The not-for-profit sector offers a rewarding and increasingly popular career stream for Chartered Secretaries. This month, CSj talks to company secretaries about the rewards and the challenges of working in this sector.
In the context of the limited resources not-for-profit organisations (NPOs) generally have, it is understandable that their priorities are often focused on fundraising campaigns and serving their beneficiaries. But as more of them realise that maintaining a high level of financial transparency and governance are key to credibility and thereby donor confidence, efforts are being made to pursue better organisational governance.
Chartered Secretaries are, as you might expect, central to this endeavour. Organisations increasingly rely on professional support from legal advisers and company secretaries sometimes in the shape of pro bono work. But what is it like working for an NPO? Do NPOs offer a rewarding career for company secretaries? What are the differences between working for this sector and the listed company sector or the corporate service provider sector?
The governance goals
Transparency serves as the foundation of trust that keeps the public committed to a philanthropic cause advocated by a charitable organisation, says April Chan Yiu Wai-yee FCIS FCS, (Honorary) Company Secretary of Hong Kong Breast Cancer Foundation and Past President of the Institute. Mrs Chan, who is also the Honorable Secretary for Hong Kong Women Professionals And Entrepreneurs Association, was the former CLP Company Secretary and therefore has substantial experience in the listed company sector. She points out that the corporate governance principles are the same for both the for-profit and the not-for-profit sectors. ‘In terms of corporate governance principles, I think the end goal is similar. We seek to promote effective standards of corporate governance and stakeholder stewardship. We want to see a greater degree of transparency through clear and conspicuous disclosures, which I think is very important to elevate an NPOs credibility and integrity,’ she says.
She points out that NPOs generally rely on sponsors and donors to sustain financial viability and operate efficiently. A scandal, a misconduct or even a misunderstanding could cause huge damage to an NPOs reputation. They must therefore enhance transparency, for example reporting the governance principles behind the organisation and how donations were spent, in order to give confidence to all stakeholders.
As with listed companies, sustainability is also a must for NPOs. They cannot only think about short-term benefits, they have to consider the communitys long-term interest as part of their strategy.
The three Ps
While the objectives of company secretaries working for NPOs might be the same as those for practitioners working for commercial entities, Mrs Chan points out that in practice the experience of working for an NPO is often very different. The amount of pressure practitioners will be working under, as well as the pace of the work and the culture of the organisation are likely to be very different. Similarly, the resources and manpower available to the organisation will be likely to be very different.
‘Small NPOs may not have adequate resources. Their priority often goes to fundraising and working for beneficiaries. Its understandable that strengthening corporate governance and improving transparency is not their top concern. So as company secretaries for NPOs, we have to do it step by step to drive constructive change,’ Mrs Chan says.
She suggests that legal advisers and company secretaries who want to get involved in volunteering for charities should bear in mind that working for NPOs, especially charities, on a volunteer basis requires strong self-motivation and commitment. Practitioners will need to have the three Ps to keep themselves motivated passion, patience and perseverance.
‘The first must-have is passion. The work will often be unpaid, so if you don’t have enough passion to promote the cause, the mission and the vision of the organisation, it will be a mission impossible,’ she says. She adds that resources in NPOs are limited and usually prioritised for fundraising events and activities, so in addition to passion, you will also need patience and the perseverance to persist with what you believe in for the enhancement of the organisations governance. ‘Though it takes time to see results, its rewarding to see change gradually,’ she says.
Are NPOs under-regulated?
In the ongoing debate about the appropriate level of regulation that should be imposed on NPOs in Hong Kong, Mrs Chan says it would be counterproductive to impose rules as stringent as those for listed companies. ‘Most charities are established out of a commitment to working for the public good. Overly stringent regulations would take away the flexibility which NPOs currently enjoy and may discourage some people from setting up charities for the betterment of our society. Instead, I think what we need at this stage is education and guidance,’ she says.
