GEORGIA MUNICIPAL SERVICE PROVIDERS ASSOCIATION BOARD OF DIRECTORS

GEORGIA MUNICIPAL SERVICE PROVIDERS ASSOCIATION BOARD OF DIRECTORS SEMINAR AND ASSOCIATION REVIEW TBILISI, GEORGIA JULY 29, 2009

MSPA AGENDA Welcome and introductions Description of the Assessment Project “Best practices” in association governance Mission and Values Discussion Focus Group Results Administrative and Management Recommendations Programs, Structure and Strategic Directions Business Meeting for MSPA

World Learning/Georgia, FORECAST Program : Assessment and Technical Assistance at the Municipal Service Providers Association and the Municipal Finance Officers Association FUNDED BY USAID

CONSULTANTS Elissa Matulis Myers, CAE Richard F. Dorman, CAE Combined Experience of 71 years Experience in Association Management In collaboration with World Learning Georgia & Partners Georgia Government Financial Officers Association (US)

DURATION OF THE PROJECT – PHASE ONE 60 hours in June (time provided pro bono by consultants) On-site July 4 through July 31 (25 days) Interim “trial reports” July 29/July 30 Final Report delivered August 15

Goal of the Project The goal of the activity is to define management and programming gaps at the MSPA and MFOA, to provide technical assistance to strategically plan for and address those gaps, and to recommend additional future activities to address priority performance shortcomings/gaps.

Objectives of the Project • To define the demand for associations’ products and services; • To increase institutional and technical capacities of the MSPA to understand meet that demand; • To develop recommendations on the associations’ advocacy strategy; • To develop recommendations on the marketing strategy; • To develop the draft communication and outreach campaign; • To develop recommendations on the support services strategy; • To outline primary set of the associations’ “core” products.

ASSOCIATIONS: A GREAT AMERICAN TRADITION “Americans have an unusual propensity to associate” – de Tocqueville 1. 4 million associations in the US Average American belongs to 4 1 in 4 “heads in hotel beds” are attending an association event 1 in 3 airline tickets are used to go to an association event

GEORGIA IS BUILDING A GREAT TRADITION OF ITS OWN An association is NOT an NGO. It’s isn’t made up of people from the outside, it comes from within a society – it is GEORGIANS HELPING GEORGIANS It is IT IS GEORGIANS WORKING WITH OTHER GEORGIANS TO ACHIEVE COMMON OBJECTIVES THAT ARE IMPORTANT TO GEORGIA

3 ASSOCIATIONS WORKING TO STRENGTHEN LOCAL GOVERNMENT IN GEORGIA Municipal Service Providers Association Municipal Finance Officers Association National Association of Local Authorities

3 ASSOCIATIONS: ONE COMMON INTEREST MSPA GEORGIA LOCAL GOVERNMENT & CITIZENS MFOA NALA

National Association of Local Authorities Mission: “NALA aims at advocating the interests of its members self-governance bodies and to facilitate the implementation of European charter of Local self governance in Georgia. ” Directions: 1. Advocacy & Lobbying 2. Consultations and technical assistance NALA’s focus is on the way that laws get made and administered, and on how the government works in Georgia

Municipal Finance Officers Association Mission: To represent the interests of financial officers working in cities, municipalities, and at the national level, through education and advocacy. To improve citizen involvement and awareness in the financial affairs of local government

Municipal Finance Officers Association GOALS Liaison between central and local government Advocacy Education & Certification Communication Collect and disseminate info on best practices from within Georgia and around the world Promote citizen involvement Increase financial independence and local discretion through early planning Offer modern financial management tools

Municipal Finance Officers Association MFOA’s focus is on how government financial resources are collected, managed, accounted for, and distributed. It strives for excellence in financial management practices. And it is committed to transparency and citizen involvement in the financial process

MUNICIPAL SERVICE PROVIDERS ASSOCIATION Mission: “Unites the local government employees, heads of municipal services, municipality council members, and others who are directly involved in local policy making and execution and promotes development of good governance and democracy on national, regional, and local levels of Georgian Governance. ” Goals: 1. Improve transparency and accountability of the public sector 2. Increase professionalism of municipal government staff

MUNICIPAL SERVICE PROVIDERS ASSOCIATION Objectives: 1. Advocacy: Act as a liaison between central and local governments; lobby on behalf of local government interests and promote citizen involvement 2. Education and professionalism : training for municipal employees, creating a network for the exchange of information; promoting use of modern management tools and techniques 3. Research: Identify and disseminate best practices within Georgia and around the world.

MUNICIPAL SERVICE PROVIDERS ASSOCIATION MSPA helps member municipalities and cities address the substance of the issues they are grappling with: 1. Waste Management 2. Unemployment 3. Attracting International Investment 4. Good Landfill management 5. Beautification of cities/cultural enrichment 6. Tourism development 7. Safe and sufficient water 8. And more….

MUNICIPAL SERVICE PROVIDERS ASSOCIATION MSPA serves as the voice of the municipalities and cities to the national government to ensure that their concerns and realities are considered in forming national law… AND MSPA communicates to local governments information on new laws, regulations, and actions of the national government, and provides support to help them come in to compliance.

How associations make things happen Associations work when a community of people with similar interests come together to collectively change or influence current reality. The extent to which an association can have an impact will depend on the resource (money and volunteer time and effort) available to it. Long-term sustainable success for an association depends on the willingness of the MEMBERS to fund its work and volunteer to provide strategic direction – and sometimes tactical implementation

A TRADITION OF VOLUNTEERISM Volunteer involvement is critical to the success of any association. In fact, it’s one of the distinguishing characteristics of a voluntary not-for-profit membership organization. A corporation must rely on tangible rewards – a paycheck or stock options – to get its work done. Association volunteers work without pay out of common interest in the mission.

