Transcript 4th Annual Corporate Governance Symposium

Greg Vickery AO, Special Counsel
Norton Rose Fulbright
Australia
Consolidation in the NFP Sector –
WHY?
Reasons
• Rising costs
• Economies of scale
• Stakeholder pressure
Three Scenarios
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a single legal entity with separate operating
divisions in each State
related parties with a common name but
separate legal entities in each State
unrelated parties with a common goals and/or
a common name
Scenario 1
This was my Red Cross experience
• It was always a single legal entity formed under a Royal
Charter with separate State & Territory Divisions, with
their own Boards, Budgets, Staff and Strategies
• There was a weak federal coordinating body (funded by
the States) which met twice a year
Issues
Making the case for change
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Economies of scale
Greater efficiencies
Better sharing of resources
Demands of donors and
Government
• Better profile nationally
• Better monitoring of risk
Challenges
• Many members resistant to change for its own sake
• “States rights” arguments
• Asking States to surrender decision making and
authority
• Rumour mongering
• Working to get a majority of support
How to progress
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Wide distribution of proposals
Much consultation and willingness to vary proposals
Compromise on minor issues
Proposing a geo-functional national board
Keeping State & Territory representatives
Playing the “risk” card
Moving in stages (Phase 1, Phase 2) and allowing
members to get used to the changes
Scenario 2
Many national organisations are a combination of
separate legal entities which work with a Federal
or national coordinating body comprising State
representatives, (usually the State Chairs and/or
CEOs). Membership is State based.
Issues
Similar to Scenario 1 but there are additional
factors
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More due diligence on commonalities and differences
State legislation and regulations need to be checked
State funding and support must be verified
Cultural fit
Key question – What form should the amalgamated
vehicle take?
Challenges
Again similar to Scenario 1 but some new issues
arise here
• Combating arguments of the “big State” takeover
• Identifying all costs and getting good tax advice
• Tailoring arguments to meet the different concerns
of each State and Territory.
• What happens if all State bodies don’t come on board?
How to progress
• Again much time and planning is needed and each
State body must be regularly consulted
• All major State stakeholders need to be identified and
their issues addressed if possible
• Take as much time as is needed
• Identify benefits of working with a national structure and
have a truly national planning team
• Preserve some key State links (at least in the short
term)
Other options
• Allowing some State bodies to “wait and see”
• Alternatively threatening to form a new branch in that
State if the existing body declines to amalgate (a risky
strategy)
• Looking at a division of power between identified
Federal & State based issues (like Australia’s National
Constitution) and keeping some State bodies in place
Scenario 3
• Same issues as for scenarios 1 and 2 however the first
step requires more due diligence and more preliminary
discussions with senior people and key stakeholders of
each entity
• Review areas where an amalgam would help with the
increased size and influence and identify areas of
concern and how best to deal with them.
• Look at the overall costs and how to fund it
Scenario 3… con’t
• There must be total honesty and openness here
• A through risk analysis must be done
• A strong proposal or case for change can then be
developed
• Aim for flexibility in the proposal where you can
• Can some components be left behind or transferred to
other organisations?
Challenges
• Ensuring the objectives are clear and the key drivers for
each organisation are understood.
• Demonstrating it is a genuine amalgamation and not a
“take over” or an “ego trip” for the proponents
• Constant and appropriate communication
• Be wary of rumour mongering (especially in the social
media)
How to progress
• Set up a national planning and implementation
committee
• Prepare carefully, with exit strategies at each stage
• Take time
• Be patient
• Be flexible
• Get sound advice from lawyers and accountants and
any funding bank
Common Issues to all 3 Scenarios
• Clarity of vision and purpose
• Leadership is essential (if leadership is unclear or
fractured, the amalgamation will fail)
• Good use of communication with face to face meetings
with key decision makers, wherever possible
• Keep talking to key stakeholders and ensure they
know what is happening at all times so momentum is
maintained
Common Issues to all 3
Scenarios...con’t
• Be clear on the benefits of the amalgamation (Why are we
doing this? How will it improve things?)
• Don’t proceed if real doubt exists
• Don’t be bullied by obstinate minorities into making
unnecessary changes
• Remain positive but realistic at all times
• Craft strong supporting messages post the amalgamation
Questions?