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Models of Civility

TODAY’S NEWS cycle and social media streams might understandably convince you that ethical leadership and civil discourse are dead. But this is where associations and other non-profits, as mission-driven organizations, can take the lead and set an example for others.

Ethical volunteer leadership goes far beyond avoiding conflicts of interest. You will be called on to behave ethically in many contexts. Disagreements over how issues should be approached often surface in board meetings. If your organization has a government relations program, disputes over political issues may arise. And because you’re in a position of power, you will have opportunities to engage in unethical behavior with staff (especially the executive director or CEO) since you hold their future in your hands.

A few simple but important principles can guide your conduct in these and other scenarios that may arise during your board service:

  1. Keep conversation civil. Listen to the views of other board members and the organization’s chief executive. In short, you can agree to disagree. Keep the discussion focused on the issues, not the people commenting on them, and avoid petty insults when listening to others’ views
  2. Be inclusive. When forming committees or task forces, include thoughtful, committed members who represent gender, ethnic, racial, age, and sexual orientation diver-sity. Involving those with divergent opinions and social backgrounds also can make committees and task forces more robust and inclusive.
  3. Keep politics out of the discussion. In today’s divisive political atmosphere, nothing can derail a friendship or business relationship more quickly than expressing strong political views. When it seems that the conversation is veering toward politics (other than policies that affect the association), change the subject. Say something as simple as “I’m so tired of politics. Let’s talk about something else.” Few disagree, and the conversation usually turns to other topics.

Here is what ethical leaders don’t do:

  1. They don’t engage in gossip or spread rumors about other board members, rank-and-file association members, or staff.
  2. They don’t use their position to harass, intimidate, insult, or
    bully others.     As recent high-profile harassment cases and lawsuits have shown, abusive behavior by people in powerful positions results in lasting psychological damage to individuals and economic loss to organizations.
  3. They don’t share opinions (especially political) or degrad-ing comments on social media. Even content that has been deleted can often be found again. Assume that your social media posts will be on the internet forever, and then post—or don’t post—accordingly.

If you follow these simple rules, you will set the standard for ethical behavior and civil discourse in your association community. In all likelihood, others will follow your lead.

Your First Priority as a Board Member

Being elected or appointed to an association’s board is an honor and a compliment as well as a business or professional advantage. Less obvious is that the role carries legal responsibility and sometimes legal risk.

As an association board member, though serving voluntarily and usually without compensation, you are held to strict legal obligations and duties. Courts have held board members personally liable when calamities have occurred to their organizations that might have been prevented by a more conscientious and attentive board.

FIDUCIARY DUTY
The overriding legal principal is that association board members must put the association’s interests first in all debate and decision making, putting its welfare ahead of any potential per-sonal or business gain. While you may be elected or appointed to represent some section of your organization’s constituency, you must still put the organization’s overall well-being ahead of other considerations.

CONFLICTS
Putting the organization first means that you must not carry on debate and decision making while privately harboring other interests that could divert your focus and judgment. The competing interests might be personal or for your company or family. Conflicts must be disclosed as requested by your organization, and if you have a conflict, you might have to recuse (sit out) or resign (withdraw completely).

CONFIDENTIALITY
Association boards often deal with confidential matters including employment-related decisions, litigation strategy, advocacy goals, and transaction negotiation. The association is not well-served, and its interests could be severely damaged, if you disclose what you learn about confidential issues in the course of your board service.

OPPORTUNITIES
Once in a while, board members might be asked to consider some financial or program prospect for the organization. This could be the purchase of real estate, the pursuit of a joint venture, or a pitch to a sponsor. Once again, loyalty to the association demands that you not go after that prospect for yourself or your company unless the association waives off on it.

PREVENTION
To honor your fiduciary duty as a board member and avoid personal legal risk, pay unswerving attention to what’s best for your organization and not what’s best for you or your family, friends, or firm.

Make sure your association has the broadest possible indemnification provision, whether in its bylaws or in a board policy; that way, the organization is committed to defending and protecting you from personal liability if someone alleges wrongdoing. Ask if your organization carries liability insurance that covers board members in those circumstances as well. Finally, be sure that the organization has access to knowledgeable attorneys and consultants who themselves are looking out for the best interests of the association and its board.

Social Media Smarts

Using social media networks can facilitate an association’s marketing efforts, aid in membership development, and help further its mission. However, it also raises possible legal risks and liabilities. Consider these potential pitfalls when using social media as a board member. 