THE POWER OF AN ASSOCIATION COMES FROM WITHIN THE ASSOCIATION – AND NOT FROM THE OUTSIDE

GREAT DIRECTORS: 1. Show up – mentally and physically 2. Listen and give a fair hearing to dissenting or new ideas 3. Speak their minds – concisely, honestly 4. Trust their fellow board members and learn to work as a team 5. Come to meetings prepared 6. Understand the “rules of engagement”

Inurement In fact, most voluntary membership associations in the United States are tax-exempt, meaning that they don’t have to pay the federal corporate income tax that forprofit companies do -- at least not on income derived from activities related to their core purpose. This is also true in Georgia. The Municipal Service Providers Association has filed for and received exemption from Georgian National Corporate Tax.

Inurement…continued A Condition of the Tax Exemption is that NOTHING can inure to the profit of any one member – or in other words, no member can directly share in the income of AMA. Staff can be paid. Members can be reimbursed for reasonable related out of pocket expenses. But there can be no profit sharing.

VOLUNTEER LEADERS Volunteers get tapped for leadership by demonstrating leadership: Showing interest in Good Governance Showing a willingness to serve Showing the ability to serve – time, resources Having knowledge or skill to contribute Being ethical and cooperative and reliable Using good communication skills

No Inurement, but Leadership has its benefits Volunteer leaders: Increase their leadership skills through participation on committees and work groups; Increase knowledge and competencies through networking with other knowledgeable peers; and Have the ability to enhance their careers and standing in their communities

And best of all… Volunteer leaders have the satisfaction of positively impacting a mission that they care about Great associations make a positive difference

ASSOCIATION BYLAWS In order to work together efficiently, the members of associations begin by agreeing on the details of How decisions will be made, and by whom, And on how work will be accomplished, and by whom.

The Bylaws or “Charter” Organizations are required to file their charter with the Georgian Department of Taxation The document describes what the organization will do, how it will be governed and how it will operate. BUT… The Charter is more than a “government filing”… it is the agreement between the members and the board of how they will do business, and should be a frequently read and referred-to document.

The Charter includes: Statement of Purpose Qualifications for membership Forms of membership Dues Structure (but not amount) Rules for filling vacancies in elective offices List of offices, terms, power, duties, as well as defining the role of the CEO Quorum provisions

The charter should also include: General meeting requirements of members and board Voting qualifications & procedures, and proxies Standing Committee Descriptions Convention and Assembly rules Designation of a corporate seal Accounting and fiscal details Bookkeeping and reporting procedures Amendment and dissolution procedures

MSPA’S BYLAWS MSPA’S Bylaws Document is called The Charter of the Georgian Municipal Service Providers Association

MSPA CHARTER This is the primary reference document outlining the major, over-arching policies of MSPA. Most of these rules can be changed, but ONLY BY THE VOTE OF THE GENERAL ASSEMBLY OF THE ASSOCIATION. Two-thirds of the members of the association who choose to vote have to vote in favor of any amendment.

MSPA CHARTER Most of the Charter can be changed by affirmative vote of 2/3 rds of the members voting – but the objectives of the association, contained in article 2, can only be modified by a vote of 4/5’s of the members voting. 1. A notice of the membership meeting must be sent in writing twenty days before each meeting 2. The notice must contain a clear explanation of what the members will be asked to vote on 3. Members can vote in person or by sending a written vote to the association (proxy)

MSPA CHARTER- MEMBERSHIP Article 3. 1 of the Charter defines membership as: “Persons eligible for active membership shall be those officials having responsibility in anyy aspect of furntion of municipal service or provides as well as other elected or appointed public officials in any unit of local government. ” As this is written, membership in the association is defined as individuals. In fact, Article 3. 2 states that: “Membership can’t be transferred to or inherited by other persons. ”

MSPA CHARTER- MEMBERSHIP The dues structure of the association is not defined in the charter, nor should it be. Current MSPA dues structure is: 2 tetras per capita for each citizen of a municipality or city with a population of less than 100, 000 1 tetra per capita for each citizen of a municipality or city with a population of more than 100, 000 This implies that the members are the municipalities and cities and NOT individuals, as stated in the charter

MSPA CHARTER- MEMBERSHIP Observations: 1. If the population of Georgia was 4, 200, 000 citizens, and even if every municipality and city paid the 2 tetra rate in dues to MSPA, total dues revenue would be 84, 000 GEL – not very much money – not enough to autonomously sustain an association with the mission of MSPA

MSPA CHARTER- MEMBERSHIP Observations: 1. Dues not enough 2. If Municipalities and cities are paying the dues, why can’t they assign a new representative if they choose to do so. 3. If more than one individual from a municipality want to join MSPA, do they also have to pay 1 or 2 tetras per capita? This is not practical.

MSPA MEMBERSHIP RECOMMENDATION ONE Revise the charter to show municipality as primary member with one representative of its choice, and create a structure that allows additional employees of member municipalities to join for an individual reasonable rate. Structural Concept: CITY/MUNI POP RATE # OF REPS GEL FOR EXTRA <50, 000 2 tetras 1 150 Lari 50, 000 -100, 000 2 tetras 2 150 Lari 100, 00 o-500, 0 o 0 2 tetras 3 150 Lari > 500, 000 2 tetras 4 150 Lari 1.

