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Understanding Not-For-Profit Governance. Keith Benson, MHA, Ph.D. 10/13/08 Associate Professor Winthrop University. Presentation Overview. Governance What are boards? Why are there boards? What do boards do? Working with boards Getting the most from your board. Keith’s Experience. - PowerPoint PPT Presentation
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Keith Benson, MHA, Ph.D.10/13/08
Associate ProfessorWinthrop University
Governance◦ What are boards?◦ Why are there boards?◦ What do boards do?
Working with boards Getting the most from your board
Ph.D in Health Policy and Administration from Penn State University ◦ Cognate area management and organizational
theory Serving or served on 13 NFP/Public Boards
◦ From local to national boards Consultant to several NFP boards Married to an ED of a NFP!
In the beginning Start with a basic and thorough
understanding of board responsibilities, functions, duties, and obligations.
Why is understanding board governance like making macaroni and cheese from scratch?
It can lead to more effective outcomes Board is ultimate decision maker for the
NFP.
Has the ability to fulfill its mission through a blend of sound management, strong governance, and a persistent rededication to achieving results.
Has the ability to maximize shareholder wealth through a blend of sound management, strong governance, and a persistent rededication to achieving results.
Courts are looking at not for profits to determine if they have used best corporate governance practices.
This session is important in protecting the organization, the board, and yourself.
Public originate with legislature and are appointed by a public executive; they oversee the application of legislation and are custodians of the public trust – receive no additional $$$.
FP Corporate are self appointed and are expected to look after the best interests of the shareholders who seek profit and ROI. Receive additional $$$.
Not for profits are self appointed and have an obligation to honor the promise of the donors and supporters of the organization as expressed in the “mission.” They have an obligation to appear trustworthy to their constituents and receive no $$$.
Not for profits (NFP) are founded for a compelling purpose that serves the public benefit and operates to accomplish a well-defined mission.
Saves government money on a public good May be more effective and efficient in
service delivery.
The NFP Board sets the direction of the organization, ensures resources, and provides oversight.
As applied to any private entity, no part of the net earnings of such entity accrues or may lawfully accrue to the benefit of any private shareholder or individual.
A corporation that cannot issue shares and cannot pay dividends. In addition, under the Federal Tax Code Section 501 (c)(3), a non-profit corporation is eligible for certain Federal and State tax exemptions and, upon dissolution, must distribute its remaining assets to another not-for-profit group.
Not-for profit means not conducted or maintained for the purpose of making a profit. Instead, it operates to serve a public good. Any net earnings by a non-profit organization are used by the organization for the purposes of which it was established.
Not-for-profit◦ An incorporated organization which exists for educational or
charitable reasons, and from which its shareholders or trustees do not benefit financially.
◦ One of the tangible features is the requirement for public benefit. This essentially means that any profits or surpluses a charity makes must be used to further its charitable purposes. Such profits or surpluses must not be distributed to owners, members or any other individual or group of individuals.
Worldwide NFPs spend $1,300,000,000,000 per year.
7th largest GDP if a country (bigger than Canada, Italy, Brazil, and Russia).
NFPs employs 40 million people worldwide (virtually every country).
More than 1.4 NFPs in the US. Over 20,000 in South Carolina. NFPs employ 7% of the US workforce. NFPs contribute over 6% to the US GDP.
NFPs are big business. Business “rules” are very applicable to
NFPs.
The concise Oxford Dictionary defines ‘Governance’ as an act, manner, fact or function of governing, sway, control.
The processes and structures that an organization uses to direct and manage its general operations and program activities.
Good governance – achieving desired results and achieving them in the right way.
The Board of Directors/Trustees has the principal responsibility for fulfillment of the organization’s mission and the legal accountability for its operations.
Vision – envision the future Direction – setting goals Resources – securing resources Monitoring – reviewing periodically Accountability – ensuring the efficient use of
resources and reporting progress
Good governance is as or more important for not for profits.
For profits have◦ Accountability to shareholders◦ Are subject to takeovers
Not For Profits◦ Have tax privileges◦ Do not distribute profits◦ Do not have owners
Greater reliance for good governance on Board of Directors and CEO
Granted the AUTHORITY to make decisions on behalf of the organization.
Must be ACCOUNTABLE for the organizational performance.
“A board needs to know that it owns the organization. But it owns an organization not for its own sake-as a board-but for the sake of the mission which that organization is to perform.◦ Dr. David Hubbard
The board owns the NFP on behalf of the community.