Apparent authority
Communicating on behalf of your association should be handled according to the association’s policy. If you are granted this authority, follow your organization’s protocols for public messaging and social media use. Often, there are guidelines for permissible use of the association’s name or for speaking on public policy matters. 

Association policies
When posting on behalf of your association on its social media channels, follow your organization’s policies regarding proper use, appropriate content, content disclaimers, and removal of prohibited postings. The social media policy may prohibit posts that share certain confidential information about the association, information that disparages its activities and mission, or content that violates the intellectual property rights of third parties. 

Personal liability
When communicating on your association’s behalf, clarify that you are doing so as a representative of the association to limit personal liability. Be aware that certain circumstances may warrant identification of your board role and that liability may be personal. 

Network operator terms and conditions
Ensure that you comply with the social media platform’s terms, including those governing content sharing and take-down requests. If an association or a representative shares content that is infringing of a third party’s intellectual property rights, the association should respect that third party’s rights and remove the infringing content. 

Content permission
Avoid using third-party material without permission. When using material owned by someone else, obtain a license or, if appropriate, provide attribution. Always review the terms of use since providing attribution alone is not always sufficient to respect that third party’s rights. 

Unsolicited communications and social media disclaimers
Even on a social networking site, promotional campaigning is subject to laws and regulations. Social media posts from your association, board members, or third parties that are part of the association’s promotional campaign may require a disclaimer that the content is promotional. In addition, email messages from board members promoting an association’s product may be contrary to U.S. or other jurisdictions prohibitions on unsolicited email marketing. 

Antitrust risk
Do not communicate via your association’s social networking channels to make an anti-competitive agreement or statement, share competitively sensitive information, or make comments that could be seen as an attempt to rally others to engage in a boycott of a supplier, customer, or competitor. In addition to reviewing these issues, consult your organization’s designated staff whenever you do not know how to proceed. You can also help monitor proper use of the association’s social media pages and alert staff to potentially problematic postings so they can take action when necessary.

Strategies for Negotiating Your CEO Contract

While a long career teaches much about the process of securing a new job, when association professionals move into the CEO role, it’s a whole new ballgame that involves signing a contract. That’s why aspiring CEOs, or CEOs moving to a new organization, need to understand key contract provisions and adopt a negotiation mindset.

Pamela J. Green, an executive coach and speaker, says that contract negotiations begin, in a way, in the interview phase. “You want to make sure you exude confidence, so they can see the value, the dollar value of your brand,” Green says. “All those things can make or break that negotiation process.”

Jeffrey Tenenbaum, managing partner at Tenenbaum Law Group, who has negotiated many association CEO contracts, says the process has some common elements but varies based on each candidate. “Contract negotiations for a first-time CEO are going to look very different from a CEO veteran going into their fourth CEO job,” Tenenbaum says. “There is no one size fits all.”

Prospective CEOs considering an offer and heading into the negotiation process should have an eye on what they want their life and career to look like down the road. 

Compensation

Typically, one of the first things a prospective CEO thinks about in contract negotiations is compensation. Green and Tenenbaum advise reviewing the organization’s IRS Form 990s to see what its previous CEOs were paid. Also look at benchmark salaries for similar organizations in similar markets.

Tenenbaum notes that compensation is more than base salary. “Other things that come into play are: How does that base salary increase from year to year? Is there a guaranteed minimum—5 percent? Is the increase tied to inflation, or is there no guarantee?”

Candidates should also consider that compensation can be structured a variety of ways. “The association is only willing to pay so much,” Tenenbaum says. “You’ve got to pick. You’re not going to max out on everything. Is it current compensation base salary? Do you think you can do well on bonus performance? It will usually be capped at 10 to 25 percent of the base salary. For some that are doing quite fine and are interested in [income] down the road, then tax-deferred compensation may be a priority.”

Term and Termination

The term of the contract and its termination provisions go hand in hand, Tenenbaum says. “The length of the initial term is one key factor. Most are in the two- to five-year range,” he says. But “what happens after that? It may end, period, with no compensation. Or, once it ends, the exec gets some form of severance pay. The other option is the contract automatically renews, but either party can give notice that it will not renew, either with severance pay or without.”

The term of the contract and what happens when it ends can also affect salary. “A first-time CEO that has confidence they can take the association to great new places—but doesn’t have the significant experience that would lead to a higher starting salary—might be better doing a short-term contract to force the renegotiation for more money,” Tenenbaum says. “As opposed to an exec who gets a really good deal upfront, so an auto renewal would work best.”