MSPA MEMBERSHIP RECOMMENDATION TWO Create within MSPA “Special Interest Groups” – SIGS (combination of topical and functional) -- CONCEPT * Mayors/Gamgebelis/city manager/chair of Sakrebulo * Heads of Economic Development & Infrastructure * Heads of Public Relations & Media * Waste Management * Water management * Education/culture/tourism/sports * Health care * Others…

MSPA MEMBERSHIP RECOMMENDATION THREE • • CONSIDER TIMING OF DUES COLLECTION – CONSIDER “MEMBERSHIP YEAR” TO BE BASED ON ANNIVERSARY DATE OF JOINING RATHER THAN ON CALENDAR YEAR –SO THAT MONEY FLOWS THROUGHOUT THE YEAR. USE DEFERRED ACCOUNTING FOR MEMBERSHIP FUNDS SO THAT “DUES ARE SPENT WHEN THEY ARE EARNED AND NOT SOONER… DUES MOVE FROM BALANCE SHEET TO INCOME AS EARNED.

MSPA CHARTER: GENERAL ASSEMBLY All authority resides in the hands of the members. Always. BUT… As it is impractical for all members to participate in every decision and act, the General Assembly typically delegates certain specific responsibilities to the Board. AND Even though they have “delegated” some authority, they can always reverse or over-rule the decisions and actions of those to whom they delegated authority

MSPA CHARTER: GENERAL ASSEMBLY ARTICLE 5: • Elects the board • Must be convened at least once a year • May modify or amend the bylaws (charter) • Appoints and dismisses the chairperson of the board • Expels members for cause • Approves the budget of the association • Defines the amount of the fee paid by the members • Establishes, reorganizes, and shuts down branches of the association

MSPA GENERAL ASSEMBLY Recommendations 1. 2. 3. 4. 5. The general assembly should elect the Board. The Board should elect its chairman from within it’s members – and only the Board should vote to expel the Chairman or other Board members. The general assembly should approve the Dues Structure, but the Board should set the Dues amount. “Establishes, reorganizes, and shuts down branches of the association” sounds like an executive or administrative decision that should be made by the executive director or the Board. Responsibility for the approval of the budget is typically a board function. The process of developing the budget should take into account member input, and should be transparent, and performance against the budget should be provided to members annually The members aren’t forfeiting control with this delegation – they retain the right to change the rules of the road at any time.

Board Policies In addition to the Bylaws or Code of Regulations, most associations have additional Policies – contained in a document called a Board Policy Manual. Board Policies are of two types: 1. Policies governing association operations 2. Policies expressing positions on external affairs (i. e. Government Affairs Policies) Board Policies are rules that the Board has the power to change at any time, and are more specific and detailed, generally, than the provisions in the charter.

Board Policies (continued) Policies represent a decision or group of decisions about a question or issue that recurs often. By establishing a “policy” the Board can delegate the handling of these recurring issues, knowing that they are being handled as the Board would want them to be. Others can act for the Board, as the Board would want them to act.

Examples of Policies Governing Association Operations Policy on Conflict of Interest Director Expense Reimbursement Articles or Statements by Directors Sexual Harassment Email Policy, Correspondence Policy Corporate Logo Usage Policy

Examples of Policies on External Affairs Policy Affirming an association value -- Transparency Policy Statement Regarding a needed amendment to a Georgian Law – for example, transfer formulas for return to munis/cities of tax collected Policy Statement on National rules governing landfill management Position on Citizen involvement in Budget Process Position on involvement of city and municipalities in national rule making ( for example “all cities/Munis Must be consulted”)

Highest duties of directors RESPONSIBILITY: “Act in good faith in the best interests of the MSPA” “Be knowledgeable of corporate affairs – finances and investments and operations and policies” LOYALTY “In matters concerning MSPA, subordinate personal or regional interests to the best interests of MSPA as a whole. ”

RESPONSIBILITY Attend Board meetings Be available for consultation Carry out committee assignments Speak on behalf of MSPA only within the bounds of approved policy or as specifically directed by the Board Read, understand, and question reports and financial data In Board meetings, express dissenting points of view. After Board meetings, support the majority point of view. The place for debate is at the Board meeting, not in public.

LOYALTY No self-dealing or making secret or unfair profits at the expense of AMA Exercise independence of judgment Subordinate personal interest to that of AMA when the interests are in conflict Disclose, and where appropriate, recuse yourself, from decisions where you have special interests.

Other responsibilities of directors 1. Establish an audit committee to: Meet privately with the auditor after the staff and auditor have finalized annual financial statements, and staff has signed off on the financial statements. Have the auditor report findings directly to the Board. Make sure members have the knowledge and experience and time to do this job. 2. Adopt a code of ethics… and require staff and volunteers with authority to sign it. The code should address conflicts of interest, loyalty, confidentiality…

Other responsibilities of directors 3. Scrupulous financial disclosure: The board should see any Management Letter emanating from an audit The CEO and CFO should “certify” accuracy of the audited financials All financial relationships with related organizations should be disclosed 4. Change your auditor every once in a while – every 3 -5 years

A Serious responsibility Serving as a director is a serious responsibility. It is a position of trust. Trust is built on honest and open communication. A director is elected to carry out the will of the members.

Doctrine of Apparent Authority Another important concern for association directors is the concept of “apparent authority. ”

Apparent Authority To avoid giving the appearance of “apparent authority, ”: Directors should not sign contracts or other documents obligating the association – nor should they imply that they have the right to negotiate or influence negotiations or purchases.