In Hong Kong, education and guidance is undertaken by the Social Welfare Department, NGOs and professional bodies. The Institutes Public Governance Interest Group (PGIG), chaired by Ms Chan, issued its first guidance note on not-for-profit governance in August 2016. The guidance note, available on the Institutes website: www.hkics.org.hk, focused on the qualities required of those at the helm of running NPOs including: selflessness, integrity, objectivity, accountability, openness, honesty and leadership. A second guidance note from the PGIG will be published soon.
The Institute works with other NPO sector associations such as The Hong Kong Council of Social Services (HKCSS). ‘We have discussions with HKCSS very often to share with them our suggestions, and co-organise with them conferences and seminars for their agency members,’ Ms Chan says.
HandsOn Hong Kong, an NPO registered as a limited company, is committed to serving those in need through mobilising volunteers. It is a member of HKCSS and is also a listed charity on WiseGiving, the branch of HKCSS focusing on financial transparency, accountability and promoting a culture of philanthropy in Hong Kong.
‘There are increasing concerns over the credibility of charities in Hong Kong, so we want to ensure that we are going above and beyond the official guidelines,’ said Shaun Bernier, Founder and Board Chair of HandsOn Hong Kong.
To be included in the WiseGiving platform, charities must be willing to disclose and regularly update accountability information, which includes the organisational brief, service delivery and reporting, governance, financial situation and fundraising principles.
The WiseGiving endorsement is a testimony to HandsOn Hong Kongs commitment to accountability and transparency, Ms Bernier says. Beyond that, it also seeks advice on strategic planning, fund raising strategy, board governance, financial management and human resources management from Asian Charity Services, a charity that provides pro bono consulting services to other charities in Hong Kong.
‘A couple of board members, including myself, were experienced in voluntary and community organisations when we were in the US and the UK, where NGO governance requirements are a bit more stringent. But we also rely on pro bono support from legal professionals and company secretaries in implementing best practices to a charity in Hong Kong,’ says Ms Bernier.
‘It’s more than completing financial reports. The essence is transparency, and it should be consistently maintained in funding sources, deployment of donations and the efficacy of the charity programme as we work towards our mission,’ she says.
After some seven years of meetings with charitable organisations and public consultations, in December 2013 the Law Reform Commission proposed in a report that all charities should be subject to the requirement of registration with a Charity Commission. Ms Bernier says the proposed reform could be helpful to them as it would enhance the credibility of those registered.
Promoting best practice
Michelle Chow, a consultant at international law firm Withers, is specialised in charity law, including advising on the setting up of charitable organisations and governance matters for universities, schools, banks, corporations and individuals. She is currently a board member of a number of charities, as well as a member of the steering committee of HKCSS WiseGiving.
In Hong Kong, the three most common ways to register an entity as a charitable organisation are:
- registration under the Societies Ordinance (Cap 151)
- setting up a trust, and
- incorporating a company under the Companies Ordinance (Cap 32).
Owing to the tax benefits a charity can enjoy, Hong Kong has seen a rise in charitable organisations with a variety of charitable causes. There is no requirement to prepare and comply with any best practice guidelines in Hong Kong, though charities that receive lump sum grants under the Social Welfare Department Lump Sum Grant Subvention System are required to follow a best practice manual issued in July 2014. The manual offers comprehensive guidance on human resource management, financial management, corporate governance and accountability issues. The guidelines are classified into two levels guidelines that NPOs are expected to follow unless there are strong justifications not to do so and guidelines that NPOs are encouraged to adopt.
‘The guidelines were developed to be as exhaustive as possible. They demand financial transparency for sure, and even regulate the use of any surplus. I believe the guidelines provide a practical framework to promote more systematic governance across the charity sector,’ Ms Chow says.
Sunlight is the best disinfectant against malpractice. To maintain public confidence in NPOs, transparency regarding the organisations mission and vision, as well as detailed explanations of how donor dollars are spent, is at the forefront of expectations from the government and the donating public.