A contract can terminate either “with cause” or “without cause.” “Termination for cause sounds simple and easy: The exec does something bad; they should be able to get fired without any further pay,” Tenenbaum says. “I have never seen the same ‘cause’ definition in the contracts I work on. The definition of cause is critical. It’s in the association’s best interest to have as broad a definition as possible. When representing the exec, I like to make it as narrow as possible.”

Termination-with-cause clauses should have a “cure provision, so you have to put the exec on notice,” Tenenbaum says. In termination-without-cause agreements, severance pay of 6 to 12 months is typical. CEOs often ask for associations to pay for continued health insurance premiums under COBRA, but Tenenbaum notes, “when I am representing the exec, sometimes we can get it, sometimes we can’t.”

Negotiation Mindset

In contract negotiations, typically the association sends out the first offer and contract terms. Green says that prospective CEOs considering an offer and heading into the negotiation process should have an eye on what they want their life and career to look like down the road.

“Look toward the future,” she says. “What is my life plan? Start thinking three to five years out: Where do I want to be, from a life perspective, a compensation perspective? Maybe they are looking to travel more, spend more time with family, buy a house somewhere different.”

That kind of reflection will put candidates in the right mindset to evaluate the first-offer contract. “I ask the exec to go through it and see what things give you heartburn,” Tenenbaum says. “What things do you want structured different? Then we’ll have a discussion and talk it through, where they want to push back and what things are deal killers.”

The most crucial negotiating tool candidates have is the ability to walk away, Green says. “You never go into a negotiation not prepared to walk away from it,” she says. “If you’re not prepared to walk, you’re doomed from the start because you’re too desperate.”

For that reason, Green advises clients to store up a rainy-day fund. “You have to put money away,” she says. “You can’t walk away when you’re in a deficit. You walk in the door feeling undervalued because you feel you have to take that job.”

How a New Committee Structure Marked a Governance Milestone

Reorienting a board that has become too deeply involved in an organization’s operational details is one of the most important—and difficult—challenges for any association CEO. With the right level of leadership commitment, however, it is possible to overcome resistance to governance change.

The International Association for Dental Research and the American Association for Dental Research provide a case in point. Their solution: a reinvention of their committee structure.

Five years ago, IADR and AADR unanimously approved a plan to modernize an outdated committee structure that had encouraged board members to get too heavily involved in association operations rather than remain focused on strategic governance. For each of their boards, IADR and AADR created four governing committees:

  • Board Operations: Headed by the elected board president and consisting of the chairs of the other three committees, this committee is responsible for the effective functioning of the board and for maintaining and developing the board-CEO working relationship.
  • Strategic and Operational Planning: This committee designs and coordinates board participation in strategic and operational planning, including budget preparation.
  • Performance Monitoring/Audit: This committee monitors programmatic and financial performance, updates operational policies and systems, and oversees the audit function.
  • Member/Stakeholder Relations: This committee is charged with maintaining effective communication and working relationships with members and key stakeholders and for making sure that volunteer involvement is highly productive and satisfying.

This new structure replaced a series of “silo” committees corresponding to specific association programs and functions (for example, Annual Session, Publications, Government Affairs, and Science Awards). These became nongoverning committees consisting only of non-board volunteers, and each reports to the appropriate governing committee.

IADR and AADR board members’ active involvement in strong governing committees has made for a deeply satisfying governing experience.

The IADR and AADR boards also adopted detailed operating guidelines for the new governing committees—for example, that every board member is assigned to only one of the three governing committees (other than Board Operations), that committee chairs and members rotate regularly, and that all reports and recommendations are made by committee chairs and members.

Powerful ROI

Almost six years after the new structure was launched, IADR and AADR have realized a handsome return on their investment of time and money in establishing and supporting each board’s four committees. Four impacts loom largest.

First, both boards have become more strategic governing bodies whose decisions have much greater impact. For example, the two associations jointly launched a new journal; the IADR board developed a day-long training session targeted at young investigators; and the AADR board replaced a diversity and inclusion task force with a permanent advisory committee to develop programs aimed at promoting D+I.

Second, IADR and AADR board members’ active involvement in strong governing committees has made for a deeply satisfying governing experience. Board members truly own their governing work, rather than merely reacting to finished staff work, and they are strongly committed to their governing decisions.

Third, by providing additional volunteer leadership opportunities at the advisory committee level, an expanded pool of nominees for board positions has emerged.