DIRECTORS ARE GENERALLY PROTECTED FROM LIABILITY Uncompensated volunteers are generally immune from liability in civil action unless: 1. They know something is wrong and participate in it 2. They know something is wrong and they approve it 3. They engage in intentional misconduct

MSPA PROTECTS DIRECTORS TOO Article 1. 13 of the MSPA charter says “the association shall not be responsible for the liabilities of its members and the members are not responsible for the association’s liabilities. ” You as a board, can choose to direct MSPA to indemnify others (i. e. committee members) who are specifically acting at the direction of the board

MSPA BOARD When the original charter of MSPA was created, it contained this language: “To manage and organize the activity of the association the general assembly shall elect the Board consisting of five members. The Board shall execute the decisions of the members and shall decide all issues of the association’s activity that fall outside the scope of authority of the membership. ” ACTUALLY, THERE ARE NO ACTIVITIES THAT FALL “OUTSIDE” THE SCOPE OF THE AUTHORITY OF MEMBERS CAN DELEGATE BUT SHOULD NOT GIVE UP THEIR AUTHORITY

MSPA BOARD In the original charter, the board composition was: 5 Members – elected by the general assembly for four years, with the opportunity to be re-elected infinitely. The members were: The Chairperson of the Board, “appointed” by the General Assembly The Deputy Head of the Board who is de facto the Executive Director Three additional members

“CURRENT” MSPA BOARD • Comprised of 21 members • 1 from each region: • 1 from each city: • 1 regional development ministry • Executive director (without vote) 14 5 1 1 (PRESUMED)

MSPA BOARD RECOMMENDATION The members of MSPA can elect up to 20 board members. Up to 14 (tbd) of those directors will be representative of the regions of Georgia (no more than one regional board member from a region) Up to 5 city representatives (no more than one from a city) One representative from the Regional Development Ministry Ex-officio, without vote, the Executive Director

MSPA BOARD RECOMMENDATION Just a reminder… though Board Members may have a local orientation, they are representative of an area, but must vote in the best interest of MSPA as a whole.

MSPA BOARD RECOMMENDATION Currently the officers of the association are the chairman of the Board and the deputy (who is the executive director). Typically, there is a Chairman (President); Vice Chairman(s); and a Secretary and a Treasurer or a Secretary/Treasurer. The role of the Chairman or President is DIFFERENT from the role of a President in a for-profit company. The President does not DIRECT the board, he presides over it’s orderly deliberation, and facilitates its discussions, and serves to motivate great board action.

MSPA BOARD RECOMMENDATION The association should develop “job descriptions” defining the authority and responsibility of: * A director * The chairman (president) * One or more vice chairmen * The Secretary/Treasurer (who may also double as head of audit committee) * Executive Director * Committee and/or SIG chairs * Committees and or SIG’s

MSPA BOARD RECOMMENDATION Many associations with a Board this large, spread out over great distances, create an Executive Committee, comprised of a smaller number of board members – generally, the officers of the association. The Board delegates some specific authorities to the executive committee, but again, maintains the right to overrule the decisions of the committee. It allows associations to act swiftly and efficiently when necessary, and to “frame” issues that require board discussion. Typically, the function delegated to an executive committee is to act between board meetings as necessary within policies established by the Board.

MSPA BOARD RECOMMENDATION TERMS OF OFFICE, AND ORDERLY ROTATION Currently Board members are elected for 4 years and can be elected again indefinitely. The term should be reduced to three years at the next election, and at this election only, directors should be elected to staggered terms – 1/3 for one year, 1/3 for two years, 1/3 for three years. Thereafter, every year one third of the board will be up for re-election. Normally we would recommend a term limit of two terms in office. In the current situation we withhold that recommendation for the time being as a pool of qualified candidates is developed.

MSPA BOARD RECOMMENDATION Terms of office for Officers will be elected annually, at the end of the association calendar year, for a one-year term, though they may be re-elected as long as they will continue to be on the Board of Directors during their term of office.

MSPA BOARD RECOMMENDATION The Executive Director should have an ex-officio position without vote on all association governing bodies including but not limited to the Board of Directors and the Executive Committee. The executive never presides over the board. This individual should be hired by the Board of Directors, and accountable to the board under the terms of a contractual agreement and job description that includes specific measurable responsibilities and goals. The Executive Director should have sole authority to hire, fire and set the salaries of additional staff members as needed, within the budget approved by Board.

MSPA BOARD RECOMMENDATION The bylaws should create a standing nominating committee. The purpose of the nominating committee is to: Pre-identify and pre-consider a slate of candidates for board service to be considered for election by the membership Pre-identify and pre-consider a slate of candidates to be elected as officers by the Board To ensure that all candidates meet qualifications as defined in board policy.

MSPA BOARD RECOMMENDATION The Nominating committee should be comprised of five voting individuals : 1. Immediate past chairman 2. Two members of the Board not up for re-election 3. Two members at large not on the board Plus the executive director (ex-officio, without vote) No member of the nominating committee can be considered for election. The Board should establish a policy on qualifications for board members and officers.

MSPA BOARD RECOMMENDATION A description of who the nominating process works, how and when the slate of candidates is presented, and how and when they are elected should be defined in a board policy statement. In the future, they association may consider adding additional ex-officio seats with or without vote to bring to the board specific insight and expertise – for example, a corporate representative selling services to the munis and cities; a citizen; a representative of a strategically aligned association.

