Alexandre Pahud, independent administrator specializing in foundation governance, APIA Swiss member and commissioner appointed by the Supervisory Authority, answers all our questions on foundation governance.
“A Foundation Board is dedicated to the realization of the Foundation’s objectives, which may be philanthropic, educational, cultural, scientific, social or other not-for-profit. It ensures that the foundation’s resources are used exclusively in accordance with its bylaws and missions.”
What are the main differences between a Board of Directors and a Board of Trustees?
Composition:
Board of Directors :
The Board of Directors is made up of members elected by the company’s shareholders or members, depending on the company’s ownership structure. It may include shareholders, senior executives and external experts. Members are properly remunerated.
Board of Trustees :
The Foundation Board is generally made up of individuals appointed by the Foundation’s founder or in accordance with the Foundation’s Articles of Association. Members are volunteers, which may influence their involvement.
Legal responsibilities :
Board of Directors: Members of the Board of Directors have legal obligations towards the company and its shareholders. They must make decisions in the company’s best interests.
Board of Trustees :
Board members may only act within the scope of the Articles of Association and the purpose defined at the outset. Once the articles of association have been validated, they are not allowed to operate outside this framework. All “profits” must be reinvested in the foundation’s mission. The Articles of Association may be revised after the first 10 years, or on exceptional request, but always with the approval of the Supervisory Authority. Foundation administrators are liable for life…
Three different foundation systems:
- Single capital
A person or company makes a one-off sum available to the foundation, which it will use until it is exhausted, or which it will use to create value and finance itself.
- Fundraising
External fundraising. Dependent on donors and must continually raise funds.
- Government subsidy
Some foundations are state-funded, because they take on a task that falls to the state.
Alexandre Pahud on the Board of Trustees:
For Alexandre, acting on foundation boards is a bit like playing superhero. It means using a given capital to do something good, something useful.
His job is mainly to put existing foundations in order. He is appointed by the supervisory authority in foundations where governance has been neglected. Management errors are common and can have serious consequences. Fraud happens quickly and is increasingly punished. Fortunately, most of the 13,000 foundations in Switzerland are scrupulously well managed.
There are still many boards of trustees who meet once a year for a meal without really discussing the management of the company, placing their full trust in their chairmen. For Alexandre, this is a tragedy, because foundations, like companies, need to have a long-term vision, strategic lines to implement and anticipate crises to ensure their continuity.
When he arrives at a foundation in a precarious situation, he starts by mapping the needs and then draws up an action plan to turn around the management and organization.
He is convinced that this practice should be changed to allow foundations to remunerate their members and thus acquire specific skills that would guarantee better management, all in strict compliance with the articles of association.
Alexandre will shortly be launching a training course to provide foundation board members with all the governance best practices they need to face today’s challenges.
APIA Swiss Team