And fourth, meetings of both boards have become more productive and efficient because of the detailed preparatory work accomplished in governing committee meetings. Far less time is wasted in board meetings going over details that are now worked out at the committee level, and far more time is devoted to truly strategic discussion.

Beating the Odds

Two primary factors account for the two associations’ ability to overcome the odds against implementing major change: significant board member involvement in shaping the recommendation to establish the new structure and hands-on CEO leadership of the change process.

A daylong IADR/AADR governance retreat in December 2010, at which board and executive team members identified governance issues and explored possible improvements, laid the foundation for board approval of the new structure in March 2011. And the intensive involvement of both boards’ officers in reviewing the retreat facilitator’s report recommending the new structure transformed them into committed owners of—and ardent champions for—the new governing committees.

The CEO of IADR/AADR played a leading, hands-on role that included securing the two boards’ agreement to hold the governance retreat, retaining a consultant to facilitate the retreat, and ensuring that the consultant prepared a detailed set of recommendations and an implementation plan. The CEO helped the boards’ officers present the recommendation to create the new governing committees at a joint board meeting. Once the change was approved, the CEO set it up for success by establishing a process to provide ongoing executive support to the new governing committees.

Implementing far-reaching governance change is difficult to pull off in almost any organization. But resistance can be overcome with substantial involvement by board members and the chief staff executive and with a clear understanding of the benefits change can bring.

Who Will Fill Your Retiring CEOs Shoes

At long last, baby boomers are seriously considering retirement. Their retirement savings plans have rebounded and stabilized, and they feel more secure about starting a new chapter in their lives. With 10,000 people turning 65 years old every day until 2030, organizations of all kinds will face a mass exodus of senior leadership talent. 

How prepared is the association sector to meet this human capital challenge? According to Nonprofit HR’s 2014 Nonprofit Employment Practices Survey, many organizations continue to operate without formal succession plans; of those without, only 14 percent say they plan to create one in the coming years. Ready or not, many associations are already dealing with the daunting task of replacing their top executives. 

The good news is that an executive’s departure by retirement usually allows ample time for thoughtful planning and action. However, the retirement of an executive does come with its own set of challenges. There’s often a strong emotional bond between the executive and stakeholders, which can derail objectivity and delay necessary steps to find an ideal replacement. These issues can impede progress and tee up a rushed search process that leaves everyone feeling uncomfortable and uncertain.

As soon as an organization’s CEO has determined that retirement is on the near horizon, it’s essential that she use her personal leadership skills to exert a positive influence on the selection process and produce desired results. Here are 10 steps to help your association find a new leader who has the qualifications, experience, vision, and values that align with organizational culture and goals.

The good news is that an executive’s departure by retirement usually allows ample time for thoughtful planning and action.

  1. Be inclusive. Work with your board to identify a search committee that includes a variety of stakeholders, such as your members, staff, volunteer leaders, board, and strategic partners. Depending on the size and structure of your organization, five to eight search committee members are usually enough.
  2. Do your homework. Using ASAE’s executive compensation data and the 990s of similar associations, define the elements of the total compensation package to be offered to ensure fair market value and overall competitiveness.
  3. Write a plan. Create a project plan that details all deliverables and due dates. An easy way to build this plan is to start with the desired “offer accepted” date and work backward from that.
  4. Encourage objectivity. With help from the search committee, conduct an internal survey to determine the specific skills, experience, and characteristics needed in your replacement. This task can be handled via email or phone and should include the same types of stakeholders as listed in step one.
  5. Define the job. Using results from the survey, work with the search committee to create a detailed job description that includes primary and secondary responsibilities, as well as required and preferred qualifications.
  6. Sell the job. With board approval of the job description, work with the search committee to create recruitment messaging that includes a scaled-down version of responsibilities and qualifications, compelling reasons to consider the position, and a specific call to action for candidates.
  7. Use technology. Working with the search committee, create a scorecard for ranking candidate submissions against the prerequisites of the job. Simultaneously, setup a central portal for receipt of candidate submissions and for the search committee to electronically review and rank candidates.
  8. Inside first. Launch your recruitment messaging internally before announcing it externally. All of your stakeholders are good sources for recruiting candidates and will appreciate being asked to participate ahead of outsiders. You can spread the word using your e-newsletters and other messages you send to your internal stakeholders.
  9. Go public. Publicly launch your recruitment messaging using employment sites such as this one (you can post the job here) and other industry-specific job boards or publications, and make sure to feature it on your own association’s website.
  10. Almost there. The search committee’s scorecard rankings can now be used to narrow down the candidate slate and determine those who should move to the next round.