Meetings of the Board The MSPA charter is currently silent on frequency of board meetings, but says that “a meeting of the board will be convened by the chairperson of the board, and notice of the meeting will be sent 3 days in advance. ” Customarily, the Board has been meeting 5 -6 times a year, generally for 1 day per meeting. An appropriate frequency or schedule should be established in the bylaws, along with the rules governing when and how notice of a meeting will be made. We recommend 3 -4 scheduled meetings per year, of one-day in duration, with a schedule published at the beginning of each year, and reminders of impending meetings sent to all delegates and published on the web site ten days in advance. The Chairman call additional special meeting And meetings can be held via any communication system (phone, video conference, etc) as long as all Directors can hear each other.

Meetings of the Board…continued No less than 50% members of the board constitute a quorum for the transaction of AMA business. Proxy voting on the board should not be permitted. All votes cast on board issues should reflect the thinking and discussions that led up to the vote, and this cannot be done by proxy. Further, board members are selected individually for their unique competence, and their judgements will be naturally and appropriately framed by the context of the overall board service. Individual Board members can be reimbursed for reasonable expenses to attend meetings

Power of the Board Manage the affairs of the corporation: sell, lease, mortgage or dispose of real property Establish and approve all administrative policies, programs, and transactions Instruct and counsel officers of the corporation Review and approve periodic statements of fiscal operation and the annual budget Whatever else is in the best interest of MSPA – except…. .

Power of the Board…continued The Board cannot by law give away these responsibilities – but they CAN delegate them, and most associations do. Successful association Boards focus on association policy, and delegate responsibility for administration to a chief executive officer who is responsible for carrying out the objectives of the association within policies established by the Board.

Responsibility of the Board Ensure that the Governance Process is functioning effectively 2. Establish and Spread the Gospel of the MSPAVision, Mission, and Values 3. Steer the MSPA toward it’s mission through Strategic direction 1.

Governance Process How big should the board be and who should be on it to ensure that we are representative of the membership What officers do we need to facilitate our work, and what qualities do we need in these leaders? How will we select directors and officers How often should we meet and how should we meet

Governance Process…continued Are members of the board meeting their fiduciary commitments? Are we thoroughly deliberating to arrive at the best possible decisions? Are we focusing our attention at an appropriately strategic level

15 Questions the Board Should Ask about the Governance Process 1. Do we have a full and common understanding of the roles and responsibilities of a board? 2. Do we understand the organization's mission and its products / programs 3. Are we structured appropriately? 4. Are lines of responsibility clear between officers, committees, executive and staff? 5. Do we have clear goals and actions resulting from relevant and realistic strategic planning?

15 Questions…continued 6. Do we attend to policy-related decisions which effectively guide operational activities of staff 7. Do we receive and read regular reports on finances/budgets, products/program performance and other important matters 8. Do we help set fundraising goals and are we actively involved in fundraising

15 Questions…continued 9. Do we effectively represent the organization to the community? 10. Do our board meetings facilitate focus and progress on important organizational matters 11. Do we regularly monitor and evaluate progress toward strategic goals and product/ program performance 12. Do we regularly evaluate and develop the chief executive

15 Questions…continued 13. Do the CEO have in place comprehensive personnel policies which have been reviewed by a qualified professional? 14. Does each member of the board feel involved and interested in the board's work? 15. Are all necessary skills, stakeholders and diversity represented on the board?

Removal of Directors A Director can be removed from office for cause – moral turpitude, felonious crimes, fraud, improper conflict of interest, breach of fiduciary duty and loyalty to MSPA or actions reflecting poorly on MSPA.

Removal of Directors Although the members elect directors, authority to remove a director should be delegated to the Board. It’s a serious business requiring: Notification of a meeting to remove a director 30 days in advance to Full board Due process – giving the challenged director an opportunity to hear the charges and defend against them While other board decisions at MSPA can be made by a simply majority, this decision should require a vote of 3/4 ths of the Directors present

Responsibilities of the Board Ensure that the Governance Process is functioning effectively 2. Establish and Spread the Gospel of the AMA Vision, Mission, and Values 3. Steer the AMA toward it’s mission through Strategic direction 1.

Responsibilities of the Board Policy : What must be done * Association Vision * Association Mission * Association Values/Culture

Board Policy AMA VISION: The AMA will be the premier advocate of the motorcycle lifestyle

Board Policy AMA MISSION: To promote the motorcycle lifestyle and protect the future of motorcycling

Board Policy: AMA values *Act with integrity and honesty *Accountable to each other, our members, and the AMA *Act as a team and collaborate *Approach challenges with Creativity & Innovativeness *Have fun and enjoy what we do * Provide excellent service to members

Strategic Direction Strategic direction: * Specifically, what do we want to accomplish * How can we “resource” our goals * How will we know when we’ve succeeded?

STRATEGIC DIRECTION Grow a sustainable membership base by better connecting to member needs Use AMA’s infrastructure to support member advocacy Strengthen the government relations function Improve AMA’s brand image by redefining the role of pro-racing

The Job of AMA’s President as stated in the AMA Code Appointed by the Board Highest executive position Oversee and take charge of all AMA functions and services Implements policy emanating from the Board Serves ex-officio without vote on Board Serves ex-officio with vote on the Nominating Committee

The Role of the CEO All authority ultimately flows from the AMA members through the Board of Directors, so in the end there is no loss of control – but complex organizations delegate operational procedures to a Chief Executive Officer who can fluidly amend them – with oversight at any time by the Board.

