What have we been doing in relation to governance?

Since its origin, GIFE understood the importance of governance for the legitimacy of social investors and civil society organizations in general. In 2010, when we launched our 2020 Vision, we emphasized the importance of developing good governance practices by recognizing “relevance and legitimacy” as one of the three key aspects of our vision, along with the breadth and diversity of investors. Together with transparency, governance is now one of GIFE’s strategic agendas.

In order to help organizations improve their governance practices, in 2009 we developed the Guide to Best Practices in the Governance of Corporate Foundations and Institutes, in partnership with the Brazilian Institute of Corporate Governance (IBGC). In 2014, in light of the need to update and expand the Guide, to include new issues and to improve its approaches, a second edition of the material was launched.

On the basis of the Guide, we also organized the course “Governance for Corporate Foundations and Institutes”, which aims to deepen the understanding of the benefits and the main challenges of the adoption of best governance practices by corporate institutes and foundations.

Governance is still an important theme of the GIFE Census, a survey conducted with our associated members, which, in its last edition, included even more questions on governance, e.g. the existence of a deliberative board and the type of board members, gender diversity in the organization’s boards, involvement of stakeholders in decision-making and deliberative bodies of the organization, among others.

Thus, based on our initiatives, studies and other projects, we seek to develop a governance approach that combines theoretical knowledge and studies of governance in organizations with methodologies and objective tools that aim to contribute to the improvement of governance practices in this field.

What do we mean by governance?

Using the Guide to Best Practices in the Governance of Corporate Foundations and Institutes (GIFE, IBGC, 2014) as a reference, we understand governance as follows:

“(…) the system according to which organizations are directed, monitored and encouraged, including the relationship between board, executive staff and other control bodies. Good governance practices translate principles into concrete recommendations, aligning interests with the aim to preserve the organization’s reputation and optimizing its social value, facilitating its access to resources and contributing to its longevity “(GIFE; IBGC: 18).

Accordingly, we work with the idea of governance in its simplest and most literal sense, linked with the way we govern an organization, and what mechanisms and structures need to be in place in order to achieve that purpose. This idea, therefore, refers to notions of control and distribution of power in organizations. In approaching the universe of civil society organizations – the object of this project – it is important to stress that the concept of governance – often accompanied by the qualification of “corporate” – emerges, and has been more commonly applied and developed within the private for-profit sector.

However, if the idea of governance in the private sector stems from the need to minimize or overcome the conflicts of interest and the asymmetry of information that results from the dissociation between the corporation’s executive(s) and its owner, when transposing the discussion to the context of nonprofits, it is important to reflect on the importance of governance in the sector and where the conflict of interests lies. Some authors, such as Mindlin (2009), comprehend that in civil society organizations, the conflict of interests lies fundamentally in the dissociation between control and management, i.e., between the funder(s)/sponsor(s) and the manager about the strategies and the allocation of resources for the fulfillment of the organization’s mission. This separation occurs mainly through two features: first one, that of internal order, related to the search for greater professionalization – which causes the founders to delegate the role of managers – and a second, more external, element related to the increase of the requirements of accountability, especially for partners and donors (Mendonça and Machado Filho, 2004). This is aggravated by the fact that, in most cases, the great challenge in terms of governance in these organizations is to think about their institutional sustainability in the absence of the founder members, which is often mistaken as the embodiment of the organization itself.

Although of a different nature than in the private sector, the existence of conflicts of interest in civil society organizations is far from being less recurrent or less expressive. On the contrary, it is even more visible when we consider the importance of reinforcing the public function of these organizations, which is the very motive and reason for their existence, and should always prevail over private interests.

Why do we believe it is important to establish governance standards for associations and foundations?

The principles and practices of good governance have been consolidated as instruments to enhance and positively impact the work of all kinds of organization. In the case of non-profit civil society organizations, the incorporation of these principles is indispensable in their strategic planning, in the implementation of their actions, and in the relationship with the various stakeholders involved in the process – sponsors, public authorities, boards, the organization’s staff, suppliers and the primary beneficiaries.

Taking into account the increasing importance of the topic of governance among civil society organizations, we have seen that its value has been increasingly reinforced since the 1980s and especially throughout the 1990s by the search for better management practices, and, more importantly, by the pressure to develop a more qualified internal management capable of guaranteeing and confirming the good repute of the organization, and contributing to the achievement of the proposed results (Guerra Silva, 2010). This pressure derives from, among other factors, the legislative regulation of CSOs, the increasing demand from partners, and also the changing scenario of economic sustainability of civil society organizations.

Regarding the political-legal system, since the 1988 Constitution, there has been a clear regulatory effort with the initial objective of revising the outdated non-profit model – until then, the legislation that guided the State/CSOs relationship dated back to the 1930s and clearly needed some improvements – and of drawing clearer lines in the relationship between organizations and the State, since the Constitution enshrines an intense participation of civil society in various stages of public policies. It was only in the 1990s, for example, that the Program of Community Solidarity (1997), the Social Organizations Act (1998) and the Law of Civil Society Organizations of Public Interest – Oscips (1999) were adopted.

Throughout the 1990s and 2000s, the legal framework – usually more focused on the relationship of CSOs with the state and quite specifically applicable only to a smaller group of organizations – was also firmly rooted in the context of criminalization and legal uncertainty that especially characterizes the field of civil society organizations in Brazil. In general, despite some innovations, this legal framework did not replace existing legislation: they only instituted new models that now coexist with the old ones. This coexistence of different overlapping norms has generated even more legal insecurity, both for the public administration as well as for the CSOs (Junqueira & Figueiredo, 2012).