Of course, more steps come after these (phone screening, background checks, in-person interviews, and final selection, to name a few), but the heavy lifting is done. By now, your actions have sent a clear message that the incumbent CEO and the association are committed to making the transition process as smooth as possible and creating a positive entry for the new leader.

Building a Better Board and Interim CEO Relationship

After a recent speech, I was chatting with a student member working toward her doctorate. She told me that she felt her professional association wasn’t really for her. Her area of interest combined two specialties, and the organization required her to choose one. She didn’t know where to go and felt unwelcome in either group, partly because of her specialty and partly because none of the leaders looked approachable. Pale, male, and stale—those were her words.

I brought it up later to the association’s executive director, and she explained that the board of directors was reluctant to change the affinity structure because professional awards and board seats were tied to that structure. Many people had worked their whole careers within that framework and shouldn’t be denied the spoils, she said.

As an outsider, I was surprised to hear this. Clearly, the mission of the organization was to maintain the health and integrity of the profession by staying on the cutting edge. The young student was in a prestigious academic program and had received numerous accolades; however, she was leaning toward joining a newer and lesser-known association. 

The executive director also knew that the structure of the organization was inconsistent with its mission. She knew that if tomorrow’s leaders didn’t join, the association’s prestige and pull in the industry would wane. This association’s story is a prime example of a board and organizational alignment being out of step, a challenge that many associations face. Here are five common issues that come between the two, and how to fix them:

Board Service as a Prize

Many boards are led by longtime members who have worked their way through various volunteer roles on a steady path toward a board position. Once there, the focus is more on what they get—status, influence, and the ability to represent and support peers and friends. Boards don’t always have clearly defined roles and responsibilities, which results in board members overstepping into staff-controlled areas or being unwilling to participate in difficult decisions.

Opportunity: Association leaders and staff must work together to develop criteria for board roles since both parties have an incentive to attract motivated volunteers. A good model to use is corporate boards, which define five-year goals, determine needs, and actively recruit and groom candidates based on those needs.

Slow Decisions

Board members may not meet frequently, and they can’t dig into issues quickly, which slows decision making. This issue is compounded when there are too many board members and calls for quorums to make decisions. Also, the turnover of board chairs might be too frequent, making it harder to develop strong working relationships. 

Opportunity: Short of changing governance bylaws, you can invite specific board members to participate informally in key initiatives, so that they become catalysts for change and motivate their colleagues to act. 

A good question to ask the board: What kind of governance do we need to become the organization of the future?

Present Over Future

Some board directors have special interests that are inconsistent with the mission of the organization. These interests might be explicitly proscribed by the bylaws, or they might be implicit, focusing on the needs of a small, likeminded group. Association leaders should work with the board to define responsibilities and establish a code of ethics.

Opportunity: In the long term, organizations can work to change the bylaws and culture of their board, pushing for greater board diversity. In the short term, association leaders can bring in advisory groups of underrepresented members and nonmembers to build a greater understanding of membership. After all, the health of the organization depends on building and nurturing a strong pipeline of new members.

Skills and Training Deficit

Typically, association board members get little to no training before joining the group. Part of the reason can be that boards are elected by other members and aren’t subject to training rules, or it may be an issue of tradition and habit.

Opportunity: Provide an optional training or invite board chairs to strategy sessions. When nominating new board members, focus on skills needed to achieve five-year plans. A good question to ask the board: What kind of governance do we need to become the organization of the future?

Disconnect on Mission

Is your mission statement written down but not used as a guiding principle? This can lead to each board member having their own criteria for prioritizing objectives. Many objectives are worthy, but there aren’t enough resources to achieve them all. As a result, the organization may choose to focus on initiatives that the most powerful board member wants, rather than the objectives most likely to support the mission. Or the organization may try to do too many things and ends up doing nothing well.

Opportunity: Put the mission and the members of the future at the center. Open board meetings with an exercise or presentation about what the organization is doing around the mission. The more people focus on the higher objective of the organization, the more likely they are to align their efforts.

Membership and governance are more connected than you might think. And organizations that aren’t all pulling in the same direction—toward the same vision of serving today’s and tomorrow’s members—will be in danger.

How to Be an Effective Interim CEO

An interim CEO may lead an association for only a short period, but that time can shape its future. An effective interim period will set up the association for long-term success, while a less successful tenure will leave the organization mired in challenges or even distrust.