Role of the CEO… continued The AMA Board has explicitly acknowledged this division of responsibility in the Board Policy Manual: “The Board establishes Policy: The Staff oversees operations. The jobs are equal but divided, and this division should be the basis for communication and progress. Both groups embrace the same objective: to provide a properly run Association of the highest quality, and in the process to gain and maintain the mutual respect of all persons involved. ”

Role of the CEO…continued Develops measurable objectives and tactics to achieve the vision, mission, and goals articulated by the Board of Directors. Puts in place the resources necessary to carry out the objectives and tactics Creates a budget based on both a realistic appraisal of available resources and a realistic assessment of what resources are required to achieve the objectives

Role of the CEO…continued Hires, trains, motivates, rewards, commands, leads, and when necessary, fires appropriate executive and administrative talent to carry out the mission and strategy of the board – within the parameters of the comprehensive personnel policies established by the board

Role of the CEO…continued Again, the AMA Board Policy Manual is explicit on this issue: “The president is solely responsible for the conduct of the professional staff. Staff members shall communicate with the Board or Individual Directors through the president or at his or her direction. The staff shall treat the directors with courtesy and respect. ”

Role of the CEO…continued Ensures that the Board is abiding by its own rules and procedures, as well as external laws and regulations that govern it’s operation. Helps the Board question it’s own efficacy and guides the Board in self-evaluation. Provides training and orientation to new Board members and officers Provides timely reports to the Board on finances and programs

Role of the CEO…continued Serves as the chief spokesman for the AMA to the media, the government, the public. Where appropriate, harnesses the voices and talents of Officers, Directors, and staff members to speak on behalf o AMA.

Committees In addition to delegating to staff, a board often finds it useful to delegate work to other groups of volunteers called Committees may include members of the Board, or they may not.

Committees…. continued There are 6 kinds of association committees: 1. Governance Committees 2. Structural Committees 3. Functional Committees 4. Extra-organizational Committees 5. Subcommittees 6. Task Forces or Work Groups

AMA Committees Currently, AMA has the following committees: 1. The AMA Board (Governance) 2. The AMA Executive Committee (Governance) 3. The AMA Congress (Governance) 4. The Finance & Audit Committee (Structural) 5. The Board of the AM Heritage Foundation (Extraorganizational) 6. The AMPAC Committee (Extraorganizational)

AMA Committees… continued The duties and composition of some committees is defined in the Code or the AMA Board Policy Manual. The AMA Code of Regulations permits the Chairman of the Board to appoint other committees. The members do not have to be Directors of AMA.

AMA Committees…continued The AMA Executive Committee is not defined in the code, but is referenced in the AMA Board Policy Manual. “The typical standing committees of the Board include the Executive Committee comprised of the Board officers”

AMA Executive Committee An executive committee is useful to make interim decisions when speed is an issue and a quorum of the board is not practical. It is also a useful body to consider highly sensitive and confidential issues. Like all delegated responsibility and authority, this does not excuse the board from “ownership” of the decision, and the board always reserves the right to overturn an committee decision.

AMA Executive Committee By definition, the members are: AMA Chairman AMA Vice Chairman AMA Treasurer (without vote) AMA Assistant Treasurer AMA Secretary (without vote) Assistant Secretary AMA President (without vote)

AMA Executive Committee The Chairman, the Vice Chairman, the Assistant Treasurer, and the Assistant Secretary are elected by the Board from among themselves – they each must be a Director. The Treasurer is the chief financial officer of AMA, who serves ex-officio without vote. The Secretary is the AMA General Counsel, and serves ex-officio, without vote.

AMA Congress AMA is a highly complex organization, representing 300, 000 individuals, corporations, and autonomous clubs and promotional organizations. The AMA Congress is a body designed to bring the voices of the clubs and promoters to the attention of the Board.

AMA Congress…continued The AMA Congress consists of: 1. A competition division 2. A Road Division 3. An Off – Road Recreation Riding Division

AMA Congress…continued The Congress specificly is charged with: 1. Considering, promulgating, amending, interpreting, and providing for the enforcement of rules 2. Publication of guidelines pertaining to recreational riding activity and amateur, semiprofessional and proam competition events sanctioned by AMA.

AMA Congress…continued In addition the Congress can make recommendations to the Board on rules and guidelines promulgated by AMA competition affailiates and road riding affiliates, and on other matters relating to AMA. The AMA Board should listen but is not bound by these recommendations.

AMA Congress…continued To be a member of the Congress, you must be a member of AMA. The AMA Congress is governed by: The STANDING RULES OF THE AMA CONGRESS

AMA Congress…continued AMA is comprised of 6 Geographical Divisions Northwest South Central North Central South East North East

AMA Congress…continued The 2 Divisions of the AMA Congress: Competition Division Road & Off-Road Division

AMA CONGRESS…continued 30 regionally elected representatives Competition Each of 6 districts Road & Off Road 2 general reps 1 ATV specialist 2 General reps

AMA Congress…continued The AMA Congress is comprised of: 30 regionally elected representatives PLUS, by AMA Board of Directors Appointment: * Motorcyle Industry Representatives * Specialists not represented * Delegates with useful skills * AMA staff members asked by AMA President

AMA FINANCE & AUDIT COMMITTEE Comprised of 4 directors elected by board including the Assistant Treasurer Role: Supervise fiscal affairs Ensure financial reports Appoint an auditor Other, as directed by Board

Nominating Committee The Board Nominating Committee shall be comprised of the following three (3) individuals: (1) the chief executive of the Corporation; (2) one Corporate Member Director; and (3) one Individual Member Director.

