MaRS Library Canada’s governance structures
In Canada, the “business” of the country is carried out by three sectors: the state, for-profit organizations and not-for-profit organizations. Each sector has its members—those to whom the organization reports and to whom it is responsible for achieving its goals.
- The stakeholders of government-controlled crown corporations are its citizens.
- The stakeholders of share capital corporations number more than their shareholders. Stakeholders include employees, suppliers, regulatory authorities, customers, financial supporters, and the community surrounding the corporation.
- The stakeholders of NPOs include their members, those who are served and their community, and also donor and employees; the work of the NPO may cover such varying facets of our society as health, welfare, poverty, and new Canadians.
Different organizations need different board structures
The chart below breaks down the nation’s business organizations into three sets of corporate structures and eight types of ownership (or membership). The three sectors of for-profit business may be referred to as the Public, the Private, and the Community. The two non-government sectors are separated by the fact that for-profit businesses earn profits that are taxable, while not-for-profit organizations may or may not earn surpluses that are non-taxable.
Businesses intend to create wealth and redistribute it in part or in whole to their owners and/or shareholders, while not-for-profit organizations seek to assist people, their communities and their philanthropic activities. Social enterprises are not recognized at this time as a distinct entity. They operate a business to create surpluses (not profits) to augment their delivery of services.
Public vs. private boards
It is easy to recognize the three forms of corporations shown in the chart above: those that trade their shares publicly, those that do not trade their shares publicly, and those whose shares are controlled by the governing family. Depending on their philosophy or size, family companies may trade their shares publicly as do many of the Canada’s dominant corporations.
NPOs may incorporate and act like a private corporation but their mission is philanthropic. Non-profit corporations include those with a community-based purpose such as science, patriotism, art, culture, social, and sports. Examples include hospitals, trade associations, non-governmental regulatory bodies, symphonies and universities.
One well-known example of a long-standing social enterprise is Goodwill Industries. It is organized regionally and operates a chain of stores selling donated goods while applying its profits to train underprivileged youth for employment. Like many similar social enterprises, it competes for its sales with for-profit businesses such as Value Village. Charities are formed to support a whole community and help the needy; they have specific purposes such as the relief of poverty or disease, the advancement of education or religion, the care of the homeless, or the improvement of the lot of minorities and the disadvantaged.
The following chart lays out a number of governance elements, and describes the key differences between shareholder businesses and NPOs.
Governance elements: Shareholder businesses vs. NPOs
|Key issues||Shareholder businesses||Non-profit organizations (NPOs)|
|Reason for being:||their shareholders||their community or clients|
|Responsibility to:||their shareholders and stakeholders||their members, their donors and the public|
|Goals:||corporate wealth and growth of share value||community welfare and social purpose|
|Other compensation:||stock options, expense reimbursement||pre-approved expenses, but not always|
|Involvement:||usually not involved below the CEO||often involved with daily issues, depending on the management structure|