for the rest of us non-lawyers
Disclaimer: The contents of these pages are offered as general principles, but not as legal opinions. Statutory law and entity policy on board structure, lines of authority and board discipline vary widely. Some of the comments here may not be applicable, or may be wrong in some situations, depending on the regulatory and organizational environment. When in doubt consult competent legal counsel. See the further disclaimer at the end.
Definitions and basic concepts for board governance are on the starting page.
Some scenarios illustrating fiduciary misconduct are collected on a separate page.
The word "discipline" has a broad range of meanings, which have been collected for convenience on a separate page. In general, it involves "instruction for correction."
Every organization has a set of distinctives expressed in its mission, vision, values, purpose, and goals. In order to maintain its identity as such, it must enforce its standards on its officers and staff, and on members (where relevant). That is, both groups are continually under the disciplinary authority of the organization as a whole--constantly being instructed in what it means to be in that role. Part of that instruction consists of a series of steps (disciplinary action) to be taken with respect to violations.
In positive terms, this means:
- the entity's mission, vision, values, goal, policies , procedures, constitution, organizational structure, and like documents place all fiduciaries and staff under their discipline.
- the legal, moral, social, and corporate requirements of fiduciary duty, integrity. solidarity, and delegation all impose a discipline on the board and its COs.
- Other laws of the land also impose a discipline.
- A fiduciary or employee comes under these disciplines by becoming part of the entity. For instance, board members must agree to be fiduciaries and to act in accord with the requirements thereof, including any code of conduct.
- the principle of delegation implies that a board only enforces discipline on itself and the COs that it directly supervises.
- relevant executives handle discipline for those they supervise. The only time a disciplinary matter will come up from that level to the board is if a fiduciary is involved, an appeal is made, or a serious legal issue is at stake and they must be informed of the risk.
- A standing committee of the board should handle its discipline.
- Other discipline (not covered here) should be the subject of organizational policy documents.
In negative terms, this means
- failure to enforce the discipline under which all have agreed to place themselves produces rogue fiduciaries.
- a rogue fiduciary constitute a survival threat to the organization.
Since a violation of any of these disciplines reflects badly on the entity, and may cause it material damage, a board must maintain a policy for handling such violations by fiduciaries. Here are some standard procedures that could be incorporated into such a document:
- Any complaint lodged against a fiduciary should be made in writing and placed before the board chair.
NOTE: such a document is called a "submission" to the board for a reason. A person lodging such a complaint is bound to accept the judgement of the body to which it has been submitted.
- If the complaint involves harassment, whether
the action is, or could become, the subject of a criminal investigation. Legal counsel should be sought.
- it uses that word explicitly, or
- the actions complained of involve "reaching past" by a fiduciary abusively assuming an authority (s)he does not in fact have to direct or override a staff member or committee
- If the complaint specifically involves bullying or the use of a supposed authority or pressure to gain financial, sexual, or other favours, it is certainly criminal and must be reported at once.
- The chair requests a response from the accused, also in writing.
- The chair convenes the disciplinary committee, it considers both submissions, consults corporate counsel (if applicable) and renders a decision. Its range of disciplinary actions may be (in escalating order, depending on the seriousness of the offense and the reaction of the party deemed guilty):
- an informative committee meeting including the guilty party and counsel
- a written demand to the guilty party or parties requiring a repentance, retraction, apology, or other remedy.
- said letter to be placed on the fiduciary's personnel file, together with a list of consequences for future violations
- forfeiture of some portion of stipend or salary,
- removal from office, either temporarily or permanently,
- confiscation of the offender's stake in the organization (forced sale of shares, cancellation of membership, or the like,
- a lawsuit to recover damages.
- filing of criminal charges.
NOTE: Some of the later steps in the process may seem harsh, and most minor cases can be handled with the first few. But any case where the law has been broken, particularly if it involves harassment or bullying, should result in the full application of all these procedures.
- Once the matter has been resolved, the disciplinary committee of the board addresses a full in camera board meeting to read the relevant documentation and inform it of the final result.
- Unless the authorities are involved, the entire matter remains confidential and known only to the board.
- If, however, the offender then defies the decision (the "submission" wasn't a submission), makes the matter known, and defies the board, the next meeting of the stakeholders needs to be apprised, and in most cases a confidence motion in the board proposed. Any governing authority that loses a confidence motion must of course call new elections and resign effective the date of the return from said elections.
NOTE: A rogue (undisciplined) fiduciary is the greatest threat to the viability of an organization, more so than that presented by an incompetent or unsupervised fiduciary, and far more than from any external threat.