AMA HERITAGE FOUNDATION Board of Directors Extra-organizational “committee” Governs the operation of the AMA Heritage Foundation A 501(c) (3) Subsidiary of AMA

Mission of the AMA Heritage Foundation “To celebrate, elucidate, and preserve the rich traditions of motorcycling in America”

AMHF…continued CHARITABLE PURPOSES 1. Preserve the heritage of motorcycling and educate the public in respect to American Motorcycling’s great traditions through the operation of a Museum 2. Maintain an archive of publications, photographs and records on history of motorcycling 3. Assist with the development of other museums, archives and projects consistent with our mission

AMHF…continued The members ARE the members of the Board of Directors of the AMA… & The members can establish other classes of membership – but no other class of member can vote.

AMHF…continued The AMHF Board is made of up to 21 Directors, including: 1. The President of the American Motorcyclist Association 2. At least three Directors of the AMA The up-to-21 members of the AMHF Board serve three year staggered terms and each “class” of 7 includes one AMA Director

AMHF…continued The officers of the AMHF are: Chairman Vice Chairman Secretary Treasurer (though more than one office may be held by the same person) They are elected by the AMHF Board

AMA Motorcyclist PAC The purpose of AMPAC is to receive contributions from individuals who may or may not be members of AMA and to disburse those funds as political contributions to the campaign committees of one or more candidates for federal office or to other PAC’s with similar goals.

AMPAC…continued AMPAC is managed by a committee: * Consisting of at least 5 but not more than 9 members who serve without compensation * One member is the AMA VP of GR * One member is an AMA Director * One member, named by the AMA President, is on the accounting staff of AMA *The rest are AMA members invited by the AMA President

AMPAC…continued The officers of AMPAC are: 1. The chairman, who is ex-officio the VP of Government Relations for AMA 2. The Treasurer, named from the AMA accounting staff by the President

QUICK REVIEW OF AMA 501 -C-4 trade association, incorporated in Ohio, operating a 501 -c-3 Foundation and a PAC

SPECIFIC RESPONSIBILITIES OF AMA BOARD MEMBERS Policy on Intermediate Sanctions Policy on Conflict of Interest Director Expense Reimbursement Executive Session Articles or Statements by Directors Sexual Harassment Email Policy, Correspondence Policy Corporate Logo Usage Policy

Board Policies Intermediate Sanctions: “AMA will not support, promote or condone payment of excess benefits to any individual or entity in violation of federal tax laws applicable to tax exempt entities like AMA. ” An "excess benefit transaction" is any transaction where the economic benefit provided by a tax-exempt organization to a disqualified person exceeds the value of the consideration received for providing such benefit.

Intermediate Sanctions…continued This policy applies to Board member, officers, executive staff, major suppliers, family members of those individuals and any substantial contributor to AMA (>$25, 000 a year). It also applies to any entity 35% owned or controlled by AMA. It continues to apply for 5 years after an individual has stopped being affiliated with AMA

Intermediate Sanctions…continued What is an excess benefit? Examples: Employment contracts Compensation arrangements Loans Office or equipment rental Travel or entertainment expense

Excess benefits…continued Compensation is reasonable if: 1. There is no conflict of interest 2. There is comparable data to support the amount of compensation 3. There is documentation of the determination

Excess Benefits…continued AMA provides Board members and others with a “Checklist to Comply with the Rebuttable Presumption of Reasonableness” And it’s contained in the AMA Board Book

Conflict of Interest A conflict of interest occurs when an individual has an interest that might compromise the reliability of their judgment. A conflict can exist even if no improper act results from it – especially if it can create an appearance of impropriety.

Conflict of Interest– AMA Policy Any director, principal officer, member of a committee with broad delegated powers, or administrator who has a direct or indirect financial interest in any matter in which he has an influential voice is required to disclose the interest

Conflict of Interest…continued PROCEDURES FOR ADDRESSING THE CONFLICT OF INTEREST A member “discloses, and explains…” and then leaves the meeting The board or committee considers alternatives to the proposed transaction or arrangement. After due diligence, they determine whether AMA can obtain a more advantageous arrangement If not they decide whether the transaction or arrangement is in the AMA's best interest

Conflict of Interest…continued If a member fails to disclose, the board can… * Remove the member * Nullify the contract It’s an important fiduciary responsibility, pointing back to Sarbanes Oxley that we discussed earlier … The best practice is to err on the side of DISCLOSING!

Conflict of Interest…continued Directors, Officers, and committee members … and executive staff… must annually sign a statement affirming that they understand agree to the AMA Conflict of Interest policy…

Director Expense Reimbursement We’ve already addressed the first issue: Corporate Directors are required to be subsidized by their sponsoring corporations. Individual Directors may be reimbursed for travelrelated expenses associated with attendance at Board or Committee meetings. Any other Board member travel must be approved, in writing, in advance of the travel.

Expense Reimbursement 1. 2. 2. 3. 4. 5. 6. Coach Plane Fare (receipt required) Lodging (receipt required) Car Rental (receipt required) Ground Transportation (taxis, shuttles, etc. ) Personal Car (reimbursed at then current IRS rate) Food (receipt required) $100 a day for up to 2 days for “lost work” while attending a board or committee meeting

Expense Reimbursement Expenses must be submitted on an expense report… With receipts Within 15 working days after completion of travel To AMA President or Treasurer Are subject to review and approval by the AMA Chair (Chair’s expenses are reviewed and approved by AMA Treasurer) Special rules apply for attending a legal proceeding

Executive Session of the Board The Board can convene itself into “executive session” by vote of a simple majority. Guests are excused, and only Directors are permitted to remain in the room. Executive Session continues until a simple majority votes to return to open session. Minutes are kept.

