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Alliance Governance Survey Results Show Signs of Progress…

The results of the 2015 Alliance Governance Survey are in and show that many member societies have made significant improvements in their corporate governance structure over the past three years.  Fifty-five Alliance member societies completed the extensive survey questionnaire (all of the responses are anonymous and confidential) and the composite results and corresponding analysis by our panel of governance experts make the finished report one of the most valuable management tools available to fraternal executives and board members.  Members who participated in the survey can purchase the report for $249 by clicking on this link.  (You may need to go to the home page to log in, then return to Shop.) Other members and associate members can obtain a copy for $449.
Fraternal Governance Survey Cover

With many states likely to enact the NAIC’s Corporate Governance Disclosure Model Act in the next two years, improving your society’s corporate governance structure is not just a good idea, it’s imperative.  While there is nothing in the Model Act that requires insurers to have a specific type of corporate governance, the extensive disclosure requirements provide more than a hint of what regulators will be looking for during your next examination.  Insurers – fraternal or commercial – with obvious flaws in their governance structures will no doubt merit additional scrutiny from regulators who have established a clear connection between good governance and organizational sustainability.

The survey highlights some very promising corporate governance improvements that Alliance members have made in the last few years.  More and more societies are moving away from electing their executive team and instead implementing a system where the board is elected by the members or delegates and, in turn, hires a CEO to run the organization.  Other societies are establishing their boards – rather than their conventions – as the supreme governing body.  And an increasing larger number of societies are putting greater emphasis on the development and oversight of realistic strategic plans for their societies.  As one respondent noted: “A goal without a plan is a wish.  And wishes make for poor strategic plans.”

Nonetheless, there are some corporate governance problems that continue to vex fraternal leaders – and will no doubt cause consternation among regulators.  These include:

  • The continued high cost and low return of society conventions.  While a few fraternals are dramatically cutting back on these events, or trying to transform into educational programs, smaller societies – those that can least afford it – seem to spend have higher convention expenses than larger ones.  These events could be perceived as junkets or perks for a few society members and not something that delivers any real benefit to the society.
  • I was shocked by how many society boards fail to conduct a thorough self-assessment.  How can you improve performance and enhance accountability without taking a hard look at yourself in the mirror? There are several excellent tools to help boards conduct these self-evaluations, including the Alliance’s own product designed especially for fraternal boards.
  • Likewise, I was stunned by how many boards fail to conduct performance reviews on the society’s CEO.  This seems to me to be a serious breach of fiduciary responsibility.  And it’s SO easy to correct!
  • While more societies are hiring CEOs – and allowing that individual to hire his or her own management team – others persist in electing not only the CEO but the other executives that ostensibly “report” to the CEO.  This is a seriously flawed structure.  CEOs should report to the board – period.  He or she should be the board’s one and only employee.  Other executives should report to the CEO.  Elected executives may be more concerned about getting re-elected than serving the organization or its CEO.  ‘Nuf said.

Corporate governance…time to take it seriously.

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