The ASAE Research Foundation’s newest report, “The Role of the Interim CEO: Key Insights of Association Executive Transitions,” examines the hallmarks of a successful association interim CEO. Association Research Consulting—in collaboration with the foundation, Vetted Solutions, and The Ancora Group—conducted interviews with interim CEOs, subsequent CEOs, board members, and senior staff at 15 associations.

The study showed that interims play a unique and valuable role for associations in times of transition and identified practices that will help interims maximize their effectiveness. While the findings may not hold all the secrets to successful interim gigs—a breadth of leadership skills and experience are critical—these practices can help interims help themselves and the organizations they serve.

Align Expectations With the Board

Associations turn to interim CEOs for a variety of reasons. Maybe an experienced leader is needed to keep the ship afloat while a search committee takes the time it needs to find the right permanent CEO. Or the board may want someone to implement major changes before a permanent CEO is brought on. Whatever the reason, an interim CEO needs to understand expectations in order to effectively and confidently execute plans to meet them.

Similarly, interim CEOs are wise to communicate their intentions and goals to the board. This serves as a check on alignment, and it allows the board to work with the interim to shift course if they find that a different kind of interim role is called for.

Take a Listening Tour

Understanding the board’s perspective is critical, but hearing what staff members think is also important. The most successful interim CEOs in the case studies started their new job with a listening tour that introduced them to staff and allowed them to hear about the organization from the people who make it work.

The listening tour might involve meeting with department heads or senior staff in large organizations to understand how each team fits in with other pieces of the puzzle. In smaller organizations, one-on-one meetings with all staff may be worthwhile. Another option is an association-wide staff survey to gather input from across the organization—and allow team members to raise issues anonymously.

Make Way for the Next CEO

While in some cases an interim CEO may be retained as the permanent chief executive, the study concluded that generally it is not advisable for the interim to pursue that role. The interim is usually brought on for a specific purpose, and turning the role into an “interview” may cause the interim to make different choices. The interim’s candidacy may also create divisions among board members and staff.

Of course, it’s possible for an interim to become permanent CEO of the same organization without regrets by any party—this happened at several of the associations studied. It’s simply important to understand that, generally, a pathway from the interim role to the permanent CEO job at an organization is not certain, and it may be deliberately blocked

Steps to a Successful CEO Search and Succession

After working hard for many years, CEOs certainly don’t want to leave their legacy up to chance. With some advance planning, associations can avoid common pitfalls in the CEO selection process, significantly improve the search committee’s understanding of what factors to consider, and dramatically reduce their risk of making a hiring mistake.

Every organization will experience an executive departure at some point. A leadership change always poses challenges, but how much disruption it causes depends largely on how well the transition period is anticipated and managed. The process will proceed much more smoothly if the association—in particular, the board of directors—has developed a strategy for executive change to help mitigate the downside risk of being caught unprepared.

Often, executive vacancies are planned, as when a CEO takes a new job, goes on sabbatical, or retires. In these instances, an executive typically will remain in the position for a time to help the board of directors navigate the transition process. When executive vacancies are unplanned, such as terminations or death, the board of directors is left to figure it out on their own.

A succession plan is an integral part of organizational strategy, and many of the same best practices for strategic planning should be applied when developing a succession plan.

Planning for succession helps key stakeholders, including the board, search committee, and association staff, to understand roles and responsibilities in the transition. Here are a few tips for navigating an executive succession and preparing for the executive selection process.

Start with a Plan

Wise associations prepare for an unplanned or planned departure with succession policies [PDF]. No single succession policy can completely predict what an organization might face at the time of an executive vacancy, but a well-crafted plan can anticipate some of the obvious issues and consider possible variables, such as the type of vacancy and estimated duration. For example, the organizational dynamics and needs during a vacancy of 30 to 60 days will be quite different from those that arise during a longer vacancy or when the association is dealing with a traumatic and unplanned event, like an executive’s death or termination.

Make sure your succession plan addresses critical management and legal questions, including:

  • When it is acceptable or unacceptable for staff or a board member to serve as acting executive?
  • When is it better to engage a professional interim executive from outside?
  • What is the bonus or compensation policy for the external interim or acting executive?
  • What is the executive role, title, tasks to be performed, and with what authority and accountability?
  • What is the exit strategy, if an interim doesn’t perform well?
  • What happens to staff serving as acting executive after the transition period ends?
  • If a board member is appointed, must he or she resign from the board and for how long?
  • Can the internal acting or external interim be a candidate for the long-term position?