Executive Session Examples of confidential discussions that might warrant Executive Session: 1. Litigation or legal negotiation 2. Discussions including information relating to the AMA competitive position 3. Selection of award recipients 4. Questions relating to personnel, morale, or disciplinary action 5. Discussions on specific breach of fiduciary duty

Executive Session STRICTLY CONFIDENTIAL *Unless a majority of the Board votes to report out (how and what will be reported out) *Directors who can not agree to confidentiality must excuse themselves until open session is declared *Violation of requirement of Confidentiality is a breach of fiduciary responsibility

Executive Session Some associations use an Ethics Committee comprised of 3 senior members to limit the number of individuals privy to discussion on issues related to fiduciary responsibility or ethical violations or other “personal fouls” like sexual harrassment. The Ethics Committee “vets” the evidence, and brings a recommendation to the Board where appropriate

Statements by Directors You have a duty to express your opinion in board deliberations. Argue. Vote your conscience. BUT Once the Board has voted you have a duty to support the majority position.

Statements by Directors While you are a Board member, when you speak you are speaking for the Board and not for yourself on matters before the Board. If you cannot support the Board, * You can lobby your fellow Board members to reconsider a decision * You have the option to resign

Email Policy Authorized communications by Board members on specific topics must me on formal Board letterhead, in riting. If urgent the letter can be faxed, but it must also be mailed. It may not be emailed. Unofficial communications (that meet the requirements of other policies) may be sent via email

Authorized email must include: The statements contained in this email reflect the personal opinion of the author and do not necessarily reflect the opinion or position of the AMA or its Board of Directors. The statements are intended solely for the information of the intended recipient and any other use or further dissemination of this email, or the information contained in it, is strictly prohibited.

Authorized Email The use of the disclaimer does not negate the responsibility for a Director to support the Board I. E. The board voted today to XXXXXXX, though I personally disagree with the decision. The policy on statements by directors applies irrespective of disclaimers

Sexual Harrassment Not only must you not do it… you must also report it if you see it… To the Chair or the President. This would be one of those issues that might be vetted discreetly by an Ethics Committee

Corporate Logo Policy Corporate members can use the logo to show their support of AMA, but they can’t use it in a way that suggests that AMA endorses them or one or more of their products. If you see the logo being used incorrectly, You should alert staff.

Corporate Logo The use of the Corporate Logo may suggest Apparent Authority, so Board members should be careful as to the context that the logo is used.

EXECUTIVE STAFF If the Board members are the heart of an association, the staff is it’s muscular/skeletal system – the arms and legs

AMA EXECUTIVE STAFF President/CEO Rob Dingman Administrative Assistant Rhonda Hixon Vice President for Government Relations Ed Moreland Public Relations Pete ter. Horst* Sym. Point International Affairs Director Rob Rasor Sales & Marketing Jim Bowie* Vice President for Administration Bob Chaddock Vice President for Operations Jeff Massey CFO/Treasurer Joel Moor

YOUR DREAMS & ASPIRATIONS 1. 2. 3. 4. 5. 6. What do you personally hope to accomplish through your Board Service? If you could change one thing about AMA, what would it be? What do you like best about AMA? Why did you volunteer to serve on the Board? How do you measure the success of your participation in a board meeting? What policies are going to be hard for you to live with?

Special Assignments 1. Ensure that your work serves a higher purpose – orient yourself to the achievement of noble, social significant goals Safety Energy Efficiency Appreciation of our wildnerness and our nation Joy and Fun

Special Assignments 2. Fully embrace the ideas of community and citizenship and believe in the interdependence of all stakeholders * Solutions that are good for one or a few at the expense of the many are never sustainable * You are a powerful community and can have a real impact on anything you set your sights on * Corporate Social Responsibility will not only make you a welcome part of the community, but will instill pride in the members and staff

Special Assignment 3. Reduce fear and increase trust – Friday 13 th and Valentine’s Day * Allow each other and the staff to make mistakes * Encourage different voices and points of view * Be kind to each other * Trust takes a long time to build and can be broken in an instant. Think before you speak or act. * Make the board meetings a place that everyone looks forward to being.

Special Assignment 4. Redefine the work of leadership – the notion of the leader as a heroic decision maker is untenable. “Leaders must be recast as social-systems architects who enable innovation and collaboration” * Work to get lots of members involved – don’t be afraid to let others do the work of collecting information, considering, making recommendations to you * Pass on the credit and share the successess

Special Assignments You have a very special association to steward, and the members are lucky to have such dedicated supporters. Your organizing documents go a long way toward ensuring that your actions stay within the law and represent the best interests of AMA. I recommend that you create a Governance task force To make them better.

Special Assignments 5. Depoliticize decision making – get rid of positional biases and embrace the wisdom of the entire organization. * Stay focused on what’s best for AMA. * Some of the best ideas come from the “bottom” of the organizational chart * Don’t underestimate experience, but at the same time recognize that the future may be seen most clearly by those with the least stake in the current reality

Governance task force Comprised of 2 -3 board member charged to do a thorough review of AMA and AMHA bylaws, your board policy manual, and other organizational documents To ensure that they are consistent, not redundant, and that policies are consistent with current best practices in associations. The task force would report back to the Board of Directors with recommendations for strengthening the governance.