Overview of Nonprofit Boards


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Chapter 4 from "Nonprofit Management," Third Edition by Michael J. Worth, https://secure.sagepub.com/protected/worth3e/icfr/intro.htm

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Overview of Nonprofit Boards

  1. 1. © 2014 SAGE Publications, Inc.Chapter 4: NonprofitChapter 4: NonprofitGoverning BoardsGoverning Boards
  2. 2. © 2014 SAGE Publications, Inc.TerminologyTerminology• Governing boards -- boards that hold ultimateresponsibility for ensuring that the organizationserves its mission and for the overall welfare of theorganization itself• Terminology depends on specific organization• Board of directors• Board of trustees• Board of governors• Governing council• Other terminology• Boards that lack legal responsibility for governingtheir organizations are not governing boards (e.g.,advisory boards)
  3. 3. © 2014 SAGE Publications, Inc.Types of Governing BoardsTypes of Governing BoardsElected boards• Common in member-serving and advocacy organizations• Governing board elected by the membership of theorganization; can lead to a “popularity contest”• Membership terms of an elected board may bebrief/turnover• Skills of board members may be uneven• CEO must have a high tolerance for uncertainty• Board members less likely to become stale, uninvolved orhomogeneous in their membership
  4. 4. © 2014 SAGE Publications, Inc.Types of Governing BoardsTypes of Governing BoardsSelf-perpetuating boards•New members are selected by the existing membersof the board who recruit them according to criteriaestablished by the board•In a new nonprofit, the initial board members areknown as “founding board members” who thendevelop bylaws, etc., which outline how theorganization will be governed•Creates a relatively stable situation for theorganization and its CEO as board members changeless frequently; boards recruit new members withskills/expertise needed at the time•Board needs to maintain diversity to guard againstbecoming homogeneous
  5. 5. © 2014 SAGE Publications, Inc.Types of Governing BoardsTypes of Governing BoardsAppointed and hybrid boards•A typical model for public organizations such asuniversities•Members selected through appointment by someauthority such as the governor of a state, etc.•In hybrid boards, some members may be elected andsome appointed or serving ex-officio•Hybrid boards can keep organizations responsive totheir constituencies as well as better accountability•Appointed or hybrid board members may lack thecommitment to the organization and may not fullyparticipate in the work
  6. 6. © 2014 SAGE Publications, Inc.
  7. 7. © 2014 SAGE Publications, Inc.Advisory Boards & CouncilsAdvisory Boards & Councils• Better term should be “councils” rather than “advisoryboards” to avoid confusion with governing boards• Have no legal responsibility or authority for governanceof an organization• Members may provide a nonprofit with technicalassistance/expertise, assist with fundraising activities,serve as advocates or ambassadors in the community• May or may not be formally established in thenonprofit’s bylaws• Role and parameters should be formalized withguidelines that outline the responsibilities of the council,etc.
  8. 8. © 2014 SAGE Publications, Inc.Board ResponsibilitiesBoard Responsibilities• Board members are “fiduciaries of theorganization’s resources and guardians of itsmission” (Hopkins, 2003, p. 1)• Board members are accountable “for everythingthe organization does and how those things areaccomplished” (Howe, 2002, p. 30)
  9. 9. © 2014 SAGE Publications, Inc.Board Responsibilities: LegalBoard Responsibilities: Legal• The Sibley Hospital Case (1974)• Care – exercising due diligence in monitoring andsupervision• Loyalty – members put the interests of the nonprofitabove their own personal financial interests• Obedience – members ensure that the organizationcomplies with all laws and actions are consistent withthe mission• Intermediate sanctions (1996)• Sarbanes-Oxley Act (2002)• Destruction of documents• Protection for whistle-blowers• Form 990
  10. 10. © 2014 SAGE Publications, Inc.Board Responsibilities: FunctionalBoard Responsibilities: Functional• Appoint, support, and evaluate the CEO• Establish a clear institutional mission andpurpose• Approve the organization’s programs• Ensure sound financial management and theorganization’s financial stability• Establish standards for organizationalperformance and hold the organizationaccountable
  11. 11. © 2014 SAGE Publications, Inc.The Board and the CEOThe Board and the CEO• Who leads the nonprofit organization?• Extreme scenario 1 -- CEO manipulates theboard, orchestrates board meetings, andrelegates the board to the role of a rubberstamp for his or her initiatives• Extreme scenario 2 -- Board micromanages theorganization and usurps the authority of theCEO• Partnership between the board and the CEO asideal, but different views on exactly how thispartnership should be constructed and how itshould operate
  12. 12. © 2014 SAGE Publications, Inc.Three Models ofThree Models ofBoard-CEO RelationshipBoard-CEO Relationship• Policy Governance Model (Carver, 1990) -- need toestablish and enforce a clear line between theboard’s responsibility for policy making and theexecutive’s responsibility for implementation• Governance as Leadership (Chait, Ryan, and Taylor,2005) -- board should assume a leadership role thatblurs the distinction between policy andimplementation, focusing everyone’s attention on“what matters most”• "Psychological Centrality and Board-CenteredLeadership (Herman and Heimovics, 2005) -- CEOsshould accept the reality of their “psychologicalcentrality” in the organization and provide “board-centered leadership”
  13. 13. © 2014 SAGE Publications, Inc.““Twelve Principles that PowerTwelve Principles that PowerExceptional Boards”Exceptional Boards”• Constructive partnership• Mission driven• Strategic thinking• Culture of inquiry• Independent-mindedness• Ethos of transparency• Compliance with integrity• Sustaining resources• Results-oriented• Intentional board practices• Continuous learning• RevitalizationSource: Board Source, 2005
  14. 14. © 2014 SAGE Publications, Inc.Problems with Measuring BoardProblems with Measuring BoardEffectivenessEffectiveness• Reliance on practitioner wisdom rather thanscience• Lack of a substantial body of research onnonprofit board performance• Lack of a single definition of board effectivenessBoard effectiveness is “whatever significantstakeholders think it is, and there is no singleobjective reality"(Herman and Renz, 2002)
  15. 15. © 2014 SAGE Publications, Inc.The Challenge of NonprofitThe Challenge of NonprofitGovernanceGovernance• Janus metaphor -- nonprofit boards arepositioned on the boundary between theorganization and its external environment• Inward-looking role in fulfilling fiduciaryresponsibilities on behalf of the membershipor society• Outward-looking role in meetingresponsibilities to the organization itself andadvance its interests• Complex responsibilities require diverse qualitiesin the individuals selected to serve on the board
  16. 16. © 2014 SAGE Publications, Inc.The Board’s Sometimes CompetingThe Board’s Sometimes CompetingResponsibilitiesResponsibilitiesTo Society• Accountability forresources and results• Adherence to missionand law• Representation ofcommunity needsTo the Organization• Advocacy andauthenticity• Protection of autonomy• Fiscal stability andsustainability