MQA-G board weakens its corporate governance (CG)
Most of us find corporate governance (CG) one of those boring topics which we recognise is necessary due to the safeguards it provides. Most organisations deal with it quickly, ensuring where there is doubt its best to be cautious and have strong governance. At MQ the development of adequate CG has been laboured and torturous.
Principles
In the Not For Profit sector the main pillars of good governance and minimising fiduciary risk include:
1. Financial audit
2. internal audit
3. having a minimum of three officer
4. periodic but regular tendering of all contracts
5. high transparency
6. declaration of interests
Headline
Against these principles the changes made by the board in May 2020, which are detailed below, further weaken MQ’s governance by:
- reducing the number officers to just one,
- removing the requirement that all on-going contracts are rigorously market tested at lest every five years,
- reducing the opportunity for interests to be declared and the associated level of transparency this entails.
MQ has never had an internal audit.
Detail of changes the board has made include
1) AGM and the Board: the requirement for the board to consider points and to ratify any resolutions at the first or second board meeting following an AGM is changed to doing so at a subsequent board meeting.
Why does this matter? The board is there to serve members’ interests, the AGM is the main forum for members views to be expressed and resolutions passed. An analysis of board minutes indicates that it rarely, if ever, discusses issues raised at AGMs. To drop the requirement for this immediately after an AGM to merely doing so at some stage, if at all, indicates a worrying contempt for leaseholders by the company’s directors.
2) Vice Chair post abolished: the board used to elect a chair and vice chair, it now only elects a chair.
Why does this matter? It was already worrying that the board didn’t have finance director / treasurer and board secretary positions foregoing the checks and balance this brings. Its possible the Vice Chair might have provided a minimal safeguard. Put alongside this the lack of separation between board and executive that the Chairman’s previous, at times undeclared, interest in MQS entails and the Chair holding similar positions in the Freehold company and it is clear that MQA-G lacks the normal safeguards stemming from having multiple officers.
3) Declaration of interest directors declaring an interest during the first board meeting following an AGM has been dropped.
Why does this matter? It is still a requirement of the CG, the company’s articles and company law that interests are declared at relevant board meetings, so this change should not matter. However, there is a history of declarations of interest not been made by the Chairman at MQA-G board meetings when they should have been. The practice of doing so immediately following an AGM provided a valuable additional safeguard, which has been removed.
4) Tendering of on-going contracts the CG specified that there should be rigorous market testing of all on-going contracts at least every five years with a schedule for this. This has been changed to regular market testing.
Why does this matter? Tendering helps to ensure good value for money and prevent cronyism. At MQ few, if any, on-going contracts have been market tested or tendered. For instance the contract with MQS, worth £150k+ annually, has never been tendered. This company was co-founded by the Chairman’s partner who for many years received a salary from MQS without this being declared to the board.
5) Changes to corporate governance the clause stating that it can be changed by the board or at an AGM has been removed.
Why does this matter? The Chairman of MQA-G has always fiercely resisted attempts to have the CG amended at the AGM and manipulated AGMs so as to avoid this, including the Jan 2020 AGM. The Company’s Articles make it clear that the CG can be amended at the AGM and having this in the CG helped to clarify this. Moreover, once the CG is amended at an AGM it becomes binding on members. Until then It is only a voluntary code which can, and has been repeatedly ignored.
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Note: Views in this blog and on this site are the honest opinion of the author & are made available in the interest of residents at MQ.