What’s Your Bumper Sticker? Save the Whales Feed the Children Marking Time
Set Policy and Direction Legal Financial/Accountability Fundraising Futuring Evaluation
Mission/Purpose Support Executive Officer and Review
Performance Effective Planning Adequate Resources Manage Resources Effectively Determine and Monitor the Organization's
Programs and Services Enhance the Organization's Public Image Serve as a Court of Appeal Assess Its Own Performance
Many courts hold NFP Board Members to this rule
Board members act: On an informed basis In good faith In an honest belief the action taken is in the
best interest of the organization Protection – D & O insurance
Board members take role seriously Act professionally and ethically at all times Have interests of organization above their
own Rotate off when terms are up Read support materials, come prepared
and make attendance at meetings a priority
Duty of Care Duty of Loyalty Duty of Obedience Duty of Compliance Duty of Fiduciary Duty to Disclose
Be informed Be active Ask questions Exercise independent judgment Discharge duties appropriately Perform duties diligently
Focus on what matters most - mission Build a deep knowledge of the
organization Promote honest, open dialogue Formally evaluate performance Insist on good practices
“No single relationship in the organization is as important as that between the board and its chief executive officer.” ◦ John Carver, Boards that Make a Difference
In simplest terms a board governs, while staff, led by the Executive Director manages
Board sets policy and establishes mission and agenda
Staff implements policy, delivers services and manages day-to-day operations
Defines the organizations needs and ensures its success
Board selects and evaluates the ED. Encourages a respectful, harmonious partnership
Communicates strategic plan, goals and benchmarks as well as expectations
Authorizes all expenditures
The Executive Director hires, trains, and supervises staff
Reports to board on operations, services, personnel, and finances
Evaluates needs, presents solutions and options
Develops position descriptions and operational procedures
Support Trust Honesty Forthrightness Respect Understanding
Board takes the lead:◦ Articulates the guiding values through policies
that put the mission into action◦ Hires, supports, and evaluates the chief
executive ◦ Monitors fiscal management, approves budget,
and hires annual auditor◦ Selects, recruits, and orients new board
members
Chief Executive takes the lead:◦ Develops and proposes policy questions for the
board’s consideration◦ Hires, supervises and motivates staff◦ Develops and implements programs
Board, Chief Executive, and Staff Share the lead:◦ Develop a strategic plan◦ Create a fundraising plan and strategies◦ Initiate and implement periodic organizational
evaluations◦ Prepare for Board meetings
Make Mission Matter Know the Organization Cultivate Relationships Inform & Communicate Facilitate Balance in the Partnership Structure the Board’s Work
Regularly attends board meetings and important related meetings
Makes a serious commitment to participate actively in committee work
Volunteers for and willingly accepts assignments and completes them thoroughly and on time
Stays informs about committee matters, prepares themselves well for meetings, and reviews and comments on minutes and reports
Gets to know other committee members and builds a collegial working relationship that contributes to consensus
Is an active participant in the committee’s evaluation and planning efforts
Participates in fund raising for the organization
Do your duties Be informed Participate Contribute financially Raise funds Be an ambassador
Determine the Organization’s Mission and Purpose
Select the Chief Executive Support the Chief Executive and Assess His/Her
Performance Ensure Effective Organizational Planning Ensure Adequate Resources
Manage Resources Effectively Determine, Monitor, and Strengthen the
Organization’s Programs and Services Enhance the Organization’s Public Standing Ensure Legal and Ethical Integrity and Maintain
Accountability Recruit and Orient New Board Members and
Assess Board Performance
Board sets goals for its own activity Board identifies progress indicators Board monitors progress indicators
quarterly
DOER – an active participant DONOR – a person who believes in the
mission and organization, but is able, at the present time to contribute monetarily
DOOR OPENER – a person who does not have a lot of time or income to contribute to the association. However, they are willing to share their network and/or rolodex to help identify other potential leaders.
DEAD WOOD - warming a seat but not much else
Attribute #1: Board members have a basic understanding of the organization’s vision, mission, operations and history
Attribute #2: The Board has a clear understanding of the organization’s primary beneficiaries and the Board’s responsibility to them as moral owners of the organization
Attribute #3: Board members ensure adequate resources for the long term
Attribute #4: The work of the Board is well organized and managed
Attribute #5: The role of the Board is clear and distinct from the role of the staff◦ Board = Governance◦ Staff = Management
Attribute #6: each board member is able to positive answer the value question. What value do I bring to the organization?