely aligned with the needs of the working community within the organization as well as social communities and constituencies external to the organization. The governance framework should be strictly followed by the board and the management in order to have a rigid control over the operations of the organization so that it can be directed to achieve the objectives which are in the best interest of the organization as well as the stakeholders. Since the area of research for this particular topic is still at its nascent phase hence further study should be conducted in order to have a better understanding of the concept. References Anheier, H., K. (2005). Nonprofit organizations. Theory, management, policy. London: Routledge. Barros, C. P., & Nunes, F. (2007). Governance and CEO pay and performance in non-profit organizations. International Journal of Social Economics, 34(11), 811-827. Campbell, P., & Hushagen, J. (2002). The governance of inter – governmental organizations. Corporate governance, 2(1), 21-26. Cornforth, C. (2010). Challenges and Future Directions for Third Sector Governance Research. Rome: EURAM 2010 Conference. Handley-Schachler, M., Juleff, L., & Paton, C. (2007), Corporate governance in the financial services sector. Corporate governance, 7(5), 623-634. Rossouw, D. (2009). The ethics of corporate governance: Crucial distinctions for global comparisons. International journal of Law and Management, 51(1), 5-9. Verschuere, B., & Beddeleem, E. (2013). Organizational governance features, innovation and performance in non-profit organizations: existing evidence and future research directions. London: Emerald Group Publishing Limited. Worth, M. J. (2013). Non profit management: Principles and practice. (3rd ed.). London: Sage. Read More