Lynton and Barnstaple - Operations and Development

If candidates are duly nominated, satisfy the qualification conditions set out in the Articles, and the notification timescale has been complied with, then it appears that the decision as to whether to appoint lies with the voting members. Of course there is nothing to prevent the board from suggesting to those members that a candidate is unsuitable. Any Chairman's principal duty is to ensure an effective board. If that is likely be undermined by the election of a particular candidate it's quite proper for that to be made clear but the members should make up their own minds.

Problems arise when candidates are elected with a personal agenda different from that of the board majority especially if they and their electors see them as representatives of a particular group. As for any board the basic principle of cabinet responsibility applies so different opinions and argument within the confines of the boardroom are healthy and should be welcome. However once a majority decision is reached all board members must support it even if they disagreed with it or voted against it. Trustees/directors are not representatives of electors generally, still less of any particular faction, so their duty to support majority decisions can create disillusion all round.

The question can all too easily become one of what do you do with a Trustee/Director who cannot publicly support majority decisions they disagree with? They don't have the privilege of taking the line that "I don't agree with it and voted against it". In that event it's usually a case of the individual resigning or , if they refuse to do so, being removed. Many heritage railway Articles will include clear arrangements for that but in the case of the L&B it would appear that there is a broad power under its Articles for its Trustees to establish rules on such matters.

Consequently for those wishing to force a change of direction by a board the election of a minority of like minded candidates may not succeed and , if it causes disruption, may undermine the effective functioning of the board.

 

In the public domain strategic investors often try to get a seat on the board to effect change.
If I'm not mistaken, there is already a candidate on the L&B board that they didn't want, but he got in last year!

 

Depends on the agenda.
Let's say the board of railway X are currently pursuing a policy of selling off historic stations and replacing them with bus shelters on platforms and running all services with diesel locos.
They are re-elected each year because of proxy votes and the selective news distributed to members.
Someone standing to be elected on the basis of keeping stations, running steam and being more truthful to members, could be seen by the board as 'not recommended' because they are at odds with the incumbent board's opinions, however the candidate are more likely to be in tune with the membership's desires.

 

There's nothing wrong with candidates being elected on a mandate to effect change as long as they and their electors accept the principle of cabinet responsibility i.e. public support of majority decisions so that unless they can persuade a majority of their board colleagues of the need to for change they endorse the status quo.

 

The problem with this approach comes when the issue is not so much factional, as about the nature and identity of the organisation. Collective responsibility does apply, and resignation is the ultimate expression of failure to agree, but that does not preclude seeking to move a board's views over time.

"Effective" does not have to imply full agreement, and I would be very concerned if a chair were to use "efficacy" as an argument for closing off legitimate debate.

These are fine lines, which may lead to hair splitting, and this new member of L&BRT felt (and feels) that the boundaries of this are being tested to destruction.

 

True, but that raises the question of corporate structure. The elected committee of a members' preservation society would be there to run the railway in accordance with its members' wishes. Once incorporated as a company or charity the duties and accountability of the Directors/Trustees change. Whilst it would obviously be sensible to retain the support of members company directors and charity trustees are not there to run the entities in accordance with the desires of what is often a distinct membership body. The failure to recognise the effect of the move from unincorporated membership societies to incorporated entities is, I believe, at the heart of much of the angst about the behaviour of some boards.

 

Or you just avoid the whole process of trying to persuade your fellow board members and just put up a group of 14 new trustees who would swamp the board and have a majority to do whatever they wanted....

 

I profoundly disagree - the disputes that I see all reflect questions of priority, rather than fundamental questions of duties. Specifically to the L&B, the debates at the AGM were about whether the board were compliant with law in the conduct of the AGM, where it was members on the floor who wished to hold them to that compliance, and where the differences in view are to do with what are the most effective ways to proceed with objectives that all members are brought into.

 

But, and it's a big but, they still have to be elected by the members. And, if they are, it would demonstrate that the previous Board had failed either to achieve what the membership wanted or, at least, had failed to communicate sufficiently with the members. That's democracy.

 

You often refer to "cabinet responsibility" but, on looking it up, nearly all references are to the management of either national or local government. I understand the principal but can you please indicate where it is laid down that it inevitably applies to companies or trusts ?

 

I would also find the references useful, but when briefed on my legal duties as a trustee/director, that principle of collective responsibility was a key part of the briefing.

It went beyond the normal way it is understood in politics, and is really quite tightly binding even where a measure is voted against. The real impact is in the extreme event of a legal challenge, where it’s important to ensure that the records for decisions are clear, not just what and who took them, but also why they are taken.


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@Lineisclear - perhaps you're unaware of what has happened at the L&B this year (which given your position with the HRA seems unlikely) or you seem to be (intentionally?) missing the point.

For the sake of argument, let's accept this is correct. (I don't agree, for the reasons @35B elquoently outlined above.)

But this is not what happened: the Chairman and the Company Secretary took a unliateral decision outwith any basis in the M&A to bar a validly nominated candidate from the election. This was disgraceful, and the opposition from the floor forced the Chairman to change his mind.

In a democratic organisation, it is up to the members to elect a Board of their choice.

Fortunately, the L&BRT is such a democratic organisation.

 

It's an old chestnut rehearsed on her many times already but incorporated companies and charities are not designed or structured to be true member democracies.