At a minimum, the succession plan should include key information, including a glossary of terms, position description, organizational charts and rosters, professional advisor list, key documents list, board resolution to change authorized signatories, executive search services RFP and evaluation tools, and search committee charter.

A succession plan is an integral part of organizational strategy, and many of the same best practices for strategic planning should be applied when developing a succession plan:

  • The governing board needs to own the plan because it is part of their organizational risk management responsibilities.
  • It is often helpful to have an independent party facilitate the succession planning process.
  • The plan should be reviewed and updated regularly to ensure accuracy and relevance in the current environment.

Partner with the Outgoing CEO

Once the board establishes a succession plan, the search committee will be called upon to use it. But most search committees are unfamiliar with the true nature of the association CEO’s job. Consequently, when an outside executive search firm surveys the search committee and association staff about what they are looking for in a future leader, their answers are often general or vague.

The outgoing CEO can help bring more rigor to the selection process by partnering with the search committee in the following ways:

  • Review the strategic plan with the search committee and rank the most difficult and strategically important items that the incoming leader must be ready to address.
  • Be sure the search committee includes people who represent the future of the organization’s membership, whether they are board members or not.
  • List business scenarios that keep the outgoing CEO awake at night. Rank them according to the amount of risk they pose to the association and discuss what kind of career experiences might prepare someone to understand and address them.
  • Review the skills gap between the current team’s capabilities and the competencies that will be needed to address the strategic plan and nightmare scenarios.
  • Encourage the committee to apply rigor to the job description and position announcement, ideally by comparing it with other CEO position announcements. After reading a few announcements, the committee will be able to avoid using the vague boilerplate language found in most announcements, replacing it with more tangible and concrete language specific to the situation.

Later in the search process, the committee will find it far more productive to evaluate a candidate’s ability to handle the specific situations and fill critical skill gaps, rather than pondering whether a candidate possesses attributes like strategic vision or global perspective without this context.

Planning for the inevitable succession—regardless of whether the departure is planned or unplanned—is a fundamental responsibility of the board. Not only can thinking through possible departure scenarios and creating an action plan significantly reduce the anxiety caused by a leadership succession, it also causes the volunteer leaders to consider how it can strategically fill this leadership void.

Ethics Codes Done Right: Avoid Antitrust Risk

Trade and professional association codes of ethics can raise competitive concerns no matter the size or focus of the association. That fact was demonstrated recently when the Federal Trade Commission (FTC) entered into consent orders with the Music Teachers National Association (MTNA) and the California Association of Legal Support Professionals (CALSPro), finding that their codes had the effect of restraining competition. Together, the two consent orders demonstrate that codes of ethics (and other similar membership restrictions) can raise antitrust issues if they limit members’ ability to compete, reduce prices, increase output, engage in truthful competitive advertising, or recruit rivals’ employees. 

The good news is that associations that follow certain best practices can minimize potential antitrust and other legal risks in connection with such codes. Any association that is considering adopting a code of ethics should first determine what it hopes to accomplish through the program and then ensure that it is designed to minimize potential legal risk. 

The Two Cases 

The Sherman Act and the FTC Act prohibit agreements among competitors that unreasonably restrain trade. Codes of ethics, like most association activity, are analyzed under the rule of reason, which examines the totality of the circumstances to balance the pro-competitive benefits of the conduct against the potential anticompetitive harm. (See, e.g., National Society of Professional Engineers v. United States, 435 U.S. 679 (1978).) 

Although the FTC and the U.S. Department of Justice (the primary federal antitrust enforcement agencies) recognize that association ethics codes can serve many legitimate purposes, the agencies will scrutinize codes that directly or indirectly prevent members from competing against each other. In the MTNA case, the FTC alleged that the association and several of its affiliates implemented ethics codes that prohibited members from charging music lesson fees that were lower than the average in the community, offering free lessons or scholarships, or advertising free scholarships or tuition. Similarly, the FTC alleged that CALSPro had adopted a code that prohibited its members from “offering discounted rates to rivals’ clients, engaging in certain comparative advertising, and recruiting employees of competitors without first notifying the competitor.” 

In both cases, the agency noted that the ethics codes had the “the purpose, effect, tendency, or capacity” to restrain competition. The CALSPro code, for example, provided that “it is not ethical to cut the rates you normally and customarily charge when soliciting business from a member firm’s client . . . .” Making matters worse, both associations had established processes for resolving alleged code violations, including the imposition of sanctions.