This process clearly influences the agenda of the Regulatory Framework of CSOs (MROSC, in its Portuguese acronym) and the most recent implementation of part of this agenda with the adoption of the Law no. 13,019/2014. By establishing a set of specific rules for partnerships between public authorities and organizations, this new law recognizes the specificities of non-profit private entities and provides inputs for reflection and production of knowledge about governance by the civil society organizations themselves. This law eventually became an important reference for the field, being able to influence the logic of governance and playing a “pedagogical function” among CSOs beyond the specific relationship with the state.

The context of restructuring the mechanisms of economic sustainability of organizations in Brazil has also caused a vital impact on the reflection by organizations on their own governance, and may pressure organizations to adopt tools and practices associated with a more “competent” management.

The sustainability of CSOs is currently threatened by economic instability and weak capacity to fundraise and to create a pro-development environment. Considering that a great part of the resources of organizations comes from private donations (both individuals and corporations), as noted by TIC-OSFIL Research, it is key to recognize that the dispute over this resource impacts organizations. The study Donation in Brazil (Doação Brasil), for example, shows that 40% of the Brazilian population does not trust civil society organizations enough to give donations to them. Distrust of CSOs is also clear in the approach of the media. A research by the News Agency for Children’s Rights (Andi) on how CSOs are portrayed in the press has revealed how news reports about CSOs focus on negative aspects, most often the misuse of public resources, or cases of corruption.

This scenario reinforces the importance of seeking ways for organizations to improve their legitimacy, enhance, and emphasize their central role in building and upholding a democratic society.

Our guidelines for this project

1. Self-regulation. Our view on governance is not restricted, and does not directly equal to mere compliance with legal requirements. We find compliance with laws and regulations to be fundamental, but this should not be the only way for organizations to organize and regulate themselves. In other words, developing better governance standards and practices should not only be a task for the State, but also for the organizations themselves. This is because the field itself knows its own complexity and heterogeneity, and knows best how to identify different kinds of organizations and best practices. This mutual recognition is highly capable of leading to better civil society performance.
2. Public nature. When we talk about governance in civil society organizations, one of the main guiding principles is to ensure their public nature. We understand that what primarily characterizes this sector is its public function and therefore the practices and procedures of such organizations must be in accordance with this principle, including the guarantee that it preserve its good repute, execute its activities in a more effective and efficient way, and ensure the fulfillment of its mission.
3. Legitimacy. The legitimacy of organizations is related to how society values them: organizations gain more legitimacy not necessarily by the simple need to exist, but as their value to society becomes clearer, and they are understood better (Suchman, 1995). Adopting good governance practices can build trust in the organization as it helps to design a clear mission and strategy, and is able to apply this strategy in an effective and efficient way.
4. Coherence in terms of values. The same values that organizations preach to the outside world – through their public causes – must also be applied “indoors”. Organizations need not only “do the right things”, but operate in the right way. Governance practices should always seek to ensure that these values are observed in the organization’s own strategy and management.
5. Transparency and openness. Greater transparency in the organization’s relationships is able to foster an environment of trust, both within and outside the organization, in its relations with its stakeholders. More than the obligation to inform, transparency must also be led by the desire to share information important for the society, not just what is required by laws or regulations. As Bernholz (2012) stresses, changes in governance practices can contribute to better communication with the public, say for example, with the design of forms of representation, participation and decision-making in and outside the organization’s boards. Governance and transparency establish a mutually reinforcing relationship: while transparency is a principle of governance, good governance can contribute to transparency in facilitating dialogue with stakeholders, and internally, in improving access to information, facilitating disclosure of information, accountability, and other practices.
6. Equity and diversity. It is important to ensure equity and diversity and fair treatment of all stakeholders in the composition of the staff and in the decision-making bodies of the organizations. Discriminatory attitudes or policies, under any pretext, are totally unacceptable, and governance can ensure that non-discriminatory practices are applied across the organization in all its processes.
7. Accountability. Who do we account for? Here, we accept the notion of accountability as the ability to hold individuals and organizations accountable for their actions. This includes the concepts of (objective and subjective) liability, control, transparency, accountability and justifications for actions that are no longer carried out (Pinho and Sacramento, 2011). Thus, the idea of accountability suggests both an internal flow, making agents of governance – associated members, board members, executives, members of the fiscal board and auditors – accountable for their actions, as well as an external flow in the relationship of the organization with the society itself. We believe, therefore, that accountability is not limited to the idea of “reporting”, but also of learning, which turns accountability practices into a learning process.
8. Dynamism and debureaucratization. Good governance should strive for balance and flexibility in its processes, procedures and rules, avoiding the excessive bureaucratization of the organization. They must preserve the organization’s dynamism and particularity – which is related to its size, activities performed, planning process, etc. It is in striving for this equilibrium, and the search for the necessary measure for each organization, that it is possible to avoid the calcification and stiffening of the organizational structures.
9. Governance as a system. We need to think about governance in a broader way. Although the deliberative board plays a great role in the governance system, being the main decision-making body of the organization, governance goes far beyond its existence and performance. Governance should address a range of issues such as the definition of a clear mission linked to public interest, the relationship with stakeholders and sponsors, setting up of institutional policies (regarding conflicts of interest, remuneration, etc.), management practices and strategies for action and follow-up, financial control, transparency, among others.
10. Horizontality. Although we should not go into management issues when we talk about governance, the line between governance and management is tenuous and these two fields are mutually supporting and complementary. In other words, when we debate governance, it is also necessary to initiate a conversation about the new models of staff management and the search for more horizontality and less hierarchical structures, and core overlapping values in both fields.