 

Accepted. But that doesn't mean that - within the quite wide bounds of director/trustee legal duties - that those created with membership structures should not operate within a democratic spirit.

 

Agreed, and as I observed earlier a well run company or charity will aim to keep members on side whether they are members of the entity itself or of a distinct support organisation. The challenge is when, for whatever reason, the board make decisions or pursue strategies that the membership are unhappy about. I suspect you would agree that in that event the capacity of the members to force a change of direction is limited.

 

The evidence is clear that, as a matter of raw power, members have limited power to force a change of decision, and few choices other than to withdraw their support, whether labour or funds. The various acts of the WSR psychodrama illustrate this.

However, there is a difference between a statement of how things are, and of how things should be.

Part of what makes for a well-run organisation is the spirit in which it is run. So, as a member of the Bluebell, I was actively encouraged to come to the recent members day, and there was clear desire for engagement with members - which included scope for debate, evident in some of the decisions on the agenda.

In contrast, where the focus is narrowly on the minimum requirements that directors/trustees must meet, the standards met have a tendency to fall to the lowest common denominator. It is noticeable that, where there have been controversies about the governance of railways on here - I'm thinking of WSR, NYMR, ELR, Peak Rail, L&B - that controversy has usually included genuine concern about whether the organisation in question has been fully compliant with legal obligations. Of those I've listed, the only one I'd exclude from that charge is NYMR.

At the L&B, where there was a long, difficult and divisive debate about whether the meetings were valid AGMs, the lack of action on promises made did not and do not show the signs of a board determined to show that they are acting with the highest degree of integrity and lack of self interest.

 

Again, @Lineisclear, this is not the case with the L&B: the Trust is a democracy and it even grants L&B Trust Members delegated proxy votes so they can vote in the Trust's trading subsidiary the CIC.

Please understand our constitution is different - it is the members who own the organisation, not the Trustees!

 

Well that's an interesting interpretation!
It doesn't appear to be borne out by the Articles of the Trust as filed at Companies House and particularly Article 27 which confirms the normal situation that the Trust shall be managed by its Trustees who can exercise all its powers. As to ownership I think your interpretation is wrong. I'm not familiar with the detail but its appears that many of the railway's assets are owned by the CIC. Its Memorandum of Association confirms that on winding up or dissolution its assets would not accrue to its shareholders but would have to be passed to another organisation with similar objects. The same requirement applies to charities like the Trust so any assets it holds would not accrue to its members. If the Trust folds for any reason any assets it holds would have to pass to another suitable charity or as directed by the Charity Commission. Unless you can point to some thing that varies those fairly standard provisions I'm afraid the notion that the members personally own the railway is incorrect. The extent of member democracy appears to be the usual one where they can vote to elect directors and table a resolution at a general meeting instructing the directors how to act if its proponents can gather the support of required percentage of members ( usually 5%). That option is also constrained by any such resolution not obliging the trustees/directors to act in breach of their statutory duties, applicable law or the Articles.

 

Look at the spirit of the document: the Trustees are elected by the Members to run the Trust in accordance with the objectives, and, as they are elected, in line with the prospectus that they have offered to the Membership at the time of the their election.

This is avowedly not the "management is always right, bugger off" attitude on display in Lynton last month, @Lineisclear; to this end, at least one of the Trustees was honest enough to swear at the auidence, explain the contempt with which he viewed them and any notion of accountability to them, and then storm off.

However, I would hardly call his outburst a template for good governance (or indeed, good-anything-else).

To the best of my knowledge, the Trust owns most of the assets, and not the CIC. The exception by historical anomally is Chelfham - if I understand the history correctly, this is only because it was acquired by the former property acquisition company, which then became the CIC. This is also the reason that it is possible to be a CIC shareholder and not a member of the Trust - and I beleiver that these people could have been disenfranchised at the last meeting because the (errorenous and invalid) CIC AGM paperwork was sent to the list of L&B Trust Members.

Unfortunately, as we've seen with the Chairman and the L&BRT's Company Secretary's unilateral and ultra vires decision to block a validly nominated candidate from standing in the trust election, the problem is that the M&As - and governance in general - rely on people behaving honourably and decently.

Recent events suggest that the Chairman and the Company Secretary lack those qualities.

 

Again, you come back to the legal minima - which I'm not going to debate (though I do recall some discussion about whether the right versions of the M&As for either CIC or Trust have actually been lodged at Companies House).

I commented earlier today on governance, and the issues of focusing on minima. Since then, we have seen the final act of Boris Johnson's premiership - his honours list. It reminds me of what Peter Hennessey has written about governance, and his essay "Good Chaps No More?: Safeguarding the Constitution in Stressful Times". His argument, as I recall it, is that the British constitution relies on those in high office being aware of, knowing, and following the unwritten rules of that constitution - and that their failure to do so undermines British democracy.

We need to think about what this means for heritage railways, and the implications that a focus on compliance with the legal minima rather than best practice may have on the organisations we value. When I speak to a lawyer at work, they don't just tell me what I can or can't do, but they also provide counsel on what may be wise to do - or not do.

In an organisation where the trustees are elected by members, those trustees are the servants of the membership, not their masters. And, before the inevitable point that they may have to challenge their members - I agree. Just like politicians sometimes have to level with voters, and lead rather than follow. But politicians remain our servants despite their massive powers.