Financial Governance

OK. So what next. Financial Governance. Obviously Malaysia is a country that has some bad press in relation to high profile financial mismanagement. Malaysia is non unique in this respect. The same could be said of most nations. That said, it is of the utmost importance to establish a financial model that serves the needs of all stakeholders.

The primary stakeholder is the individual that CYW serves. This is the trafficked individual. It is of utmost importance that all financial activities be targeted at this demographic. If these individuals are not served by CYW in its operations, then CYW becomes a conflicted brand. Since the goals of personal wealth growth and service of trafficked individuals is not the same, it is important to establish priorities or face conflicts of interest and potential corruption.

The bible is very clear in stating that the pursuit of wealth is an ignoble endeavour. 1 Timothy 6:10 states "Some people, eager for money, have wandered from the faith and pierced themselves with many griefs." So wealth generation can not be a primary goal of CYW. Salaries are acceptable, as is the development of shareholder equity, but these goals are always in line with the primary focus "serving individuals caught in human trafficking".

How can CYW minimize greed as an organizational motive? (00)

CYW does not have to become a "Non-Profit" in order to accomplish this goal. A new model of development programs has emerged in the last half-decade called "Hybrid Organizations". These are organizations that adopt for-profit principles into a primarily non-wealth generating business mission. For example, CYW will always be involved in assisting at risk individuals. In order to do this, it will need to attract funds. Some of these funds will NOT come from charitable sources. Non-profits attract their support solely from charitable sources. It is the goal of CYW to attract revenue through profit projects. This will involve the sale of advertising and partnership programs. It could involve other fiscal projects such as sale of t-shirts, book deals, app partnerships, various synergies and other corporate goals.

The main differentiation between a Hybrid organization and a For Profit organization is that funds created are to be used in the realization of the organizations mission statement, not for personal wealth growth. Having this clear distinction will avoid conflicts of interest. Participants in the project will clearly see their primary objective as part of the mission statement, not creating their own wealth. By creating CYW as a Hybrid organization, however, the organization can utilize for-profit initiatives to raise the funds it needs.

So what about talent acquisition and remuneration? Obviously, staff can not and should not work for free. Incentives need to be created that allow for CYW to attract and retain staff members of the highest quality. At the same time, the remuneration of staff and owners needs to be clearly restricted to avoid the use of the organization as a personal profit vehicle and therefore damage the mission of the organization.

The following are the plans that should be implemented to create a Hybrid organization that rewards participants, but also protects the mission statement. The primary safegaurd is the limitation of unlimited profit motives from all participants. In its place fair and flexible salary allowances need to be made. CYW needs to implement a salary provision that allows individuals to obtain fair or better than fair return for their labours. This salary should not be approved by members, but by a board of directors. An independent board should have the ability to adjust remuneration as it sees fit. This power should not reside with the management or staff. In this manner all remuneration is fair and independent.

A second remuneration tactic can be asset shares. Members of CYW can NOT obtain shares in the organizations profits as these profits are for the purpose of fostering future growth. This means that shares in the company are very different than shares in a for-profit organization. Shares in a for profit organization reflect an ownership of the company assets, its revenue and its ability to turn capital into future revenue. Since future and current revenue are dedicated to the mission statement, the only element of ownership for a share holder is the actual tangible assets of CYW. This means that a share owner owns portions of the stapler, or the office chair or the land that CYW may own in the future. These are tangible assets without consideration of their profit generation.

By offering shares in the organizations capital holdings, a shareholder is in a very unique position. They own physical assets, but they can not procure wealth based on their profit generation. Therefore at all times, the shares of CYW are actually Charity-Generating assets (not revenue generating assets - as such a shareholder owns personal charity generating resources). They do have a tangible book value, however their profit generation potential is in terms of CYW's mission statement not personal wealth growth. The share holder can realize financial gain in two ways. They can obtain financial gain as the company's asset base grows or when they dispose of shares. An shareholder who leaves CYW would gain reward by selling his shares back to CYW or another partner.

The benefit of this arrangement is that shareholders have their heart in the company. The Bible clearly says, where your treasure is, there your heart will be. In this way shareholders will have a stronger tie to the organization. There is one potential problem. The management of the company – if it was so inclined – could take revenue and invest it heavily in assets. By doing this they would increase the value of their shares by sabotaging the mission of CYW. For this reason, if we do distribute asset based shares, there MUST be an independent review process by the Board of Directors. The Board of Directors must not be shareholders themselves, but have the power to remove employment from any shareholder that is seen to be abusing his power to acquire assets.

It sounds complex, but basically boils down to this. (1) Staff should get paid well. (2) Key staff should get share packages (To foster personal responsibility for CYW's mission, not to promote personal profit). (3) An independent board of directors (who we may pay a fixed fee) will have voting power to remove the employment of any management individual who is not upholding CYW's mission statement. These three points should allow for healthy remuneration without a conflict of interest. It should allow us to attract competent staff and maintain integrity toward our mission statement.

I also think, as a hybrid organization, we should make our financial dealing public. The more trust we can engender, the greater ability we have to attract future funds. In this manner we should also avoid any potential corruption through transparency.

It is recommended you review ECFA's Seven Standards of Responsible Stewardship

What powers should the Board of Directors have in order to maintain CYW's integrity? (00)

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