Is Your Constitution Fit for Purpose?
How to ensure your organisation meets good governance guidelines
One of the core responsibilities of board directors is to ensure that the organisation's governance structures are robust, relevant, and legally compliant. Yet, the importance of regularly reviewing constitutions is often overlooked until something goes wrong. This article explores why your constitution should be more than just a document gathering dust—it must be a living, guiding contract that shapes your organisation’s relationship with its members and society.
The Constitution: A Legal Contract, Not Just a Document
Your constitution is not merely a set of rules; it’s a legal contract that binds your organisation to its members and society. It defines everything from your tax status to what happens if your organisation winds up. Unfortunately, too many organisations treat their constitution as a last resort, something to consult only when there’s a problem. This mindset is risky and can lead to severe legal and operational consequences.
I often tell boards, to “think of your constitution not as a document you hide away, but as a tool that should guide your daily governance practices”. If your constitution is outdated or misaligned with current legislation, you’re sitting on a ticking time bomb. The solution? Regular reviews and updates.
Why Regular Constitutional Reviews Are Non-Negotiable
Working with boards across various sectors, one common issue I encounter is the reluctance to review the constitution regularly. Some organisations haven’t updated their constitution in decades, and it shows. I’ve seen constitutions with clauses that haven’t been relevant for years, and in some cases, those clauses can actively harm the organisation.
I once worked with an organisation that had a clause forbidding real estate investments. When they decided to purchase a head office, a disgruntled member used this clause to force the organisation to sell the property—at a loss. The directors were nearly held personally liable for this loss. This situation could have been easily avoided if the constitution had been reviewed and updated to reflect the organisation’s current needs and goals.
When you’re reviewing your constitution, I recommend you:
Check What You Must Do: Are you fulfilling all the obligations stated in the constitution? If not, you either need to start doing them or change the constitution.
Check What You Can’t Do: Are there outdated prohibitions that could harm your organisation? If so, they need to go.
Consider Legislative Changes: Have there been any changes in the law that affect your constitution? Make sure your document reflects these changes.
Engaging Your Members in the Process
Changing your constitution isn’t just a legal exercise—it’s also about governance and risk management. One of the biggest mistakes boards make is failing to engage their members in the process. If you present a set of changes to your members and say, “just approve this,” you will likely face resistance.
Instead, involve your members early and often. Explain the reasons for the changes, listen to their feedback, and make sure they understand that the goal is to protect and strengthen the organisation. In one instance, I worked with a board that set up an independent governance working group, including members and just one director. This group helped shape the changes, ensuring that they were both necessary and acceptable to the broader membership.
Modern Trends in Governance: What You Need to Know
As we look to the future, it’s important to be aware of the trends shaping modern governance. Here are a few that I believe are particularly relevant:
Smaller Board Sizes: There’s a growing trend towards smaller, more agile boards. This allows for more efficient decision-making and better governance outcomes.
Term Limits: Establishing clear term limits is essential for bringing fresh perspectives to the board while preventing stagnation.
Independent Directors: Bringing in independent or co-opted directors can help fill skill gaps and provide an external perspective that is invaluable for strategic decision-making.
When It’s Time to Toss the Old Constitution
Sometimes, your constitution may be so outdated that it’s better to start from scratch. I’ve seen constitutions patched together over the years with clauses added here and there, resulting in a document that was nearly impossible to interpret, let alone enforce. It may be time to throw out the old constitution and start fresh with a template that aligns with current best practices and legal requirements.
Final Thoughts: Governance is a Continuous Journey
As board directors, your job is not just to guide your organisation but to protect it. A well-crafted, regularly reviewed constitution is one of the most powerful tools to achieve this goal. Don’t wait until a crisis forces you to look at your constitution—make it a priority now, and ensure it’s fit for purpose.
By staying proactive, engaging your members, and staying informed about modern governance trends, you can mitigate risks and set your organisation up for long-term success.
Steven Bowman is a seasoned expert in board governance, with decades of experience helping organisations navigate the complexities of governance, risk management, and strategic decision-making.