The consent order with MTNA highlights a risk that is unique to associations: that an umbrella association can be held responsible for the activities of its local chapters and affiliates. Although the FTC was clearly concerned with MTNA’s ethics code, the agency focused on the fact that many of its local affiliates had adopted code provisions that were even more restrictive. As part of the consent order, the FTC required MTNA to obtain certifications from each of its roughly 500 affiliates confirming that they do not have restrictions on student or job solicitations, advertising, or price-related competition. MTNA must disaffiliate any affiliate that fails to provide the certification. 

Antitrust Policy and Best Practices 

When implementing a code of ethics or similar program, an association should consider a number of important steps to limit potential risk. At the top of the list should be the adoption of an antitrust compliance program. The costs and burdens of defending an antitrust investigation far outweigh the costs of implementing such a program. Notably, MTNA posted a statement on its website explaining that signing the consent order with the FTC was better than “spending hundreds of thousands of membership dues dollars fighting the federal government.” 

The FTC consent orders with MTNA and CALSPro required them to adopt an antitrust compliance program, in which all aspects of their activities would be vetted for potential antitrust risk by in-house or outside counsel. A formal antitrust policy should include, at a minimum, the following provisions: 

  • an overview of the antitrust laws and explanation of prohibited types of conduct 
  • an affirmation of the association’s commitment to compliance with federal and state antitrust laws 
  • a requirement for employee training and distribution of the policy to the association’s officers, directors, employees, and representatives 
  • a requirement that association meetings have an agenda circulated in advance, and that minutes of all meetings properly reflect the actions taken at the meeting 
  • a requirement that any committee or staff recommendations or decisions that potentially impact the market are reviewed in advance by in-house or outside counsel

In addition to implementing an antitrust compliance program, associations that have ethics codes and other similar restrictions on their members should keep the following best practices in mind: 

  • A code of ethics should never be created or used for the purpose of raising, lowering, or stabilizing prices or fees; excluding competitors from the market; or limiting the supply or products or services.
  • There should be a valid, objective reason for each code provision. The association should document the development and reasonableness of the proposed provisions. Code provisions should be no more stringent than necessary to ensure that minimum acceptable levels of conduct are met.
  • The code should be reviewed and updated periodically to ensure that it is current. In addition, associations should document all complaints or concerns about the code and resolve them as appropriate.
  • An ethics code should be clear and unambiguous, reasonable, fair, and objective. The enforcement process must be objectively and uniformly administered, without subjectivity, favoritism, or discrimination. Due process should be built into the program, and those administering the program must scrupulously, consistently, and objectively follow the rules of the process. 
  • Associations should maintain strict confidentiality with respect to all adverse allegations, complaints, actions, and proceedings that arise in connection with the process. 

Other Legal Risks

Although the MTNA and CALSPro consent orders were based on antitrust concerns, codes of ethics and other member restrictions can also raise legal concerns in the areas of due process, defamation, and federal tax-exempt status. 

Due process. Common law due process requires associations to notify members or prospective members of potentially adverse decisions, to provide an opportunity for those members to defend themselves, and to offer a way to appeal an adverse decision. 

Defamation. This is a risk when an association uses its ethics code to accuse members of dishonesty or other moral, professional, or business deficiency. Defamation is the oral utterance or written publication of false or misleading facts (or implied facts) that are derogatory or damaging to the reputation of an individual, entity, or product. Defamation claims may arise whenever an association expels a member or when potentially damaging information about a member or applicant is disclosed during an ethics code enforcement process. 

Tax-exempt status. If a tax-exempt 501(c)(6) association uses its code of ethics primarily as a tool to resolve business disputes among members, the association could run afoul of federal tax law prohibitions on 501(c)(6) organizations providing substantial “particular services” to members. An association would be in danger of losing its tax-exempt status only if the IRS were to determine that this activity constitutes more than half of all the association’s activities. Even if this test is not met, the IRS still might seek to tax (as unrelated business income) fees the association receives for providing this service. 

Any association that has a code of ethics or is looking to implement one should take steps in advance to ensure that the code serves a legitimate function and does not expose the association to potential antitrust or other legal risk. Spending some time focusing on these issues upfront can save a lot of expense and headache in the long run. After all, the costs of defending a government investigation or private lawsuit, regardless of merit, will undoubtedly far exceed the cost of vetting the proposed ethics code or other association membership restriction for potential legal risk.