Principle 13, Legal and Compliance Issues, addresses the aspects of governance within organizations dealing with charities and foundations. The principle relates to the observance of legal guidelines, especially in leadership, and covers the statutory compensation of payment made to CEOs, including sanctions and penalties for violating the legal provisions. For charities and foundations, it is critical to have written procedures for the compensation to prevent the unethical and illegal use of organizational finances such as excessive payment for the executives. The Intermediate Sanctions regulations set out a reasonable payment for the executives and audit accounts to ensure compliance. The process involves the use of comparable data from other organizations to implement fair compensation, which is listed for the CEO and other officers, directors, and key employees in foundations and charity organizations. The regulation is set for employees who earn over $100,000 (The Principles Workbook, 2009). Those who earn over $150,000 must fill Schedule J., which is critical for the IRS to regulate the compensation for these organizations created for the welfare of vulnerable members of the community.
Definition: Principle 15 addresses the issue of board education and communication. The board is expected to establish an efficient process for educating and communicating with members. The process will create awareness regarding their ethical and legal responsibilities and understanding of the organization’s programs and activities to perform their functions effectively (The Principles Workbook, 2009). The principle requires that every board member has a clear job description, understands the fiduciary responsibilities, recognizes an organization’s function, and engages in an ongoing education process.
Evaluation: Bosh Bosh does not have a detailed plan for the training of its board members. Members have diverse educational backgrounds, some of which are not related to the mission and vision of Bosh Bosh. The board executives have failed to implement a training program for members to become knowledgeable about the organization’s mandate. Furthermore, although members communicate important issues relating to the organization, the process is ineffective because of the lack of regular meetings. The organization meets once per year, which is ineffective because of the lack of physical contact to discuss matters affecting the organization. In essence, Bosh Bosh experiences communication breakdown due to irregular meetings.
Assessment of Compliance with the Principles
The Bosh Bosh is one of the organizations created in Liberia to support the wellbeing of vulnerable populations. The organization supports the development and social welfare of rural women in Liberia through education and empowerment. The group complies with Principle 13 IRS regulation on the compensation of executives. Although the organization does not have a CEO, it has other directors and officers working to support various aspects of the organization.
Regarding principle 15, although members of the board understand their roles and responsibilities in the organization, various areas require improvement to support the effective running of the organization. The IRS expects the board to be knowledgeable about all the aspects of the organization to support the achievement of its objectives. The board should increase the frequency of board meeting to discuss the important aspects of managing Bosh Bosh.
The general limitations evident in the organization based on the lack of regular effective meetings necessitate a detailed plan to address. The organization requires a document with a list of recommendations to address the communication problems affecting it. Below is a list of suggestions to solve the communication problem and to improve compliance.
- The board should have meetings every quarter of the year instead of once a year to discuss the operations of the organization and address emerging problems. Regular meetings will improve communication within the board and between the members and other employees of the organization.
- Although the board members live in different parts of the world, some in the United States, while others in Liberia, they should hold the regular meeting to improve synergy and information sharing (Al-Najjar, 2012). Besides holding a meeting in every quarter of the year, the members of the board should have monthly video conferences to discuss emerging issues that might require urgent solutions before the three months are over.
- The chairman of the board will send an email to all board members relating to the quarterly meetings and the video conferences. The email will communicate the time of the meeting and the agenda to be discussed. All emails will be sent three days before the meeting to give members time to prepare.
- During the regular meetings, the board should address various issues, including the use of finances and resources of the organization. In line with Principle 13, the board should comply with IRS regulations, including the need to set reasonable compensation for executives and other top employees. The rule is necessary to prevent wastage of finances and resources.
- The board should always revisit the roles and responsibilities of the members of the board according to Principle 15. The initiative is critical to support communication, collaboration, and information sharing between the members and with other employees (Al-Najjar, 2012). Besides, the board should evaluate the performance of duties allocated to various members to prevent reluctance to perform responsibilities. Sanctions can apply to members who are not fulfilling their obligations to the organization.
- The board should implement effective communication channels to improve communication between the executives in the United States and Liberia. The initiative is critical to prevent misunderstandings and breakdown of operations due to miscommunication.
- Bosh Bosh requires a more active board to ensure ethical operations. Therefore, the board should develop a code of conduct or moral code to guide the actions of the members. The code of conduct will prevent misappropriation of the organization’s resources and pursue its mandate responsibly.
Al-Najjar, B. (2012). The determinants of board meetings: evidence from categorical analysis. Journal of Applied Accounting Research, 13(2), 178-190.
The principles workbook: Steering Your Board toward good governance and ethical practice (2009). Independent Sector and Board Source.