4. Boards and Directors have Legal Duties of
Care, Loyalty and Obedience
Hold public benefit corporation ―in trust‖ for the community
Duty of
care
Duty of
loyalty
Duty of
obedience
• An obligation to act in good faith
– with best interests of nonprofit
in mind – with such care of a
reasonably prudent person
• An obligation to keep
confidences of nonprofit and
avoid actions that benefit self at
expense of nonprofit
• Required directors to comply with
applicable laws, adhere to
bylaws and remain guardians of
the mission
• Be informed e.g.
– Attend meetings regularly
– Seek and review necessary information
• Exercise independent judgment
– Ask questions – avoid simply going along with
other directors
– Rely only on judgment of dependable sources
• Avoid self-dealing transactions
• Where directors’ firm provides services
or products to nonprofit, make conflict known
to board, recuse self from discussions/votes
• Understand mission and bylaws
• Ensure regulatory filings completed
• Require operation audit and policy review
4
5. Types of Boards
Organizing Board
– small, homogeneous, informal
– committed to purpose
– Very hands on to support start up
Governing Board
– larger and more diverse board
– committees become important
– shared authority between board and staff: board chair and
executive director are principal leaders
– transition to governing board takes at least 3 years and a lot of
staff time
Institutional Board
– very large (35-60 or more)
– prestigious -- includes large donors or those with access to funders
– accepts significant responsibility for fundraising
– often delegates some governance to executive committee
5
6. Creating a Dynamic Board
Environment
• Monitor external and
internal environment to
prioritize areas for
Board attention
• Ensure quality
performance across 3
primary Board roles
• Develop a set of enabling
Monitor and improve performance
practices around Board
composition, size
structure, processes, and
staff relationships
Enablers
6
7. 9 Responsibilities of Nonprofit Boards
• Shape, clarify
mission and
vision
• Engage actively
in strategic
decision making
and policy
decisions
Monitor and improve performance
• Select, evaluate
and develop CEO
• Ensure adequate
financial
resources
• Lend expertise;
provide access to
people
• Protect/enhance
reputation of
organization
• Oversee financial management, ensure
appropriate risk management
• Monitor performance, ensure accountability
• Improve board performance
7
8. Importance Ratings Vary Greatly by Organization
Q: Over the next one to two years, how important is it for your Board to focus on:
1. Clarifying the organization’s mission
or vision
1
2
3
2. Resolving key strategic or policy
issues
1
2
3
1
2
3
4. Developing financial resources to
support strategy
1
2
3
5. Providing expertise or access to
support organizational priorities
1
2
3
6. Building the reputation of the
organization with key stakeholders
1
2
3
7. Overseeing financies and ensuring
adequate risk management
Shape
Mission and
Strategic
Direction
1
2
3
8. Assessing performance against
mission and key program priorities
1
2
3
1
2
Medium
3. Developing CEO capabilities
Ensure
Leadership
and
Resources
Monitor and
Improve
Performance
9. Improving Board performance
Low
3
High
Rated Importance
Group Average
Group Response Range
8
9. The Governance Gap
• 97% said that a high-performing board was important to a high-performing
nonprofit...
— However, only 19% said they were tapping their boards’ full potential
• 94% felt that their boards provide the appropriate level of strategic guidance…
— However, only 46% thought that their directors would be able to summarize both
the mission and the vision of their organizations
• 77% of respondents indicated a desire to improve board fundraising, but…
— Just 21% set individual board member fundraising goals
— Just 38% provided fundraising training
— Moreover, a mere 16% reported having individual board members receive formal
feedback on their performance at a regular interval
• Source: McKinsey survey of social services organizations
9
10. Board Performance GPA
Survey response to ―give your board a letter grade‖ on each dimension
Understanding mission
Financial oversight
Legal/ethical oversight
Supporting CEO
Knowledge of programs
Director view
Monitoring performance
CEO view
Strategic planning
Community relations
Increasing diversity
Fundraising
0
1
2
3
Source: Boardsource Nonprofit Governance Index 2010
4
10
11. 5 Enablers are Key to Closing Execution Gap
• Effective board leadership must drive for a true
partnership at board and committee level
• A trust-based relationship with CEO as an underlying
foundation
• Sweating the details on process is critical to board
function and engagement
• Composition requires needs-based management and a
graceful transition mindset
• Size and structure are a balancing act but must ensure
coverage of 9 responsibilities
11
12. Self Assessment Is Critical
Select, evaluate
and develop CEO
1
2
3
4
Poor
Average
Good
Distinctive
Succession planning
Board has no clear succession
plan
Board has informal discussion
with CEO on succession and
on identifying candidates
before need for a CEO
transition arises
Board has explicit view on
succession and works with
CEO to identify internal
candidates with leadership
potential
Board has explicit view on
succession and actively works
with the CEO to identify
internal candidates and
provide development
opportunities for the top 3-5
candidates to “round out”
their skills
Evaluation and
development
process
Evaluations are subjective and
occur on ad-hoc basis; most
board members are unaware
of process or feedback
messages
Evaluations performed
annually against preagreed
criteria; board members have
opportunity to provide input
to process
Evaluations performed
formally and annually against
pre-negotiated goals; written
feedback messages are
reinforced through CEO
compensation
Evaluations performed at
annually against predefined
gooals; evaluation includes
360-degree feedback and
includes a self-assessment by
the CEO. Written feedback
includes skill development
plan.
CEO compensation
decision reinforces view of
performance
12
Comments
13. Relative Priority (ratio vs average)
Dynamic Boards Set Priorities Based on
Need and Performance
1.4
Change
Maintain
Ensure Resources
1.3
1.2
Monitor org
performance
Enhance reputation
1.1
Shape M/V
1.0
0.9 Improve Board Performance
Shape strategy
Provide expertise and access
0.8
0.7
Oversee
financial
performance
Develop CEO
0.6 Quick fix only
0.8
0.9
1.0
Reduce effort
1.1
1.2
Relative Performance (ratio vs average response)
13
14. Summary Take-Aways
• Roles Matter: There are 9 clearly defined responsibilities of a nonprofit
board, with a gold standard of performance for each. Increasing emphasis
on:
• Multi-year planning
• Performance measurement and accountability
• Risk management
• Sweat the Enablers: Good governance is execution
• Pay attention to the enablers of execution, including the small stuff
• Board Chair as CGO
• Understand and address the ―human‖ aspects of director interests and
styles
• Pick Your Battles: There are lots of ways boards, as entities and directors as
individuals, can help. Pick your spots carefully to allot valuable time where
needed most
• Look in the Mirror: Invest significant time in board evaluation and continuous
14
improvement
15. A Good Board is a
Victory, Not a Gift
Cyril Houle
15
Welcome to the Board Fellows Program Kick-off I have been communicating with most of you, reading applications and really excited to see you all here together today.We are delighted to see students, mentors, nonprofit staff and board members represented today
The purpose of today isProvide the opportunity for fellows and mentors to meet one another and to plan for the year aheadProvide a chance for all participants to meetExplain program expectations, roles and responsibilitiesProvide an introduction to best practices in board governanceGive you a chance to hear from past participants and ask questions Introduce and thank Nora, Evin and Jean
The Agenda for today.
This page should be highlighted as they need to have an understanding of the benefits and requirements are of a tax exempt organization