The Perkins Law Five-Finger Philosophy of Nonprofit Board Composition
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The concept behind the Five-Finger Philosophy of Nonprofit Board Composition is that all of us resemble one of the five fingers on your hand. Which finger are you? Which ones do you want on board? Which ones do you want to steer clear from? For copies of the referenced worksheet, connect with Eric through LinkedIn.
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The Perkins Law Five-Finger Philosophy of Nonprofit Board Composition
- 1. The Perkins Five-Finger Philosophy of Nonprofit Board Composition November 30, 2011
- 2. Key Issues for Nonprofit Board Members • Who owns the organization? • What are my legal duties to the organization? • What are the three most likely sources of trouble for my organization? • What is D&O coverage and why do I care?
- 3. Sources of Trouble • The IRS • The State Attorney General’s Office • The Disgruntled
- 4. The Ultimate Nightmare for a Nonprofit Director • Imagine you’re a director or officer of The Second Mile Foundation • PA Governor Tom Corbett says, “I need to know what the board members knew.” • Organization (founded in 1977) is basically in wind-up mode at this point.
- 5. Other Recent Examples of Nonprofit Troubles • New Caste Youth Football Program—Managers investigated by state AG for misuse of funds, state police involved, criminal charges filed.
- 6. D & O Coverage • D&O = Directors and Officers • Protects against breach of fiduciary duty claims • Biggest benefit: Covers legal fees and costs of defense
- 7. The 5-Finger Philosophy The Concept: Every person on your board of directors (including YOU) fits into one of five categories, each resembling one of the fingers on your hand.
- 8. Benefits of the 5-Finger Philosophy • Maximize Effectiveness of Current Board • Better Recruiting and Retention • Self-Actualization (Abraham Maslow) AN IMPROVED, HIGHER FUNCTIONING NONPROFIT ORGANIZATION
- 9. The Index Finger • The most important • Need at least 1-2 on your board
- 10. The Thumb • • • • Reliable Loyal Hardworking Perfect candidate for corporate secretary or treasurer
- 11. The Ring Finger • Inconsistent participant • Flashes of brilliance and passion • Potential leader • Underutilized asset
- 12. The Pinky • • • • Poor attendance Minimal input at meetings Minimal activity Nonfactor
- 13. The Middle Finger • Type A personality, argumentative, uncooperative, narcissist, controlling, patronizing, etc. • The trouble with these people • What do you do?
- 14. The Worksheets • Evaluate Your Board RIGHT NOW • Take Extra Worksheets for Your Colleagues • Make It Part of Your Annual Nominating or Strategic Planning Process
- 15. What Happens Next? • • • • Address Current Problems Improved Engagement Levels More Strategic Succession Planning Better Leadership Development
- 16. You Are Now a Guru on Assembling an Effective Nonprofit Board of Directors!
- 17. _________________________ 4870 Sadler Road, Suite 300 Glen Allen, VA 23060 Phone: 804-205-5162 Email: eric@ericperkinslaw.com www.ericperkinslaw.com
Editor's Notes
- Attorney and Ambassador of Tennis (32 years—tournament competitor, teaching pro, tournament director, tournament sponsor, league participant, racket stringer, been to all 4 grand slams, volunteered and led committees at local, state, sectional, and national levels…and right now I serve as an officer and director of a CTA) --We’re here to have some fun and learn a few things…and the objectives today are as follows: Talk about the important role of the board of directors and some issues to consider as a director We are going to transform the way you view yourself and others when it comes to nonprofit board composition. We’re going to have some fun and you’re going to get a chance to do something you probably have always wanted to do but perhaps never had the chance….until today. And we’ll have plenty of time for questions
- Surprisingly, some people don’t understand the concept, and others lose sight of it over time…but ownership is really what differentiates for-profit from nonprofit corporations. Nonprofit has no shareholders or owners, it serves the public or its targeted group of beneficiaries. A fiduciary duty is generally viewed as the highest level of obligation you can owe to someone else…it is the requirement that you put someone else’s interests above your own. Generally broken into 2 duties: Duty of Care (are you acting reasonably in a manner that you believe to be in the best interests of the organization) and Duty of Loyalty (means that you act for the benefit of the organization and its mission, not in pursuit of self-interest…Conflict of interest issues) Legal protections—Federal and state immunity/volunteer protection statutes, corporate governance document protections (indemnity and advance of expenses), insurance, contractual transfer of risk.
- D&O insurance is protection against a breach of "duty" by the directors and officers. D&O pays for actual or alleged wrong decisions, what the policy calls "wrongful acts." Although each insurer defines coverage in its own way, D&O insurance generally includes: "any actual or alleged act or omission, error, misstatement, misleading statement, neglect or breach of duty by an Insured Person in the discharge of his/her duties.“
- Self-actualize = the full realization of one’s potential.